[BikeRider]

I was reading an article in a past Kiplinger magazine and it made a good point (though the article was trying to be mostly up beat), a lot of sellers are stuck. They have drawn most or all of the equity out of their home. They can’t afford to lower their price.

My thinking is, this may or may not have been REAL equity, none the less, they withdrew it. So, they don’t have much, if any, wiggle room to lower their price without taking a big hit. I could see new home prices dropping and existing homes just not selling much, due to the fact existing owners can’t reduce their price enough to lure in a first time homebuyer. I think the key player in all of this is the first time buyer. They are the ones that must be lured in to buy, so, in the case of an existing owner, they can move up. Other than location, why would a first time buyer purchase an existing home if they could buy a new home cheapr? I’d think they would pass on the existing home.

Listening to Wall Street Journal Today on XM this morning, they were saying that it was half the price to rent in Washington DC, than to buy, so they recommended potential buyers just wait.

I guess there are all kinds of senerios (sp?).

[BikeRider]

“Why would people who can afford conventional 30-year mortgages sign on to Option ARMs especially if the fees are higher with prepayment penalties? ”

I’ve wondered why they would and I think it is because they forget about RISK. Risk that the home value will decline, risk that they could lose their job, risk that the market will go south. I think I have read often where people have actaully drawn out the equity in their home and invested it. To me that sounds crazy, but I do not have any stomach for risk. I guess if you can sleep at night, even leveraged like that, then you are fine.

[BikeRider]

I liked Dennis Miller’s comment regarding gas guzzling SUVs. He said that America won’t do anything about energy efficient cars until oil is gone, so he’s driving a gas guzzler to speed up the process.

Hard to say what might change…
1. You won’t see 52″ flat screen plasma TV’s being bought.
2. People won’t have the money to waste on cell phones.
3. Won’t be buying cable TV.
4. Won’t eat out so much.

The list could go on and on, depending on how bad it got. Think about it really, Americans buy so much crap that they could live without. Somebody thinks up something, a marketing department thinks up a way to may people feel they need it and there you go…. everyone is walking around with a cellphone that takes pictures. You could take the picture with a standard digital camera, then send it over for no extra charge than what you pay for internet, but no, we have to have everything right now. So, let’s pay extra to send some stupid picture to someone that would rather not be bothered using our cellphone. What did Jay Leno say about the cellphone, Ipod, picture phone thingy…. can you say car accident?

I was listening to Dave Ramsey last night driving home. He was remarking on itunes sales. Some woman had written into somewhere that she called off a wedding when she found out that her finance had 40K in credit card debt and that the debt was from downloading itunes,buying DVDs and CDs. There was 8K worth of itunes and this guy had a 45K a year salary. Can you say stupid?

[BikeRider]

What is the definition of “poor people” ? Maybe some of you in SD that can’t afford current housing prices? Just kidding. But really, I think the typical lax lending standards sets a trap for a family with low income. The low tickler rate lures them in, but as soon as there is a rate reset or their income takes a hit, they are toast. Most middle income families aren’t really ready for any kind of income change. I read all the time that most families have no savings. So, if they are a two income family, living off both incomes and then lose one of those incomes, they are probably going to lose the house. A lot of families in America now have a lot of stuff, using credit, but you really couldn’t say they were rich. They are kind of like poor, but got a lot of stuff they really don’t own yet, with more income than someone living in a van down by the river.

[BikeRider]

Look, bottom line this one…… home prices will only go down if people are not willing to pay the current prices or are willing, but CAN’T pay the prices. If there are enough people willing to buy, be they crazy, more money than sense, rich, whatever, then prices will not drop. So, everyone sitting on the sidelines, waiting, better hope that people go broke so homes don’t sell and prices go down. If you are wanting to own a home, can afford one now, and you are just looking for a HOME, not an investment, go for it. But if you don’t plan to stay in the home, then you better think twice. Now if you just want to wait, you’ll probably get a better price in a few years. You’ll never be able to judge when to jump in.

