What ARE the fundamentals?

[DWCAP]

FSD-
I have seen that reset chart alot. I constantly wonder how much of that is second’s, already sold, or flips; which will reduce the overall pain of resets.
I actually agree with you on the rests to the Neg Am. This in my mind is the thing that will get the CV/RSF’s, much more than subprime. The thing is, those people are also the ones with the best income growth right now. If they over extended themselves 10% or so, and have 5 years to make up for it, they will likely be ok. Add in that they will prob. be able to caugh up some money to grease the refi wheels so to speak and alot more of them will be ok. Prime borrowers are not subprime borrowers, to expect them to make or even have only the choices that a subprime does is incorrect. That doesnt mean that reset wont hurt, or that only prime borrowers bought in the nicer areas.

[DaCounselor]

“But why would he take that ARM when he could get a fixed for that rate and lock it in for 30 years?”
_____________________________

Because if he went conventional 30 yr fixed he would be paying principal as well, which on a median SD purchase probably would have bumped the monthly payment up by about $500/month. I think alot of the ARMS were interest only.

FSD has a good handle on the reset issue. As for how long LIBOR can remain at historically very low levels, we just had a 4 year run of very low rates earlier this decade. How far will LIBOR drop and how long will it stay low this time around? Who knows?

[DaCounselor]

“But why would he take that ARM when he could get a fixed for that rate and lock it in for 30 years?”
_____________________________

Because if he went conventional 30 yr fixed he would be paying principal as well, which on a median SD purchase probably would have bumped the monthly payment up by about $500/month. I think alot of the ARMS were interest only.

FSD has a good handle on the reset issue. As for how long LIBOR can remain at historically very low levels, we just had a 4 year run of very low rates earlier this decade. How far will LIBOR drop and how long will it stay low this time around? Who knows?

[DaCounselor]

“But why would he take that ARM when he could get a fixed for that rate and lock it in for 30 years?”
_____________________________

Because if he went conventional 30 yr fixed he would be paying principal as well, which on a median SD purchase probably would have bumped the monthly payment up by about $500/month. I think alot of the ARMS were interest only.

FSD has a good handle on the reset issue. As for how long LIBOR can remain at historically very low levels, we just had a 4 year run of very low rates earlier this decade. How far will LIBOR drop and how long will it stay low this time around? Who knows?

[DaCounselor]

“But why would he take that ARM when he could get a fixed for that rate and lock it in for 30 years?”
_____________________________

Because if he went conventional 30 yr fixed he would be paying principal as well, which on a median SD purchase probably would have bumped the monthly payment up by about $500/month. I think alot of the ARMS were interest only.

FSD has a good handle on the reset issue. As for how long LIBOR can remain at historically very low levels, we just had a 4 year run of very low rates earlier this decade. How far will LIBOR drop and how long will it stay low this time around? Who knows?

[DaCounselor]

“But why would he take that ARM when he could get a fixed for that rate and lock it in for 30 years?”
_____________________________

Because if he went conventional 30 yr fixed he would be paying principal as well, which on a median SD purchase probably would have bumped the monthly payment up by about $500/month. I think alot of the ARMS were interest only.

FSD has a good handle on the reset issue. As for how long LIBOR can remain at historically very low levels, we just had a 4 year run of very low rates earlier this decade. How far will LIBOR drop and how long will it stay low this time around? Who knows?

[Eugene]

In 2003, typical ARM interest rates were in 4 – 4.5% land. They didn’t get to 5.75% until 2006.

[Eugene]

In 2003, typical ARM interest rates were in 4 – 4.5% land. They didn’t get to 5.75% until 2006.

[Eugene]

In 2003, typical ARM interest rates were in 4 – 4.5% land. They didn’t get to 5.75% until 2006.

[Eugene]

In 2003, typical ARM interest rates were in 4 – 4.5% land. They didn’t get to 5.75% until 2006.

[Eugene]

In 2003, typical ARM interest rates were in 4 – 4.5% land. They didn’t get to 5.75% until 2006.

[DWCAP]

esmith,
I dont mean to seem like I am disagreing with you all the time. You just seem to have a more bullish sentement on rents than I do. I agree that rents will create a floor underhousing. I just think that using the highest rent in the area to justify pricing isnt gonna pan out. Using your same numbers, but tying to the lower range of the rent scale I get a purchase price of $245000. Requiring a reduction of 25% on current 330000 listings.

