Everybody wanted them, and spent millions to get them. Investors went crazy, scrambling to get their piece and sell it for 100 times the cost. Soon, people were no longer buying them for utility, or even intrinsic value… but instead, to resell them for huge profits.
Fortunes were doubled in the blink of an eye. Poor men became rich, and rich men became filthy rich – without doing a day’s work!
Desperate to cash in on this wildly speculative marketplace, investors traded or sold (often at ruinous discounts) land, produce, livestock, grocery budgets, jewels, livery, the family silver, small businesses – even their homes … to buy into the frenzy.
Are we talking about the technology boom? The stock market? Real Estate bubbles? SIV’s? Wii? Tickle Me Elmo? None of the above… it was Tulipmania!
This mass hysteria over nothing but a flower actually took place nearly 400 years ago, in 1630’s Holland, and it wasn't from high tech, securities, or real estate. It was a small flower bulb that seduced the Dutch – tulips!!
Coming from Turkey to Holland during the 16th century, by the early 17th century these exotic and expensive flowers became so sought after, the market exploded!
When the middle and lower classes began to realize how much money the upper classes spent on tulip bulbs, and how much money they made selling them, they sensed a “fool-proof” get-rich-quick opportunity. Thus Tulipmania was born.
After approx. two years of madness, more prudent investors began to understand that this folly could not last forever… prices could not continue rising forever, particularly in huge increments. As this conviction spread, prices fell, and never rose again. In 1637, when a gathering of bulb merchants could not get the usual inflated prices for their bulbs, the bottom dropped out of the tulip market over a 60-day period.
Word quickly spread, and the commodity market crashed. Confidence was destroyed, and a universal panic ensued. Thousands of businessmen, many of whom were among Europe’s leading economic powerbrokers, were ruined almost overnight. Millions of speculators from the full spectrum of society – lost everything.
Just like today's collapsing “Housing Bubble”, and the ripple effect from the closely related “liquidity crunch” – Tulipmania plunged Europe into an economic depression. The disaster was such an extraordinary event, that even now – centuries later – it helps explain the eerie similarities to our country’s current housing market, the “herd instinct” and the madness of crowds!!
To gain some more insight on how these issues are impacting investment decisions in today's real estate market, see the article Beware The Blue Sky at Creative Real Estate Online's How-To-Library" at: http://www.creonline.com/articles/index.html
Beware The Blue Sky--The Current Housing Market
Despite the obvious bursting of the housing bubble and the associated freezing up of credit markets, many (suspiciously self-serving?) forecasters and investors suggest that the housing slump is close to bottoming out--or soon will be!
Even now, TOFKAOOATT (The Organization Frequently Known As Overly Optimistic All the Time) aka the National Organization of Realtors (NAR) projects that existing home sales will gradually rise over the next year as "pent-up demand is unleashed."??? This would be great news if it made any sense. Click Here to see the rest of this article.
Even now, TOFKAOOATT (The Organization Frequently Known As Overly Optimistic All the Time) aka the National Organization of Realtors (NAR) projects that existing home sales will gradually rise over the next year as "pent-up demand is unleashed."??? This would be great news if it made any sense. Click Here to see the rest of this article.
Liquidity Crunch – The Breakfast of Champions! Part 2
In a recent interview (August, 2007), former Federal Reserve chairman, Alan Greenspan, made a foreboding prediction of the things to come in the real estate market:
"There is a bubble in the housing market, and the decline is going to be larger than most people expect."
That, my friends, is "A Problem". And it is playing out already, as new reports in September '07 by the Mortgage Bankers Association, and TOFKAOOATT (National Association of Realtors – "The Organization Formerly Known As Overly-Optimistic All The Time") underscore the record pace of increasing foreclosures, and the growing price decline in the housing markets!
Liquidity Crunch – The Breakfast of Champions!
"Will work for food!"
Talk about "creative financing"… the guy that came up with that familiar hand-held sign had a stroke genius in both financing – AND marketing!
Perhaps real estate investors, notebrokers/ finders, and real estate agents can learn how to turn a similar simple concept into longer-term success – and save the current economic marketplace from Itself in the process!
Let's think this through…
A Return To Normalcy
As defaulted mortgages and bankrupt lenders bring the weakest segments of the institutional mortgage industry to their knees, investors across the broader financial markets have begun dumping other debt instruments and monetary investments – that would seem to have nothing to do with home loans. As Associated Press correspondent Dan Seymour lucidly observed in a recent news article, “The widening fallout in the U.S. mortgage industry has reminded investors of a risk that so many seemed to have forgotten – the fear of risk itself!”
To continue reading the full article click here...
To continue reading the full article click here...
APR on ARM loans - Fact or Fiction?
This Forum is related primarily to the private cash flow marketplace, where ARMs are typically not a factor, and where disclosures such as TILS and RegZ are not generally part of the process of buying and selling notes, per se. But Variable Interest Rate notes are an area where even exempt "seller- carryback purchase-money mortgages" may have potential "usury" issues - so it is certainly advisable that you should avoid purchasing adjustable rate notes (private or not), until you have a fairly good handle on the issues that can come into play down the road.
That being said... the formula for calculating APR is set by federal regulation, to enable so much as possible, a direct comparison of the cost of mortgages. The APR formula is much more useful for fixed-rate mortgages than for adjustable-rate loans. Because no one can predict how interest rates will change over the years, the APR for adjustable-rate mortgages is based on forecasts, which can - in hindsight - turn out to be inaccurate, as you have alluded.
Calculating APR's on adjustable rate mortgages (ARMs) with the starting interest rate, and
click here
That being said... the formula for calculating APR is set by federal regulation, to enable so much as possible, a direct comparison of the cost of mortgages. The APR formula is much more useful for fixed-rate mortgages than for adjustable-rate loans. Because no one can predict how interest rates will change over the years, the APR for adjustable-rate mortgages is based on forecasts, which can - in hindsight - turn out to be inaccurate, as you have alluded.
Calculating APR's on adjustable rate mortgages (ARMs) with the starting interest rate, and
click here
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