From Orange County: 82% of 2005 California home buyers are fools - and San Diego condo market about to implode

Interesting roundtable on OC real estate hosted by the OC Register (hat tip to HP reader Peter L). Here's Scott Simon from PIMCO with some interesting observations and stats. Especially this: "last year, 82 percent of the purchase loans in the state of California -- Orange County being representative -- were either interest-only or negatively amortizing loans"

Holy crap! How sad is that - that 82% of homebuyers in Cali could simply not afford the home they wanted, so they took out a loan which will doom them for sure.

And how dumb have people gotten that they're only looking at their payment, and NOT THE PRICE OF THE DAMN ASSET? I keep driving this point home and I continue to be amazed at the pure stupidity of the American (and worldwide) population on this one - stupid is as stupid does. It's one thing to make that mistake with a $20,000 car (in the form of a lease or 7-year loan to get a "good payment"), but on an $800,000 condo - it's not a mistake, it's a financial disaster that will now ruin lives.

Most people buy a $1,000-a-month or $2,000-a-month payment. They don’t think about what their mortgage is. Suddenly you could get a mortgage that was twice as large as the mortgage you could get a couple of years earlier for the same payment.

We think it’s a momentum market. It’s been driven by momentum, initially driven by affordability. It just takes a while to roll over. We think it’s going to slow down. It’s pretty much started now. We think you are going to see some pretty bad numbers, more negative numbers starting in January. ... So things that were accelerating will no longer be accelerating. Things that have gone flat will go negative.

then:

Bostic:So which places do you think?
Simon:Places that specifically worry us? San Diego worries us.
Bostic:Particularly in the condo market. I agree with that.
Simon:San Diego earliest went to the affordability product, interest-only mortgages most heavily, earliest. Biggest number of investors, earliest. And it’s probably just further along in the cycle.