5 thoughts on “This time it’s different!”

  1. Different indeed! It’s a new paradigm in the real estate market. Condoflip will revolutionize the way we think about condo sales. The real estate market has too many middlemen. The new wave of mortgage instruments is the market thinking outside of the traditional box. VC funding for mortgages I say!

    Did I miss any keywords?

    Bloomberg July 11: Buyout firm Nito G ewirtz LLC secured $30 million in 1st round funding from Kleiner Perkin Caufield & Byers to buy Condo #1210 in the yet to be built Miami Lux$ Towers. Managing Partner Incog Nito declares this a new landmark in real estate financing: “Unlike most startups who have little more than a business plan as collateral, we have 900 sq feet of prime Miami real estate.” Managing Partner Jonathan G ewirtz hints at the possibility of a mezzanine round: “#1210 is only the beginning. The synergy inherent in #1211 is too tempting to pass up. We are truly on the verge of a new epoch.”

  2. I wonder how hot the market would be if the federal tax write off of personal housing interest rate payments were not in play. When lending institutions start promoting ‘no principle’ payment option loans you know the banks have become the new landlords of rent property. Maybe its just me, but this seems to be headed to the 80’s Savings and Loan collapse if there’s a stumble in the economy. These loans are a bet that those signing the contracts have future income just a the farmers back in the 80s gambled on their future income. Back then that failure meant the US Taxpayer ended up with a half a trillion dollar hit to the debt. Heaven only knows how much we’re going to be asked to pick up the banks’ management this time.

  3. Actually the interest only loan originated in California, where house values escalated so quickly that the averager person could not afford a home. This option usually goes away in 5 yrs, leaving the borrower with a 25 yr mortgage at a 30 year rate (although i have seen 10 yr interest only loans).

    The good news is that some 95 % of all loans are refinanced/paid off within the first five years. As to those accounts that remain open, the income of the borrower has increased enough that he can afford the payment. In the rare case that this is not true and the house moves into foreclosure, the equity gained over 5 years more than offsets the fact that no principal has been paid.

    And so, the short-sighted american family that thinks only of the now has a mortgage payment one-third lower (or a bigger house)! The lender, who charges higher rates on these interest only loans, makes more money and everyone is happy and nobody ever gets ahead…except, of course, the lender/loan officer/real estate agent/government/title company.


  4. I’ve been in Florida off and on for over forty years and have the the housing bubble before. Real estate doesn’t depreciate but when the bubble bursts it can be damn hard to move a piece of property. Then it is the old location, location, location game.

    Maybe I’m just to damn conservative but to take the gamble of a five year interest only loan would scare hell out of me-especially if there were some big dollar closing costs and down payment up front. Maybe cheaper than rent but I would think a while about it. Five years is a long time and too many varibles to consider to make it a safe bet.

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