[quote=sdrealtor]The low end crashed quickly because it should have. As you said it had no buffer. It increased by a much higher percentage. This isnt a war on on the working class. These loans were made to people who could not pay them off if they were at 0% interest. They could only work with increasing property values. These loans had to be cleared out asap because there was no hope for them.
In the mid and upper ranges, there were plenty of bad loans made overextending borrowers but most were to people with real jobs, incomes and assets. Again this isnt a plan to support the rich at the expense of the poor or any kind of economic class warfare. Some of these loans weren’t made to people with long term real jobs and most of those seem to have been resolved quickly. I used to track all the foreclosure data around me and every week it was full of realtors/mortgage people whose income disappeared. These should have been wiped out quickly and they were. The others have stuck around much better and will continue to resolve themselves because there is a way to save them.
I never said it was fixed nor do I beleive it’s over but they are winning the war and I beleive they will win it. The worst has passed already.[/quote]
As you’ve noted in other threads, most homes appreciated by about the same amount (but different percentages). The reason the mid tier was able to increase the way it did was because people who owned the low-end homes were selling for $200K-$400K+ more than they had paid for their homes. This money came from the new entrants with zero-down NINJA loans, which is why these new low-end buyers had no buffer.
Many (most) of these newly rich low-end sellers took that money and used it as a down payment on a mid or higher-tier house. They could now afford to pay $600K, and only have a $200K-$300K mortgage. That’s what pushed the mid-tier prices up — new entrants with a lot of money to use as a down payment.
The mid-tier sellers could then use that money for a higher-end home. They had higher down payments, but these people often did have higher incomes as well, so they could afford to get slightly larger mortgages.
This is why you saw the largest price increases on the lower end, as a percentage of pre-bubble prices, vs. the mid and higher-end homes.
While some of these new mid-tier buyers were responsible and will be able to stay in these homes, there is no NEW money coming into the market to justify the higher prices in the mid-tier market. Many pre-bubble owners (and new owners) of mid-tier homes took new HELOC/refi loans that were just as irresponsible as the NINJA loans at the bottom. These people have been able to stay only because of the intervention by the Fed/govt. Not only that, but the artificially low interest rates and govt-backed mortgage market have enabled new entrants to pay bubble prices for mid-tier houses, without having to pay market interest rates and without enough skin in the game to entice private lenders to lend to them.
Prices are determined by what NEW buyer are willing and able to pay. Prices that resulted from a credit bubble that happened in the past are irrelevant.
Where do you think prices would be without all the Fed/govt intervention? Where would prices be with market interest rates and GSE loans with loan limits of $350K or below? That’s what some of us are waiting for.
