Secretly stacking the deck against renters/prudent RE investors

[schizo2buyORnot]

This is what I fear most as I rent, analyze, and try to determine the best time to make the biggest investment of my life . . . the deck may be being quietly stacked against us behind closed doors on tel cals between Bernacke and Rubin.

http://money.cnn.com/2007/10/03/news/economy/fed_crunch.ap/index.htm?postversion=2007100318

You can’t “fight the fed” and if the fed decides to make Citi happy. It is bad for patient renters and good for irresponsible “buy as much home as possible on cheap credit” home owners.

[schizo2buyORnot]

How Fed may be screwing the prudent investor . . . .

Linked article goes on to make this point

“The players in the biggest trouble, of course, were the ones who’d taken the biggest fliers in junk mortgages, ultra-risky leveraged buyouts, and other financial esoterica that proved to be malignant.”

. . .

“Finally, consider this. Even though Bernanke’s cut may mean that some junk mortgages will reset at lower rates, the cost of large, high-quality fixed-rate mortgages, which are tied to long rates, will be higher than they’d otherwise be. (Yeah, penalize the people who are prudent – way to go!)”

http://money.cnn.com/2007/09/28/news/economy/sloan_bernanke.fortune/index.htm?postversion=2007092814

In search of a crystal ball . . . .

[what_a_disasta]

Go ahead and buy if you can afford it. Life is for living, not getting depressed and paranoid about “them” screwing your future.

[(former)FormerSanDiegan]

Don’t worry, it’s a win-win situation for you.

First, if they really are out to get you, that means you are not paranoid.
Second, if you are paranoid, then they are not really out to get you and things will turn out OK.

[HereWeGo]

Since the junk mortgages are no longer available, it’s a moot point.

[LA_Renter]

The bubble popped, pretty much everything you read and hear about the bailout is only in the context of mopping up the mess.

[4plexowner]

Just because I’m paranoid it doesn’t mean that they AREN’T out to get me!

[(former)FormerSanDiegan]

Paranoid or not, the deck has always been stacked for the landowner and it’s not really a secret or a conspiracy or anything. This has been true for a number of centuries dating at least back to the concept of fiefdoms.

[temeculaguy]

Former, nice win/win post, loved it.

Schizo, the deck is never stacked against you as long as you are proactive, don’t set yourself up for situations where you need the stars to align, just figure out what you can control and control it. Buy some Tony Robbins tapes on E-bay, get some power back.

Here’s what the lever pullers can’t do:

They can’t bring back wacky financing
They can’t stop the decline in prices or sales immediately

Here’s what they can and might do:

Lower the discount rate to lessen the blow to resets and helocs.

Try and keep the 30 yr as low as they can (although their power is limited) so some buyers can still buy and they can stop the bleeding or prevent a collapse.

You won’t get a house for 30 or 40 cents on the dollar, if that’s your only plan, get a new plan, if it happens great but don’t count on it. You will get 25-50% off peak depending on the market, you will need 20% down and you will need to qualify and you may need to be ready to take advantage of that in the next 6 to 36 months, if you need more time you may miss it. If long rates go up 1 or 2 points, prices will come down an equivalent amount, people buy on payments not prices, if it does, don’t pay any discount points and refi your smaller debt when the rates come down. If they stay the same, you will want to fix because they won’t stay that way forever, but either way it’s a win/win for you if you are prepared to take advantage of it.

Nothing is good for irresponsible borrowers, they always lose.

[drunkle]

well, the economy is currently geared towards a population that spends as much as it can rather than saves as much as it can in order to promote growth… if people saved all their “disposable” cash, there would be a steady outflow of money from the banks to the depositors. where’s the profit in that? conversely, a population that spends every dime increases income for companies, profits for creditors, business for lamborghini and everyone is happy…

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