patrick.net

How you like your big gov dems now?

Obama's statement was just lip service bullshit.
The only thing that they can do is buy some mortgages from guys paying 7% and replace them with 4%.
House prices are going down, it's gravity. The bubble will deflate after it has popped.
Nothing Obama nor anyone else says can create the ability of people to get a down payment and a job out of thin air by Obama running his mouth.
Who cares who is underwater in his mortgage and how far? He should either 1. pay the mortgage or 2. leave it to the bank.
Places like Seaside, CA had houses go from $300K to $700K in 6 years. Now they are $269K and falling. They fell 7.2% in 2011.
Nothing anyone can do can stop this. Why? because the houses are still too expensive for the incomes of the people who live there, $49K.

So far, these things have generally been passed by our congress regardless of party affiliations.

If you think about it, borrowers don't really choose whether the loan held is fannie/freddie or private. The private loans are probably held by the banks because of lower risk profile. It only makes sense to bring it up to par with Fannie and Freddie.

The banks are no longer lending money to just anyone who can hold a pen. Why do you think those times are coming back?

My friend here who has a house that was once "worth" a small fortune always moans and complains that the govt. is not "helping" housing. He is of course a hypocrite: he likes Ron Paul, he has a safe with some silver and gold coins in it, has guns in case of a zombie apocalypse, etc. His business is under the radar using craigslist/ebay and multiple paypal accounts.
He starts to get upset when I tell him that those short brown people pushing baby strollers, those panhandlers, those baristas, those dilettantes hanging at Starbucks, Verve, Lulus, Santa Cruz Roasting Co, are not going to scrape together $120K to put down on a house around here. Not ever.
I tell him to look around him when he's buying his macadamia nuts at Trader Joes and tell me which of the kooks in there will have that $120K jingling in their jeans.
Forget them qualifying for a $500K mortgage.

clambo says

I tell him to look around him when he's buying his macadamia nuts at Trader Joes and tell me which of the kooks in there will have that $120K jingling in their jeans.
Forget them qualifying for a $500K mortgage.

You want kooks? Try The Food Bin and The Herb Room!

But in all seriousness, I think that most people are somewhat like your friend in that housing is an entitlement. Aspiring-to-home-ownership is thrust into Americans' faces from the day they are born. Lots of us are on here venting because we see how messed up the system is, and despite that, we are all still complaining because we WANT to own houses. Home-ownership is sort of a sacred cow politically, and people also see it as such.

The bubble years really messed up people's mentality toward housing, and many people bought into it (and are still bought into it). It is just going to take time for the rosy vision of housing to die. You would think that it would go away fast given the market's behavior in the last 5 years, but people are eternally optimistic. It is fairly easy to convince someone of a good thing, and once you get them to buy-into it, it will take a lot longer to get them to give up on it than it took to get them into it once they are personally invested.

The market will continue to correct itself. Having big government and crooked private party cartels involved makes the process agonizingly slow. Despite this, the foundation of our economy is rotten and we can only put fresh paint on the exterior walls so many times before it actually comes apart. At that point, we will at least be forced to deal with the foundation issues. Yay, metaphors.

Sometimes I watch an old netflix movie. In Barefoot in the Park, 1967, Robert Redford is a lawyer in manhattan and he and Jane Fonda have their honeymoon in the Plaza hotel. The rate=$30/night.
Later they have an overpriced crummy apartment in the Village downtown: $125/month.
Robert Redford complains because he has so little dough left over.
Rents and real estate values generally went up at the rate of wages rising (inflation).
ONLY when banks started opening the floods of easy money to anyone breathing to buy houses did the value of houses rise anywhere above inflation.
Those days were an aberration. They were a mistake, and they won't be repeated (at least for mortgages).
Renting is not a death sentence. My businesswoman grandmother 1. always had dough 2. always rented houses 3. died with dough
She had an interesting business, that some readers may like. She had an antique business in New York.
Who were her suppliers? Some were those who sold her awesome things for cheap because they were WIPED OUT in 1929!
Grandma had some cash and she could buy their nice antiques for cash on the barrel head and later sell them.
Maybe some of her sources were widows whose husbands jumped off tall buildings when they were wiped out in the stock market crash of 29?
Maybe she had an irrational fear of: 1. debt 2. leverage 3. risk. This might explain her dislike of mortgages
Either way, she had a wonderful lifestyle, lived in awesome places, and didn't die broke.

