CA foreclosures up 67% from last year!

[bennylong]

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/08/03/FORECLOSURE.TMP

Finally, we might see houses in San Francisco selling for less than $800,000.00!

Foreclosure up 67% from last year. The end is coming for you people with ARM! This is only the beginning as more ARM are up next year.

 

[Slew Foot]

yup, 500 billion this year, $2 trillion next year, $1.2 trillion in 2008 (i think).

Im glad I sold my SF home for $500K profit

 

[Cattlegod]

sell sell sell!!!

 

[waggy]

yeah i read in a paper (or magazine cant rememeber) that said forclosures up all over the nation by a lot.

Ok i can understand why someone would get a ARM but never a interest only loan. same thing with 50 yr mortgage. WTF thats insane. they showed in the tribune (i think) that a 50 year mortgage will cost you more (in interest of course) and not save you really much per month.

 

[everman]

Sounds good to me :thumbsup:

 

[bennylong]

Originally posted by: waggy
yeah i read in a paper (or magazine cant rememeber) that said forclosures up all over the nation by a lot.

Ok i can understand why someone would get a ARM but never a interest only loan. same thing with 50 yr mortgage. WTF thats insane. they showed in the tribune (i think) that a 50 year mortgage will cost you more (in interest of course) and not save you really much per month.

Yea, it will cost you a lot more and you will only save about $50 on monthly payment on a $200k loan

 

[weirdichi]

My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

 

[JulesMaximus]

No surprise here. It's only going to get worse.

 

[Slew Foot]

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

 

[Amplifier]

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

bro you still maintain equity gained by appreciation. you still can amortize your loan by investing the savings or placing the savings in the bank. its not even close to renting.

 

[Amplifier]

Originally posted by: Amplifier

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

bro you still maintain equity gained by appreciation. you still can amortize your loan by investing the savings or placing the savings in the bank. its not even close to renting.

but amp amp i disagree with you!

 

[Greenman]

If you?re speculating on an increasing market, interest only loans are a fine idea. And don?t get to excited about ?the bubble? bursting, there may well be a small down turn, but there so many people waiting to jump on that bandwagon, it won?t last more than a few months.

 

[thomsbrain]

Originally posted by: Amplifier

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

bro you still maintain equity gained by appreciation. you still can amortize your loan by investing the savings or placing the savings in the bank. its not even close to renting.

yeah but you have to bet there will be appreciation, and since most interest-only people are thinking for the short-term, that's not actually a sure thing. it would really suck if you had to pay out for this mortgage for a couple years, decide or be forced to move, and then still owe $50,000 AFTER you sell your house because you didn't pay down your principle at all.

 

[Amplifier]

Originally posted by: thomsbrain

Originally posted by: Amplifier

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

bro you still maintain equity gained by appreciation. you still can amortize your loan by investing the savings or placing the savings in the bank. its not even close to renting.

yeah but you have to bet there will be appreciation, and since most interest-only people are thinking for the short-term, that's not actually a sure thing. it would really suck if you had to pay out for this mortgage for a couple years, decide or be forced to move, and then still owe $50,000 AFTER you sell your house because you didn't pay down your principle at all.

if you paid all cash and the house drops 50% in value you'd be out 50%

if you paid no cash on an interest only loan and the house drops 50% in value you'd still be out 50%

smart people dont take the money they save on an interest only loan and buy toys they use the extra money for advertisement or investments with high returns

equity is dead money thats why companies make a big deal out of return on equity especially when analyzing their apartments

 

[Queasy]

Why aren't these people refinancing from an ARM to a fixed? Honestly, it isn't that hard. I refinanced my first house when interest rates dropped and I'm about to do the same on my second.

 

[Garet Jax]

Originally posted by: Queasy
Why aren't these people refinancing from an ARM to a fixed? Honestly, it isn't that hard. I refinanced my first house when interest rates dropped and I'm about to do the same on my second.

Because the value of the house has decreased, they can't cover the difference and the mortgage company won't cover the difference.

They're upside down on their mortgage and they can't get out of it.

 

[Queasy]

Originally posted by: Garet Jax

Originally posted by: Queasy
Why aren't these people refinancing from an ARM to a fixed? Honestly, it isn't that hard. I refinanced my first house when interest rates dropped and I'm about to do the same on my second.

Because the value of the house has decreased, they can't cover the difference and the mortgage company won't cover the difference.

They're upside down on their mortgage and they can't get out of it.

Wait (I don't live in CA so bear with me) home values in CA are dropping? I've only ever heard that they are constantly rising. I can understand being upside down if you pull all the equity out of the house but home values dropping in CA is new to me.

 

[dullard]

So much to respond to in this thread. Where do I start and where do I end? I'll just randomly pick out some quotes which are interesting.

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

I don't have any links, but one simple trick usually works in this case. Ask her specifically why she needs to get an interest only loan. The answer is often something like this, "I need an interest only loan, because is the only way I can get that house, otherwise I can't afford it." Bingo, she answered exactly the problem with the interest only loan. She can't afford it. All the tricks, bells, whistles, IO loans, etc that are pulled won't change that simple fact. She can't afford the house if she needs an interest only loan. Interest only loans have their place in the world, but they are good only in very rare, unusual cases. I bet this is not one of those times.

