Where are people getting the money to buy at these prices? Subprime Part II

I'm going to keep this brief.

A few times blog readers have asked, where is the money coming from that people can buy into this market? They are implying that properties are still very grossly overvalued.

In March, I posted this:

One realtor knocked on my door last week while I was taking a shower, and I was kind of sorry I missed her. She's the same lady who knocked on our door last June and invited us to an open house (and she did get that house sold, though the original asking price of $760,000 and the final sale price was $670,000). She left a sheet of recent sales in the neighborhood. I very much appreciated that she didn't try to calculate a median sale price as if to imply that that is what homes are worth. She didn't try to dazzle me with statistical bullshit - she simply listed the sales. But she left another sheet of paper talking about FHA loans as an option in financing a purchase. Let's see - no income limit, no sales price limit, no FICO score requirement, no reserve requirement - haven't we heard this someplace before? Oh yeah! The subprime mess and the credit market meltdown! Only now the FHA is insuring lenders by collecting premiums from the borrowers. Oh, they throw in one stipulation - bring 5%, no questions asked. I suppose that's better than 0% down, but doesn't leave me any assurance that credit restrictions are really all that much tighter.

You can find the link to the original posting here.

It took two months, but it looks like the media is catching on.

Folks, the powers that be are trying to keep this game going as long as possible. We will see if leading the horse to water will compel him to drink. Has deflationary psychology finally set in for the buyer? Stay tuned.

-- Susan