Two years after the infamous goo-goo-for-housing cover, and two years of absolutely no reporting on the mortgage meltdown, the housing crash or what's really happening in America, TIME Magazine FINALLY wakes up, does their job, and runs a story on the crash.
It was also nice to see recurrent HP themes of kudzu in the South and "Ponzi Scheme" show up in the article. Glad we could help.
If Wall Street wants to get even more worried about the real estate market, it need look no further than southern California. There, the culprits aren't just the bad-credit borrowers whom banks and lenders loaded up with ballooning debt to purchase their dream homes. The well-to-do have partaken of those treacherous loans as well. And now everyone is hard pressed to pay as interest rates rise.
The spectacularly bad trend was coupled with news from mega-mortgage lender Countrywide Financial that homeowners with good credit are starting to fall behind on mortgage payments. It has all contributed to a contagiously pessimistic mood. "We thought the upper end of the market was immune," says Steve Johnson, of real estate consulting firm Metrostudy. "But this is now like Kudzu in the South, spreading into all product types in the southern California housing market."
With home values increasing by double digits annually, "people began buying houses they couldn't afford under the theory that the more house you buy, the more wealth you have once it appreciates," he says. "It's kind of a Ponzi scheme on a mass scale. But there has to be an end at some point."