Mob psychology may actually be changing

[Navydoc]

I’ve noticed quite a few threads the past few days concerning how low prices will go, and my take is this whole thing is still dependent on the psychology of the average Joe.

In light of this I wanted to share something I observed in the physicians cafeteria while having breakfast this morning. Two junior residents were seated at a nearby table discussing the local housing market. The resident leading the conversation described the coming waves of ARM resets and forclosures in a manner that could have been lifted from these threads (potential reader/poster?). The other resident was listening attentively and nodding his head in agreement, but it appeared that this was the first time he had heard these things.

Now I can tell you from personal experience that to a junior medical resident the housing market is the last thing on your mind. Sleep when you can, eat when you can, pee when you can, in that order is the typical Rx for residency. The only exception to this has been the occaisional conversation over the past couple of years about how great the real estate market is to put your money.

Now I understand the meaning of anecdotal evidence as much as anyone, but the above conversation is the first real ray of hope that the general public may be starting to get it. Of course these represent more educated people than the average Joe, but it speaks volumes that they are concerned about this, considering the average resident workload.

Sub $400s in 4S? I doubt it, but I think $600-$700s are a real possibility, and I would be willing to pay that. If I can get a loan.

[kewp]

I think the big psychology shift thats going to occur is when folks simply stopping payment on their mortgage (rather then stretching) and forcing foreclosure proceedings.

If enough people do this its going to overload the system and they will be able to stay in the property for months (years?) rent/mortgage free until the bank can kick them out.

[kewp]

I think the big psychology shift thats going to occur is when folks simply stopping payment on their mortgage (rather then stretching) and forcing foreclosure proceedings.

If enough people do this its going to overload the system and they will be able to stay in the property for months (years?) rent/mortgage free until the bank can kick them out.

[kewp]

I think the big psychology shift thats going to occur is when folks simply stopping payment on their mortgage (rather then stretching) and forcing foreclosure proceedings.

If enough people do this its going to overload the system and they will be able to stay in the property for months (years?) rent/mortgage free until the bank can kick them out.

[HLS]

You can get a loan!
Jumbo Loans (above $417k)
30 YR Fixed, 20% down are 7.625%.
(2nds are available up to 90-95%) with 680+ mid credit score. With a score above 720 or 780 it gets slightly better.
Money is still available. Jumbo rates are higher than they were a month ago, but still less than they were years ago.

Below $417K 30 YR fixed are about 6.25%.

[HLS]

You can get a loan!
Jumbo Loans (above $417k)
30 YR Fixed, 20% down are 7.625%.
(2nds are available up to 90-95%) with 680+ mid credit score. With a score above 720 or 780 it gets slightly better.
Money is still available. Jumbo rates are higher than they were a month ago, but still less than they were years ago.

Below $417K 30 YR fixed are about 6.25%.

[HLS]

You can get a loan!
Jumbo Loans (above $417k)
30 YR Fixed, 20% down are 7.625%.
(2nds are available up to 90-95%) with 680+ mid credit score. With a score above 720 or 780 it gets slightly better.
Money is still available. Jumbo rates are higher than they were a month ago, but still less than they were years ago.

Below $417K 30 YR fixed are about 6.25%.

[Borat]

Sub $400s in 4S? I doubt it, but I think $600-$700s are a real possibility, and I would be willing to pay that. If I can get a loan.

Let’s work this out. First of all, you’re going to have a hard time getting a non-conforming loan from here on out. That sets a maximum loan amount of $417K. Let’s say your dream 4S ranch house costs $600K. That means you’ll need to pony up $183K for a down payment. Okay, let’s run some numbers:

Interest rate 7.5% (they are going up and loans are becoming harder to get now)
30 year fixed

Payment (Principal/Interest): 2915.72/mo
Property Taxes @ 1.25%: 625mo
Insurance: 200/mo
Opportunity cost of $183K down payment in a 5% CD: 762/mo
Approx tax benefit of deducting interest: 750/mo

The opportunity cost of giving up your down payment basically cancels out any tax benefit, leaving you to spend $3740/mo for your $600K home.

Now ask yourself a few questions:

1) How many people have a $183K down payment?
2) Of those, how many will be willing to give up their guaranteed safe 5% return to invest in a home?
3) How many families can afford to spend almost $3800/mo for their housing? This of course doesn’t factor in maintenance.

Of course if you don’t have a $183K down payment, you *might* still be able to get an 80/10/10 where you’d only have to cough up ~91K but then you’d be paying principal and interest on that second which would increase the monthly nut even more…

I’m guessing that you’re a physician from your handle, so you’re probably going to be allright no matter what you do. But I wouldn’t be so quick to discount the possibility of homes returning to the $400K range in 4S ranch…

Best of luck to you whatever you decide!

[Borat]

Sub $400s in 4S? I doubt it, but I think $600-$700s are a real possibility, and I would be willing to pay that. If I can get a loan.

