An Empire of Leveraged Debt

The San Francisco Chronicle reports on how one couple gets by:

Their monthly reality is more sobering. They have $2.3 million in mortgage debt and negative cash flow that ranges from $5,000 to $15,000 monthly depending on the season.

So how do they pay the bills?

"We sort of count our equity loans as our income," she says, with the slightest wince. "If we had real jobs, we'd be fine, but we just need to get some money in. Some people call it a pyramid, but I don't like to think about it that way."

Surreal financing? Bubble economics? Perhaps. But it's also the way people are increasingly approaching real estate: as a bet that in the long run can't be beat.

Negative cash flow.The higher prices go the lower they will go on the downside because who'll be left to buy? Prices will eventually go to positive cash flow.It's a matter of time.