[4runner]

Thank you. I knew that I was missing something that was in front of my face…

[4runner]

If you really want to be cynical– why not just list it yourself and offer the buyer’s agent 8%???

[4runner]

You are wealthy if:
-you make more money than your wife feels comfortable spending and
-you make more than your brother-in-law.

[4runner]

50% default rate on $360 a year??? That is un-f’in-believeable. Start liening with a vengeance.

If you feel comfortable posting it, what is the name of your HOA?

[4runner]

Yes- banana-republic style inflation could save the housing market. Of course, there would be other problems if this happened.

Not the sort of thing that you want to wish for…

[4runner]

No_such,

I agree with you that all of these are likely to occur without a meaningful appraisal process.

I only question whether these are sufficient to outweigh the temptation for short term, easy profits. There is a fundamentally different paradigm between a lender who gets paid to originate loans with OPM and a lender who gets paid based on the rate of return on his/her own capital.

Yes, some banks do keep mortgage loans on their books. However, I can’t imagine that originating a loan with them is much more difficult than originating a loan that is to be securitized, as postulated. From a consumer’s perspective, they are equivalent. To be competitive, the banks who keep loans on their books have to adopt comparably shoddy lending practices.

As for changes in interest rate, people who buy MBS’s “know” that the rate of default is “X,” based on historical records. This is the same way that people who invest in stocks “know” that stocks return 10% per year on average. It takes time for the information regarding higher rates of default/lack of meaningful appraisals to work its way into people’s consciousness.

[4runner]

No_such_reality (realty??),

Isn’t the lack of a real appraisal a big part of the problem? Why would a bank insist on using their own appraiser when the loans are just going ot get securitized and sold?

The originators are just short-term holders of the debt…

[4runner]

Can you point to a house or condo that is for sale that can be rented for more that 50% of the carry on a traditional mortgage?

My wife and I supposedly have a LTV on our condo of under 40%. If we were to rent it, we’d make about 3% of the carry/month.

It looks like there is plenty of room for a 50% drop…

[4runner]

Wow– thanks for the links.

One more stat of interest: only 93,000 out of 434,000 renters pay more than $1500/month gross rent.

[4runner]

Because with an amortizing $3000/month mortgage, some $600-$700 of that is a principal payment and the remainder (above the standard deduction) is tax deductible. Yes– you escape maintenance/repair costs by renting, but those costs are generally far below principal payments if you own.

As for the buying and selling of $700k to $900k homes, it looks like that is stopping too.

[4runner]

Renting these houses is obviously a lot cheaper than buying/carrying them.

However, run the numbers to determine the market size. If a renter is willing to pay up to 40% of take home pay to rent, 3k$/month would require the renter to take home over 7.5k$/month– or a salary of at least 100k$/year. Rent payments of 33% of take home pay pushes it even higher. This is without the interest deduction for people whom the interest deduction actually matters.

I find it hard to believe that there is a large market of people earning six figures who are renting. Admittedly, a lot of relatively well-to-do people have moved to the sidelines in this real estate market, but 3k for rent still strikes me as a lot.

[4runner]

It looks like these Bressi Ranch homes are now to be rented.

A whole bunch of furnished/unfurnished rental listings popped up on Craigslist on 12/5.

Examples are found here:
http://sandiego.craigslist.org/apa/244557096.html
http://sandiego.craigslist.org/apa/244554229.html
http://sandiego.craigslist.org/apa/244558461.html

It is curious how inexperienced landlords think that there is a large, underserved market of renters willing to pay ~$3000/month to rent a single family home…

[4runner]

Also– when did the economists actually predict that a housing slowdown would actually happen? Didn’t most economists predict that the housing market would only move sideways? Now all of the sudden, they admit that we are in the middle of a “slowdown?”

[4runner]

“I think the borrower’s obligation to pay taxes on $200K could be almost as bad as making the mortgage payment on that amount. At a 28% federal tax rate, the borrower is looking at owing Uncle Sam $56K this year.”

The borrower can just take out another loan to pay off the 56k$.

[4runner]

Look- I’m not recommending that anyone walk away from a mortgage intentionally. As I said in my earlier post, it bespeaks a lack of character.

Instead, I’m amazed that California law is set up this way. There are other states where mortgages are recourse debt– the lenders get to go after a defaulting borrower’s other assets, in addition to the mortgaged property.

The California law is almost a risk-free invitation to gamble. It may have something to do with the speculative element of the real estate bubble, especially if the people doing the speculating are real estate professionals who undertsand the law.

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