Downpayment: 12500
Morgage: 1350
Prop Tax: 245
HOA: 325
Tax deduct: -427
dont forget 5% down brings morgage insurance:
morg. ins. 80

Total: 2000/month.
-427 tax deduction
Cost: 1575/month

This is right in the middle of the range of rents right now and doesnt include upkeep costs, homeowners insurance, any managment or advertising fees, or rent loss due to turnover. The cost of capital on 12000 isnt much, so forget that.

Plus the argument that rents rise, so long term it is a good investment is a hard sell on me. Sure over 30 years it will turn cash positive, but that still doesnt make it a good investment. Most any non retarded or high risk investment over 30 years will make a return. Plus in the time frame we are talking about, 1-5 years, who says rents go up?

http://www.baltimoresun.com/business/realestate/bal-renters0121,0,4619944.story?ref=patrick.net

http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?ref=patrick.net

[DWCAP]

esmith,
I dont mean to seem like I am disagreing with you all the time. You just seem to have a more bullish sentement on rents than I do. I agree that rents will create a floor underhousing. I just think that using the highest rent in the area to justify pricing isnt gonna pan out. Using your same numbers, but tying to the lower range of the rent scale I get a purchase price of $245000. Requiring a reduction of 25% on current 330000 listings.

Downpayment: 12500
Morgage: 1350
Prop Tax: 245
HOA: 325
Tax deduct: -427
dont forget 5% down brings morgage insurance:
morg. ins. 80

Total: 2000/month.
-427 tax deduction
Cost: 1575/month

This is right in the middle of the range of rents right now and doesnt include upkeep costs, homeowners insurance, any managment or advertising fees, or rent loss due to turnover. The cost of capital on 12000 isnt much, so forget that.

Plus the argument that rents rise, so long term it is a good investment is a hard sell on me. Sure over 30 years it will turn cash positive, but that still doesnt make it a good investment. Most any non retarded or high risk investment over 30 years will make a return. Plus in the time frame we are talking about, 1-5 years, who says rents go up?

http://www.baltimoresun.com/business/realestate/bal-renters0121,0,4619944.story?ref=patrick.net

http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?ref=patrick.net

[DWCAP]

esmith,
I dont mean to seem like I am disagreing with you all the time. You just seem to have a more bullish sentement on rents than I do. I agree that rents will create a floor underhousing. I just think that using the highest rent in the area to justify pricing isnt gonna pan out. Using your same numbers, but tying to the lower range of the rent scale I get a purchase price of $245000. Requiring a reduction of 25% on current 330000 listings.

Downpayment: 12500
Morgage: 1350
Prop Tax: 245
HOA: 325
Tax deduct: -427
dont forget 5% down brings morgage insurance:
morg. ins. 80

Total: 2000/month.
-427 tax deduction
Cost: 1575/month

This is right in the middle of the range of rents right now and doesnt include upkeep costs, homeowners insurance, any managment or advertising fees, or rent loss due to turnover. The cost of capital on 12000 isnt much, so forget that.

Plus the argument that rents rise, so long term it is a good investment is a hard sell on me. Sure over 30 years it will turn cash positive, but that still doesnt make it a good investment. Most any non retarded or high risk investment over 30 years will make a return. Plus in the time frame we are talking about, 1-5 years, who says rents go up?

http://www.baltimoresun.com/business/realestate/bal-renters0121,0,4619944.story?ref=patrick.net

http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?ref=patrick.net

[DWCAP]

esmith,
I dont mean to seem like I am disagreing with you all the time. You just seem to have a more bullish sentement on rents than I do. I agree that rents will create a floor underhousing. I just think that using the highest rent in the area to justify pricing isnt gonna pan out. Using your same numbers, but tying to the lower range of the rent scale I get a purchase price of $245000. Requiring a reduction of 25% on current 330000 listings.

Downpayment: 12500
Morgage: 1350
Prop Tax: 245
HOA: 325
Tax deduct: -427
dont forget 5% down brings morgage insurance:
morg. ins. 80

Total: 2000/month.
-427 tax deduction
Cost: 1575/month

This is right in the middle of the range of rents right now and doesnt include upkeep costs, homeowners insurance, any managment or advertising fees, or rent loss due to turnover. The cost of capital on 12000 isnt much, so forget that.

Plus the argument that rents rise, so long term it is a good investment is a hard sell on me. Sure over 30 years it will turn cash positive, but that still doesnt make it a good investment. Most any non retarded or high risk investment over 30 years will make a return. Plus in the time frame we are talking about, 1-5 years, who says rents go up?

http://www.baltimoresun.com/business/realestate/bal-renters0121,0,4619944.story?ref=patrick.net

http://money.cnn.com/2008/01/16/real_estate/rents_flat/index.htm?ref=patrick.net

[Author]

Posts