[Volokh] David Bernstein: More Signs of the Bubble: (a new post at The Volokh Conspiracy)

[notify at powerblogs.com]

Posted by David Bernstein:
More Signs of the Bubble:
http://volokh.com/archives/archive_2005_06_19-2005_06_25.shtml#1119496558


   Heard on NPR today that S&P warned investors about some newly popolar
   kind of crazy mortgage where the homeowner gets to choose each month
   how much he pays, and, if he pays less than the normal mortgage
   amount, the extra is added to his mortgage. And I thought
   interest-only loans were a sign that mortgage companies had gone out
   of there collective minds!

   Also read that in D.C., 50% of all loans this year are interest-only.
   When (if?) prices decline sharply, I feel sorry for whoever owns these
   loans, because some decent fraction of the mortgage holders are going
   to walk away from their six-figure paper losses, either because they
   can't afford the adjustable-rate increases, or simply because they'd
   rather saddle someone else with their loss.

   And federal regulators are starting to put pressure on banks and
   mortgage companies to rein in their wild loans.

   Finally, there is [1]www.condoflip.com, launched in Miami (where 80%
   of condos are being bought by speculators), and coming soon to a city
   near you. Certainly a sign of the housing apocalypse.

   Having missed out on the housing boom, I'd like to profit from the
   coming bust. LEAP puts on homebuilder stocks (which have increased by
   hundreds of percent over the last five years) seem very attractive to
   me. Which publicly traded builders are most exposed to the most
   overheated markets (Boston, Vegas, Miami, D.C., Boston, etc.?)

References

   1. http://www.condoflip.com/