Reply #13: Silicon Valley [View All]

[lapfog_1]

These are usually not first time buyers, but people that own a home they bought 4 to 8 years ago.

The rise in equity of that home plus a DINK income of $150K or more (a good software engineer here makes $130K or
more, and most families have 2 incomes) allows one to qualify for a decent mortgage rate. Still, even with the
$100K down, rising interest rates dictates that people spend up to 40 percent of their after tax income on the
mortgage (or more). Which, if there is ever another down turn in high tech (and we know that there will be),
will mean a lot of foreclosures at some point in the future. Also, a lot of people are starting to think that
now is the last time to "flip that house" and get out before they sit on the market for years or they have to
sell them for little or no equity gain.

I think the housing market is about to tank here. Maybe worse than in the 1990-1992 downturn where a lot of
people found themselves upside down on their mortgages.