Real estate isn’t in a bubble. Nosirree, just because home prices in southern California often doubled in the preceding 3-4 years and are now slacking off or falling just means it’s a mild correction, a breather. No need to worry, just sign on the dotted line for your new home. In our area, $675k will get you a 1800 sq ft house on a 1/4 acre. In Santa Monica a comparable would start at over a million, and forget about the quarter acre, think postage-stamp sized plot instead.
Lots of folks bought in the past year or so, using some tricky whizz-bang reverse inverted interest-only balloon floater mortgage (ok, I made that name up) with zero down to help them slide into their dream home. Hey, the mortgage only eats up 40% of their gross pay too. What a bargain. Oh wait, it’s a balloon mortgage and the clock is ticking. Better hope they have lots of helium when the new nosebleed rate kicks it and the balloon won’t lift off.
Well, you can always just mail the keys back to the bank if real estate goes south, right? Not any more. The new bankruptcy laws specifically prohibit that. You can mail back the keys, but you still owe the money. Doing a BK may not absolve you of the debt. Isn’t predatory capitalism wonderful? Someone’s getting rich, and it’s not you.