Home Equity Increases $1 Trillion in Five Years ? Is the Market Peaking?

A new survey reveals that in the last five years, the equity in the California real estate market has increased by more than one trillion dollars. A trillion dollars is a large number to ponder, but put in concrete terms, it can be represented by a stack of one hundred dollar bills that is six hundred thirty one miles high! This astronomical increase in California home values isn't all that unique, however. Prices on the East Coast, particularly in the Washington, D.C. area, are increasing just as rapidly. There are areas on both coasts where home prices have tripled during the last five years. This, along with the dramatic increase in interest-only mortgages among homebuyers, suggests that home prices may be peaking.

In California, 35% of all mortgages written are interest-only mortgages. In Washington, the figure is a whopping 48%. With an interest-only mortgage, the homeowner pays only the interest on the home loan for the first few years of mortgage payments. After the agreed-upon period of time ends, the amount of the payment is adjusted to include a portion of the principal. This typically increases the amount of the payment by about one-third. Interest-only mortgages have gained in popularity as home prices have increased, mostly because buyers otherwise would not be able to afford to buy homes. The problem with these mortgages is that for the first few years of payments, the buyers aren't actually paying anything for the home itself!

What these statistics tell us is that in California, more than one third of buyers cannot afford a mortgage that allows them to actually contribute to paying for the home when they move in, and in Washington, the figure is nearly one half. Experts disagree on exactly when the hot real estate market will collapse, but it would seem to the casual observer that when half of all buyers can't actually afford to make payments on the home they've just purchased, the collapse may be near.

What does this mean for potential buyers? Anyone considering purchasing a home in the red-hot markets in California or on the East Coast should carefully consider whether or not they can actually afford to purchase a home. Qualifying for a loan isn't good enough if you can't actually make payments that will reduce your principal. If may be wiser to buy in a cheaper outlying area and commute. Others may wish to rent in the short term in hopes that the prices will soon decline. It is always difficult to predict which way the real estate market will go, but a market where one-third to one-half of buyers can't actually reduce their principal should set off an alarm for anyone considering a real estate purchase.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.

---

Google News Updated : Fri, 05 Sep 2008 14:05:39 GMT Lavrov rejects Cheney's attack on Russia - CNN International BBC News Lavrov rejects Cheney's attack on Russia CNN International - 1 hour ago By CNN's Matthew Chance MOSCOW, Russia (CNN) -- Russia on Friday rejected sharp criticism by US Vice President Dick Cheney that its intervention in Georgia raises doubts about Moscow's reliability as an international partner. Video: Cheney Slams Russia for War Against Georgia AssociatedPress Russia says Cheney fanning Georgian aggression Reuters India Reuters UK - guardian.co.uk - RIA Novosti - Voice of America all 2,162 news articles Publ.Date : Fri, 05 Sep 2008 12:45:40 GMT Reviews of McCain's speech - MSNBC Telegraph.co.uk Reviews of McCain's speech MSNBC - 30 minutes ago The AP’s Ron Fournier says McCain “preached bipartisanship and unity from a stage retooled to carry him out to the Republican faithful. McCain: I work for you CNN Political Ticker ‘Change is coming,’ McCain tells GOP in speech Kansas City Star CNN - Houston Chronicle - Forbes - Chicago Sun-Times all 906 news articles Publ.Date : Fri, 05 Sep 2008 13:35:16 GMT In Long-Awaited Maps of Cancer, The Breakthrough Is the Problem - Wall Street Journal In Long-Awaited Maps of Cancer, The Breakthrough Is the Problem Wall Street Journal - 10 hours ago By GAUTAM NAIK After struggling for years to improve the treatment of cancer, scientists now hope to fight the disease with the help of the same techniques that deciphered the human genome eight years ago: mapping it. What You Need to Know About Mapping the Cancer Genome U.S. News & World Report Data on defective genes make tailored remedies possible Baltimore Sun Reuters - The Associated Press - Bloomberg - eFluxMedia all 261 news articles Publ.Date : Fri, 05 Sep 2008 04:01:28 GMT Lebanese ruling majority accuses Syria of interfering in Lebanon - Xinhua Sydney Morning Herald Lebanese ruling majority accuses Syria of interfering in Lebanon Xinhua - 2 hours ago BEIRUT, Sept.5 (Xinhua) -- Lebanese ruling majority accused Syrian President Bashar Assad of interfering in Lebanese internal affairs and not recognizing Lebanon's sovereignty, local press Naharnet reported Friday. Video: Sarkozy in Syria : the press is divided france24english Editor's Notes: A losing battle, so far Jerusalem Post PRESS TV - Ynetnews - Ha'aretz - New York Times all 1,062 news articles Publ.Date : Fri, 05 Sep 2008 11:59:29 GMT Dell looks to sell factories worldwide - CNNMoney.com Wall Street Journal Dell looks to sell factories worldwide CNNMoney.com - 50 minutes ago By Scott Moritz Dell (DELL) is getting more serious about trimming costs and is exploring plans to sell its PC manufacturing plants, according to a news report Friday. Dell said to consider sale of factories MarketWatch Ahead of the Bell: Dell may sell plants, WSJ says Forbes Bloomberg - EETimes.com - BloggingStocks - Zacks.com all 83 news articles Publ.Date : Fri, 05 Sep 2008 13:15:09 GMT Nokia Forecasts Drop in Third-Quarter Market Share (Update1) - Bloomberg AFP Nokia Forecasts Drop in Third-Quarter Market Share (Update1) Bloomberg - 1 hour ago By Juho Erkheikki Sept. 5 (Bloomberg) -- Nokia Oyj, the world's biggest maker of mobile phones, forecast a drop in third-quarter market share after competitors slashed prices and a new handset was delayed. Nokia Sees Market Share Slipping in Third Quarter Wall Street Journal Nokia Lowers its Third Quarter 2008 Mobile Device Market Share Outlook FOXBusiness MarketWatch - Reuters - TheStreet.com - The Associated Press all 138 news articles Publ.Date : Fri, 05 Sep 2008 12:50:07 GMT PIECING TOGETHER A PLEA How the deal got done - Detroit Free Press Boston Globe PIECING TOGETHER A PLEA How the deal got done Detroit Free Press - 6 hours ago BY JOE SWICKARD • FREE PRESS STAFF WRITER • September 5, 2008 Prosecutors rolled Detroit Mayor Kwame Kilpatrick's plea deal into court Thursday praying the wheels wouldn't fall off. Detroit Mayor Acknowledges 'Poor Judgment' NPR Detroit mayor pleads guilty, to leave office Reuters DetNews.com - International Herald Tribune - The Associated Press - WWJ all 853 news articles Publ.Date : Fri, 05 Sep 2008 07:57:24 GMT Clickbank Datafeed Legitimate Work From Home Jobs

