Housing Market Bust

[Xavier434]

Originally posted by: yuppiejr
Right from the snake's mouth:

http://www.npr.org/templates/s...y.php?storyId=12555904

Clinton, Schumer and Dodd are the big 3 - just hit google with "mortgage bail-out news" and/or add any of the last names and you'll find plenty to read...

Well I read some stuff I found on Google. This one is tricky. While I do not feel that it is fair that irresponsible people should simply be bailed out using my tax money, I fear what could happen if the drastic foreclosure rate continues to rise and how that will effect my future even though I do not own a home yet. I would like to own one in about 2 years. I am not experienced enough to understand what will happen if the government does not help. However, I do understand that if they spend that money then it needs to come from somewhere which means it will either come out of my pocket or out of some other fund which I may value more.

In particular, my favorite article that I found was on msnbc:

http://www.msnbc.msn.com/id/18059004/

From the article:

Last year, more than 1.2 million foreclosure filings nationwide were recorded by RealtyTrac, a Web site that compiles default notices, auction sales and bank repossessions.

That's a scary number.

 

[Slew Foot]

Originally posted by: vi_edit

Originally posted by: Demon-Xanth
Regarding takeing longer loans:
$100k, 8% interest
10 year: 1213.28/mo
15 year: 955.65/mo
20 year: 836.44/mo
25 year: 771.82/mo
30 year: 733.76/mo
40 year: 695.31/mo
50 year: 679.27/mo

The difference between a 30 and a 50 year isn't much. You'd only get 8% more money than you would with the 30 year for the same payment. Kind of a losing deal if you ask me. Once you hit 30 years, things level out quite a bit.

How many people in CA have only a 100k mortgage?

Do it on a more realistic figure like 300k and you are looking at:
10 year: 3639.83
15 year: 2866.96
20 year: 2509.32
30 year: 2201.29
50 year: 2037.82

That's a $1600 a month swing.

The difference between 30 and 50 isnt a whole lot, considering you're tacking on an extra 20 years of payments. Not sure how the numbers work out if you pay off more than the base amount. 300K is even a little low for CA these days, especially along the coast where people actually live.

 

[Vic]

Originally posted by: Slew Foot

Originally posted by: Vic

Originally posted by: Slew Foot
http://flippersintrouble.blogspot.com/

The Sacramento area and the central Valley are the same. I haven't checked SD in a few months but it was running similar last I ran them. Selling prices aren't really true indicators for pricing as a whole, especially now with subprimers out of the game, medians are artificially higher since people who are more qualified tend to purchase more expensive homes.

My personal rental, sold for 450K in 2005, current asking, $340K.

Oh great, anecdote and more FUD from you. :roll:


You're approaching McOwen level, pal. I just think you should know. Assuming that the "subprimers" were all buying cheaper homes is just ignorantly assinine of the actual market. Subprime loans were frequently used to buy more expensive homes. Fannie caps its loan amounts to $419k and Alt-A/Jumbo was/is much more restrictive. OTOH, lower-tier purchases are most frequently done with conforming and government programs, which have remained virtually unchanged throughout all this, and the lowest tiers remain the strongest parts of the market whereas the higher ends have practically ground to a halt.

Here's a tip: stick to your profession, because the more you post about this, the more you expose how you don't know jack about mine. I'll return the favor by not posting FUD about your profession.

Ironically, the opposite is true in the area so stop pretending you know the CA market. The expensive stuff still sells recently well, while the cheap stuff is stuck. Houses in the 2+ mill range sell in a week, while throngs of 300-600K sit for months-years in the suburbs where the flippers battle the developers chasing the market down for buyers that are few and far between. My prediction is for the upper end in CA is to collapse, with jumbo rates rising steadily.

For the most part during the boom, you couldnt even find a house in CA for under 419K, unless you had a pile of equity, there wasnt anything sold that was Fannie Mae conforming.

How about you back up your continual anecdotes with factual links (besides blogs)? And while you're at it, why don't you try actually addressing my arguments?

 

[Vic]

Originally posted by: Slew Foot

Originally posted by: vi_edit

Originally posted by: Slew Foot

Originally posted by: dullard

Originally posted by: Slew Foot
Selling prices aren't really true indicators for pricing as a whole, especially now with subprimers out of the game, medians are artificially higher since people who are more qualified tend to purchase more expensive homes.

