Thursday, August 18, 2005

"More painful than I thought"

The San Francisco Chronicle sought to find out where sellers are finding homebuyers willing to pay these exhorbitant prices. The unfortunate answer is one we kind of already knew. It's us:
"It's painful, more painful than I thought it was going to be," said Kris Crichton, who bought a $640,000 condo in San Francisco's SoMa neighborhood using $50,000 in equity from a home she owned with her former husband and an interest-only loan for part of the mortgage. "I'm eating ramen and PB&J every day, but at least I have a house."

If you're eating ramen and PB&J everyday, some might argue that at MOST you have a house. There were words of caution in the story:
... one of the study's most surprising conclusions finds that nearly 1 out of every 5 recent California home buyers is spending 50 percent or more of his or her income on housing costs -- twice the national average (the study defines recent home buyers as those who purchased homes in 2002 and 2003). Though 2004 and 2004 data were not available to include in the study, Johnson said the percentage is likely even higher today.

Experts fret that consumers are placing an expensive bet on an overheated market that is expected to cool off. "I worry there are going to be a lot of unhappy young couples five to 10 years from now because of the heavy risks they're taking on," said Ed Leamer, economist at the UCLA Anderson Forecast.
Be sure to read the whole story at this link.