ANOTHER FANTASTIC MORTGAGE DEAL.

Here it is again folks. A fantastic deal just waiting for you call. I saw this advertisement when I pulled up my e-mail. At the bottom of the screen were several silhouettes showing people dancing around some text that said "$510,000 mortgage for less than $1,698 per month." Being a curious sort of fellow, I got my trusty HP 12C calculator out, put in the numbers and came up with in interest rate of 1.25%. Reminds me of the TV commercial that offers a mortgage that's the "Biggest no-brainer in the history of Earth." I never knew there were lenders out there who would loan home buyers money at a rate less than the US government pays. Some lenders even advertise those as "30-year fixed." How can they do that? The secret is that the payment is fixed for five years...........Well, not exactly fixed but it escalates at a fixed rate of 7.5% per year. Still sound like a good deal? Look at your loan balance. It goes up every month, not down.

Another "fantastic deal" is the 50 year loan. With a half million dollar principal, it saves a borrower $365 per month over a 30 year loan (assuming the same interest rate). The worst thing about those advertisements is that they claim the payments on this loan are even lower than interest only loans. Think about it. How could a loan with any principal payments whatsoever have lower payments than an interest only loan? (Again, assuming the same interest rate). Another mathmatical mystery. Maybe some of my clients with an MBA in finance can send me an e-mail answering this question.

We continue to watch the real estate markets. It appears that most commercial real estate is overpriced relative to the income it produces. We have yet to see much weakness in this area. The housing market is another story. If you look hard enough it is possible to buy houses at lower prices than a year ago. The high foreclosure rate, along with overbuilding, is putting downward pressure on home prices. All this at a time when the rental market is growing stronger. We may be approaching a point in which rental housing is becoming more attractive relative to other investments. We are not quite ready to recommend jumping into the market at this time. When the current excess inventory begins to diminish, we will be ready to scour the markets for buying opportunities.