Originally Posted By DouglasDubh <What point are you trying to make here, Doug?> That wages plus benefits increased close to inflation early in the decade, and then exceeded it last year, and things are nearly as bad as you're trying to make them, by cherry picking economic statistics.
Originally Posted By jonvn Everyone thinks they missed the boat all the time. There will be another boat. Prices are falling in many places. You dno't have to put down 20%. You can put down much less. You will have to have some savings, though.
Originally Posted By Mr X Sure about that, Jon? Like many others, the thought of putting down even a penny is disconcerting (plus all those pesky documents!)...here's the solution (Hopemax, check it out!!)... <a href="http://www.countrywide.com/RetailLoans/HotProducts.asp?product=80-20_nodown&menuitem=7" target="_blank">http://www.countrywide.com/Ret ailLoans/HotProducts.asp?product=80-20_nodown&menuitem=7</a> Oh, wait. Well, it's still on the website and all but...hmm, wait a second... <a href="http://biz.yahoo.com/rb/070309/subprime_countrywide.html?.v=2" target="_blank">http://biz.yahoo.com/rb/070309 /subprime_countrywide.html?.v=2</a> Oops. Guess you should have jumped on it late Friday night when the company sent the email. Now it's too late.
Originally Posted By RoadTrip THE SKY IS FALLING... THE SKY IS FALLING!! What happens in California is NOT indicative of what happens elsewhere in the U.S. (thank God). Out here in flyover land we never had the run-up in housing prices that you saw in CA. During the absolute peak in the market Minneapolis saw prices increase 8-10% per year.... not the 20-25% that California saw. So now, even in a tough market, houses in the Twin Cities area are holding their value. Some claim that prices have even gone up 1-2% over the past year, but I don't know if I buy that. We do have houses being lost to foreclosures, but for the most part it is real estate in marginal areas. This property is owned people who normally could not buy housing and the property itself would normally be rented rather than owned by the occupant. So now the housing goes back to being owned by Joe Slumlord and the occupants are renting once again rather than owning. So what? At the other end of the scale you have the McMansions purchased by people who couldn't really afford them. But as I said before housing in the Twin Cities area has remained pretty stable so they can more than likely unload the property at a price that will cover their mortgage. Yes, it will take 6 months to sell rather than the 45 days it would have taken during the boom, but we are certainly not looking at a total collapse in the housing market. The companies that own sub-prime mortgages are certainly going to get hit. But just as California real-estate is really just a blip on the radar screen when looking at the overall U.S. housing market; the mortgages you are talking about are a very small percentage of the total. The great majority of mortgages are still 30 year fixed rate mortgages that required a 20% down payment.
Originally Posted By Jim in Merced CA <People with 0 interest loans on homes that have depreciated 15%-20% and now are worth less than they owe> <This is only a problem if they overspeculated, or if they lose income. Otherwise, they can continue to make their payments until the worth of their house bounces back.> I would agree with this concept. While the home may have dropped 15-20%, it will appreciate in value over time. Seems there was a time when a home was considered to be a long-term investment. Now, there's a whole audience of buyers who want to get into a house, and then sell it 5 years later for a nice profit -- using these very risky loan agreements. Then, when it doesn't work out, we blame the banks for loaning the money to them. Sure, you can take a cruddy house in a iffy neighborhood in Baldwin Park, CA, buy it up, make the improvements, and get a nice profit after you sell it. There's a young guy around the corner from me [my extremely modest suburban home in our new suburban subdivision] who has purchased a brand new home, and is now making the typical granite countertop-stainless-steel-appliance upgrades, and thinks he's going to flip it a la that guy in Baldwin Park. And recognize that we're in a subdivision where the builder has a good 12-18 months of new home building left. And this young kid thinks he's going to flip it in the next few months. I think he's delusional. He might be able to do it within the next 3-5 years, but the next 3-5 months? I just don't see it. A buddy of mine tried to flip a house in a suburb of Dallas, and it was an absolute disaster for him. When the dust settled, he's made about $150.00. That's one hundred fify. Not thousand. One hundred fify dollars and no/100. It's like the stock market. Used to be that people invested in the stock market as a long term investment. Now, everyone wants to make thousands of dollars in 6 months. Good luck. But understand the risks. And when it doesn't work out, buck up and stop whining.
