patrick.net

This is a foreign concept to most people Peter.

I know. :(

It is going to be bumpy but the market will survive. I hope policy makers have the will and “heart” to let people fail. Destruction is part of the creation process.

This is a foreign concept to most people Peter.

I agree! The price of tulips fell, but the world didn't end....

"can't even come up with a 1977 downpayment. What does that tell you?"

What's worse is that those homes should have been paid for. As a matter of fact, this year! They're not. They've probably been flipped, fi'd, re-fi'd and re-fried at least 8-10 times since then.

My friend in MV just got turned down for a HELOC. That's a first...

My friend in MV just got turned down for a HELOC.

Is he a renter?

lunarpark,

Based on what? Not enough income? Appraisal too low? Getting laid off? Not to be nosy but myself and Mr. skibum would like to know. Our position has been that even lower rates may not be the salvation people are praying for. Low rates of course don't help if you got no job!

Just curious. :)

The "burn card" is left for those that have a decent income, house appraised fine BUT..... DTI.... too HIGH!

I've got your "burn card" right here bunky!

For those that don't play cards, Spades, Pinochle etc. the "burn card" is something you hold in an otherwise WORTHLESS hand that keeps your opponent/s from running the board or having a perfect hand.

But they think they got it all wrapped up, so they bid (and bid big) never suspecting this lowly deuce of clubs will leave them talking to themselves... all the way back to the ATM! Oh and get me a pizza on the way back!

LOL@Peter P - SHE is not a renter, haha, you made me laugh.

DinOR -

I'm getting this secondhand from a mutual friend - my understanding is that her credit is poor and the HELOC was turned down based on that. She has been taking money out of her place over the last few years. It's never been a problem until now. She has called her realtor and is going (try) to sell asap.

Jon,

Well I can't imagine taking THAT lecture sitting down but that's where so many boomers grossly miscalculated. They generalized too much, and not just about finance.

In order to have 1) bought at the absolute perfect time 2) landed lifetime employment 3) cashed out without a hitch AND 4) had a very optimal and cooperative stk. mkt along with 5) a birthday (birthright actually) to assure maximum retirement and health benefits.

Oh... along w/perfect health, NO divorce and model/self supporting children. Is THAT so much to ask!?!

lunarpark,

She's your friend so I'm going to tread lightly here. Just saying her credit is poor may not necessarily explain everything. No change in employment or marital status? It's always worked for her/him before, right? Why not now?

DinOR,

Sometimes I think I'm unmarried, don't want kids, saving half of my income, paranoid about job security, constantly going on and on about immigrating to Australia, etc...just so I can be different.

I suppose if that doesn't work out, I could get some cyanide capsules in case things get really bad.

DinOR -

No changes in employment or marital status. I know she's taken A LOT of money out in the past and it's never been a problem. I don't know anything else - just that she is very upset. Personally I think it's good that she is FINALLY going to sell. Her payments were ridiculous vs her income. Her realtor thinks if she sells now she can still walk away with $50k.

The bailout has begun

In my neck of the woods, Spitzer is making a lender payout $6M to the victims. I'm glad this lender is still around to fund it, but when it all hits the fan and all those ARM's reset, I think the taxpayers will ultimately be stuck paying in the long run when the majority of lenders go under.

Allah,

That's not so much a bailout but a fine against predatory lending. If you read the story, those guys had people's interest rates up to 13+% with the fees for the loan at 10% of the loan value. It's fairly obvious they were not just 'rose glassing' the housing picture and making unwise loans, they were actively making loans with the intention of foreclosing on the house after they squeezed as much out of those guys as they could.

Also, the total 'bailout' comes to 6k per person. Hardly a home saving bailout. And since it doesn't come from taxpayers, but rather a shady loan company, it's no skin off my nose.

As long as I can remember people have been complaining that housing costs too much here. Some of them leave, but new ones come in.

And much of that timewas before all the new rich from Asia had their sights on moving to the cities along the West Coast.

Crap, I missed that. Good eye, Jojo. :D

theOtherside

Thanks for the laughs. It's been a tough day, but you've helped me to end it well.

