Looks like there won’t be a bailout

[patientrenter]

JWM,

I suspect you meant “PR” not “PD”. PD is a dignified Coronado resident on this blog. Unfortunately, I don’t fit that description at all!

You are strongly convinced that prices will drop a lot. By 50%? 60%? Fair enough. Whatever it is, I’m just trying to tease out from you what your reasoning is, and that of others with similar opinions, by presenting some of the more obvious obstacles to that outcome. Why would I do that? Because I don’t know everything, and maybe something you know and share would help me make a better analysis and, ultimately, buying decision. That’s the alpha and omega of my agenda here.

Am I claiming that I am a superior paragon of rational analysis, then? No, I want to get the analysis right for my own sake, and I find I do that best when I set my emotions to the side. BTW, my emotions say that house prices are ridiculously high, driven there by loose credit that I hate because it rewards borrowers, especially ones who won’t pay if things go upside down, at the expense of savers like me, and I dearly hope for a drop of at least 50%, because then home prices would be – just barely – low enough for me to hold my nose and buy after 20 years of being priced out of the market where I live. My wish is that you or soemone else here will lay out a case that is so tight that I will have full faith in that 50%+ drop.

So cheer up, JWM, and don’t assume DaC or I are trying to pull the wool over your eyes. I have no motive and I’m not that smart! I gain only if prices drop, and the more the better. I don’t even mind a horrendous recession to get there. But until then I just want to see what the most likely outcomes are as clearly as possible, and fact- and reason-based exchange on this forum was a good way to improve my own insights on that.

Patient renter in OC

[patientrenter]

JWM,

I suspect you meant “PR” not “PD”. PD is a dignified Coronado resident on this blog. Unfortunately, I don’t fit that description at all!

You are strongly convinced that prices will drop a lot. By 50%? 60%? Fair enough. Whatever it is, I’m just trying to tease out from you what your reasoning is, and that of others with similar opinions, by presenting some of the more obvious obstacles to that outcome. Why would I do that? Because I don’t know everything, and maybe something you know and share would help me make a better analysis and, ultimately, buying decision. That’s the alpha and omega of my agenda here.

Am I claiming that I am a superior paragon of rational analysis, then? No, I want to get the analysis right for my own sake, and I find I do that best when I set my emotions to the side. BTW, my emotions say that house prices are ridiculously high, driven there by loose credit that I hate because it rewards borrowers, especially ones who won’t pay if things go upside down, at the expense of savers like me, and I dearly hope for a drop of at least 50%, because then home prices would be – just barely – low enough for me to hold my nose and buy after 20 years of being priced out of the market where I live. My wish is that you or soemone else here will lay out a case that is so tight that I will have full faith in that 50%+ drop.

So cheer up, JWM, and don’t assume DaC or I are trying to pull the wool over your eyes. I have no motive and I’m not that smart! I gain only if prices drop, and the more the better. I don’t even mind a horrendous recession to get there. But until then I just want to see what the most likely outcomes are as clearly as possible, and fact- and reason-based exchange on this forum was a good way to improve my own insights on that.

Patient renter in OC

[novice1027]

Let me start by saying ANY knowledge I have on economics or real estate have been learned here, and I thank all of you for your education.
I here people on this site saying be careful what you wish for, we could have a big recession.
I am a nurse, so this is all new to me in the last year.
I lived here in the 90’s pretty unscathed, was that considered a recession?
My question to the people in the know is, how does one make themselves recession proof?
My husband & I have a decent income, a very low mortage, and 1 small car payment, along with money in the bank.
What does one need to do to prepare for a recession besides putting your money under your matress?
Any thoughts or suggestions?

[novice1027]

Let me start by saying ANY knowledge I have on economics or real estate have been learned here, and I thank all of you for your education.
I here people on this site saying be careful what you wish for, we could have a big recession.
I am a nurse, so this is all new to me in the last year.
I lived here in the 90’s pretty unscathed, was that considered a recession?
My question to the people in the know is, how does one make themselves recession proof?
My husband & I have a decent income, a very low mortage, and 1 small car payment, along with money in the bank.
What does one need to do to prepare for a recession besides putting your money under your matress?
Any thoughts or suggestions?

