A Tough Decision In New Jersey

This story from New Jersey shows how a home price boom is a financial dead-end. It's titled, 'Leave N.J., or go deep into debt? Taxes, high costs squeeze middle class.' "The FDIC reported that 20 percent of all mortgages in New Jersey last year were interest-only loans, compared with 15 percent in New York and 11 percent in Pennsylvania. But some local mortgage brokers said that volume has grown this year." "(Broker) Jim Brown in Spring Lake Heights, for example, said 60 percent of his mortgages are interest only. 'It takes $80,000 to $100,000 (in) income to purchase a home, provided they don't have a lot of debt going into the home,' Brown said. 'Kids are having trouble staying in the same hometown as their parents because there's nothing affordable.'" "'The concern is whether home buyers trading up will be able to afford the current price structure that current baby boomers are going to vacate,' said Jeffrey Otteau." "What would happen to home prices if interest rates go up and income growth continues to lag? For one, residents with interest-only financing won't be able to afford their mortgages, raising the specter of foreclosure. 'If you want, you can paint a bleak picture from that,' Otteau said." "'We're so atypical around here, it's not even funny,' said (mortgage broker) Drew Anlas in Brick. Not long ago, condominiums were less than $100,000, and only homes with waterfront views were more than $1 million. Not anymore, he said. 'The average loan size in the last 10 years has more than doubled. People are borrowing a lot more than they used to,' Anlas said. 'We've created a monster.'"