Apparently America hasn't learned anything from the experience of the Japanese. Fannie Mae is purchasing more 40-year mortgages, which have until now been extremely rare in the US. Before the real estate crash in Japan, people were mortgaging homes for ridiculously long periods of time, effectively making them multi-generation loans. How's that for an inheritance - getting the remainders of a mortgage?!? Longer term mortgages allow people to pay more for a house, which helps drive up prices. But eventually the system collapses, with people facing lifetime mortgage payments. There are many other factors, and we're not in an exact repeat of Japan. But the availability of 40 year mortgages is not a Good Thing.
Addendum: There's a good story on Real Estate Journal titled "Seven Harsh Truths About Real Estate." Keep them in mind when thinking about buying property.
Posted by Tom Nugent at May 17, 2005 04:16 PM