[ex-Texan]

"It's something to keep in mind . . . "

That may be the greatest understatement of all times. Why? Because when those all those Option ARM loans and ARM loans were written with 2.5% (or lower)teaser rates. The loans written about two years ago are going to reset at the current contract rate. Which, in many cases, is higher then the LIBOR rate. [Yada, yada]When the higher rates start to click in, people all over the U.S. will be howling in pain. Then their howls will turn into screams of agony. Because the greater percentage are going to be in the first stages of foreclosure. With the nasty option ARMs, the amount of aggregated and unpaid interest will be added to the total bill. Thousands and thousands of dollars. Together with penalties, late fees, charges, attorney fees, together with other costs. Get ready for a huge fire sale.

[Tulane]

I am an attorney in VA/DC and help companies convert from apartments to condos...we were half-joking the other day that if 2000-05 was all about conversion, then 07 will be all about representing the lenders in forclosures...

[TXBSAFH]

Soemthing else to consider. My wife and I are thinking about gettign a new house in a few years. I occasionally go online to the local real estate association website once ot twice a month. Just to see what is out there. We would like to move now but want to pay off our student loans first. I did a search for a specific town and size of house. I get 20 to 30 hits and I looked at them online. 2 were obviously repos. There has been a lot more repos in the past few months.

[2banana]

The real estate developer was offering one full year of mortgage, assessments and taxes as an incentive to buy -- not to mention the unit was rented.

Well, here we are two years later, and I fear of what is to come. We put the unit on the market in April 2005 with no luck thus far. We first started the price out high, but by the summer we had came down to our exact purchase price.

What developers were doing this in 2003-2004? Did they see the market peaking and just want to get out??? First I have heard this early.

[MineralMan]

Real estate investments are not for weenies. Good luck to these condo folks. If they're lucky, they'll get to keep the one they're living in.

[NYFriend]

I'm not as up on this as I should be (considering my wife and I are planning to buy a house in Nov. or Dec.). what is a No Doc loan? Is that just a "no income verification" loan?

Our plan is first house/last house, 30 yr. fixed, with between 15 and 20% down. I'm thinking we should be on firmer footing than most, as long as 1) we watch our monthly and 2) both keep our jobs.

[Koblenz]

Be responsible for your investments and your loans. We have an interest-only 7 year ARM, 2 years into it. I only make the minimum interest payment each month.

However, I also put another amount, equal to about half my interest payment, into an S&P 500 index fund. It is automatically deducted from my account. I am doing that in lieu of my mortgage principal, as I believe that over time, the S&P will beat the mortgage interest.

Furthermore, the mortgage is less than 50% of the house's current value. It was about 55% of the value when we moved in two years ago, but I figure the house has appreciated somewhat, if nothing else than the fact that it has a new roof and boiler and basement floor and a bunch of other stuff we financed out of pocket to repair / upgrade.

[Dont_Tread_On_Me_888]

I wish I could help you, but for others:

1] Failure to use the advice of professionals often costs "do-it-yourselfers" fortunes. I have been advising against direct real estate investments for about one year now. I was advising FOR real estate related investments in 1999-2004/05 period. There were four mega-waves all happening together that pushed real estate demand higher, and nearly all these factors have run their course and are reversing, slowing or flattening.

2] This couple purchased the second condo for an "investment". Not trying to play Monday-morning quarterback here but the typical Latin America fund (iShares "ILF", for example) was up about 50% last year and over 100% over the last two years. $40,000 invested here would have grown to $80,000 in the last two years, a far different scenario than what the condo deal turned out to be.

The point I am making here re the Latin America fund is not that it would have been wise to mortgage $20,000 to invest in a stock index, but that TRENDS were different--real estate was at a peak and due to come down (or demand come down) for about four major reasons, and by contrast, stocks in general and international (and small cap and mid cap) indexes were doing VERY well and in EARLY stages of an upturn. Real estate is late stage right now.

3] Major investment decisions should be made in concert with a highly qualified investment advisor--with real estate, that is NOT a real estate person, but a true adviser qualified to advise across ALL investment classes.

The "Money Magazine", discount broker, do-it-yourself push, etc. is quite harmful to the typical person. Most investment variables are much more complex than what most people believe.

In my practice, you would not believe the percentage of investors I have advised who have, over the last five years, had most their 401k, IRAs etc. money invested in large cap stocks, even though large cap stocks have trailed badly mid and small and international for better than six years. People think they know what they are doing, but most do not have a clue about all the factors involved in what makes things tick now versus earlier versus projected later.

I can't help this person now, but hope that some future "do-it-yourselfers" that lack sufficient knowledge take warning. Always better to seek sound advice before taking such great risk.

NOTE: All points here are general and used for example purposes and are not to be taken as specific advice for any one individual.

[razorback-bert]

Best real estate investment advice I received as a young man was you make your profit when you buy it.

[sangrila]

People who don't know what they are doing should not speculate in real estate. This talk about a market crash is also absurd. The appreciation will just slow down. Foreclosures are up because home ownership is higher than ever, and it has been very easy to get a loan in recent years.

[doug from upland]

If they cannot sell the condo, they may be able to exchange it for another property. I've done that for clients in several states for many years. There will be someone, somewhere who wants a condo in Chicago and will exchange either real or personal property for it. There may be a doctor out there who would offer 20K in future medical services in exchange for the equity. Unless the loan is already upside down relative to value, there are ways to get out of the investment. They should also consider a lease-option to give a lessee some incentive. They could take a personal note from someone with good credit as a down payment. With no cash down, the tax benefits to that investor may be worth owning the condo.

[junta]

Or, they own the bank. I have heard about scared mortage companies coming up with 40 year mortages with at the 30 year mark a baloon payment. It ain't over till the fat lady sings and never underestimate the creativity of the printing press operators.