[patientrenter]

Novice, I am not recession-proof myself, so I’m not really an expert on this, but I’ve though about it, so I’ll pass on my thoughts to you.

LIQUIDITY
In a recession, the prices of many assets tends to drop a lot. An example is stocks. Real estate tends to get hit by recession as well. Commodities too. People argue over what’s affected most and least. Obviously, money in the bank isn’t affected (except eventually by inflation). Anyway, if you have to sell those assets during the recession, you’ll lose a lot. So make sure that you don’t have to sell many of them. Most people do that by building a reserve fund in “liquid” assets like bank deposits that will cover their bills even if they lose their jobs, until they find a new job. Having two jobs, as you do, especially in different fields and industries, really helps a lot. Nursing is probably one of the safest occupations – we’re not going to allow people to die in a recession, they’ll just have to cut back on buying big new TVs.

DIVERSIFICATION
What else can you do besides avoiding forced liquidation of assets during the recession? Well, you can try to make sure that the future total value of your assets isn’t permanently impaired by the recession. After all, recessions do end, and you want the assets to be worth something then. That might not happen if you invested all your savings into one asset that got wiped out by the recession, like the stock of a company that goes bankrupt. So it’s a good idea to spread your savings over assets that are very different from each other. Then lots has to go wrong before you lose a big chunk the total value of your assets. I invest in a wide variety of stocks, spread fairly evenly over the world and many industries, including real estate. You have an investment in your home already, so you probably don’t need any more real estate assets. if you don’t want to research global stock markets, then you can buy a mutual fund that invests in a very broad worldwide basket of stocks. (Vanguard, Fidelity, Barclays, and many others are offered. Investment advisers can tell you more.)

If you do buy a global mutual fund, then you may want to do it in disciplined pre-planned fixed amounts per month over the next 2-5 years. That way you won’t kick yoursself if you buy all at once now and it turns out that was the market peak over the next 15 years.

INCOME
I am a 1-income household, working in private industry with no pension benefits, and over half my compensation is highly variable. Obviously, I am taking on high income risk. You are a 2-income household, at least one of you is in a very stable profession with good pension benefits, and most of your compensation is fixed in advance and doesn’t go up or down much. You’ve probably done as much as you need to reduce risk here.

Patient renter in OC

[patientrenter]

Novice, I am not recession-proof myself, so I’m not really an expert on this, but I’ve though about it, so I’ll pass on my thoughts to you.

LIQUIDITY
In a recession, the prices of many assets tends to drop a lot. An example is stocks. Real estate tends to get hit by recession as well. Commodities too. People argue over what’s affected most and least. Obviously, money in the bank isn’t affected (except eventually by inflation). Anyway, if you have to sell those assets during the recession, you’ll lose a lot. So make sure that you don’t have to sell many of them. Most people do that by building a reserve fund in “liquid” assets like bank deposits that will cover their bills even if they lose their jobs, until they find a new job. Having two jobs, as you do, especially in different fields and industries, really helps a lot. Nursing is probably one of the safest occupations – we’re not going to allow people to die in a recession, they’ll just have to cut back on buying big new TVs.

DIVERSIFICATION
What else can you do besides avoiding forced liquidation of assets during the recession? Well, you can try to make sure that the future total value of your assets isn’t permanently impaired by the recession. After all, recessions do end, and you want the assets to be worth something then. That might not happen if you invested all your savings into one asset that got wiped out by the recession, like the stock of a company that goes bankrupt. So it’s a good idea to spread your savings over assets that are very different from each other. Then lots has to go wrong before you lose a big chunk the total value of your assets. I invest in a wide variety of stocks, spread fairly evenly over the world and many industries, including real estate. You have an investment in your home already, so you probably don’t need any more real estate assets. if you don’t want to research global stock markets, then you can buy a mutual fund that invests in a very broad worldwide basket of stocks. (Vanguard, Fidelity, Barclays, and many others are offered. Investment advisers can tell you more.)

