recent posts


The Interest-Only Loan

The May Short Figures on Home Depot

Betting on the Bubble

New Yorker Caption Contest #8

One Year from Today

New Yorker Caption Contest #7

New Yorker Caption Contest #7

New Yorker Caption Contest #7

Housing Bubble Starts to Burst


Thursday, June 16, 2005
This article in the New York Times today helped clarify for me what's going on with all these exotic mortgages out there. This graphic is especially helpful in explaining the different option:

Risking Affordability

My conclusion: things aren't as precarious in the short-run as I may have hoped. One economist puts it in perspective:

Nationwide, the increase in monthly payments as more mortgage rates start to float will cost families about an extra $40 billion over the next two years, according to estimates by Credit Suisse First Boston. That is the rough equivalent of a 40-cent increase in gas prices over the same span, which would pinch incomes but would not be likely to create a recession.

It seems like most these risky, ill-advised borrowing schemes blossomed within the last couple years. And their impact doesn't hit for 4 or 5 years. But when it does, ouch. So tulip mania has another year or two probably to flourish before people start to get worried about looming changes in their mortgage payments and the tide starts to turn (and the negative feedback loop sets in.)

So where to invest? The foreclosure industry (whoever that is.) Or something that targets a market of really stressed out people that going to start to swell around the end of next year.