For the past eight months we’ve been yammering on about “risky mortgages”. Why? We’ll let David Lereah (chief economist for the National Association of Realtors) explain:

“Home price appreciation, after reaching an astonishing estimated 12.7 percent national annual rate, will decelerate back into single-digit territory, registering 6.1 percent and 7.3 percent for existing and new home prices, respectively.
This cooling is exactly what markets need today, because it helps check the rise in speculative buying and the growth in risky mortgages, such as the interest-only loans we started seeing at the height of the boom.
That risk-taking changed the residential real estate landscape in significant ways by encouraging some investors to flip properties and home buyers to spend beyond their means.
There will be some adjustment, of course, as many of the hottest areas transition from a seller’s to a buyer’s market.
We’re already seeing inventories rise and days-on-market increase as buyers and sellers search for equilibrium in pricing, with buyers saying no to double-digit price hikes and sellers dragging their feet before agreeing to adjust their price downward.”

We’re just surprised nobody saw that coming. Oh, wait a minute…
Sometimes, second is best []
An ARM (And Quite Possibly A Leg) [SocketSite]
We’re Raising The “Bubble Alert” Level To Yellow [SocketSite]

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