If you do buy a global mutual fund, then you may want to do it in disciplined pre-planned fixed amounts per month over the next 2-5 years. That way you won’t kick yoursself if you buy all at once now and it turns out that was the market peak over the next 15 years.

INCOME
I am a 1-income household, working in private industry with no pension benefits, and over half my compensation is highly variable. Obviously, I am taking on high income risk. You are a 2-income household, at least one of you is in a very stable profession with good pension benefits, and most of your compensation is fixed in advance and doesn’t go up or down much. You’ve probably done as much as you need to reduce risk here.

Patient renter in OC

[novice1027]

Thanks for the info Renter,
I figure I am about as safe as I can be, but I have just been lucky due to my lack of wanting any risk in my financial life.
I do really appreciate all that I have learned from this site. Thanks for any other future input.

[novice1027]

Thanks for the info Renter,
I figure I am about as safe as I can be, but I have just been lucky due to my lack of wanting any risk in my financial life.
I do really appreciate all that I have learned from this site. Thanks for any other future input.

[DaCounselor]

Just a quick update regarding the status of FAS 140 interpretation. The SEC itself has weighed in and has opened the door for modifications without servicer/seller accounting repercussions. The significance of the SEC statement will be reflected by the number of modifications that are actually undertaken by previously concerned servicers. The door now appears wide open for modifications. We’ll see what actually happens.

Christopher Cox’s July 24 letter to Barney Frank, which summarizes the SEC’s position, can be found here:

http://www.house.gov/apps/list/press/financialsvcs_dem/sec_response072507.pdf

[DaCounselor]

Just a quick update regarding the status of FAS 140 interpretation. The SEC itself has weighed in and has opened the door for modifications without servicer/seller accounting repercussions. The significance of the SEC statement will be reflected by the number of modifications that are actually undertaken by previously concerned servicers. The door now appears wide open for modifications. We’ll see what actually happens.

Christopher Cox’s July 24 letter to Barney Frank, which summarizes the SEC’s position, can be found here:

http://www.house.gov/apps/list/press/financialsvcs_dem/sec_response072507.pdf

[lendingbubblecontinues]

DaCounselor:

Keep hope alive, right? There’s got to be a way to avoid a collapse in the value of my investment, er, home, right? I know there is….I can just feel it! (Pretend Will Farrell’s “Elf” character is speaking and re-read the last two lines;)

Not.

[lendingbubblecontinues]

DaCounselor:

Keep hope alive, right? There’s got to be a way to avoid a collapse in the value of my investment, er, home, right? I know there is….I can just feel it! (Pretend Will Farrell’s “Elf” character is speaking and re-read the last two lines;)

Not.

[patientrenter]

Thanks for the info, DaCounselor. This process is more complicated, and the range of possible outcomes more uncertain, than I think many people realize.

Patient renter in OC

[patientrenter]

Thanks for the info, DaCounselor. This process is more complicated, and the range of possible outcomes more uncertain, than I think many people realize.

Patient renter in OC

[DaCounselor]

“Keep hope alive, right? There’s got to be a way to avoid a collapse in the value of my investment, er, home, right? I know there is….I can just feel it! (Pretend Will Farrell’s “Elf” character is speaking and re-read the last two lines;)”
______________________________

There was a wonderful post on another thread – by I believe FSD – that stated something to the effect of “don’t confuse someone who insists on facts over sensationalism as being a housing bull.”

I’m just reporting the facts and providing the links re the modification issue. While I have been and remain a mild-to-moderate housing bear, I don’t ignore developments that may affect the market in a positive way. Some people are so married to their beliefs that they choose to ignore or ridicule facts that don’t support their position. Me? I prefer to see the full picture. To each his own.

[Author]

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