America's House Price Time Bomb

[Issachar]

I bought my first house in 1977. Typical back then was 20% down and monthly payment wouldn't exceed 25% of gross monthly income.

Issachar

[darmab]

A while back, when my children went away to college, we decided to downsize our house. We found a very small house in a "transitional" neighborhood for a great price. Both the real estate agent and the bank kept insisting we needed MORE HOUSE! We kept telling them we wanted something we could pay off right away but, at the time, I found their attitude very puzzling. Why would I want more house?

Needless to say, I am very glad right now that we made the sensible decision. But it gives me a lot of insight into how people get into trouble in this market. Most people are a little intimidated by their bankers and when these people tell them they'll approve a loan for double the size of the house they figure they can afford---they rely on what they consider expert advice.