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May 16, 2006 at 11:32 AM #25479May 16, 2006 at 11:34 AM #254804plexownerParticipant
“Buy when there is blood in the streets.”
Powayseller is right on in regards to the right time to buy.
When it is actually time to buy, her friends and associates will be trying to talk her OUT of buying. They will be telling her that real estate is DEAD and has nowhere to go but down.
In summary, check out what the crowd is doing and try to do the opposite.
May 16, 2006 at 11:47 AM #25481sdrealtorParticipantThanx, I’ll keep them in mind.
May 16, 2006 at 11:59 AM #25483sdrealtorParticipantWhat I heard was they thought the last two years were speculation (as Rich astutely has pointed out) but that there were reasonably good fundamentals in place until late 2003 (as I have thought intuitively). My impression was you could take away what ever you wanted. My friends are looking through fresh cleaned rose colored glasses while yours are a bit darker and foggier;). So I think it would be great to hear what someone with your beliefs interpreted their report to say rather than what the realtor driven media has spun out of it. This is not a loaded a question.
By a 180, I mean Anderson was predicting a melt down and they seemed to back away from that to a soft landing with flat prices until 2011. My question for you is whether this is what you heard or was it just media spin?
May 16, 2006 at 12:27 PM #25484BugsParticipantI don’t see why we’re quibbling over the percentage of recent mortgagees (which number includes far more than just the people who have recently purchased) who are overextended enough to be susceptible to foreclosure. And we definitely shouldn’t be limiting our analysis of the percentage to any single year’s sales volumes because the credit overextension spans more than one or two years, and those totals are cumulative.
If the rate of foreclosures were to exceed even 5% of these mortgagees that number would be much more than sufficient to drive the market. A rate of 5% of mortgagees over the last 3 years would be more than 15% of any single year’s sales volume, especially in a year of reduced volumes. In such a market, if 1 sale out of 6 is from a lender you better believe those sales will dominate the market pricing. A 10% foreclosure rate among recent mortgagees would be catastrophic to lenders. A 5% rate might even be too much.
How many $50,000 losses would it take to put any one lender down for the count? I don’t think it will take very many. When you consider a $50k loss is less than 10% of the current median prices here we would need to be very concerned for any price corrections exceeding 20%. Such a loss on a regional scale would wipe out many of the equity positions held by recent mortagees and start cutting into the mortgage positions held by the lenders. That’s at 20%. The risk to the lenders could increase exponentially if the price corrections were to exceed 20%, as some people believe may happen.
May 16, 2006 at 12:38 PM #25486BugsParticipantJust as a side note it might be helpful to consider exactly what the margins are for lenders and how much (or how little) profit they actually make.
I once saw a local commercial bank get threatened with insolvency as a result of a single loan on a single property. If memory serves, the loan amount was less that $2,000,000, but this particular borrower decided to duke it out in court and he ran the lender’s costs to foreclose so high that they took a beating by the time they got the property back and sold it; and their initial loan was by no means unreasonable in relation to the value of the property. That borrower was savvy – they stopped making payments and used their attorney to abuse the system.
I have to believe that there are legions of attorneys out there who are ramping up their “stop foreclosure” arsenals even as we speak. They know that a certain percentage of overstressed homeowners will gladly work the system in exchange for a year’s free rent prior to eviction. And it won’t take very many of those lawsuits to further clog our legal system. Increased costs to foreclose will take it’s toll on both lenders and the availability of credit, which in turn can exacerbate pricing declines.
May 16, 2006 at 2:44 PM #25489powaysellerParticipantAmerican Real Estate Solutions estimates 15% of people with ARMs will default. so that’s 1 million people nationwide. The reason is that they won’t be able to handle the up-to-50% increase in payment. Since 1/3 of people who took out a mortgage loan (purchase or refi) have 0 or no equity, when house prices fall, they cannot just walk away; they are already underwater. If I find a study about the anticipated foreclosure rate, I’ll start a thread on it. The loan and equity data is not real clear, so there’s a lot of estimating going on.
The question I have for the people who got ARMs is: With interest rates at historic lows, why did you get an adjustable rate mortgage, and interest-only, or a negative-amortization mortgage? Interest rates rise and fall, and have nowhere to go but up. Why wouldn’t you take advantage of historic low rates to lock in the 5% or 5.5% rate?
I’ve read that people do it to purchase a bigger home than they could otherwise afford, or to be able to buy a home at all. In SD, most buyers couldn’t make a purchase without the help of the 1% ARM.
Perhaps you can offer some insight as to why someone got an ARM, and how that person will be able to make the payments when their mortgage goes up by 50% (from 2%+prime to 5%+prime).
Also wondering why not all those people are busy refinancing right now.
May 16, 2006 at 3:32 PM #25490PDParticipantWe have been watching housing in a neighboring city. A new house just came on the market with repossesion notices up in the window. The house is priced under everything in the neighborhood and is the 3rd cheapest house in the city, despite the fact that it is in a good neighborhood. It is priced to undercut everyone in an attempt to sell fast. When you start having a bunch of these, the prices will go down fast.
Lenders who find themselves with lots of foreclosed inventory and more on the way will be trying to unload as fast as possible. After the savings and loan debacle, you could buy land at unbelievable low prices.
When a lender goes under, what to they do with the inventory? Sell it as a bulk deal? The buyer gets it all for a song and can then sell each property at a heavy discount?
May 16, 2006 at 4:01 PM #25491lendingbubblecontinuesParticipantSorry PowaySeller…I have no insight other than the people I know are apparently stupid and have no idea that they will be the bag-holders in the end.
“I see debt sheeple”
May 16, 2006 at 4:37 PM #25493BugsParticipantIt depends on the lender’s performance and their relationship with their respective regulatory agencies. If they have a good (in terms of safe/secure) track record the feds won’t lean on them too badly to dump their REO properties under liquidation conditions. If they’ve been having problems or they have a lot of foreclosures coming up, the feds will force them to sell ASAP. Selling under those conditions means the price will be discounted as much as it takes to move the unit in 60 days or less.
Putting the phrase “Bank Owned Foreclosure” in an MLS listing is a guaranteed way to generate lowball offers below whatever the low point of the market is at that time. Just as when the market’s hot and buyers will pay anything to get in, when the market is in decline some sellers will do anything to get out.
May 16, 2006 at 5:32 PM #25495bmarumParticipantI can’t speak for others, but we got an ARM because I know that I won’t be in this house for more than ten years. Therefore a 30-year fixed loan doesn’t make sense for me.
May 16, 2006 at 6:21 PM #25498hsParticipantOne good way to move is: try to pack the small things and move them by yourself. Leave the big bulk furniture with those strong guys if they charge you hourly. We had about 2000 pounds of stuff and we did part of it by ourselves and I only paid about $300 for the move.
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