[bearishgurl]

I didn’t succumb to “cash out” during the “bubble” because I’ve seen this whole RE cycle thing occur twice before in my life (actually 3x but I was in college during the 1st one) and I didn’t buy during those “bubbles” either. I was also fortunate initially get into the RE market BEFORE the long “exorbitant-interest-rate-crash” and also fortunate to buy again near the bottom of “Gen-Dyn-leaving-SD-bust.” I was taught about RE cycles many, many years ago in “RE Principles class.”

Being “well-educated” in subjects that are not related to RE will NOT HELP an agent or principal in navigating the street and the players on it. A college degree will NOT TEACH you what to do to successfully consummate RE deals. ONLY intimate product knowledge combined with a good RE education and more importantly, experience on the street will enable an agent/principal to get a “lay of the land” enough to know what they are doing. If a new agent is fortunate enough to mentor with or assist a very experienced agent for the first year or so …. all the better.

edit: Also bought during the “Gulf war crisis malaise” and that turned out to be a good investment as well. IMO, the trick to remaining solvent with above-water properties is to refrain from extracting equity, esp large amts.

[bearishgurl]

[quote=SK in CV][quote=sdrealtor]I couldnt resist. I emailed him and asked him how big the bedrooms were and what the condition of the roof was? Will let you know if he responds and how long it takes.[/quote]

The response i imagine:

The bedrooms are the right size. Not a size influenced by GOV intervention. They are large enough to do the things you need to do in a bedroom, without interference from FEDERAL government regulations. You will however be subject to STATE government interference, because that is the right kind. Though unfortunately, due to LEGISLATION FROM THE BENCH, sodomy is now legal in Texas If you have a uterus, it should also not be safe from STATE only invasion.

The roof was built in 1971. With REAL gold backed dollars. It is NOT a fiat roof. It may have to be replaced soon, and you can only replace it with new roof purchased with FIAT currency, so it will probably not last as long as my GOLD backed roof.

vty,

R. Paul

[/quote]

lolol . . . where is our markmax when you need him??

[bearishgurl]

[quote=SK in CV] . . . If you remember a few years ago when the auto industry was in massive trouble. The promised retirement benefits cost them more than they could afford. But it wasn’t monthly pensions. It was health care. More than once over the last 30 years, they had pension trusts that were actually over-funded, and they made deals with the unions to take that money back. Then the cost of health care spiraled up and out of control, and they were no longer over-funded. . .[/quote]

Overall good and informative post, SK. Since retiree healthcare was provided older “Tier 1” retirees but never contracted with the unions, the way SDCERA solved the escalating costs of retiree healthcare was to charge the retirees 100% of their (group rate) premium. Tier I retirees plus the formerly Tier II (now added into Tier I) *newer* (pre March 2002) retirees are paid an allowance of $200 – $300 mo to offset monthly premiums (only if they subscribe to a plan) but the monthly premiums are nearly twice that and far beyond. Those retiring after 3/8/02 under an *enhanced* (Tier A) plan do not get the healthcare allowances. The entire monthly premium is/will be subtracted from their pensions.

The 06/07 Grand Jury Investigative Report on SDCERA stated that, at that time, only about 2/3 of (non-Medicare) retirees availed themselves of the County’s plans. This is understandable given the current competitive and choice-laden individual market out there (available to those without pre-existing conditions).

edit: The monthly healthcare allowance paid to SDCERA Tier I retirees (a finite amt of employees who have already left svc) is a fixed sum between $200 and $300 mo based upon years of service. As health plan rates continue to rise, this sum will continue to be fixed.

I note that nearly 100% of the older original “Tier 1” retirees are now eligible for Medicare or dead.

[bearishgurl]

I want to add here that I believe in the concept of FHA loans. They were originally designed to give first-time buyers a “leg up” into the housing market. I believe a $300K loan limit (for the SD region) is more than sufficient today for this purpose. I just don’t feel that it is an appropriate for the FHA to be available to finance upscale or luxury properties (or even fixers in highly desirable areas). Persons who are buyers in these categories need to use their own money and obtain a conventional mortgage, if necessary. IMO, by HUD taking on individual risks this large, the taxpayers will unwittingly be subsidizing more “luxury home” defaults.

