Let's be honest... Today was one of those horrifying whipsaw affairs that investors like me really loathe... yet we can NOT look away.
It's like a car wreck... First the market screeches up almost a percent before noon, and everything's rosy with the old consumer confidence brimming over and all... and suddenly armageddon arrives.
People out there are worried about the mortgage industry. Well, no kidding. They should have worried BEFORE they signed up for the 5-year ARM at zero percent for the first three years, ticking up slightly to 23% for the rest of the loan.
Poor souls... whatever shall they do? I seriously wouldn't want to be refinancing right now, although have you noticed? Interest rates are still pretty reasonable! But housing prices are absolutely retarded.
I just got back from California and noticed that the price of a 3-bedroom shack in Petaluma where I grew up starts at around $450,000. For a decent place you'll pay at least $575,000.
Now to actually afford that mortgage at current rates you would need to be making approximately $183,600 per year if you were allowing for your mortgage to be 25% of your gross monthly income (before taxes).
If you were talking about net income, you'd have to be pulling in well over $200,000 a year to afford this 3-bedroom hovel! Listen, I like organic food and temperate weather as much as the next guy, but $575 large? Come on.
Anyway... I'm tired of investors getting spooked about the mortgage thing. I mean, what are they scared of? The housing market's already imploding, so who cares? If you're not making money with equity, should you then flee the markets altogether?
That seems like thowing the baby out with the bathwater. A silly plan.
As I said in yesterday's post... get ready for a choppy, ugly summer... but one that in the end should see the markets having gained about 1 inch of ground...
Good day,
James
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