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Location: Halstead, Kansas, United States

This is my seventh year at Halstead which is also where I live with my wife and my soon to be two year old daughter.

Tuesday, June 28, 2005

Does This Remind You Of Any Other Time In History

Say maybe right before October 29, 1929 or so?:

Nicki Randolph, a San Francisco real estate agent, hasn't been scared off by talk of a housing bubble. Although she already owns both a home and a condo in Palm Springs, Calif., Randolph just closed on a third property -- dropping more than $1 million on a 1,400-square-foot loft in the heart of San Francisco. How does she juggle so many properties in the overheated California market? Lots of leverage, thanks to banks all too willing to provide ever more.

To finance her loft purchase, Randolph took out a mortgage that lets her pay only interest for the first five years -- a tactic that helps her ease into the hefty monthly payments. "Fears that the market is going to crash are way overstated," she says confidently. "It's a seven-mile-by-seven-mile city and a premier place people want to live. You have to be more aggressive here because the prices are so high."

PRESSURE KEEPS BUILDING. Randolph's story is a familiar one -- and it shows the lengths to which buyers are willing to go to snatch up real estate as well as the extremes lenders will stretch to accommodate them. As prices continue to skyrocket in much of the country, banks and lenders are cranking out an ever-growing array of products ranging from no-money-down or interest-only mortgages, to special "Payment Power" loans that allow homeowners to defer monthly payments altogether twice a year.

Such creative financing is letting even marginal buyers purchase houses with price tags that used to appeal only to the rich and famous. In the process, banks and mortgage companies appear to be taking on more risk than ever before -- and if rates rise sharply or prices tumble, many of their customers could find themselves in deep trouble, too.

All those innovative mortgage products are a sure sign that lenders are doing everything they can to keep the housing boom going and to capitalize on yet another round of falling interest rates that no one expected. There are plenty of other signs of frenzy as well. Home appraisers complain that mortgage originators are demanding the optimistic appraisals needed to close on loans. "They started warning me to 'be a team player' and to 'hit the number' they needed to seal the deal," says Robert Burnitt, an appraiser in Midlothian, Tex.


Read more by Dean Foust

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