Originally Posted by Finndog
... There is a lot of twitching going on right now with the many folks who bought in over their heads with ARMs, If the ARMs spike it will cause prices to fall, when many can't get out of an escalating mortgage payment; many gambled that the appreciation on the house would outstrip the payment (speculation). If you have negative equity and have to sell, it ain't a good thing for them, but could be bargain for you. ...
Way back when sonny boys, I remember renting a house in L.A. in the early 90's when the bottom dropped out of the aerospace industry and who knows what all ... seemed like a lot of homeowners were "underwater" on their loans and giving them back to the banks which built up big REO portfolios. Borrowers were suing lenders for having the audacity to believe the appraisals the borrowers had given when they bought in and thought the sky was a limit. For 3 straight years when my lease came up the landlord asked me to buy him out -- at a lower and lower price. When I moved out of L.A., he was asking about 55% of what he'd bought the place for something like 6 to 8 years earlier. I haven't tracked it too closely but had I bought in then -- around 1994/1995 -- and stayed, zillow.com tells me it would be worth about 3 times what I could've bought it for.
Now as a prospective buyer -- that's the cycle I'm looking for.
I haven't followed it that closely but it seems to me a lot of vacation property has been selling on the "bigger fool" theory. I.e., it doesn't matter what I pay, because I'm going to sell it to a bigger fool next year.
At some point there's no bigger fool -- and interest rates tighten, the economy turns down, etc. etc.
That's when I want to buy a ski condo.