Originally posted by: Greenman
And don?t get to excited about ?the bubble? bursting, there may well be a small down turn, but there so many people waiting to jump on that bandwagon, it won?t last more than a few months.

The typical downturn lasts 6-10 years. If you include inflation, it takes 15-20 years for housing prices to recover from a downturn.

Originally posted by: Queasy
Why aren't these people refinancing from an ARM to a fixed? Honestly, it isn't that hard. I refinanced my first house when interest rates dropped and I'm about to do the same on my second.

Because they can't afford to switch. Think about the typical California market. Suppose the mortgage was $500,000 with a 4.7% ARM a couple years ago. That meant $1958 a month in interest was being paid. Now suppose they switch to a fixed mortgage now at 6.7%, the monthly interest is now $2791. That means switching is another $833 per month. Plus there is the $2000 in refinance closing costs and the fact that they probably are stretched thin to want the ARM to begin with. Can a budget that is stretched thin handle the refinance cost + $833/month? The answer in many cases is NO. Selling and/or foreclosure (depending on how late the people realized the problem) is often the only answer. Both have downward pressure effects on housing prices.

Originally posted by: Garet Jax
Because the value of the house has decreased, they can't cover the difference and the mortgage company won't cover the difference.

They're upside down on their mortgage and they can't get out of it.

I bet that is false Garet Jax. Almost anyone who got an ARM several years ago has seen the house price increase. Especially since we are talking about CA, prices have gone up, not down.

 

[WolverineGator]

Just closed on a townhome near Orlando the day before yesterday. 6.85% 30 year fixed. Payments are $1910/month with taxes escrowed in. I have it leased for at least 2 years so all expenses are covered. Markets differ by area, so KNOW YOUR MARKET!

 

[weirdichi]

Originally posted by: dullard
So much to respond to in this thread. Where do I start and where do I end? I'll just randomly pick out some quotes which are interesting.

Originally posted by: weirdichi
My mom is thinking about an interest only loan. I'm just thinking it's nuts. You're basically renting the house if you're paying interest only. How do I convince her not to do it? Any links to resouces I can show her?

I don't have any links, but one simple trick usually works in this case. Ask her specifically why she needs to get an interest only loan. The answer is often something like this, "I need an interest only loan, because is the only way I can get that house, otherwise I can't afford it." Bingo, she answered exactly the problem with the interest only loan. She can't afford it. All the tricks, bells, whistles, IO loans, etc that are pulled won't change that simple fact. She can't afford the house if she needs an interest only loan. Interest only loans have their place in the world, but they are good only in very rare, unusual cases. I bet this is not one of those times.

I think that is the case. The problem is that she really can't afford the house. I help out as much as I can, but working part time only and going to grad school isn't helping out on the bills. The brother is a lazy ass who can't even pay me back for the insurance on his car and the cell phone he promised to pay, so he can't cover anything at all. Is there anything we can do to help us keep the house in it's current state of just paying mortgage and not going with the interest only loan?

Her reasoning is that the payments are lower so she'll be able to afford it and when it's time to move, then she'll sell it and just go get an apartment. The interest only loan is still better than renting and she can afford the monthly payments.

So from what I read, investing the saved money into accounts will be a wise idea? Any help would be appreciated.

*EDIT*
The house is in Brooklyn Center, MN, northwest suburb of the Twin Cities.

 

[cpals]

Originally posted by: WolverineGator
Just closed on a townhome near Orlando the day before yesterday. 6.85% 30 year fixed. Payments are $1910/month with taxes escrowed in. I have it leased for at least 2 years so all expenses are covered. Markets differ by area, so KNOW YOUR MARKET!

Just curious, but what was the sale price?

 

[MetalMat]

I dont wanna live in CA.

And LA = Louisiana, not Los Angeles. L.A. = Los Angeles

:beer:

 

[Garet Jax]

Originally posted by: dullard

Originally posted by: Garet Jax
Because the value of the house has decreased, they can't cover the difference and the mortgage company won't cover the difference.

They're upside down on their mortgage and they can't get out of it.

I bet that is false Garet Jax. Almost anyone who got an ARM several years ago has seen the house price increase. Especially since we are talking about CA, prices have gone up, not down.

That's probably true, but my post was in response to why can't they refinance.

 

[Garet Jax]

Originally posted by: Queasy
Wait (I don't live in CA so bear with me) home values in CA are dropping? I've only ever heard that they are constantly rising. I can understand being upside down if you pull all the equity out of the house but home values dropping in CA is new to me.

When I lived in San Francisco (early 2000s), there was an adjustment in San Jose that caused a friend of mine the problem I described. He over paid for his house and was upside down on his mortgage with no ability to refi until he covered the equity deficit. I don't know how common this is, but it has happened.

 

[FrustratedUser]

I had a feeling something was going to happen....

Anyhow, in VA the interest rates have been dropping alot the last 2 - 3 weeks now. It's almost down to the level I locked my loan at (6.375%) but I definately hit the peak of the market here. Sales are down from last month and down 5% from the same period last year.
House values here are expected to increase by 'only' 6-8%/year compared to 15-20%/year the last 4-5 years.

My luck I guess...