patrick.net

SP,

The even funnier thing about TOS' "bottom line" is that by strict definition, a recession is technically defined as at least TWO quarters of negative GDP growth.

Bottom line - TWO quarters are more than ONE quarter.

TOS said:
Do you mind sharing with us how the required cash at the table and PITI compared on a:
1- Last year picture: 790K loans @ 7% on a (30 year jumbo + piggyback) minus a 160K in a CD at +4.5% (downpayment money invested in a CD, because some crazy investor was mis-pricing piggyback loans)
versus
2- Today picture: 592K loan @ 8.5% (30 year jumbo) amortized over 29 year (to compare apple to apple) plus the return that you realized on your downpayment last year (assuming it was not in your mattress in US $$) plus your rental savings…

Last year picture (sic): $ 4700 p.m. (5250 - 550) with a zero down FB loan.

Today picture (sic): $4600 p.m. with 20% down payment, assuming you have the credit to get it funded.

The only people to whom the "last year picture" would look good are those who cannot do real math and have to rely on Realtor-Math + howmuchamonth logic + MID.

What fool would put 160K in a CD at 4.5% and borrow 792K at 7% just to get a zero down loan?

SP

To limit size of program cap the amount available to local median price of homes or lower.

That is a form of price control, right?

I think the most sensible way is to bail out the banks so that the crisis does not spread. There is no way to help "enough" homeowners without effectively nationalizing housing.

America is built on the foundation of free enterprises. Any form of gross market intervention should be frowned upon.

Bailing out banks is a form of free enterprises?

Since when?

Pretty contradictory if you ask me.

Anyway, how is it a form of price control?

Bailing out banks is a form of free enterprises?

It is easier and more effective than bailing out the homeowners. Expect some "homeowners relief" bill that has nothing to do with helping families.

Anyway, how is it a form of price control?

You were trying to limit the amounts, right?

Sorry, there will not be a public vote as to whether the bailout gets passed.

As I have said, there will be a banks bailout disguised as a homeowners bailout. "Something" will be done, just not what you think.

Realtors should lobby for bailing out the banks instead so that mortgages can remain affordable for new buyers.

If foreclosing families are given a break, then they will hold on to the homes. There will be no transactions/commissions.

The Democrats want to help out the homeowners, not the banks.

The Democrats wants to help the homeowners as much as I want world peace. Am I going to do anything about it? I have better things to do.

You need to take a class in human nature.

With me, the number should have been 99.9%.

So, you want us to... delete your posts? :)

So it is not free enterprise, just easier. Thought so.

They are limiting the total available, not the price. What is said is not set in stone, either. If the total is not that high they could help billionaire homeowners too. Oh that is what you want with the bank bailout.

Everyone I talk to knows that the problem is two-fold, not just one way. Why should just FB suffer and not FCs?

Oh that is what you want with the bank bailout.

Not really. But it is just easier and it had been many times before. Banks will still lose some. Think about it, if banks are allowed to take the full hit, many smaller banks may fail. The people will be hurt.

Why should just FB suffer and not FCs?

We should not apply value judgment in economic decisions.

“The NAR and NAHB funded Democrats want to help out the homeowners.”

Sorry, they want to help potential home buyers or at most home sellers. They should not care whether existing homeowners can keep their homes.

Mortgage people may want homeowners to hold on for more refinancing. But their reputation is pretty bad right now.

Let me get this straight. Back in 2005 we were all just a bunch of JBR's b/c we wanted "some" connection between home prices and what people could actually afford to pay? Next we were fitted for tin-foil hats for pointing out gross tax abuses along with deliberate under pricing to ignite bidding wars and now we're all just a bunch of wet blankets for being against a bailout? :(

O.K, I got it.

That makes sense, BUT, if the inventory is flooded with subprime borrowers selling their homes, this causes prices to decline a lot. Foreclosures also bring down home prices. And what comes down along with prices? The infamous 6% commission, of course!

If they change to terms to let homeowners keep their homes, or apply any form of price control, there will be no prices and no transactions.

6% of something is still better than 6% of 0.

A bank bailout is the most sensible solution.

Oh Banks are the People. What kind of reality do you live in? Just the other week my wife's bank fired some of their most senior tellers.

Value judgments in economic decisions. Sorry dude, I am human like the vast majority of people, not a statistic, like economists or people who take them too seriously like you think we are.

So what if bank bailouts have been done before. Doesn't make it right or the best decision either.

I'm sorry, I am saving my charitable efforts to help out those who have fallen behind on their Ferrari payments and can't afford petrol. You wouldn't expect people with modest incomes to drive Camrys, would you?

That's why this is so pathetic. 6 mos. ago it was "buy now or be priced out forever" and now it's "Why a bailout makes sense!"

I mean, if we're at the point where we're actively discussing a bailout then can we at least agree that the "appreciation" from 2003 to 2006 was just so much fluff and hot air?

Now it's a "crisis".

