Are houses selling fast now?

[TheBreeze]

It’s not just the ARM buyers. You also need to factor in all those folks who took out a HELOC at the top. Like this dude:

http://tinyurl.com/ycpwke

Price Reduced: 10/10/06 — $560,000 to $530,000
Price Reduced: 10/24/06 — $530,000 to $489,900
Price Reduced: 11/03/06 — $489,900 to $479,900
Price Reduced: 11/09/06 — $479,900 to $475,000
Price Reduced: 11/10/06 — $475,000 to $470,000
Price Reduced: 11/20/06 — $470,000 to $465,000

According to Zillow, this condo was purchased in 2003 for $426,000, and yet somehow the owner got himself upside down.

It’s going to get ugly out there.

[davelj]

PS, the ability to refinance is a semi-important part of the whole issue. But, to be clear, I’m willing to bet anyone on this board $10,000 (or more) that less than 50% of almost any specific type of mortgage product from a particular vintage year will default. Yes, there are some bad products out there. But I’m willing to make a very large bet that there is NO product in which 50% of the origination volume from a particular year will default. But, again, I’m allowing for these folks to refinance out into a product that may one day in the future lead to their demise.

[powayseller]

TheBreeze, you are right, and I’ve made those same comments too: people who purchased or refinanced into an exotic loan will be in trouble. Some old time homeowners refinanced out their equity. It isn’t just the buyers who did it. Middle aged and near-retirement folks are in for a nasty retirement.

Davelj, the ability to refinance is compromised by several factors: declining home equity, rising interest rates, lower credit scores.
1) Lower credit scores
If the homeowner missed a payment and then seeks to refinance, I think they have trouble getting a loan; a 30-day late seems to be a problem for lenders. More HELOCs and higher debts accumulated can also lower the credit score.
2) Declining home equity
Declining homes value are a problem too; if you’re underwater on your mortgage, you can’t refinance. If you got a 0% down loan, then how can you refinance? Will the lender loan you 120% of your home value in a refi?
3) Rising interest rates
If your income didn’t keep up with rising interest rates, the you won’t quality for a loan. The guy who barely got a loan at 3% or 4%, cannot get that same loan at today’s 6% rate. The payment is too high for his income.

So how do you propose the 2002 – 2005 batch of borrowers can refinance? Anyone from 2004 onward lost his equity, most likely. The interest rates are now higher, so how can they afford it? I’m very interested in any knowledge you might bring to this subject.

[davelj]

Why do I bother? You have your opinion and it’s not going to change. No amount of rational analysis will change your view. Everyone here knows this about you. I’ve tried to get around this issue by saying, “Look, if you think you’re so smart then take the bet for god’s sake!” And you won’t bite. So just drop it… or continue to debate with yourself. Either one is o.k. with me. But without a wager of some sort this topic gets pretty old for me.

[powayseller]

davelj, my opinion will definitely be changed in the light of new evidence and data. That’s why I am asking you how you think those people can refinance. For example, if you tell me for sure the Fed will lower rates back to 1%, then I would agree all those people can refinance. My question is sincere.

[powayseller]

davelj, my opinion will definitely be changed in the light of new evidence and data. That’s why I am asking you how you think those people can refinance. For example, if you tell me for sure the Fed will lower rates back to 1%, then I would say many of those people can refinance. My question is sincere.

[(former)FormerSanDiegan]

powayseller – You said : “So how do you propose the 2002 – 2005 batch of borrowers can refinance? ”

I purchased a house in late 2002. The loan balance is 1.1x my annual income and about 50% LTV. I’m pretty sure I could refinance.

[(former)FormerSanDiegan]

powayseller –

The problem is that you assume that all ARMS were put in place in the same category: 100% LTV, buyer stretched to 40% of their income for PITI, etc. This is simply not the case, and probably what drives some of us batty.

Though there are many loans in these high-risk categories, the 25% of loan resets next year and the xx billion dollars at stake also includes some people who put 20% or more down for loans with PITI at less than 20% of their incomes.
I pointed to a specific above. Others have pointed to specific examples of FBs who are in the category you assume. No way a majority of ALL ARMs resetting in 2007 go into default.

By the way, I won’t take any side bets on this one. I placed my bet in 2002 and will stick with it.

[an]

so, how about this bet… over 50% of the IO ARM w/ 100+% LTV will go into foreclosure when they reset? Who wanna bite? :-D.

[sdcellar]

an– Even your example lacks enough detail. When were these loans secured? That’s a big variable and there are plenty more. These are the kind of things Powayseller leaves out of her grand pronouncements. Maybe she has them all along, but doesn’t share them until later. That’s what I think drives people crazy. I mean, sure, keep adding qualifiers and eventually most things can be “predicted” with a very high degree of accuracy.

Keep in mind too that she said 90%. Few things in life are that predictable. Hell, probably at least 10% can suck money out of their parents when they get in trouble (but wait, am I supposed to leave this population out as well?)

Also, I’m know you’re not defending her position. I’m just using your example to illustrate the problem.

[nccoastalseller]

nccoastalseller

Stop the useless banter already.

Place your bets using the instrument called the S&P CME Housing Futures and Options. San Diego is one of the 10 markets tracked. All the rules for this game of chance are set.

Does anyone follow these markets?

[sdcellar]

Thanks, but the banter is fun. But tell you what, let’s cease and desist with all this “betting” talk in general. I’m pretty sure davelj put it out there mostly as a metaphor anyway (although I’m sure he’d really take the bet!)

Most of this talk of real betting on real markets is speculation pure and simple. I didn’t think it was a great idea for the average dude with stocks. I don’t think it was great with real estate. And I don’t think it’s great in general.

Gold, futures markets, inverse indices, oil, currencies. I don’t think many of the folks here are really betting or planning to really bet anything on them (nor should they be).

[sdcellar]

Also, I’m not saying that no one here is qualified to invest in some of these things, just that those folks are in the minority. Just as most folks should never have fancied themselves real estate tycoons.

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