PARLOT::Ebooks, Scripts, Websites, and more...

Adsense websites

High Risk Mortgage Lenders - Using a Sub Prime Lender Online

Sub prime lenders handle high risk mortgage loans that traditional... Read More

Remortgage To Release Equity By Improving Interest Rate

You have been paying on your mortgage for quite sometime... Read More

Refinance Your Property Online

By refinancing your property online you can take advantage of... Read More

What is a Buy To Let Mortgage?

A buy to let mortgage is a mortgage on a... Read More

Refinancing Online - Tips For Getting a Low Interest Rate When Applying Online

Refinancing online is a great opportunity to find low interest... Read More

California Bad Credit Mortgage

California is a beautiful place to live There is no... Read More

Fixed Rate Mortgage Loans - Understand the Pros and Cons of the Fixed Rate Mortgage

There are many benefits and drawbacks to consider when deciding... Read More

Mortgage Information

A mortgage is borrowing money using property as a security,... Read More

Why Refinance Back into a 30-Year Loan?

One of the biggest reasons homeowners refinance their mortgage is... Read More

How to Find a Direct Homeowner Loan

If you've been thinking about applying for a direct homeowner... Read More

Alternative Options For Rising Interest Rates

As interest rates have risen in the last six weeks... Read More

Bad Credit Mortgage Lenders - Things You Should Know About Subprime Lenders

Interest rates and fees vary between subprime lenders just like... Read More

Home Loans For People With Bad Credit - Tips To Getting Approved Online

Buying a home with bad credit doesn't have to stop... Read More

Refinancing Your Mortgage Can Really Save You Money

Refinancing a mortgage is simply taking out a new mortgage.... Read More

Mortgage Pre Approval - Getting Pre Approved For a Home Loan Online

A pre-approved mortgage is a must in a competitive housing... Read More

Flexible Mortgages - Offering Relief from the Fixed Mortgage

A pension mortgage may seem lucrative at the first sight.... Read More

Shopping for A Mortgage? Do Your Homework First

If you happen to be shopping around for a mortgage,... Read More

Home Loans: Where Do I Begin?

So you've finally decided you've had enough of paying rent... Read More

Private Mortgage Insurance Basics

Will you be asked to pay Private Mortgage Insurance, or... Read More

Online Mortgage in UK - Introducing the Best Mortgage Plan Across UK

Add the term 'online' and it will open for you... Read More

Should You Get an Interest-only Home Mortgage?

Before you consider taking out an interest-only mortgage, you should... Read More

Best Buy to Let Mortgages

Are you looking for the best buy to let mortgages... Read More

Refinancing Your Mortgage Can Open Up A Lot Of Options For You And Your Family

It can happen to anyone, the roof is leaking, the... Read More

A Home Equity Loan ? Is It For You?

Home equity loans are often touted as being the solution... Read More

Buying a Home With Bad Credit - Why a Recent Bankruptcy Will Not Stop You From Getting Approved

Buying a home with bad credit is possible with the... Read More