"ease the current crisis and protect consumers"

Oh...! You mean the crisis YOU created! Protect consumers? Protect them from what? You?

I'm in favor of a homedebtor/bank bailout as long as Congress is also willing to retroactively reimburse me for any past and future gambling losses (though I get to keep any winnings, of course). Oh, and I'd like to be retroactively "bailed out" on my student loans that took 11 years of scrimping and working shitty jobs to pay back.

Barring that, FUCK YOU Mr. Homedebtor & Mr. Bankster.

@HARM,

That's kinda my point. Just one more thing to love about the housing "boom". Can you BELIEVE this!? After everything the REIC/perma-bulls have dragged us through they still have the b@lls to ask for a bailout! And get this, (they're reasonably confident that they'll get it!)

No question, this entire event has been driven by herd mentality, and so far... it's WORKED! Why stop now?

I am human like the vast majority of people, not a statistic

A single foreclosure is a tragedy. A million foreclosures is a statistic. :)

The problem is there are way too many realtors with way too much time on their hands. So instead of going out start a Web 2.0 social networking company or something else marginally less useless, they spend their time pretending not to be realtors posting on blogs.

Hint: They are *all* realtors (or otherwise in the industry).

Didn't they catch like half of the regular non-agent posters on Zillow.com's forums were really those same "registered agents" using aliases just agreeing with their own bullshit?

I've seen Patrick.net listed on at least 3 RE-blogs as a place "concerned agents should visit".

2007 Realtor Bloggers == 2005 Freeper Bloggers. Just a bunch of knuckle dragging fucktard choads.

Yeah, I hate the idea of bankruptcy. A college pal of ours who liked to live better than her teacher’s salary *intentionally* bought a whole bunch of new expensive stuff on a whole bunch of new expensive cards even as she was making appointments and plans with her bankruptcy lawyer. She ran up an additional $10K in debt so that she would have everything she needed to start fresh. And this was $10K around 1995–to put it in perspective, $10K was close to half of her first year teacher’s salary in the town where she lived.

Um, that’s stealing.

Ok, there seems to be a few misconceptions here about bankruptcy that need clearing up. IANAL, nor BK expert --haven't filed BK, but a few in my family have. Even so, it seems that a fair % of people here seem to think it's some kind of revolving welfare program exclusively used by the deliberately irresponsible.

While, as Randy often likes to remind us, whenever there's a government program, there are always those who will find loopholes and try to game the system, every major study on the subject (including the Harvard one last year) have found that "gamers" so not constitute a majority or even large % of those who file. On the contrary, BK is used by most of the public as it was intended: as an avenue of last resort.

Bankruptcy actually has its origins in the ancient Biblical tradition of "Jubilee": The concept of the Jubilee is a special year of remission of sins and universal pardon. In the Biblical book of Leviticus, a Jubilee year is mentioned to occur every forty-nine years, in which slaves and prisoners would be freed, debts would be forgiven and the mercies of God would be particularly manifest.

Bankruptcy as a "fresh start from debt" concept was introduced to English Common law in 1570, mainly as a way of relieving overcrowded debtors prisons.

No form of BK is perfect, and like any government program, it can be gamed. But let's face reality people, it's there for YOUR benefit as well as your idiot neighbor's. Yes, the regulars on this blog tend to be unusually responsible, finance-literate and of the renter-saver type. Even so, no one here is immune to financial ruin. Anyone of us could lose his/her job (or business) and health insurance tomorrow, through no personal fault. Any one of us here could be bankrupted in the future by medical expenses or failed investment or a business deal gone bad.

BK is there as an option of last resort --and should be treated as such, I agree. If some of you would like to tighten up requirements to discourage "gaming" that's one thing (though I believe Congress already took care of that in spades back in 2005). However, would anyone here really care to back to the bad old days of debtor's prison? Anyone care to be hounded to your grave about some huge unpaid medical bills you got in your 20s due to no health insurance?

For that matter, why is it that corporations get a total free pass while individuals get the new "means test"? Ford, Chrysler, GM, AA, United, Continental, etc. all get to file BK as often as they like, while we put individuals through the wringer. Seems to me BK laws should be *at least* as lenient towards real living people as non-living corporations, no?

Peter P,

O.K, that was a good one! Seriously though, where does NAHB come off talking 'bout "stability"? They're the ones that threw the people they JUST sold homes to under the bus when they got in the slightest pinch and started to offer all the upgraded pregraniteel and free olympic sized swimming pools!

How many times have we seen the SSOTW where miffed recent buyers can in no way compete with the very developer that just sold them up a creek?

DinOR, they still have good spinnists. :)

I wonder why North Korea's official name is Democratic People's Republic of Korea. Democratic. People's. Republic. Hmm...

Isn't something like Authoritarian Kim's Kingdom more appropriate?

goman,

Estimates are that about 30% of the households in this country are rentals and an additional 31-34% own their homes free of debt. Of the remainder, some portion are simply not in trouble financially - they're meeting their obligations and appear to be able to continue doing so. You may argue the figures by a few points, but there can be little doubt that most of the country, by a wide margin, are not requesting a bailout from anyone.

