If you haven’t seen it already, check out voiceofsandiego.org’s new housing market hot topic page, which includes scads of relevant article links and an “explainer” (as we apparently say in the business) that I’ve written about the San Diego housing bubble.

While I’m linking to other voiceofsandiego.org content, I’d like to recommend Kelly Bennett‘s latest piece on exotic loans. The article includes a striking statistic: during the first 11 months of 2006, 30 percent of mortgages were of the negative amortization variety while a further 37 percent were interest-only.

While housing market sentiment certainly darkened in 2006, these figures make it clear that plenty of people were still willing to take on risky loans in order to purchase homes that they probably couldn’t afford otherwise. How else could one explain the low incidence of traditional fixed-rate mortgages at a time when fixed rates are still near historic lows?

Home buyers largely continued to borrow as much as they could, and to put off the payment as much as they could, right up until the bitter end. The lenders were the ones who finally blinked. As Kelly’s article also mentions, lenders are now scrambling to tighten their standards as the buyers of their mortgages finally start to question just how many of these loans will be paid back. San Diegans seem to love exotic mortgages, but they may be harder to come by in 2007 than they were in 2006.


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