Let’s work this out. First of all, you’re going to have a hard time getting a non-conforming loan from here on out. That sets a maximum loan amount of $417K. Let’s say your dream 4S ranch house costs $600K. That means you’ll need to pony up $183K for a down payment. Okay, let’s run some numbers:

Interest rate 7.5% (they are going up and loans are becoming harder to get now)
30 year fixed

Payment (Principal/Interest): 2915.72/mo
Property Taxes @ 1.25%: 625mo
Insurance: 200/mo
Opportunity cost of $183K down payment in a 5% CD: 762/mo
Approx tax benefit of deducting interest: 750/mo

The opportunity cost of giving up your down payment basically cancels out any tax benefit, leaving you to spend $3740/mo for your $600K home.

Now ask yourself a few questions:

1) How many people have a $183K down payment?
2) Of those, how many will be willing to give up their guaranteed safe 5% return to invest in a home?
3) How many families can afford to spend almost $3800/mo for their housing? This of course doesn’t factor in maintenance.

Of course if you don’t have a $183K down payment, you *might* still be able to get an 80/10/10 where you’d only have to cough up ~91K but then you’d be paying principal and interest on that second which would increase the monthly nut even more…

I’m guessing that you’re a physician from your handle, so you’re probably going to be allright no matter what you do. But I wouldn’t be so quick to discount the possibility of homes returning to the $400K range in 4S ranch…

Best of luck to you whatever you decide!

[Borat]

Sub $400s in 4S? I doubt it, but I think $600-$700s are a real possibility, and I would be willing to pay that. If I can get a loan.

Let’s work this out. First of all, you’re going to have a hard time getting a non-conforming loan from here on out. That sets a maximum loan amount of $417K. Let’s say your dream 4S ranch house costs $600K. That means you’ll need to pony up $183K for a down payment. Okay, let’s run some numbers:

Interest rate 7.5% (they are going up and loans are becoming harder to get now)
30 year fixed

Payment (Principal/Interest): 2915.72/mo
Property Taxes @ 1.25%: 625mo
Insurance: 200/mo
Opportunity cost of $183K down payment in a 5% CD: 762/mo
Approx tax benefit of deducting interest: 750/mo

The opportunity cost of giving up your down payment basically cancels out any tax benefit, leaving you to spend $3740/mo for your $600K home.

Now ask yourself a few questions:

1) How many people have a $183K down payment?
2) Of those, how many will be willing to give up their guaranteed safe 5% return to invest in a home?
3) How many families can afford to spend almost $3800/mo for their housing? This of course doesn’t factor in maintenance.

Of course if you don’t have a $183K down payment, you *might* still be able to get an 80/10/10 where you’d only have to cough up ~91K but then you’d be paying principal and interest on that second which would increase the monthly nut even more…

I’m guessing that you’re a physician from your handle, so you’re probably going to be allright no matter what you do. But I wouldn’t be so quick to discount the possibility of homes returning to the $400K range in 4S ranch…

Best of luck to you whatever you decide!

[temeculaguy]

Navydoc, you are right about the average joe with little or no interest in the market has changed their thinking but it didn’t have to come from housing blogs. In the last month it has dominated the wall street news and in many cases the national news, anyone who picks up a paper or turns on the t.v. will be mentally prepared to join that conversation no matter how busy they are. Those young doctors talk to patients all day long, they probably just hear things from their wide variety of average joe interaction or the t.v. being on in the rooms they walk into. You no longer have to seek out the info, it will find you.

[temeculaguy]

Navydoc, you are right about the average joe with little or no interest in the market has changed their thinking but it didn’t have to come from housing blogs. In the last month it has dominated the wall street news and in many cases the national news, anyone who picks up a paper or turns on the t.v. will be mentally prepared to join that conversation no matter how busy they are. Those young doctors talk to patients all day long, they probably just hear things from their wide variety of average joe interaction or the t.v. being on in the rooms they walk into. You no longer have to seek out the info, it will find you.

[temeculaguy]

Navydoc, you are right about the average joe with little or no interest in the market has changed their thinking but it didn’t have to come from housing blogs. In the last month it has dominated the wall street news and in many cases the national news, anyone who picks up a paper or turns on the t.v. will be mentally prepared to join that conversation no matter how busy they are. Those young doctors talk to patients all day long, they probably just hear things from their wide variety of average joe interaction or the t.v. being on in the rooms they walk into. You no longer have to seek out the info, it will find you.

[HLS]

Borat, where you getting your information ?

It’s not as dismal as you say. I’m in the lending biz.
Conforming loans have NOT gone up and they are NOT harder to get.

The thirst for returns from Wall Street is NOT going to disappear, and conforming rates will NOT be out of whack.

Everything to a lender is risk/reward. Until they sort out the new guidelines, it was easier to just say no for now, which created the current situation. It ISN’T permanent.

The mentality of a primary residence as an investment needs to go away. It’s a life style choice like buying a car.

Your math is perfect for an investor, and of course it doesn’t make sense in our area. NICE ?

[HLS]

Borat, where you getting your information ?

It’s not as dismal as you say. I’m in the lending biz.
Conforming loans have NOT gone up and they are NOT harder to get.

The thirst for returns from Wall Street is NOT going to disappear, and conforming rates will NOT be out of whack.

Everything to a lender is risk/reward. Until they sort out the new guidelines, it was easier to just say no for now, which created the current situation. It ISN’T permanent.

The mentality of a primary residence as an investment needs to go away. It’s a life style choice like buying a car.

Your math is perfect for an investor, and of course it doesn’t make sense in our area. NICE ?

[Author]

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