So there seems to a consensus that the real estate market is cooling off. Though, no one really seems to be calling it a bust (yet).

I just can't wait for the banking crisis to follow.

Why?

I'll take my neighborhood for example. A year ago when my wife and I moved into our house, people were lining up at the sales office every month to get a chance to purchase one of four homes (on average) that our builder released per month. There were no homes for sale in our neighborhood. Those that went on sale stayed on the market for a week before being sold. People were coming in with adjustable rate mortgages (ARMs), mortgages that were short-term fixed which converted to ARMs, and even negative-amortization loans where the monthly payment didn't even cover the interest on the house. Greater than 100% financing. 2nd mortgages to cover down payments on the 1st mortgage. Etc. etc. We qualified for our house with my income alone (which isn't a trivial amount, granted, but the mortgage payment would have consumed 75% of my take home pay...) incredibly enough.

My point? People literally begged, borrowed, and cheated their way into these very nice homes.

Now I think people are starting to pay the price. They're not lining up at the sales office anymore, and there are 8 or so houses in our neighborhood for sale. Some have been for sale for at least a couple of months. Coincidence, perhaps. But you wonder how much the recent interest rate jumps have started putting the pinch on people who took out ARMs or other adjustable rate mortgages. And if that's the case, how long before the banks start owning these houses? Which have been negative amortizing and are now worth less than their outstanding mortgage? And how long before those losses begin to add up, especially in overheated markets like mine?

And I am sure this isn't just our neighborhood either.

Might be some good buys coming up soon....but too bad that will be at the expense of the appraised value of my home....