Ron wrote:My wife and I like to watch the prices of beach houses. Houses in the 3-4th fila selling for $250-300K, unbelievable!!! Cheap money will run out and prices will fall dramatically.
Like others, I have watched this thread very carefully and with great interest, and I appreciate all the great ideas I have read. What I still don´t understand is this concept I keep reading about "cheap money". Last time I checked, mortgage rates were hovering between 9% and 10% and it is hard to qualify for loans, unless maybe they are of the "mi vivienda" variety.
If there is a real estate bubble, I suspect that it is optimism, not easy credit, that is driving it.
I have gone into banks and yes, for foreigners it is dificult to get a loan (even with a CE). Many banks are skeptical. But for a Peruvian it is easier. If you know the decision makers it can be done. If you have a member of your family vouch for you, yes, loans can be had.
We wanted a loan to rebuild my home in Pimentel (which I own free in clear). The Bank would not give me the loan to rebuild but offered me a loan to buy a new apartment. I guess they are connected wito construction Companies and Developers it may be more profitable to sell us an apartment.
On the upper end of the economic scale it is not ez credit becasue there is documentation to prove income. But on the low end housing the banks accept almost any evidence of income. western union reciepts etc...
The housing crisis in the USA, the main cause was not so much ez credit. Many should have purchased homes they could afford, the result, the ez credit would not impact their economics, because they could afford to make payments.
The problem?, buying more home than they could afford. This is what is happening in Peru.
The income levels do not justify the prices that people are paying. The average income in Peru:Men earned an average of 1,239 soles per month in the first three months of 2009,
The average monthly income for women in Peru was registered at 829 soles.http://www.livinginperu.com/news-8783-e ... -9-percent
About 2100 soles (2.80 per dollar). $750.00 for an average couple, lump that with mortgage and other household expenses and it does not pan out (and this is average). Many Peruvians that I know , family included are underwater in credit.