Originally Posted By SuperDry <<< the mortgages you are talking about are a very small percentage of the total. The great majority of mortgages are still 30 year fixed rate mortgages that required a 20% down payment. >>> Oh, I think you're quite mistaken about this. I think you'd be very surprised at just how many homes are being bought with unconventional financing. <<< when it doesn't work out, we blame the banks for loaning the money to them. >>> The problem is that the lending practices have allowed housing prices to go up much higher than they otherwise would have, which makes things all the more expensive for everyone, including the people that are trying to become homeowners sensibly.
Originally Posted By tiggertoo <<I think that a great many people in these situations have yet had the other shoe drop, but will over the next couple of years. It shall be interesting to see.>> Definitely; but it’s going to be more interesting to see how the economic fallout will be spun by political hacks. Of course, because Democrats have Congress, you know the Coulters of the world will be pointing the finger of blame their direction. This is going to be entertaining.
Originally Posted By RoadTrip <<Oh, I think you're quite mistaken about this. I think you'd be very surprised at just how many homes are being bought with unconventional financing.>> I agree that 'unconventional financing' is done much more now than it was in the past, but the 30-year fixed rate mortgage still dominates the market. <<Applications for ARMs accounted for 25 percent of all loan applications in November 2006. Over the 23 years of the survey the market share of ARMs has fluctuated between 11 percent in 1998 and 33 percent in 2004. "Consumers are financially savvy and respond to changes in the relative cost of different loan products," Nothaft said. "As ARMS became more expensive relative to fixed-rate loans during 2006, the ARM share of lending declined.">> Source: <a href="http://www.mortgagenewsdaily.com/1112007_ARM_Survey.asp" target="_blank">http://www.mortgagenewsdaily.c om/1112007_ARM_Survey.asp</a>
Originally Posted By Mr X RT, if this is really "no big deal", why are the bigger companies scrambling to quickly cancel those dangerous lending practices? Remember, the problems that brought down New Century are related to what happened LAST year (which they tried to cover up)...we have yet to see how much worse things really are now, except to see the "better" companies quickly sweeping the similarities under the rug. I'm not saying the whole industry will come crashing down, but it will be interesting to see just how deep this rabbit hole goes. After all, even if like you say 75% of the mortages are conventional...25% is still bajillions of dollars that we don't know yet how much of is at risk. (horrible sentence, sorry...) And Jim, I agree with you. Ben Stein said something similar, something like "if you're looking to buy a house now, go ahead and don't worry. in 10 years or so, it'll be worth more". The only people who need be concerned are sellers, and especially people who got in over their heads to begin with. Oh, and the companies that let them do it.
Originally Posted By mrichmondj << I agree that 'unconventional financing' is done much more now than it was in the past, but the 30-year fixed rate mortgage still dominates the market. >> I have read in a number of sources where unconventional products outnumbered conventional products in 2005 and 2006. ARMs are only one part of the equation. Interest-only products that turn into conventional mortgages after a fixed time period have been even more populat among speculators and house flippers, as well as individuals looking to buy more house than they can really afford. Then you add in the 40-yr and 50-yr products that are now in the market, and you find that the 30-yr loan is not longer the leading mortgage product in market share. I guess that explains the look of disbelief from my realtor several years ago when I bought my home on a 15-yr loan. Apparently, that doesn't happen very often.
Originally Posted By vbdad55 <<<< the mortgages you are talking about are a very small percentage of the total. The great majority of mortgages are still 30 year fixed rate mortgages that required a 20% down payment. >>> Oh, I think you're quite mistaken about this. I think you'd be very surprised at just how many homes are being bought with unconventional financing. < My former neighbor who owns a very large mortgage brokerage firm ( now offices in 12 states ) - told me 6 months ago that 60% of his business over the past year was 0% or reverse/back loaded interest mortgages...and another good portion ARM's-- that doesn't leave much for the traditional mortgage.
Originally Posted By SuperDry <<< I have read in a number of sources where unconventional products outnumbered conventional products in 2005 and 2006. >>> <<< My former neighbor who owns a very large mortgage brokerage firm ( now offices in 12 states ) - told me 6 months ago that 60% of his business over the past year was 0% or reverse/back loaded interest mortgages...and another good portion ARM's >>> Those are more like the numbers I'm familiar with as well. I think that many people are underestimating what will happen to the housing market if lending requirements return to normalcy, which in my opinion will almost certainly happen. So not only will there be foreclosures and distress sales because of the people that had unsustainable mortgages, but there will be reduced demand because fewer people will be able to buy homes. That's not to say it will be a calamity, although I'm sure there will be many personal situations that turn out very badly. Overall, I'm sure everything will work itself out over time as it always does.
