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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.
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.
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.
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!
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!
A very generous FB indeed. Nice to see people being generous with money that isn't theirs to begin with.
lunarpark,
I'm sorry to hear that on BOTH counts. However big hearted her intentions sadly the bottom line is that she *did treat her primary residence as the "Bank of Me" and the equity IS gone. At this point whether it was adjudicated toward family care OR frivolity isn't helping her cause.
The difference is, this is a caring person and one of the few instances where you can get behind their hopefully finding a GF.
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?
Brent,
Good question. Maybe some of the financial experts here have a better answer, but I think there are a few issues here. First, there's a real factor of comparing apples to oranges. The average US house size in the 1950's was 983sf; In 2004 it was 2349sf. This accounts for a portion of the price increase. Second, there's the effect of people over many years putting capital into real estate, both their primary residences and their investment/vacation properties. Sure, a lot of that money is for maintenance costs, but the home improvement upgrades have to show up somewhere as a ROI. How many 1970's homes had lux bathrooms, granite countertops, and all that crap?
However, if you look at data that tracks resale of the same house historically, like the S+P Case-Shiller index, prices of the same houses resold do NOT increase substantially over time, when you account for inflation, house size and quality. This is for trends in the US since 1890, Amsterdam since the 1600's and Norway since the early 1800's.
Here's one take on this data:
http://economistsview.typepad.com/economistsview/2006/03/shiller_longter.html
But I will say that these trends in deviation from the mean appear to occur over decades and decades, so is it possible that over the course of our meaningful lifetimes, we will not yet see the reversion to the mean for this particular cycle?
lunarpark,
I agree w/ DinOR, I'm sorry to hear that your friend has had all these issues. However, in the end she's basically hoping a GF will foot the bill for the rehab, health care, college tuition.
Incidentally, in turn that GF's salary is probably paid for by a startup, which in turn is funded by a VC, which gets their money from hedge funds (or private equity). The hedge fund gets a big chunk of their money from institutional investors, who represent ... YOU AND ME! So in some small, small way, we're paying for this! Thank you, Amerika!
DinOR - I really hope she does find a GF and at least break even. I have sympathy, but at the same time two of us have been telling her to sell for over 18 months now. Also, I would have been more tough love with the kid in rehab twice, but I'm not a parent so maybe I shouldn't speak on this. Really, with her family life she has bigger problems so in my emotional accounting I do cut her slack. She's actually a very nice person who just happens to be not so good with money.
Also, I think her situation shows how borrowed money has not only held up spending on consumer goods, but other areas of the economy - the healthcare expenses alone, my goodness.
skibum,
Well said. tOs also swept the outrageous int. rates of the late 70's and early 80's under the carpet and elected to go w/ 8.25% to further contort the economic backdrop at the time. Try 18.25% ?
Someone wrote:
> The inflation calculator I just tried said:
> What cost $20,000 in 1977 would cost $68,425.49 in 2006.
Then eburbed Says:
> $68k… that would just barely be 10% these days.
The crappy little homes on the Peninsula that were selling for ~$20K in 1977 (when I was a freshman in HS) are close to $1mm today (and the nicer ~$30K on ’77 homes west of El Camino are all way over $1mm)…
skibum,
Agreed, it just amazes me that whenever we as Americans encounter difficulties our 1st reaction is to rob our own house! What would have become of her family had their *not been a House ATM (TM) conveniently located in the living room?
In ways this scenario cuts to the core of the issue (for me anyway). It's as if these are "built-in costs" when one goes into the housing market these days. If it's not written into the seller's price, it's certainly implied! I just want your home (you can keep the luggage). :(
Brent Says:
> Can someone here please explain to me how the
> average Joe’s biggest asset can outpace inflation
> in the long run?
Most of the homes in California are not that old (and most of the old homes like the one I grew up were very high quality).
In the next 20 to 50 years many “homedebtors†are going to be hit with huge CapX bills that should slow home price appreciation.
P.S. The cost to remove every tile on my parents roof, fix the leaks and replace the original tiles (held to the roof by a single copper wire attached to a copper nail) was more than they paid for their first home…
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http://www.time.com/time/printout/0,8816,915445,00.html
Sound familiar? Yet another story from 2005? Nope... the publication date of this article was September 12, 1977 - nearly 30 years ago.
Let's look at some other snippets from this time capsule:
Does anyone know what happened to the housing market in California after 1977? Or was the impact of Prop 13 too influential in the resulting statistics?
And finally, the social impact:
So... this was in 9/1977. Now, it's hard enough predicting what 9/2007 will be like - but what do you think September 12, 2037 will be like?
Already, both parents are working, realtors are spinning the Bay Area as a place so great that you don't need to take vacations - what's next? Will child labor make a come back? ("Monta Vista High School and Fireworks Factory #88"?) How much more special can it get here?
(Bonus points for including Peak Oil in your prediction...)
#housing