You seem to want to frame the discussion in terms of class warfare. I say you can't characterize renters and paid-up homeowners as some kind of elite. They're every sort of person living every sort of life and all they have in common is their good sense and the good luck (for all of us) to form a considerable majority.

If the few measures which have been taken so far look elitist to you, you haven't been paying attention. The fed has acted to keep markets from stopping, and not to pick up the tab for speculation. There's a world of difference. As it stands now, lenders and investors in asset-backed securities, investment banks and private equity (all the people you evidently despise) have been given no protection from the consequences of their actions. They're going to lose money, and many will be out of work.

Let me stress that keeping the banking system in working order is different from 'propping up the rich' as it seems you would prefer to see it. The real moral hazard is to be found in publicly-funded programs or monetary policies which insulate everyone from all downside risk.

Grow the f*^k up.

The real moral hazard is to be found in publicly-funded programs or monetary policies which insulate everyone from all downside risk.

Exactly.

Just talked to an acquaintance in the mortgage industry.

Jumbo loan remains in the semi-shut-down stage, because no investors will buy them. People without a good credit and a solid family income (read: $200K or above) can hardly borrow anything beyond $417K. Those who pass the threshold can only borrow up to 3x gross household income. Secondary loan+ primary loan combination to come up with enough dp is on life support.

So, the higher-income worker bees with a long enough earning history in the valley now can only borrow up to $750K (assuming $250K income). That will put a cap on middle upper class housing price at $937K.

People without a good credit and a solid family income (read: $200K or above) can hardly borrow anything beyond $417K. Those who pass the threshold can only borrow up to 3x gross household income.

Wow. If this is representative of the general mortgage market, this will *destroy* prices in CA. I doubt there's a broom closet to be had in Pasadena for less than $417k.

I heard similar things from a MB friend. Looks like 10% DP is the absolute minimum now. And even that is difficult to pull.

Wow. If this is representative of the general mortgage market, this will *destroy* prices in CA. I doubt there’s a broom closet to be had in Pasadena for less than $417k.

Yep. The prices we see now are simply lagging the financial reality of the market.

NOT INVESTMENT ADVICE

Peter P,

I agree. They're totally unreal. We really can't say where prices are right now and probably won't until after the dust settles.

DinOR :

That’s why this is so pathetic. 6 mos. ago it was “buy now or be priced out forever” and now it’s “Why a bailout makes sense!”

First they were trying to convince us that housing prices will keep going up forever. Now they are trying to argue that the prices will not fall due to bailout etc.

The only problem is they are a bit too late in their arguments. Prices have already started coming down. I have noticed a sea of change in the attitude of Bay Aryans - including dual income immigrant techies. Some people even realize that median going up is a deceptive indicator ! Who knew !

Given the way the money faucet works, I think the current "fair" market price for SFHs in good neighborhoods should be around $800K-950K, which means lots of these 1.xM homes will need to come down 25-30% to meet the "new market".

Since we know that the market always overreacts, so it is possible that you may pick up a deal, say $650K in San Marino or something.

10% dp will not work for something without a 750+ credit score.

Now in order to borrow more than $417K, you need aboslutely the combination of the following 3:
1) 10% dp as the absolute minimum
2) more than 3 years of documented earning history that supports your borrowed amount (3x)
3) credit score of 750+

Even so, you are looking at a rate of 7+%. People who cannot jump through such hoops may still get money if they are lucky, at about 12% rate.

The SF Bay Area Craigslist ReduceOMeter has been shutdown, because, quite frankly, it just wasn't that much fun any more. As a replacement, may I introduce the ShortSaleOMeter. There were 89 "short sale" listings for the two day period of Aug. 31-Sept. 1. Even a couple of condos in *gasp* Marin. Don't worry FBers, your crys for help are not going unheard...

StuckinBA,

Exactly. I just can't understand why any REIC member would find this something to boast about?

"Go ahead, take the plunge (even if prices are in a free fall and your source of funding is in doubt!) How much lower could prices go down with a bailout at the ready?"

Great sales pitch! How's that working out for you? :( Pathetic.

For that matter, why is it that corporations get a total free pass while individuals get the new “means test”? Ford, Chrysler, GM, AA, United, Continental, etc. all get to file BK as often as they like, while we put individuals through the wringer.

To be fair, AA has never file for bankruptcy.

"may I introduce the ShortSaleOMeter"

You certainly may! Sounds like the only sensible alternative. Like I say, with as many specuflippers (TM) going the "no guts, no glory" route when insisting on their 'wishing price' this may be a more accurate indicator anyway. I mean, the guy is 5 months behind on his specu-payments and he can only rent for 1/2 to 2/3rds. of his monthly nut so WTF!

"Either I'll get lucky and sell it for what I owe, or it'll go back to the bank, right?"