The next few years could be quite scary...

As I drive to work through suburbia, I am starting to see more and more residents place their "For Sale" signs directly behind their white picket fences (gearing up for the Spring season). The vast amount of signs (many more than last year) is telling of the ease in which people could attain mortgages and the problems that will more than likely come to fruition in the future.

Consumer debt is at all time highs, yet people continue to whip out one of their five favorite credit cards to pay for "things" they can not afford. What is even more scary is the ease at which many of my friends have bought homes over that past year or two. With historically low rates since 2002, our money could be streched further to purchase homes that would have previously been out of our reach. I have friends who honestly make no more than 60K and are purchasing $250,000 homes with no or VERY little money down. To add to this, many are tricked into believing that an ARM will ultimately be cheaper for them since the first year (or more) of payments are much lower. Well, what happens when this "conundrum" that Greenspan has quoted during the last Humphrey Hawkins testimony works itself out??? Rate are inevitably going to rise, money managers are overwhelmingly short bonds, its a fact. When this comes to fruition there will be plenty of kiddies running to mommy and daddy because they can not come up with their mortgage payment or need money to pay off their loan when they go to sell their homes since the market has depreciated in the new higher rate environment.

This is truly scary and think there will truly be a nasty correction within the near future.