Meanwhile, the median price of a single-family home in the Lake Tahoe Basin was $732,875 the past quarter, according to a quarterly analysis by real estate agency, Chase International.

These figures suggest that after a number of years of relentless increases, housing prices are softening a bit, at least in some areas. What may or may not soften are mortgage payments in the years ahead.

MORTGAGE PAYMENTS
"Loan Landslide on Shaky Soil" was the front page headline in the October 4th San Jose Mercury News, a major metropolitan daily in the heart of Silicon Valley. The story goes on to document the potential risks to people who have taken (or are taking) on "exotic, easy-to-get loans" in order to enter the real estate market. The impact of such loans--"payment shock"--can be increasingly severe if housing prices stabilize or drop in combination with an increase in interest rates.

For example, the Mercury News story provided examples of the payments schedules for three different types of loans. Two of the examples, a "3/1 Hybrid ARM" and an "Option ARM," had monthly payment schedules that doubled or tripled during the life of the loan.

There are many names for the newer-type loans. Here are few:

Twenty- or thirty-, or even forty-year Fixed Rate Loans
These used to be the standard. People who qualify for such loans at a bank or a savings & loan pay a known, fixed amount for the life of the loan.

ARMs, Hybrid ARMs, and Option ARMs
These are various types of adjustable rate mortgages, which mean the size of monthly payments will likely change over time. Some ARMs begin with a very low "teaser" rate but escalate quickly. Others start with a fixed rate but switch to an adjustable rate later. One variety allows for interest-only payments in certain circumstances.

Piggyback Loans
These are combination loans--often a mortgage loan and a home-equity loan are packaged together. The Wall Street Journal reported Wednesday (October 12) that banks are actually sweetening home-equity offers “to entice nervous buyers.” The WSJ further reported that banks’ profit margins on home-equity lines are twice as high as those on other consumer banking products such as credit cards.

Non-traditional lenders including online sources, mortgage brokers, and finance companies make a significant portion of such newer-type loans. Eager lenders, eager buyers, and eager realtors (who are reported in the WSJ to have made $61 billion in commissions in 2004) make an interesting combination.

Overall, the message from unreal estate seems to be the ancient admonition: caveat emptor (buyer beware).