[bearishgurl]

[quote=FormerSanDiegan][quote=bearishgurl]
Amount of MIP deposited (assuming all pymts are timely made):

by 13th month of ownership = $17,587.64
by 25th month of ownership = $22,403.96
by 37th month of ownership = $27,220.28

Is this enough cash to protect HUD (another acronym for “gubment”) if this borrower should default in these first three critical years??[/quote]

It depends on the default rate…[/quote]

From an 11-15-11 article:

The dangers of a low rate environment

Let us assume we operated in a truly free market (which we don’t) then an interest rate would truly reflect the risk of lending out money to a venture or a securitized asset. Yet in this current market we are largely operating in a distorted netherworld of easy money. Is there really almost no risk in giving a 30 year mortgage to someone in this volatile economy? Absolutely but current mortgage rates reflect an almost risk free bet that the 30 year note will be paid in full. This reminds me of Taleb’s Black Swan where you are right until you are wrong. Home values never went down on a nationwide basis prior to the Great Depression, until they did. This is why problems are now cropping up with FHA insured loans:

[img_assist|nid=15578|title=FHA “Foreclosure Impact” Chart|desc=|link=node|align=left|width=100|height=72]

FHA defaults are now surging as a percent of the overall mortgage market. Of course this would make sense since FHA loans stepped in largely in 2008 and going forward for the low down payment market. It should be no shock that things are getting bad quickly because a low rate can’t make up for a lost job or low income growth.

Mark to fantasy model of real estate accounting. California property assessments down only 4 percent from peak but home values are down by 37 percent. FHA default rates surge.

And a March 2010 report (which preceded the passing of the current [lower] FHA limits and MIP rules):

…About 9.1 percent of FHA borrowers are in default, having missed at least three payments as of December 2009, a statistic that has gone up from 6.5 percent a year ago—which is a 40 percent increase in this statistic in one year. Although the FHA expects the tidal wave of defaults to gradually abate over time, assuming perhaps an “Earlier Recovery” scenario, there are signs that the reduction in real estate values may also be contributing to the growing defaults and claims debacle.

http://nationalmortgageprofessional.com/news16534/excessive-defaults-and-future-fha

[bearishgurl]

[quote=sdrealtor]Sorry but you are twisting my words. Assuming your old TOXIC OPTION ARM today when rates are sub 4% means NOTHING. In the future, someone being able to assume a 30 year FIXED rate loan at 3.75% could have lots of value. Sorry….you lose again BG[/quote]

For the record, FHA rates are currently just over 4%.

And again, mainstream prime and Alt-A OPTION ARMS of the 1984-2002 era were NOT “toxic!”

The reason OPTION ARMS were given a bad rep of late is due to them being later turned into sub-prime vehicles for the purpose of funding RE purchases for “toxic” borrowers! The features of these loans bear no resemblance to mine.

[bearishgurl]

Proposed new FHA purchase in SD, CA using new loan limit of $729,750 (with $12771 MIP escrow deposit):

$748,450 purch price (no HOA or MR)
$ 18,700 3.5% downpayment

$729,750 Mortgage at 4% fixed

P&I = $3480.91
Taxes = 729.74
Ins = 161.17 (non fire-risk area)
MIP = 401.36

Total $4773.18 (mo PITI + MIP)

Amount of MIP deposited (assuming all pymts are timely made):

by 13th month of ownership = $17,587.64
by 25th month of ownership = $22,403.96
by 37th month of ownership = $27,220.28

Is this enough cash to protect HUD (another acronym for “gubment”) if this borrower should default in these first three critical years??

I don’t think so. Assuming the loan doesn’t go bad until the 37th month, $27,220.28/$3,480.91 = 7.82 months of P&I in “reserves.” And this doesn’t even cover late fees, trustees fees, unpaid taxes, insurance and clean up/maintenance on the REO!

And I’ve never met a HUD home that took less than nine months to get there. In recent years it has taken up to three years for an FHA mortgage to foreclose.

I don’t think I need to ask here who will end up footing this bill …. :=0

[bearishgurl]

[quote=Rich Toscano][quote=bearishgurl] Why not take the $12,771 and add it to the downpayment and try to buy FF with a 95% LTV mortgage? (PMI is surely the lesser of two evils.)
[/quote]

Because FHA loans are assumable.[/quote]

IMO, current MIP is a VERY high price to pay for “assumability.”

Acc to some on this board . . . ahem . . . “assumability” means nothing because a buyer who wishes to assume today must jump thru all the same hoops as a buyer qualifying straight away for a new mortgage.

Rich, do you know what the “assumption fee” is on FHA loans?

[bearishgurl]

If one borrows the maximum FHA loan amount of $729,750 and puts only 3.5% down on their purchase, their MIP will be HUGE under the new rules.

Up front MIP payment to escrow: $12,771
Monthly MIP payment (into oblivion, lol): $401.36

WHO would throw all this money (both up front and monthly) to the wind? Why not take the $12,771 and add it to the downpayment and try to buy FF with a 95% LTV mortgage? (PMI is surely the lesser of two evils.)

If you answer, “persons whose credit score is not high enough to qualify for FF,” then IMHO, those persons have no business purchasing a $750K+ property. Perhaps they need to save far more cash and bring up their scores before purchasing RE.

An FHA loan limit of $729,750 will quickly prove to be another gubment knee-jerk debacle which will most certainly self-detonate when these borrowers can no longer pay their HUGE mortgages with monthly MIP wrapped into the required impounds… ESPECIALLY if this new mtg limit will prevail everywhere in the country.

