I think the "new math" is: No documentation + No income verification + (probably) No money down = Taiwan Lee + cash back at close. Check out this story, but be forewarned you might be gasping for air so remember to breath! By the way, it's part of a series... so yes, incredible as it may seem, there's more...

Steal of a Deal Houses bought at inflated prices. Millions in loan proceeds allegedly pocketed. All ending in foreclosure. In Colorado, it's one part of a nation-leading problem.

This story is worth checking out, especially the "Just a Coincidence" graph:

Can the economy survive the housing bust? Real estate downturns have a way of leading to recessions and stock market slumps.

Yesterday I was sitting at the local Starbucks, out on the deck reading the paper, and realized after a few minutes that the three people at the table next to me were a couple and a real estate agent in a home buying transaction. I perked up when I heard the real estate agent (who was white) say to the couple (who were black) that interest rates would be going down (implying the home value would go up, or maybe that payments would go down, if the loan was an ARM).

I found this shameful for two reasons:

1. The real estate agent doesn't really *know* that interest rates will go down. His argument was that, yes, they have been going up, but since we'll probably have a recession, they will be lowered. This of course assumes we don't have stagflation, where interest rates have to be raised. Yet that appears to be the most likely scenario at this time.

2. Why should future interest rates be a topic at all in a home-buying transaction (absent an ARM)? The question should be whether the buyer's finances are adequate to service the mortgage, and of course whether the property is right for them for how long they plan to stay in place.

I just wish I had had an opportunity to interject that they should probably rent and wait a few years on housing -- but the three of them all left at the same time.

So another set of unsuspecting folks may have gotten bilked by the real estate complex here. It was fascinating (and nauseating) seeing it actually happen.

just read the "The Housing Market - Plateau of Denial" and had a few thoughts of my own.

My mother lives in South Florida, she purchased her home in 1990 for about $110K. Since then her house has appreciated to about $350K- $400K. In the state of Florida all full time home owners get 2 tax breaks: 1) a $25K homestead exemption on the taxable value (2X for retired widows), 2) a save our homes (SOH) cap of 3% max tax increases. My mother current pays about $1,750 on her taxes and her neighbor (who just purchased) pays about $7,500 on an assessed value of $325K (about 2.25%).

Everyone in South Florida is up in arms about the taxes because they are feeling stuck in their houses; they can't move because their taxes will reset. The population of Florida is demanding that the government lower taxes and insurance rates.

Here are some thoughts on annual costs to own a home in South Florida.

% Value of home annually:

Principle (opportunity costs: down payment and interest) 6%-7%

Taxes: 2.25%

Insurance (South Florida rates): 0.75% - 1.25% (depending on location)

Maintenance: 0.5% - 1.0%

Total: 9.5% - 11.5%

Based on these numbers, where is the largest cost of home ownership??? How much can the government affect these numbers?? 1.0% maximum (when was the last time government gave back 1/2 of their income)?? For a house like my mother's the costs would be about $3,500 lower but it would still cost her 8.5% annually (on the low end of the spectrum). So, most of these trapped people would probably still be trapped due to the high price of the homes down here.

One last thought: the house rental prices don't even approach the annual cost of ownership. I have a friend living in a $750,000 house for $2,500/mth in rent. Due to these conditions, I fully believe that the South Florida housing market cannot sustain its current pricing.

Just a note on housing stocks. Shorts are prevalent. They will impact the down trend in their own way.

Market will go down. Good point that a bounce is due. This might kill off the rest of the "FUTURE BAGHOLDERS," these being the folks who buy an internet stock in 1998 for $135 a share. Somebody has to buy at the top and I guarantee there is a slew of "waiting for the bottom" house buyers just begging to get killed when the final hair cut cometh.

I like Toll Brothers at seven bucks. Wouldn't say they were gonna get there next week.... just like them at seven bucks (price in 2002).

Markets are fabulous relative to their predictabiltity. Too much stock? Price comes down. We got too much stock and thanks to the liquidity of the last 8 years? Too much stock coming on line any moment now....just in time for Toll Brothers seven bucks.