I recommend you pick up a copy of Mankiw as it will answer #3 for you, and it may help you with your weak understanding of inflation dynamics as expressed in your point (2).

#4 - CA has had 2 major corrections in housing post 1977, and 1-3 minor ones depending upon which metro area. San Diego/OC is the only area to suffer all 5.

#2 - Aren't you the one continually citing an MIT economic report? Well golly willikers if they didn't recently collaborate with the Federal Reserve in an extrapolative model that predicted upwards of 30-50 years of real housing price declines. If your reference isn't too optimistic, then this one isn't too pessimistic.

#1 - It would cost about 12% more than it would have in 1900, up from 5% LESS that it would have cost in 1948, and a measly 5% more in 1970.

Gosh. Inflation is a cruel master, isn't it.

How many crashed did CA experience between 1977 and 2007

Well the reale questin is hows many uped? Not how many crashed did CA experience. Learn how to write you fat assed troll maggot.

#1 - It would cost about 12% more than it would have in 1900, up from 5% LESS that it would have cost in 1948, and a measly 5% more in 1970.

I didn't crunch the numbers but until recently I was going to guess inflation pretty much made the gains a push. Remember though the power of leverage, so even a small positive margin translates into a great return on initial investment (the downpayment). Over the really long run, it was a push until scarcity and other factors pushed the new construction rate up causing upward pressure on old home prices. Think about this as Patrick says in his treatise; a house is a depreciating asset. What goes up is actually the land value, and like I said wage inflation, and increasing raw materials costs. The recent bubble defied these fundamentals which is why it was so easy for us to spot.

Jon,

yeh, a cent above the 255K pound threshold which includes your main residence, you get taxed at 40%. The problem is, almost every single retiree in the southern part of England will have more than that, simply because of the wild asset bubble going on there.

Before long, our seniors will start to flee the US for death tax as well, since all of us will be living in multi-million-dollar homes before long :-) On top of that we have a more broken Medicare system.

Inflation is your friend, don't you wanna drive a hundred grand car and live in a million-dollar home?

People in NYC are sending kids to public schools again not because they have confidence in the crappy public school system, but because they cannot afford to send kids to private school, after buying a $2M condo.

Not all the schools are crappy in NYC. If you can get into Stuy, you're in pretty good shape.

Of course, that means you kid may have a daily commute that's longer than your daily commute (or, you can commute together in the morning!)

It's so cool to see 9 year olds commuting via subway to school (they were not going to Stuy) by themselves. Unlike counting on "Mom's Taxi" like here in the Bay Area or any other suburbanland.

Fuck FC Liverpool. Fuck Benitez, Crouch, Gerard, Belammy, Riise. Go Arsenal, go PSV.

12 September 2037, Florida gators will still be the champions, Dolphins rule football, Marlins dominate baseball. And the Heat, well if you can't stand the Heat get ot of the kitchen. LoL. In the EU Arsenal kicks ass.

One big BooYaa

lunarpark,

Of course without any of the particulars it's hard for us to say but if you're like me you have doubts about your friend "walking away with 50k".

Sounds like more realtwhore (TM) BS to get the listing. Secretly the realtor may even be thinking, "finally... a MOTIVATED seller!" My guess is that if she has tapped out the place (really any place) to the point to where she can no longer make the payments it's doubtful there is any equity beyond the realtor's 6% commission.

astrid,

I'll never fault ANYONE for wanting their life to turn out different. You can only imagine the looks anyone attempting to leave the "paradise" of Cicero, IL gets when attempting to leave! Like, WHAT? Are you STUPID? Why would anyone want to leave here? We got it MADE! :)

"you can simply transfer your equity"

"Can" being the operative word. Average occupancy of 7 years is yet another NAR fantasy skewed by legions of mid-westerners that bloom where they are planted. Over half of today's mortgages in America are under 2 years old.

The hole no board strapped to your ass is going to span is the fact that you won't be "making payments" on your 1977 S+P 500 investment. Conveniently glossed over, OF c o u r s e. :)

DinOR - But this is Mountain View! MOUNTAIN VIEW!!! It's sort of like Paris, but, not really...

"sort of like Paris"

Rally?

