zero down mortgages.

You have to know, right now, at many banks, they are going to great lengths to get your mortgage business — the low interest rates present a great opportunity to grab up customers from other banks through re-financing and bring in new customers through new mortgages.

Now, they’re starting to encourage people to take zero-down mortgages — higher interest rates, but lower barrier to entry for first time buyers.

Mortgage brokers say those who believe they cannot afford a house because they don’t have money for a down payment are wrong. As housing prices have climbed – leaving more and more potential home buyers behind – the mortgage industry has responded with loan programs that allow even those with a short credit history to use, for example, cell phone bills to prove their credit worthiness.

So, this increases the risks for banks, since they initially have no buffer to protect them against default — in a state like California, it really is no protection as the bank is only entitled to the collateral (the house) if the buyer defaults. There’s no going after the buyers other assets.

This is essentially a bet that house prices will continue to rise. Is it rational? Or is this a short sighted maneuver to grab more mortgage businesses? I’d be willing to bet there are more than a few bank employees who’s future bonuses are determined by the volume of their mortgage business.

This might also explain why mortgage rates continue to go down despite a steady rate from the Fed.

Even Greenspan is worried about this one.

thought provoking discussion of group size in social settings

Chris Allen, over at Life with Alacrity has posted a thought provoking discussion of group size. The post takes the Dunbar Number (i.e. the upper bounds on human groups is about 150) as it’s starting point and considers the affect of the purpose of the group (ie survival vs other activities) on the optimal size. Along the way, he provides some interesting references to empirical data from the on-line multi-user gaming. Check it out.

SFGate.com: Bay Area home prices not rising as quickly as other areas

So the Fed has released a study of housing prices nationwide that shows Bay Area home prices not rising as quickly as other areas . Fresno and Riverside, on the other hand, top the list, appreciating at about 20% in the last quarter.

Homes prices in Santa Clara County grew at one of the slowest rates in the nation during the fourth quarter of 2003, while seven other metropolitan areas in California ranked among the top 10 with the highest year- over-year gains, according to a new federal report.

House prices in other Bay Area towns also slowed, tho not as much. Alameda and Contra Costa counties slowed the least.

Seven California metropolitan areas ranked among the top 10 in year-over-year home price appreciation in the fourth quarter of 2003. The Bay Area’s three biggest cities were far down the national survey of 220 cities, with San Jose finishing third from the bottom.

One thing that the article that I wasn’t aware of was the two ways that housing prices are measured: DataQuick uses median house prices from recent sales. The Fed uses data from Freddie Mac and Fannie Mae. The Fed data seems a bit more restricted (no jumbo loans) and tends to move more slowly. Right now, they disagree about how the Bay Area housing market is performing

Still, some homeowners’ experiences suggest that prices may be stagnating, in line with the federal agency’s results. Financial adviser Dan Goldie purchased his Palo Alto home for about $1.1 million in April 2002. Since then, he and his wife, Karole, have refinanced three or four times.