Originally Posted By SuperDry <<< I guess that explains the look of disbelief from my realtor several years ago when I bought my home on a 15-yr loan. Apparently, that doesn't happen very often. >>> That's what I did as well. It's hard to believe that I'm already 4.5 years into the 15 year mortgage. It feels pretty good! I think of it as a kind of forced savings program.
Originally Posted By DouglasDubh <Those are more like the numbers I'm familiar with as well.> But apparently those numbers only occurred in certain markets, and not in most. <I think that many people are underestimating what will happen to the housing market if lending requirements return to normalcy, which in my opinion will almost certainly happen.> And I think some people are overestimating what will happen.
Originally Posted By jonvn "Sure about that, Jon?" Yes. You don't have to put 20% down. However, if you do not have 20% equity in your home, you have to pay PMI. This goes away if your house appreciates in value. I've never put 20% down on a house. 10% is usually enough, but some places will allow 5%, and these loans here are 0%. People keep saying they "missed the boat." But the fact is that if you did not buy a house recently, then you are lucky, because prices have declined from a year or so ago, so you can get one for cheaper than you did.
Originally Posted By RoadTrip <<My former neighbor who owns a very large mortgage brokerage firm ( now offices in 12 states ) - told me 6 months ago that 60% of his business over the past year was 0% or reverse/back loaded interest mortgages...and another good portion ARM's-- that doesn't leave much for the traditional mortgage.>> That may be. But those are mortgages written in the past year. Even if 100% of the mortgages written in the past year were unconventional, that still is a very small percentage of the total out there. You also cannot say that everyone using that type of financing will be in trouble. Many use those instruments because it makes sense for them. If you know that in three years your youngest child will be school age and your wife will be going back to work a low now high later loan payment makes sense. Will this be a big problem for the lenders that specialized in these types of mortgages? Yes, it will. But that is still a relatively small part of the overall market. I’m convinced the overall market will be just fine. Just as the stock market needs an occasional correction when it has become oversold, the housing market needed a chance to get things back in line. To a large extent this has happened and the housing market is expected to return to normal in 2007. People need/want housing. There are a lot of folks on the sidelines waiting for prices to bottom out so they can go in and snatch up a bargain. When it looks like things have bottomed you will see a lot of people jumping in to buy property. This pent-up demand will start prices on their way back up again and we should have a healthy housing market again. If the housing market could survive the outrageous interest rates of the early 80’s, it can certainly weather what is going on now. I realize that there were/are a lot of flakey financing schemes out there. I realize that some people will get in trouble because of this. I realize that some mortgage companies will get in trouble with this. But in my opinion it is “chicken little†behavior when people start talking about a total collapse of the industry. It just ain’t gonna happen folks.
Originally Posted By fkurucz >><<< My former neighbor who owns a very large mortgage brokerage firm ( now offices in 12 states ) - told me 6 months ago that 60% of his business over the past year was 0% or reverse/back loaded interest mortgages...and another good portion ARM's >>> This is not surprising. The market ran out of qualified buyers years ago, so the lending industry created new one with these loans. How else can a family with an average income be able to buy an average priced home? And its not just the super expensive markets either. Case in point: Greeley, CO. The average price is in the mid 100's. Still, even with those "affordable" prices, Greeley has he highest foreclosure rate in the nation (per money.cnn.com). This happens when people who work at Target for $12/hr buy $150K houses.
Originally Posted By jonvn House prices will simply collapse then. If you don't have any buyers, prices will go down. Except around here where it's always been expensive to live. Either that, or eventually no one will be able to buy a home, and they will be bought up by large corporations, and people will rent or lease from them, and private home ownership will be a thing of the past.
Originally Posted By fkurucz >>That may be. But those are mortgages written in the past year. Even if 100% of the mortgages written in the past year were unconventional, that still is a very small percentage of the total out there.<< I recall reading that over 30% of all outstanding mortgages in my neck of the woods are non conventional. Its not just first time buyers. A lot of people who should have known better refinanced using these turkeys, often using the cashed out equity to buy toys they couldn't afford otherwise. I get at least one offer in the mail every day which boldly proclaims that I can reduce my mortgage payment by 70% or more. Fine print: after two years it will be more than you are paying now, but who cares? I'll just flip the place or take out another neg am loan. After all, my house will have appreciated 30-40% during that time frame, right?
Originally Posted By fkurucz >>Either that, or eventually no one will be able to buy a home<< That's when fundamentals will kick in (as they appear to be beginning to do so). It doesn't matter how short the supply is, if people can't afford it, they can't afford it. They will either rent, or move on to lower cost markets.
