Navydoc, you’re right on. It’s mind boggling. Personally, I call things for what they are, and alt-a is what I like to call fancy subprime. The loan scenario might be a little different in that the borrower has a better fico score, but that’s usually about it. Some have 5-15% to put down the others are riding on 100%. Will it have an impact? I think it’s going to be unbelievable. Most of these people got into these homes based on 2/28, 5/1, 7/1 arms or interest only, and keep in mind, we’re not talking about dumb people. Smart, Phd, high income people that felt that extra two hundred or more payment to get into a 30 year fixed wasn’t worth it since ‘we’ll sell in about 5 years’. They lacked some common sense and a little caution.
As far the economy, an old appraiser schooled me when I had the gleam of green being new in the business, said the US economy runs on 3 things, oil, the stock market, and California housing. I think the California housing is being a bit egocentric since we’re Californians, but to some extent when California is doing well, the rest of the US economy seems to follow (probably going to be some outer staters and others that are going to rip into me on this one). I think my old appraiser friend left out one more component, the consumer. The last time I checked 2/3 of our economy is based on someone in this country buying something. If you take a step back, and think about it, it’s truly amazing. We don’t sell much of anything or make anything (with the exception of big guns, planes, tanks and all the neat military hardware that’s designed to kill lots of people quickly). So here’s my take on it and I don’t have a phd or consider myself a brainiac by any means, just a regular guy with a few ideas, if the economy for the past 5-6 years was super hot because of rate cuts, people buying homes, buying stuff to fill those homes, buying toys to drive to those home, buying vacations from their homes and eating out instead preparing meals on their nice new granite countertops…and all this comes to a dwindle, I’ll leave the rest to your imagination.
Perry: “They are being saved. They are marginal buyers with spotty ability to pay. They should not be taking on mortgages in this declining market”
Should not is a relative term. People should not have take an option arm, should not have purchased more home than they could’ve afforded, should not play with matches. I don’t deal with the newby investor buyers since most are rank amateurs and anyone who’s going to sit across from me and tells me what loan is good for them and I think otherwise gets shown the door. The buyers I deal with are fully aware of the credit/housing bubble or whatever it’s going to be labeled after all of this. They buy based on necessity, mother/father are getting older and is living alone at home so daughter buys a place to move them a block away from them so they have more time with the grandson, or has long tem plans to stay in an area and wants to buy that sort of deal. Everyone’s motivation is different. The housing market is taken hits from different angles, but it doesn’t mean everyone just stops buying, maybe most on Piggington, but there’s a whole ‘nother world outside of this place with opinions to match. I have professional investors that have been rehabbing houses for years that will snap up a deal when it presents itself and no, they’re not listed on joe public mls. So great time to buy versus catching a falling knife? Well, that’s an individual decision and depends on what you want.