New York is "special"

From the rag that's basically a shill for the real-estate market in New York, the New York Times, we have news that all doesn't seem to be well in paradise. Turns out even though everyone wants to live in New York, they're having just a teensy-weensy bit of trouble: The Battle for a Mortgage.

AS homeowners across the country have dealt with the declining values of their houses and their ballooning mortgage payments, most New Yorkers seem to believe that the market here doesn’t play by the same rules.

But in recent weeks, a growing number of New Yorkers, often with six-figure salaries and reasonably good credit, have begun to find that mortgages are harder to get as lenders try to stem losses from loans to the weakest, or subprime, borrowers.

Ooooh, trouble in paradise!

Buyers like Lee and Kimberly Au had to adjust their expectations. The Aus wanted to buy a one- or two-bedroom condominium costing $800,000 to $1.25 million at the Atelier on West 42nd Street, now that their 8-year-old son has a modeling contract in New York. But they quickly learned that they could no longer get 100 percent financing, even though Dr. Au makes more than $700,000 a year as a surgeon in Hawaii. So the couple settled on a $625,000 studio and used $62,500 in savings for the down payment.

The Aus recently found that their credit scores had slipped into these lower categories. Dr. Au, who has four surgical offices in Hawaii, saw his score dip to a subprime level after he and a relative invested in a project, which Ms. Au would not discuss. She said the relative had missed some payments.

The Aus tried to tap into the equity in their four-bedroom house in Honolulu or their rental property at Haiku Plantation nearby in Kaneohe, but banks refused to refinance or to lend on these investments.

The couple are using Ms. Au’s credit score, which falls in the Alt-A category, to qualify for a 7.5 percent first mortgage and an 8.5 percent second mortgage.

“We have a lot of our money tied up in real estate in Hawaii,” she said. “I knew we had to find something quick.”

Incidentally, this is the profile of the typical speculator. Someone who thinks "real estate can't lose", someone who's already invested in a "project with a relative" which they don't discuss.

What kind of person spends $625K on a studio? They rent for $1500-$2000 depending on the area. Hell, they're paying something like $3500 for the first mortgage alone, never mind the second.

(Answer: someone who thinks a greater fool will come along.)

Please note that the credit score of the "good doctor" who's "making" $700K is sub-prime (as in same as the average Burger-flipper.)

This is all speculation, levering up, negative gearing, call it what you will.

When this shit happens, and there's literally no doubt any more that it will, I'm going to be like the hyperactive kid on too much sugar, running around screaming, "I told you so, I told you so, I told you so!"

Wheeeeeeeeeeeeeeeee! This is so much fun.