A dozen homes out of hundreds of thousands isn't a true indicator for pricing as a whole either. The median is far more accurate than that crap you keep linking.

Yes, some people paid too much for a house. But that doesn't mean that housing prices are falling. Your link could have happened anywhere at anytime even in a rising market.

Show me anyone in the area who's trying to sell a house for 6% off the 2005 price, and Ill show you an empty open house.


In this case, EVERYONE in the CV paid too much in the last 2+ years.

You play the stock market enough. You of all people should know that the stocks that rise the fastest fall the hardest.

Same thing for real estate. Areas that had ridiculous appreciation over the last 5 years are due for the hardest correction.

Thats exactly what Ive been saying, but for some reason, people dont believe me.

Because they're genuinely not analogous. A stock is a piece of paper. A house is always a house, and people will always need houses to live in.

It's this whole stock market attitude that led to the boom in the first place, and now is fostering the bust.
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

 

[Demon-Xanth]

I chose 100k so people can easily multiply. $1600 is the difference between a 10 and a 50, not a 30 and a 50. The difference between a 10 and a 30 is 90% of that $1440, the differnce between a 30 and a 50 is only $160.

10-15=27%
15-20=14%
20-25=8%
25-30=5%
30-40=5% (notice it's a 10 year gap now)
40-50=2%

 

[SSSnail]

Originally posted by: Vic
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

Once upon a time in America, people used to be more prudent and honest with their lending practices also.

 

[yuppiejr]

Originally posted by: Xavier434

Originally posted by: yuppiejr
Right from the snake's mouth:

http://www.npr.org/templates/s...y.php?storyId=12555904

Clinton, Schumer and Dodd are the big 3 - just hit google with "mortgage bail-out news" and/or add any of the last names and you'll find plenty to read...

Well I read some stuff I found on Google. This one is tricky. While I do not feel that it is fair that irresponsible people should simply be bailed out using my tax money, I fear what could happen if the drastic foreclosure rate continues to rise and how that will effect my future even though I do not own a home yet. I would like to own one in about 2 years. I am not experienced enough to understand what will happen if the government does not help. However, I do understand that if they spend that money then it needs to come from somewhere which means it will either come out of my pocket or out of some other fund which I may value more.

In particular, my favorite article that I found was on msnbc:

http://www.msnbc.msn.com/id/18059004/

From the article:

Last year, more than 1.2 million foreclosure filings nationwide were recorded by RealtyTrac, a Web site that compiles default notices, auction sales and bank repossessions.

That's a scary number.

Look at the foreclosure situation like the .COM bust a number of years ago... People made a lot of risky investments and inflated the value of their commodities well beyond what the market would endure. Once the startups living on borrowed time and venture capital folded it set off a chain reaction of selloffs and bankrupcies the rest of the market lost a tremendous amount of value in a short amount of time. Only the financially sound institutions survived while the rest cleared out and flooded the market with a glut of everything from IT talent to lightly used office furniture that had ripple effects throughout the economy.

I compare that situation to the housing market today - it's a bubble that's about to pop due to the overvaluation of homes and a lot of risky lending to financially unsound individuals. For a short time it will hurt a lot of people who had no business being in the market but it will create tremendous opportunity for new homebuyers and investors who are essentially frozen out of the current market. It's NOT the responsibility of the taxpayers at large to bail these people out any more than it was the government's job to bail out investors who lost their shirts in the .COM bust.

Wall Street surged back in a fairly short time from the .COM bust (even with the 9/11 terrorist attacks) and will do the same from the housing bust. If the government starts bailing people out it's going to cost tax dollars to somebody which means less money in the economy (and less tax revenue for the government) which has a tremendous ripple effect and will greatly slow the market's natural recovery.

 

[Xavier434]

Originally posted by: yuppiejr
Look at the foreclosure situation like the .COM bust a number of years ago... People made a lot of risky investments and inflated the value of their commodities well beyond what the market would endure. Once the startups living on borrowed time and venture capital folded it set off a chain reaction of selloffs and bankrupcies the rest of the market lost a tremendous amount of value in a short amount of time. Only the financially sound institutions survived while the rest cleared out and flooded the market with a glut of everything from IT talent to lightly used office furniture that had ripple effects throughout the economy.

