The Mortgage Bubble

The San Diego Union-Tribune reports:

In 2005 in California, half of the new mortgages were interest-only. In the next 12 to 18 months, 7 million households (representing $1 trillion in mortgage balances) will see their payments “adjust” – i.e., increase.

In addition, the other household expenses will rise. Property taxes rarely remain stagnant and even more rarely fall. Ditto for heating and fuel prices:

They will rise. So will maintenance costs, as roofs, windows, and plumbing systems deteriorate.

As for rises in income to compensate, the owner naturally hopes for hefty annual raises. But this is not the era of automatic wage increases. One of three jobs in the United States pays less than $12 an hour, with little prospect of regular increases.

This is good article on understanding some of the new mortgages and the risks.