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CBad.
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October 14, 2007 at 1:30 AM #88894October 14, 2007 at 1:30 AM #88900
Eugene
Participant{total off-topic}
Will the bursting R/E bubble hurt some guy in Montana or Texas? A little, but it’s gonna hurt like hell in Southern California
Popular sentiment, but i’m not sure if it’s entirely true.
On one hand, yes, we had huge runup in prices and Texas didn’t. So we have further to fall.
On the other hand, look at the list of places with most foreclosures. Half of them didn’t see much appreciation. Denver is #6. Memphis is #9. Atlanta is #12. Atlanta home prices grew barely 10% inflation-adjusted since 2001 and yet they are having more foreclosures per capita than San Diego.
Bubble in house prices may have been confined to CA/NV/AZ/FL, but lending standards were lax everywhere, and it’s much easier to overbuild in the Plains than in Southern California where it’s hard to find a good chunk of flat land that’s free of environmental restrictions within 1 hour drive from downown LA or SD.
I have a feeling that Texas has its share of $14,000/year ARMed Mexican strawberry pickers.
October 14, 2007 at 9:02 AM #88917Navydoc
ParticipantAs someone who hs personnally recovered from a foreclosure back in 1994, I think I have something to contribute. The foreclosure stayed on my credit history for 7 years, but I was able to begin rebuilding my credit after about 3. At first I was the equivalent of a junk bond, then by 4 years I was about a B. Granted, I probably wouldn’t have been able to get a mortgage until after the 7 years, but I was able to get a used car loan in 1997.
Couple of comments about the situation: bear in mind that the clock doesn’t start ticking until after the judgement has been filed. I made my last mortgage payment in April 1993 after a DISASTEROUS year renting the place out; my judgement wasn’t final until Sept 1994. The other point I have to make is you CAN recover from this. I was an undergrad while I was trying to keep the home above water, foreclosure occered in my senior year, and I reconstructed during medical school. Now my credit rating last time I checked was 809, well into AAA category. I used to think the home purchase/foreclosure was the worst thing that ever happened to me, but now I look at it as a situation where I was saved from making a purchase now which could have been an order of magnitude worse.
I believe the correction must come, and while it will be painful, the majority of people will recover from it, and hopefully be the wiser as a result. My only question is what kind of condition the financial community will be in as a result. I have a feeling it’s going to look quite a bit different than it does today.
October 14, 2007 at 9:02 AM #88924ParticipantAs someone who hs personnally recovered from a foreclosure back in 1994, I think I have something to contribute. The foreclosure stayed on my credit history for 7 years, but I was able to begin rebuilding my credit after about 3. At first I was the equivalent of a junk bond, then by 4 years I was about a B. Granted, I probably wouldn’t have been able to get a mortgage until after the 7 years, but I was able to get a used car loan in 1997.
Couple of comments about the situation: bear in mind that the clock doesn’t start ticking until after the judgement has been filed. I made my last mortgage payment in April 1993 after a DISASTEROUS year renting the place out; my judgement wasn’t final until Sept 1994. The other point I have to make is you CAN recover from this. I was an undergrad while I was trying to keep the home above water, foreclosure occered in my senior year, and I reconstructed during medical school. Now my credit rating last time I checked was 809, well into AAA category. I used to think the home purchase/foreclosure was the worst thing that ever happened to me, but now I look at it as a situation where I was saved from making a purchase now which could have been an order of magnitude worse.
I believe the correction must come, and while it will be painful, the majority of people will recover from it, and hopefully be the wiser as a result. My only question is what kind of condition the financial community will be in as a result. I have a feeling it’s going to look quite a bit different than it does today.
October 14, 2007 at 9:24 AM #88923temeculaguy
ParticipantNavydoc, thanks, that was easily your best post ever. Without knowing it at the time, you were in medical school and business school at the same time. Both cost you money and both made you smarter. The people that learn today about zero down arm loans that they can’t afford will lose some money and end up renting, but most will have learned a valuable lesson. When someone gets cancer I feel bad for them, when someone has their house foreclosed on because they were overextended but still has their health and job, I look at it as “their” lesson. I have had many money losing lessons in my life and I always recover, wiser and richer in the end.
esmith, you bring up a valid point but there are some differences. In the non bubble markets that have high foreclosure rates they are a result of employment scenarios or just what would have been credit card debt a few years ago. Without the lax lending standards of the past few years, those same people in the non bubble areas would have racked up huge credit card debts and gone bankrupt. Today’s foreclosures in those areas would have happened but have manifested themselves in another form. The blame is not unrealistic pricing so the cure won’t be falling prices. It’s still a supply and demand scenario and there will be price declines in those areas but not on the magnitude of the bubble areas where that was the culprit. And you are right, there are probably many unqualified borrowers elsewhere as well.
October 14, 2007 at 9:24 AM #88929ParticipantNavydoc, thanks, that was easily your best post ever. Without knowing it at the time, you were in medical school and business school at the same time. Both cost you money and both made you smarter. The people that learn today about zero down arm loans that they can’t afford will lose some money and end up renting, but most will have learned a valuable lesson. When someone gets cancer I feel bad for them, when someone has their house foreclosed on because they were overextended but still has their health and job, I look at it as “their” lesson. I have had many money losing lessons in my life and I always recover, wiser and richer in the end.
esmith, you bring up a valid point but there are some differences. In the non bubble markets that have high foreclosure rates they are a result of employment scenarios or just what would have been credit card debt a few years ago. Without the lax lending standards of the past few years, those same people in the non bubble areas would have racked up huge credit card debts and gone bankrupt. Today’s foreclosures in those areas would have happened but have manifested themselves in another form. The blame is not unrealistic pricing so the cure won’t be falling prices. It’s still a supply and demand scenario and there will be price declines in those areas but not on the magnitude of the bubble areas where that was the culprit. And you are right, there are probably many unqualified borrowers elsewhere as well.
