Originally Posted By Sport Goofy I know a few smart people who got caught up in the housing euphoria. They weren't poor. They just didn't want to get "left behind" in the housing gold rush. These were normal people, educated folks, with families and relatively conservative approaches to risking their money. The relentless talk of people making 100%, 200% on flipping real estate and upgrading their homes was just too much for them to resist. I know several of these people who are now stuck with upwardly adjusting ARMs, property that can't be sold for the price they bought it, and other nightmare financial situations that you might expect relatively intelligent folk to not get themselves wrapped up in. I don't blame the lenders so much as the real estate agents and mortgage brokers who purposefully advertised housing as an "investment that never loses money," and a get rich quick scheme. Then there are the real estate developers, who barfed up enormous amounts of tract housing and condos that they knew exceeded the actual demand for these properties if you did any sort of research into population trends. And, of course, there's the Baby Boomer generation that has no savings and somehow expected to make up for that problem by inflating their home equity beyond reality. The sadder day that is coming is when these Baby Boomers, who have established a lifestyle based on easy credit and home equity, will find themselves on fixed incomes, with homes that are depreciating in value, and meager savings to support the consumer lifestyle that they spend 50 or more years establishing for themselves.
Originally Posted By Mr X Your first four sentences said it all, Sport. They got greedy. Heck, they're in good company. The lenders all felt the same way! What those people should've asked was, "why does it sound too good to be true?". And if they were dumb enough to listen to a bunch of agents and brokers, then I really have to wonder if they were really all that smart in the first place. Haven't salespeople, from time immemorial, been known to exaggerate and "say anything" to sell their product. Still, even stuff like that doesn't fall into "predatory". They would have to be actually and intentionally LYING about stuff for that to happen. I'm sure it did, but I don't blame the bulk of the mess on that. The bulk of the mess, on BOTH sides, was pure and gross greed. Now we see everyone pay the price for it. It's kinda fun to watch, honestly. Like some sort of grand fable come to life. Heck, I think I'll write children's books around this event. Maybe THEY'LL pay attention and not repeat the stupidity. Hopefully, anyway (I'm an eternal optimist).
Originally Posted By Sport Goofy << And if they were dumb enough to listen to a bunch of agents and brokers, then I really have to wonder if they were really all that smart in the first place. >> I think that's an easy comment to make, but not so easy in practice. I bought a home at the beginning of 2003. The boom was well underway and accelerating. It was very difficult trying to stick to traditional lending recommendations, conventional loans, down payments etc. The prices were escalating so fast that normal folks were being priced out of the market for even the typical family home. I was an oddball. I put 20% down and financed on a 15-year mortgage. When I related this to friends, family, and realtors they all treated me like I was some sort of anachronism and not with the times. I had several friends who were purchasing homes at the same time and they all tried to sell me on the opportunities in interest-only loans, no-down payment loans, and other "innovative" products. It wasn't largely the realtor and mortgage brokers giving me this pitch, but my own friends and family! Of course, they had not saved as much as me, so these products were probably their only option to buy a decent home. I had other options and was able to remain the conservative stick in the mud. I guess my point is that you weren't necessarily "stupid" for jumping on this band wagon. It is incredibly difficult to go against a tide with currents this strong, and the popular opinion over the past few years was very strongly pushing a go-go real estate environment. You couldn't go to church on Sunday without hearing someone in the congregation talk about their real estate investments. It was a bit sickening. A few of us saw all this coming all along. And it's going to get a lot worse before it gets better. I don't think that makes me any smarter than the rest of the population, just more stubborn and pragmatic. When I sold my home at the height of the market in 2005, I had a lot of people telling me that I needed to hold on because I was leaving money on the table. I hate to even look at what the value of that place is today. Certainly not what I sold it for.
Originally Posted By Kar2oonMan >>It's kinda fun to watch, honestly.<< It isn't fun watching people lose their homes and banks go out of business. We're talking about people's lives here, not a sport. There was a relentless pressure from all around that "you better get in now, or you'll LOSE OUT FOREVER!!!!" It's nice to say that people shouldn't ever get swept up in these things. The fact is, people WERE making huge profits flipping houses, and it wasn't just for a couple of months. It was happening over a period of years. It was classic "buy low, sell high" at work. Of course, at some point, it couldn't maintain. Some people made money, others were left holding the bag. But I don't know that it was "stupidity" necessarily, any more than any sort of investing gamble is stupidity. When you're talking about residential real estate, you're talking about what has become the American Dream. Right or wrong, by accident or by design, there is a lot of emotion that gets wrapped up in what will be for most people the largest purchase they'll make in their lifetime. Lenders and real estate agents and mortgage brokers play on those emotions like crazy, always have and always will. And when the government is there to bail them out, there's really not a lot of risk for them.
Originally Posted By Mr X ***It isn't fun watching people lose their homes and banks go out of business. We're talking about people's lives here, not a sport.*** Sure it is. They deserved what they got, for the most part. And besides, I was involved enough in "the sport" to get screwed over at times, so I've no compunction watching the greed grubbers get what's coming to them.
