Sunday, May 29, 2005

Washington Post Article: 'Most DC Buyers Choose Interest Only'

In today's WashPost there is a front page article about how most DC homebuyers are using interest only loans. Here are the highlights.

  • "The loans are attractive because their intitial monthly payments are tantalizingly low - about 1,367 a month for a 320,000 mortgage, compared with about 1,842 a month for a traditional fixed-rate loan. f home prices fall, though borrowers could lose big"
  • About 54% of home buyers in DC (just the city, not the sorrounding suburbs) purchased their homes using interest-only loans so far this year."
  • "Just 5 years ago, only 2 percent of home=purchase loans in the Washington area were interest only."
  • "Mark Zandi chief economist of said buyers are turning to interest only loans because real estate has become so expensive partially because of the use of these new products". Exactly
  • " 'It largely reflects the inability of famililies to afford a home with a plain-vanilla mortgage.' Zandi said 'This is a way for people to get into what are extremely expensive homes'
Finally, there was an interview with a family where husband and wife are both teachers. They are looking to buy a townhouse in Woodbridge, VA ( a far out suburb of DC). Twice they made offers on a townhouse but were outbid. However, "they could stretch their income further if they considered a interest-only loan." But is "really dangerous, You don't know what interest rates will do. " said the husband "It would be great, yes, to get a property but bad to be destitute "

A smart man indeed. :-)


  1. Thanx. I added yourt link. Wonderful site.

  2. Guess which market blows up first?


    I bet LV!

  3. Thats a solid bet. Its I ironic if its Vegas because the whole city has grown because of gambling. Howeverm this time what happens in Vegas won't stay in Vegas.