I compare that situation to the housing market today - it's a bubble that's about to pop due to the overvaluation of homes and a lot of risky lending to financially unsound individuals. For a short time it will hurt a lot of people who had no business being in the market but it will create tremendous opportunity for new homebuyers and investors who are essentially frozen out of the current market. It's NOT the responsibility of the taxpayers at large to bail these people out any more than it was the government's job to bail out investors who lost their shirts in the .COM bust.

Wall Street surged back in a fairly short time from the .COM bust (even with the 9/11 terrorist attacks) and will do the same from the housing bust. If the government starts bailing people out it's going to cost tax dollars to somebody which means less money in the economy (and less tax revenue for the government) which has a tremendous ripple effect and will greatly slow the market's natural recovery.

That makes sense to me and it does make me feel a lot better. I hope you are right.

 

[Slew Foot]

Originally posted by: Vic

Originally posted by: Slew Foot

Originally posted by: vi_edit

Originally posted by: Slew Foot

Originally posted by: dullard

Originally posted by: Slew Foot
Selling prices aren't really true indicators for pricing as a whole, especially now with subprimers out of the game, medians are artificially higher since people who are more qualified tend to purchase more expensive homes.

A dozen homes out of hundreds of thousands isn't a true indicator for pricing as a whole either. The median is far more accurate than that crap you keep linking.

Yes, some people paid too much for a house. But that doesn't mean that housing prices are falling. Your link could have happened anywhere at anytime even in a rising market.

Show me anyone in the area who's trying to sell a house for 6% off the 2005 price, and Ill show you an empty open house.


In this case, EVERYONE in the CV paid too much in the last 2+ years.

You play the stock market enough. You of all people should know that the stocks that rise the fastest fall the hardest.

Same thing for real estate. Areas that had ridiculous appreciation over the last 5 years are due for the hardest correction.

Thats exactly what Ive been saying, but for some reason, people dont believe me.

Because they're genuinely not analogous. A stock is a piece of paper. A house is always a house, and people will always need houses to live in.

It's this whole stock market attitude that led to the boom in the first place, and now is fostering the bust.
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

Ill agree with you on that one, people were treating houses as investments instead of residences which led to the boom, and is now leading to the bust. The bubbliest areas being the ones that will all the most. Of course, when you factor in houses/apartments/condos/etc... there is now a huge oversupply of housing units. Supply and demand being what it is...

 

[Vic]

Originally posted by: SSSnail

Originally posted by: Vic
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

Once upon a time in America, people used to be more prudent and honest with their lending practices also.

You mean through discriminatory redlining? Confusing non-standard documents and disclosures? The S&L crisis? Rampant inequality in rate and fee pricing for comparably qualified borrowers? Denying loans except to those who don't need them?

No, they weren't.

 

[PingSpike]

Where will people go for the their get rich scheme from here? First it was tech stocks, then it was real estate speculation...

 

[Xavier434]

Originally posted by: PingSpike
Where will people go for the their get rich scheme from here? First it was tech stocks, then it was real estate speculation...

I hear multi level marketing is becoming popular :laugh:

 

[PhoenixOrion]

Finally found a very good article addressing the question of OP, options besides foreclosure in the brink of a house price bust.

http://www.businessweek.com/th...3/the_new_exit_st.html

 

[ElFenix]

Originally posted by: Xavier434

In particular, my favorite article that I found was on msnbc:

http://www.msnbc.msn.com/id/18059004/

From the article:

Last year, more than 1.2 million foreclosure filings nationwide were recorded by RealtyTrac, a Web site that compiles default notices, auction sales and bank repossessions.

That's a scary number.

it's nothing without context.

Originally posted by: Demon-Xanth
I chose 100k so people can easily multiply. $1600 is the difference between a 10 and a 50, not a 30 and a 50. The difference between a 10 and a 30 is 90% of that $1440, the differnce between a 30 and a 50 is only $160.

10-15=27%
15-20=14%
20-25=8%
25-30=5%
30-40=5% (notice it's a 10 year gap now)
40-50=2%

and that's only for loans of the same interest rate.