October 14, 2007 at 9:39 AM #88926bsrsharma
ParticipantWill the bursting R/E bubble hurt some guy in Montana
Drove through Montana/Wyoming/Idaho last summer. The amount of speculative home building to attract investors and transplants from high price areas like California is astounding. There are miles and miles of empty tract homes as far as you can see. They are even priced "Californian" { 300K – 400K for a place where typical prices would have been half that }. This is going to destroy a lot of builders/lenders/investors and speculative buyers/flippers.
October 14, 2007 at 9:39 AM #88931ParticipantWill the bursting R/E bubble hurt some guy in Montana
Drove through Montana/Wyoming/Idaho last summer. The amount of speculative home building to attract investors and transplants from high price areas like California is astounding. There are miles and miles of empty tract homes as far as you can see. They are even priced "Californian" { 300K – 400K for a place where typical prices would have been half that }. This is going to destroy a lot of builders/lenders/investors and speculative buyers/flippers.
October 14, 2007 at 9:45 AM #88933ParticipantI was an undergrad while I was trying to keep the home above water, foreclosure occurred in my senior year
Navydoc – why did you buy a home as an undergrad? Who gave you a mortgage? How did you come up with down payment etc., I think this was before 100% loans.
October 14, 2007 at 9:45 AM #88940ParticipantI was an undergrad while I was trying to keep the home above water, foreclosure occurred in my senior year
Navydoc – why did you buy a home as an undergrad? Who gave you a mortgage? How did you come up with down payment etc., I think this was before 100% loans.
October 14, 2007 at 10:02 AM #88935ParticipantI bought the home in 1989 while I was making a fair living as a furniture salesman. I had an FHA loan at the time, and could afford the payments easily. I lost my job in 1990 when the furniture market declined, and started the process to get my real estate license (amazing the parallels to today). While working on my license I took a job working night as a Nurses Aide in an elderly care facility to pay my bills, and afterward kept the night job while I tried to sell houses during the day.
I learned I preferred washing asses to kissing them for a living (sorry SDR and sdr, and I posted in an earlier thread how I got out of real estate), so I decided health care was the life for me. I enrolled at Penn State as a 25 year-old undergrad in 1991, lived in the home for the first year, but found the payments were getting too tough to keep up with, so I moved in with my brother and rented the place out for a year. The tenants trashed the place, and left me with $2000 in unpaid gas and electric bills which took me two years to pay off. In the meantime the housing market declined and the house was worth less than I had paid for it, and still owed. I calculated that selling the home at current market value would have required I bring at least $7500 to the table, which was money I didn’t have at the time. I made the logical decision to walk away and live with the consequences.
For those that think I should have dropped out of school and make good on my debts, you have a valid point. But if I hadn’t made the decision I did, I’m quite certain I wouldn’t be where I am today. I think what happened to me is going to happen to a lot of people, just to a much larger extent. Remember, the house I bought was only $42,000, but the fundamentals will prove to hold just as true today as they did back then.
October 14, 2007 at 10:02 AM #88942ParticipantI bought the home in 1989 while I was making a fair living as a furniture salesman. I had an FHA loan at the time, and could afford the payments easily. I lost my job in 1990 when the furniture market declined, and started the process to get my real estate license (amazing the parallels to today). While working on my license I took a job working night as a Nurses Aide in an elderly care facility to pay my bills, and afterward kept the night job while I tried to sell houses during the day.
I learned I preferred washing asses to kissing them for a living (sorry SDR and sdr, and I posted in an earlier thread how I got out of real estate), so I decided health care was the life for me. I enrolled at Penn State as a 25 year-old undergrad in 1991, lived in the home for the first year, but found the payments were getting too tough to keep up with, so I moved in with my brother and rented the place out for a year. The tenants trashed the place, and left me with $2000 in unpaid gas and electric bills which took me two years to pay off. In the meantime the housing market declined and the house was worth less than I had paid for it, and still owed. I calculated that selling the home at current market value would have required I bring at least $7500 to the table, which was money I didn’t have at the time. I made the logical decision to walk away and live with the consequences.
For those that think I should have dropped out of school and make good on my debts, you have a valid point. But if I hadn’t made the decision I did, I’m quite certain I wouldn’t be where I am today. I think what happened to me is going to happen to a lot of people, just to a much larger extent. Remember, the house I bought was only $42,000, but the fundamentals will prove to hold just as true today as they did back then.
October 14, 2007 at 11:31 AM #88957patientlywaiting
ParticipantWow, great story, Navydoc. I think what’s wonderful about America is not all the smart bombs we can build but how our system allows guys like you to learn and start over.
We used to have debtors’ jail at one time. Bankruptcy laws are so that people can start over. Why live in debt slavery? The home-debtors of today should take advantage of bankruptcy relief to start over and build a brighter future.
October 14, 2007 at 11:31 AM #88964ParticipantWow, great story, Navydoc. I think what’s wonderful about America is not all the smart bombs we can build but how our system allows guys like you to learn and start over.
We used to have debtors’ jail at one time. Bankruptcy laws are so that people can start over. Why live in debt slavery? The home-debtors of today should take advantage of bankruptcy relief to start over and build a brighter future.
October 14, 2007 at 1:01 PM #88974lindismith
ParticipantCashflow, regarding your friend who has foreclosure looming – can you tell us anything about the loan? Was it adjustable? Did he experience some other kind of financial hardship recently? I mean how did he get himself into this situation?
Just curious. -
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