I for one would love to get updates in the ongoing saga if it's not too much trouble. I've got a feeling your friend isn't alone. What's really funny is all the recent articles about people that bought in say 2000/1 that re-fi'd themselves right out of house and home that are now cursing the "boom".

Allah did you look at the date on the link was from 1999????

Yeah, you're right, I didn't realize that. But still it does show how quickly they want to "rescue" people.

That’s not so much a bailout but a fine against predatory lending. If you read the story, those guys had people’s interest rates up to 13+% with the fees for the loan at 10% of the loan value. It’s fairly obvious they were not just ‘rose glassing’ the housing picture and making unwise loans, they were actively making loans with the intention of foreclosing on the house after they squeezed as much out of those guys as they could.

Also, the total ‘bailout’ comes to 6k per person. Hardly a home saving bailout. And since it doesn’t come from taxpayers, but rather a shady loan company, it’s no skin off my nose.

No, I agree it is not much of a bailout and yes, they were preying on these people but really, what distinctly separates 'predatory lending' from overstating someones income to qualify them for a loan they eventually will not be able to pay? How can one prove that it wasn't the borrower that willingly increased the income or that it was the originator that did it unknowingly to the borrower? When people are in distress, they will all claim themselves as victims; It happens all the time!

Yes, the amount is small, but that doesn't mean that when mortgages are resetting all over the place and the sob stories get thicker and thicker, that these amounts won't also get thicker. Once money starts going to these 'victims', it is not very easy to stop and when you throw money at one class of sheeple, there will be many more that will have their hands out as well.

With all the lenders going under, who do you think will end up having to fund the bailout?

Most of you are negative about the housing market. I've read some of your posts and I've to say yall are making some good points. But when do you see housing prices turn really sour? I'm just curious.

Most of you are negative about the housing market.

What makes you say that?

I’ve read some of your posts and I’ve to say yall are making some good points. But when do you see housing prices turn really sour? I’m just curious.

It's already happening depending on the area in question and when the majority of those ARM's reset, it will certainly turn really sour.

Some people are still quite clueless; These people are just going to contract and they think they already have $25k in equity just because of a bank appraisal. Meanwhile, there are foreclosures surging around here (Long Island) at this very point in time.

DinOR - No problem, I will update when I know more.

"What’s really funny is all the recent articles about people that bought in say 2000/1 that re-fi’d themselves right out of house" - Um, I think my friend falls into this category. She may have even bought before 2000. Imagine buying in the Bay Area pre-2000 and only walking away with $50k profit (if that). Wow.

Can someone here please explain to me how the average Joe's biggest asset can outpace inflation in the long run? Trendy non-essential assets, like tulips perhas, but housing units??? Is it that lending practices and expected lifetimes are inflationary as well?

lunarpark,

Thanks, it will be interesting to see how that plays out. Funny thing is if she's having a tough time getting re-fi'd it's safe to assume many of her potential buyers are encountering the same headwind.

The over extension of credit will result in ruining the realtwhore's pool of marginal buyers for years to come. If it doesn't seem to forward ask her what she thinks her "burn rate" is? I mean, how long can she stay afloat status quo and what are the avg. DOM?

Imagine buying in the Bay Area pre-2000 and only walking away with $50k profit (if that). Wow.

On the other hand, your friend, like millions of other FBs got to "enjoy" a "lifestyle" that they otherwise would never have been able to afford. It's the Amerikan way, after all.

Can someone here please explain to me how the average Joe’s biggest asset can outpace inflation in the long run? Trendy non-essential assets, like tulips perhas, but housing units??? Is it that lending practices and expected lifetimes are inflationary as well?

Credit is contracting right now. This is deflationary and doesn’t bode too well for housing. TOS is living in a fantasy world where everything only goes up; Inflation, Housing, etc. Here is a great article on this.

"On the other hand, your friend, like millions of other FBs got to “enjoy” a “lifestyle” "

While I would agree this description does describe a lot of FBs, my friend is a little different. She took money out to help cover her father's care when he developed Alzheimer's and I think she paid for her grown daughter's drug rehab (twice). She's also paying for college for her son. Of course, I think she is the minority of the FB camp. She even drives a used car!