The Increasing Price of Naples Real Estate Makes Exotic Loans More Popular

The rapid increase in the cost of Naples real estate has outpaced "personal income growth, further widening the gap between what consumers earn and what they can afford to borrow." Some market watchers blame skyrocketing housing value appreciation for the weakening housing markets throughout Florida. However, the Naples real estate market, ranked number one in the county in price appreciation, has not been affected by the huge jump in prices.

In order to keep up with soaring Naples real estate prices, more homebuyers are turning to exotic and high-risk home loans. Loans increasing in popularity within the Naples real estate market are interest-only, "in which borrowers pay no principal on the loan for the first five or ten years," and adjustable-rate mortgages "that give borrowers a variety of monthly payment options."

The goal of these loans is to keep "payments low enough to allow the borrower to get the loan." But as Naples real estate inventory begins to increase and values flatten or even decline, the loans can be harmful to "both borrower and lender."