Originally Posted By Mr X ***There was a relentless pressure from all around that "you better get in now, or you'll LOSE OUT FOREVER!!!!"*** Any student of history would tell you that's an incredibly stupid thing to buy into. It was then. It is now. It will be in the future. Everyone should take notes.
Originally Posted By Mr X **And when the government is there to bail them out, there's really not a lot of risk for them.** There's risk enough to go 'round, K2M, that's for sure. You hear about some of the high level "bailouts" such as Countrywide or Bear Sterns, but don't forget about the HUNDREDS of companies (how many employees is that anyway?) that shut their doors without so much as a hint of any help. Nobody rode this out with "no risk", that's for sure. Even the supposed "bailouts" occurring now are quite sketchy. If the government actually did have to bail out the whole bunch, well, we'd be erecting shanty towns to be quite honest about it. Hope it doesn't come to that!
Originally Posted By Sport Goofy << They deserved what they got, for the most part. >> Does the guy who takes a promotion to a new city deserve the fact that he probably can't sell his home right now because the market conditions are so crummy that people are loathe to buy a house even at "bargain" prices? That's a real drag on the economy, and even if that person bought their home on a conventional loan, they suffer the consequences of the whole affair. What about the folks who are seeing their neighborhoods blighted with homes in foreclosure and vacancies? They're still paying their loans off, but have to suffer the deterioration of the community as a result of the bloated excess. It's easy to say thate people deserve what they get, but there's a lot of folks who are getting spillover effects from this and they didn't deserve a thing.
Originally Posted By Mr X I did say "for the most part". Of course some innocents get screwed in the process, AND some evil-doers get rich. That's the way of the world. But in the grand scheme of things, I think the scumbags that got greedy are now getting their due. That's the way it looks to me, anyway.
Originally Posted By Mr X **That's a real drag on the economy** What economy? The economy of Tahiti? This, as far as an economic concern, has been VASTLY overblown.
Originally Posted By Mr X Sport and K2M, much as I might disagree with you guys on certain points, I do appreciate your comments and am glad we're at least TALKING about the subject again. Many thanks for that (and sorry this particular post wasn't "on topic" lol).
Originally Posted By Kar2oonMan >>Sure it is.<< Well, then you have a very different idea of "fun" than I do.
Originally Posted By Mr X Watching the CEO's go down, when they've screwed so many people over with their lies, is, I admit, quite entertaining. Perhaps it's the nasty side of me, I dunno, but they didn't seem to mind hurting so many others. Does anyone cry for Hitler?
Originally Posted By Kar2oonMan >>But in the grand scheme of things, I think the scumbags that got greedy are now getting their due. << Maybe. But there is a tremendous amount of collateral damage. Local schools, as always, will bear the brunt of it. State budgets are a mess everywhere. Taxpayers will of course pay in the long run in any number of ways. So, it's really the little guy that gets left holding the bag, while the "scumbags" will be riding whatever the next big wave is.
Originally Posted By Kar2oonMan The CEOs, for the most part, go down with lovely golden parachutes. They don't lose their home. They don't lose much of anything, except maybe some stature among their peers. But even with that, many will be hired to be CEO of some other company in some other industry. The average guy gets hurt.
Originally Posted By dshyates Mr. X, I find your attitude shocking. Yeah, sure, some lendees got greedy, but for the most part I think people were doing what they believed was in the best interest of their families and to start buildig equity, and going on some really bad advice coming at them from all directions, got themselves in trouble. With the real estate tends they were being shown, they were being told by everyone they were "missing the boat", and no one was stressing they were "betting the farm".
Originally Posted By Mr X dsh, how is it that *I*, an average guy of average intelligence with absolutely NO real estate experience saw this coming from a mile away, and yet noone else did? I don't buy it. It SHOULD have been obvious, as I say (it was dead obvious to me, which is why I started short selling the heck out of the lenders which I've been writing on LP about now for YEARS)... Why didn't anyone else ask "why is this too good to be true?". Seriously. Was everyone that dumb? History is RIDDLED with crap like this. Heck, it happened in America just back in, ooh how shockingly long ago...Y2K. Seriously, this seems like a no-brainer to me. Why was everyone else such a bunch of idiot suckers?
Originally Posted By Mr X **Mr. X, I find your attitude shocking.** What part of my attitude is "shocking"? If I sound cynical, it's most likely due to the fact that I paid the price for their lies and greed much like others have.
Originally Posted By dshyates "which is why I started short selling the heck out of the lenders which I've been writing on LP about now for YEARS)..." That right there explains why you saw it coming and most didn't. Most of the people caught up in this mess can't even spell portfolio, and certainly don't know what the phrase "short sell" even refers to.
Originally Posted By DouglasDubh <Douglas, is it simply your opinion that banks were under political pressure to lend to poor borrowers, an educated guess or a hunch, or do you have some actual data or evidence to support it? If it's just your opinion, that's fine. Just say so. If you have some data to back up that opinion, that's great, just please provide it.> I said a while ago it was my opinion, based on things I've read over the years, such as articles and editorials where people complained about the lack of lending to the poor.