 

[dullard]

Originally posted by: PhoenixOrion
Finally found a very good article addressing the question of OP, options besides foreclosure in the brink of a house price bust.

http://www.businessweek.com/th...3/the_new_exit_st.html

Did you just refer to yourself as OP? I've never seen that done before.

My GF bought a house this January. It was a nightmare buying experience, especially for a first time home buyer. Why? The previous owners were doing a short sale just like that article mentioned. Her housing offer was accepted many, many months before the deal finally closed. It just took banks that long to decide to allow it to go through. Special deals had to be made with everyone involved: GF paid more than agreed to in writing, real estate agents took a cut to their commission, sellers had to cough up extra cash, and the banks had to decide to take their small losses and run rather than foreclose.

While it can happen, short selling is a nightmare for BOTH the buyer and the seller. Especially when the buyer doesn't know ahead of time of the pending foreclosure.

 

[Demon-Xanth]

Originally posted by: ElFenix

Originally posted by: Demon-Xanth
I chose 100k so people can easily multiply. $1600 is the difference between a 10 and a 50, not a 30 and a 50. The difference between a 10 and a 30 is 90% of that $1440, the differnce between a 30 and a 50 is only $160.

10-15=27%
15-20=14%
20-25=8%
25-30=5%
30-40=5% (notice it's a 10 year gap now)
40-50=2%

and that's only for loans of the same interest rate.

Yes, and iirc longer term loans get higher rates. Which can make it get to a point where shorter=cheaper.

 

[nweaver]

Originally posted by: waggy

Originally posted by: PhoenixOrion

Originally posted by: waggy
heh trying to flip a house out in the country (we have maybe 300 people in town) is just a dumb idea.

there goes the real estate saying "location, location, location"

oh yeah. not everyone wants to live in a town where you have to drive 17 miles to buy milk.

granted house's are far cheaper out here. I paid $150k for my house. if i lived in 2 of the nearest big towns (Rockford or dekalb) it would be $250+ easy.

yeah, a lot of those people are the opposite of clastrophobic, and fear the true dark of the country, and many are allergic to the fresh air.


FYI, it's only about 12 miles to get milk for us...or I suppose we COULD get it at the little gas station at a hugely inflated rate, then it's only about 2-3.

 

[PhoenixOrion]

Originally posted by: dullard

Originally posted by: PhoenixOrion
Finally found a very good article addressing the question of OP, options besides foreclosure in the brink of a house price bust.

http://www.businessweek.com/th...3/the_new_exit_st.html

Did you just refer to yourself as OP? I've never seen that done before.

Lol. Why not?

I'm not blackinches by the way. Just to make things clear.

 

[Exterous]

Originally posted by: yuppiejr

Originally posted by: Xavier434

Originally posted by: yuppiejr
The idea that some neo-socialist politicians are proposing a bail-out makes my blood boil... Reward the financially foolish by giving them a free house and let the rest of the taxpayers foot the bill just to win a few votes? Unreal...

What are these proposed bail-outs you are referring to? I'd like to read about this.

Right from the snake's mouth:

http://www.npr.org/templates/s...y.php?storyId=12555904

Clinton, Schumer and Dodd are the big 3 - just hit google with "mortgage bail-out news" and/or add any of the last names and you'll find plenty to read...

Good god - yet another scheme to use my hard earned money to pay for some other idiot's mistakes.

 

[SSSnail]

Originally posted by: Vic

Originally posted by: SSSnail

Originally posted by: Vic
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

Once upon a time in America, people used to be more prudent and honest with their lending practices also.

You mean through discriminatory redlining? Confusing non-standard documents and disclosures? The S&L crisis? Rampant inequality in rate and fee pricing for comparably qualified borrowers? Denying loans except to those who don't need them?

No, they weren't.

As oppose to giving loans to anybody that could breath and then sell them off so you don't have any responsibility and make a buck load?

 

[Vic]

Originally posted by: SSSnail

Originally posted by: Vic

Originally posted by: SSSnail

Originally posted by: Vic
Once upon a time in America, people used to be far more ethical in their attitudes towards the housing market.

Once upon a time in America, people used to be more prudent and honest with their lending practices also.

You mean through discriminatory redlining? Confusing non-standard documents and disclosures? The S&L crisis? Rampant inequality in rate and fee pricing for comparably qualified borrowers? Denying loans except to those who don't need them?