Good L@rd, what were the powers-that-be thinking here?? :=[

[bearishgurl]

[quote=KSMountain] . . . While that author is bemoaning soggy sleeping bags and the unfairness of it all, others are following their dreams and changing the world.[/quote]

I understand this, KSMountain, but those who can afford to “follow their dreams” and be “innovators” in this day and age are very far and few between. There has to be a market out there for what one would spend time “innovating.” The majority today are just trying to exist month to month and depend upon their employers (or UI, small pension, small SS, public assistance, etc) to survive.

[bearishgurl]

[quote=CA renter]…Some facts:

FACT: The average public pension in California is $25,000 a year. 80% of public employees such as nurses, school employees, college professors, and child protection workers who retire receive less than $2,500 a month in retirement benefits.[/quote]

All very good points, CAR …

In my experience with non-sworn, non-professional county government workers, their average pension varies from about $600 to $1300 mo for those who retired PRIOR to March 2002 and about $800 to $2000 mo for those who retired AFTER March 2002. (Those employees retiring AFTER March 2002 have a much higher contribution rate.) The lower end applies if the employee decided to take benefits early. Full retirement age is 62 (age 60 for post 3/02 retirees).

There are MANY MORE non-professional workers who keep the wheels of gov’mt turning than there are “chiefs” (who have MUCH higher pensions). Most “midmanagement” positions were done away with between 1998 and 2002. As those incumbents retired (either voluntarily or with a 2-yr “service credit” carrot placed before them), their (mostly redundant) positions were simply not replaced and never will be.

edit: Here’s the (very interesting) ’06/07 Grand Jury Investigative Report on SDCERA.

http://www.sdcera.org/pdf/Grand_jury_report_5-07.pdf

As far as I am aware, the county has followed ALL of its recommendations.

[bearishgurl]

[quote=tugg49]Actually I’m an ex-San Diegan. I left the rat race and moved to Monterey.
The home is a short sale and at the peak it was refi-ed for 1.2 million. I got it for 450K. 3300 sf on an acre of land in a gated community. 10 years old. TWO furnaces!! Lots of short sales up here if you can stand the 6 month wait. But for 3.75% I can wait a long time. 132 bucks a SF. Can’t beat that!
The market up here is lively! All houses we liked were bought by cash offers in less than a week. Can’t compete in Monterey.
The working stiff has to commute from the outer regions but it’s still only 20 minutes on four lane highways. Get to watch the surf roll in most of the way.[/quote]

I’m envious, tugg!

[img_assist|nid=14952|title=Harbor Seal performing on Cannery Row|desc=|link=node|align=left|width=100|height=58]

I just did another “17 mile drive” last month and know you will enjoy your new digs!

[bearishgurl]

[quote=eavesdropper] . . . Many older Americans have “wealth” (in reality, “wealth” = no debt, a paid-off mortgage, and 35 bucks in the bank) because they’ve been much more prudent in their spending habits. Most realized that there was an important distinction between being able to *BUY* something, and being able to *AFFORD* it, and they have the self-discipline to keep from crossing that line. That went away in the mid-90s, when the banks were trying to lend out all that cheap money the Fed was giving them, and sold the idea to the poor and the middle-class that they weren’t poor and middle-class.

And the problem is that they’re still not accepting of the idea that they’re poor and middle-class. They’re in a temporary cash-crunch because the “boomers” stole all their money when they weren’t looking.[/quote]

So true, Eaves! Another excellent post that answers my question …

[quote=bearishgurl]How do you define “rich?”[/quote]

[bearishgurl]

[quote=bake]Texas is a “non disclosure” state bearishgurl, meaning they do not have to disclose selling price at close, so comps are hard to come by. Some people (real estate agents) support the policy citing “Texan’s fierce independent nature” but most of the people think it has something to do with protecting a monopoly?!

Property tax assessments are public record though, and are updated yearly. Try this link:

http://publicrecords.onlinesearches.com/Texas-Assessor-and-Property-Tax-Records-2.htm
[/quote]

Thanks for the info and link, bake! However, it appears you need the name of a property owner to use it. It makes sense now that not all sold comps there would be easily available online.

My next question to you would be, is a property in TX re-appraised upon sale for tax calculation purposes or is the assessment there disconnected from the price it fetched at the time of resale?

[bearishgurl]

[quote=paramount][quote=bearishgurl][quote=pri_dk]…Ever hear the old song: “Load sixteen tons and what do you get…” ?…[/quote]

IIRC, “Another year older and deeper in debt…”

If I appear to be “pro-union” on this board, in actuality, I’m not … entirely …

It’s complicated… to the nth degree …[/quote]

Let me take a guess though – you’re pro-union when it comes to the SuperHumans (gov’t workers)?[/quote]

Actually … it depends upon the union in question …

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