This morning in the Washington Post (Monday, Feb. 11, 2008) a really interesting editorial by Michael Hall was published. The link for this editorial is:
I will not attempt to paraphrase his statements, as I believe the most accurate way to interpret his opinion is to read what he wrote. I would invite you to follow the link and read his comments.
I would agree with many of Mr. Hall's contentions. It is naive to think that as the issues with lending, particularly in the sub-prime market, self-correct, through foreclosures, short sales and reductions in house values, that eventually, we will not work back to a system where people in certain markets have to borrow large amounts of money to afford housing. Rents are tied to demand and landlord expenses, so as housing prices go up, so do rents. If a family has to make a large payment for rent, and the payment to own is not too much more, many will opt to buy. It is part of the American Dream that we all own our own homes!
Shortly before the 'sub prime crisis,' as it is known, emerged, I was starting to hear about 40 year loans. I suspect that we will begin to see more products like this one brought out by lenders. I remember when car prices really started to go up, the traditional 3 or 4 year loan became an option next to a 5 year loan. Personally, a 40 year house loan makes more sense to me than that, since most people don't stay in their homes for the length of their loan, but folks often own their cars for 5 years.
It will be necessary for mortgage companies to develop new products that will allow willing and informed consumers to purchase homes that are out of their reach with the traditonal 30 year fixed loan.
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