No, they weren't.

As oppose to giving loans to anybody that could breath and then sell them off so you don't have any responsibility and make a buck load?

I don't see how one extreme justifies another. The fact is that you said that "people used to be more prudent and honest with their lending practices" and I simply pointed that out to be historically incorrect. OTOH, people treating their homes like the stock market did contribute significantly to this issue (and coincidentally, to a loosening of lending guidelines as rapidly appreciating values reduced lender risk).

 

[nweaver]

Originally posted by: Fritzo
That's why I would NEVER go with a variable rate loan. Never have, never will. They never turn out pretty.

ARM's are a great tool for a very specific thing. The problem is they have been used like a hammer for the last couple of years. "Sure, we can fit you into that 500K house on minimum wage..."

My friend is a mortgage broker/real estate investor, and used them (he is not using them now, and hasn't for a while) to flip properties. He was making money hand over fist when it was booming, and he is smart enough to see the roadsigns and get out/get into better options. He has freed up TONS of cash, and is currently waiting for the market to bottom out before plucking up foreclosures that would make good rentals for the next couple of years.

 

[BurnItDwn]

Meh ...
I went with 0 down.
I went with a 3/1 arm.
My first adjustment is due for This October.

I am not concerned or worried. I expected rates would go up, and I expected my payment would go up.
That said .. my mortgage to income ratio is not at all bad. I would never buy more house than I could afford.

My solution is Stupid lenders who gave out loans to people who clearly could not afford them are going to suffer.
Stupid people who bit off more than they could chew are going to suffer.

I feel sorry for people when medical bills or sudden unemployment fvcks them over. That is a terrible thing. Or for when divorces fvck up people's financial plans ...

But ... people who are just stupid .. I don't feel sorry for them.
I dunno, maybe I'm just an ass.

 

[nweaver]

Originally posted by: BurnItDwn
Meh ...
I went with 0 down.
I went with a 3/1 arm.
My first adjustment is due for This October.

I am not concerned or worried. I expected rates would go up, and I expected my payment would go up.
That said .. my mortgage to income ratio is not at all bad. I would never buy more house than I could afford.

My solution is Stupid lenders who gave out loans to people who clearly could not afford them are going to suffer.
Stupid people who bit off more than they could chew are going to suffer.

I feel sorry for people when medical bills or sudden unemployment fvcks them over. That is a terrible thing. Or for when divorces fvck up people's financial plans ...

But ... people who are just stupid .. I don't feel sorry for them.
I dunno, maybe I'm just an ass.

Responsibility is as much on the borrowers wanting more house as the lenders willing to do magic tricks to get that house. Not to mention, those who are in trouble with their homes, are the same ones with maxed out CC, a lease for a car they cannot afford (or two) and boats/4 wheelers, etc. Those who aren't in trouble, are those who bought responsibly (within their means) and live on a budget, drive smaller/older/less expensive cars, etc. It's financially stable versus financially unstable.

 

[smack Down]

Originally posted by: nweaver

Originally posted by: BurnItDwn
Meh ...
I went with 0 down.
I went with a 3/1 arm.
My first adjustment is due for This October.

I am not concerned or worried. I expected rates would go up, and I expected my payment would go up.
That said .. my mortgage to income ratio is not at all bad. I would never buy more house than I could afford.

My solution is Stupid lenders who gave out loans to people who clearly could not afford them are going to suffer.
Stupid people who bit off more than they could chew are going to suffer.

I feel sorry for people when medical bills or sudden unemployment fvcks them over. That is a terrible thing. Or for when divorces fvck up people's financial plans ...

But ... people who are just stupid .. I don't feel sorry for them.
I dunno, maybe I'm just an ass.

Responsibility is as much on the borrowers wanting more house as the lenders willing to do magic tricks to get that house. Not to mention, those who are in trouble with their homes, are the same ones with maxed out CC, a lease for a car they cannot afford (or two) and boats/4 wheelers, etc. Those who aren't in trouble, are those who bought responsibly (within their means) and live on a budget, drive smaller/older/less expensive cars, etc. It's financially stable versus financially unstable.

And it is the same landers who lent money so they could max out their credit cards, lease a car, ect.