Monday, November 23, 2009

The Debts of the Spenders: FHA Re-Inflating the California Bubble

According to Einstein, the definition of insanity is doing something over and over again and expecting a different result every time. Lest any readers forget, California was the home of the housing bubble.

SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”

Maybe I should apply for a FHA loan (maxed out of course), get a HELOC loan at 6-7% interest, and then use these funds to buy assets yielding 9-12%. Oh yea, don't forget the ability to rent the property out.

It's the real estate/dollar carry trade - US patriotism at its finest. Apparently, this is more patriotic than risking your life overseas to fight in Iraq or Afghanistan.
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