"If you're underwater through no fault of your own and can't refinance, this plan changes that," Obama said in a speech in Falls Church, Va. On Wednesday.

Oh great, thanks Obama. The people who have school loans and 2+ kids and car loans got a massive house loan at over 4 times their annual salary and while living month-to-month, the bread earner lost their job that required no specialized education. Awesome. No fault of their own of course. No freaking accountability for anyone anymore. Spend and spend and when you hit a bump in the road, cry to the government that things are unfair and everyone else is getting bailed out so you should too.

Despite what the guy with a picture says, the banks are NOT going to be allowed to make bad mortgage loans and sell them as securities.
1. US govt policy is against it.
2. the suckers who "invested" in them lost money. there will be no buyers ever again.

Other things will be the next bubble, but it's not gonna be real estate.

This is a nice way to clear out questionable titles too. All in all a good, populist way to help banks and stick the bill to tax payers. Cause you know for some of these folks saving some $400-500 a month isnt enough to keep them in a home thats of questionable afforability.

The thing that pisses me off is that we still have no price discovery. I know I'm preaching to the choir but that was the first thing I thought of when I heard Obama bring this up.

bgamall4 says

Once the big private equity guys get involved, it will be much different than it is now.

How deep is that well?

Is there enough REAL private equity interest to mop up millions of homes?

I've asked this same question in other places.

To me it smacks of "the foreigners will swoop in and prop things up!" which was the preferred Bay Arean BS a couple years back.

bgamall4 says

You still don't get it do you. The ponzi was set up by the banksters. They through securitization were at fault for the housing bubble. The responsibility for one getting too much house has always rested with the bankers, the UNDERWRITERS. But when they are banksters they don't give a crap.

It's common knowledge the banks are at fault. I just don't think the homeowners that can't pay their loans should all be saved. If you sign the deal with the devil for a house you shouldn't have bought, you need to man up and take responsibility for the consequences.

bgamall4 says

No, you are wrong. The IMF recently came out for a rekindling of the securitization of loans and Wells Fargo says they must be all guaranteed by the government. The millenials who are tired of renting will likely jump at an easy money loan, and won't listen to their parents.

clambo is correct. The government will not guarantee future poorly underwritten loans.

bgamall4 says

You read about how private equity is set to invade the housing market.

So Mitt Romney is going to take over the housing market? So now we know why he said that the govt. should not stop foreclosures. He and hi cronies want to buy up all the foreclosures for pennies on the dollar.

clambo says

House prices are going down, it's gravity. The bubble will deflate after it has popped.

The ramifications of another large scale crash from current prices would be far too devastating to our economy for the government not to interfere. Think about it...

Lowering home prices much further from here will eventually just put downward pressure on incomes..... If i'm an employer and I know it only costs you $100K for a really nice 4 bed/2bath home with a pool in Los Angeles... Why would I ever give you a raise? And entry level college grad making $30K a year could easily afford a sweet home at $100K...

Higher cost of living is what pushes wages higher... Rooting for lower home prices, you might as well root for a pay cut.

There is no easy solution to the mess we've gotten ourselves into... Lower home prices will cause all sorts of unexpected societal problems that include practically bankrupting a generation of 25-35 somethings who bought in the past decade... and have the largest student loan debt in history.

A generation of renters? Maybe.. What will happen when the current generation reaches retirement and they spent all their retirement trying to save an underwater home... and still lost their home... and now the government.. (the taxpayers) have to support them for the rest of their lives.

It's far too naive to think lower home prices is the cure. I'm thankfully in a decent position that if my home value dropped in half from the current level... I'd have some options... (as long as I kept my job). But would I cut back all spending elsewhere... ? hell yeah.. I'd save because I know if i had to sell I'd have to take a loss and need cash in the bank to do so. A generation of current owners hoarding cash and just staying home watching TV isn't gonna spur our economy.. And that's what is happening now to those that bought in 2006.. but can still afford their mortgage.

