Evidence of a California Housing Bubble - Page 5 | Piggington's Econo-Almanac | Southern California Housing Bubble News and Analysis

Evidence of a California Housing Bubble - Page 5 Piggington's Econo-Almanac Southern California Housing Bubble News and Analysis: "When prices are high only because market participants expect prices to go even higher, that's called a bubble. And Californians have bought into this bubble with great enthusiasm. Consider the following statistics, all from 2004:
80% of San Diego mortgages were adjustable-rate, meaning that many borrowers were speculating that their salaries or home equity would increase faster than their mortgage interest payments. (San Diego Union-Tribune)
47% of San Diego mortgages were interest-only, meaning that many borrowers were speculating that their salaries or home equity would increase faster than their mortgage interest payments and the eventual addition of mortgage principal payments. (Business Week)
27% of San Diego mortgages involved no down payment, meaning that many borrowers could (and did) use ultra-low rate interest only ARMs with no money down in order to afford far more house than their incomes would typically allow. (San Diego Union-Tribune)
37% of San Diego condo conversion buyers were investors, meaning that, given the comparitively low rents discussed above, the only possibility of these people not losing money is for condo prices to rise enough to cover the current negative cash flow. (San Diego Union-Tribune)
A poll of Los Angeles homebuyers indicated that the buyers expected, on average, that their new homes would increase in value by 22% per year for the next 10 years. (The Economist) "
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