Until home prices stop dropping... People are not going to go out to eat.. or spend money freely. They are going to pay down debt.. and hoard cash. The government doesn't want this... so they will do whatever they can to improve the housing market... Or atleast prevent another large scale crash... Even if it means a $20K hand out to new homebuyers... larger mortgage interest credit... debt forgiveness...

If home price drops continue to accelerate.. Look for all of these options to be put on the table post-election.

tatupu70 says

clambo is correct. The government will not guarantee future poorly underwritten loans.

Sure they will, if the campaign contributors want them too. They'll just back them up with a taxpayer guarantee.

StoutFiles says

If you sign the deal with the devil for a house you shouldn't have bought, you need to man up and take responsibility for the consequences.

Banksters first.

Los Angeles Owner says

he ramifications of another large scale crash from current prices would be far too devastating to our economy for the government not to interfere. Think about it...

Lowering home prices much further from here will eventually just put downward pressure on incomes..... If i'm an employer and I know it only costs you $100K for a really nice 4 bed/2bath home with a pool in Los Angeles... Why would I ever give you a raise? And entry level college grad making $30K a year could easily afford a sweet home at $100K...

Higher cost of living is what pushes wages higher... Rooting for lower home prices, you might as well root for a pay cut.

There is no easy solution to the mess we've gotten ourselves into... Lower home prices will cause all sorts of unexpected societal problems that include practically bankrupting a generation of 25-35 somethings who bought in the past decade... and have the largest student loan debt in history.

Prices became disconnected with incomes in the bubble, all that anyone is really asking is that they fall back in line with incomes without being propped up artificially. Incomes haven't statistically grown much over the past decade, but housing prices increased significantly. The correction has already happened in some places, I don't think another correction in some more local markets is going to have the broad impact you are describing. I think the doomsday scenario you paint is exaggerated.

Median income of an area is a very misleading indicator of what property values should be!

for instance... http://projects.latimes.com/mapping-la/neighborhoods/income/median/neighborhood/list/

Median income in Santa Monica, CA is only $69K... yet look at median income in Porter Ranch.. (north of Northridge on the outskirts of the san fernando valley) is $121K. Now Porter Ranch is a nice area... but based on median income home prices should be way more expensive than in Santa Monica.

Median income is bunk for any areas with large rental markets/apartment complexes.

You have a lot of low income renters packed like sardines in studio apartments lowering overall incomes for areas.

bgamall4 says

Ha. That is what you think. You read about how private equity is set to invade the housing market. Well, this is a world wide premeditated plan and it will impact housing prices both on the upside and on the downside. Read this and weep
http://www.hic-net.org/articles.php?pid=1724
Understand that this is something that was working in Europe in the housing boom. But now private equity will swoop down and take over foreclosures in a huge way in the US. Private equity is hot money speculation!

I'm sorry. It just makes no sense at all. Why would private equity want to buy up poorly underwritten loans? In the past, people were caught up in the real estate only goes up syndrome. Not so anymore. Doing it now would be throwing money out the window. Why would private equity want to knowingly throw money out the window??

futuresmc says

Sure they will, if the campaign contributors want them too. They'll just back them up with a taxpayer guarantee.

I know it's funny to say that, but it's ridiculous. Bailouts are NOT politically popular. Most Americans are selfish and resent that someone else got help and they didn't.

futuresmc says

StoutFiles says

If you sign the deal with the devil for a house you shouldn't have bought, you need to man up and take responsibility for the consequences.

Banksters first.

Well the government has already decided the banks won't be held accountable. So if it's either we punish the irresponsible home owners or the intelligent savers, I choose the former.

bgamall4 says

Not loans. Foreclosed properties, for pennies on the dollar. That will give these big firms massive clout in any easy money bubble down the road.

OK--my problem is with your theory that there will be an easy money bubble down the road. I see zero chance of that happening.