[BikeRider]

CardiffBaseball, yes, there was a lawsuit. We all sued her insurance company. It took one year to settle. It takes a long time to go through this type of lawsuit. For one, you have to heal as much as possible, so everyone knows just how bad you are hurt. They base a settlement on the percent of impairment due to the injury. Luckily for all of us, she had a lot of insurance. Three injured riders all at once. The whole experience was a real learning experience. One, I found out that my wife and I had been very under insured. You just don’t think about bad things that can happen and how you need to protect yourself and your assets. If this lady had been an uninsured driver we wouldn’t had gotten much, because we weren’t carrying very high limits at the time. We fixed that. Two, I found out why you should have long term disability insurance. As it was, I had short term insurance through work and it was enough to cover my expenses while I was out of work. If my neck had been broken….. man that would have been bad. Of course the settlement reimbursed all expenses, plus some more $$. As you said, the money doesn’t give me my knee back and I’d rather have my knee working at 100%. The car hit me and my buddies said I went about fifteen feet in the air, spinning like a top. I landed down the road in the ditch. Looked down and where my knee cap used to be was a big dent. I couldn’t get up and both of my legs hurt something awful. Ended up that both knees were hit, but the right knee just had a deep bone bruise and a fracture. The left patella was busted into a bunch of little pieces. The doc put the three biggest pieces back together with pins and wire. I’m 47 now (almost 48), I was 46 at the time. I did road riding to train for mountain bike races. Endurance stuff just for fun. I wasn’t real fast, but could ride for long periods, so was doing 12 hour solo races and 24 hour races. The accident destroyed the cartiledge in my knee, so instant arthritis is the result. I am back cycling again, but not the level as before the accident. I didn’t get enough money out of the settlement to retire (not serious enough injury), but it did give us a nice nest egg. We were already in pretty good shape, so it just made things better. But now there are things I can’t do. I used to run marathons. Not anymore. I can’t run. Can’t squat. The knee just won’t bend enough. My knee just doesn’t work right anymore. I can cycle, but only because I wouldn’t believe the doctor when he said I wouldn’t ever ride again. I made my knee do it. The last time I saw the doctor he told me that he was amazed at my recovery. After the first surgery my knee wouldn’t bend enough to allow a full spin of my bike crank. I would hook my feet under my weight bench and grab my weight rack and force my leg to bend. Tears in the eyes, but over time I got the tendons to stretch back out (or whatever was breaking loose in there). Plus going to physical therapy two days a week for months. It was so much pain involved with recovery, you wouldn’t know. I doubt I will ever race again, though I am going to try someday. I just had my third surgery this past September, so time will tell. I did not know how long it takes to recover from a serious injury. I had never broken anything until that day. All I can say is don’t ever injure a joint. They don’t mend like just breaking a bone.

[BikeRider]

CardiffBaseball, I’m overly sensitive to traffic violators because in 2005 a lady turned left into a group of cyclists and took out 3 of the 4 riders. I was the lead rider and my left patella was shattered, requiring three surgeries and leaving me 19% permanently impaired in that leg. Lady never saw us and yes, she was on the phone. We had the ‘right of way’ (yep, dead right), but that didn’t help us much. Two of my buddies didn’t fair much better, one getting both arms broken. The lady got a ticket of ‘failing to yeild right of way’. Should have been attempted murder if you ask me. And as to parenting, I would probably suck as a parent. But, I don’t have any children. I just critique other parents. Kind of like watching a chess game, looking over the player’s shoulder you see all the moves they are missing.

[BikeRider]

CardiffBaseball, you get no sympathy from me. Yeah, big oops. I witnessed what can happen when someone runs a red light. A lady ran a light and T-boned a van with a mom and her kids inside. Bad accident. Hopefully your wife will stay off the cellphone and drive sensible.

[BikeRider]

Nancy_s soothsayer, you suck as parents for sure, not I guess. You buy your son a brand new truck and also write a check to solve his traffic problem. Did he work for this truck, or just have it handed to him? Can you say “spoiled brat”? I think a belt to his ass was needed, not a bail out check. 98 MPH. Hmmm, he could have killed himself, or worse, killed some innocent person. When do you plan to let this grown man stand on his own two feet? He’ll get a reality check one day when Mom and Dad can’t fix his problem.

[BikeRider]

You don’t know what prices will do. It is possible that some people could just be trapped in their homes for years. They bought at the peak of the bubble, also took out a HELOC. So, they can’t lower their price without losing their shirts. I could see where many existing homes stay priced high and just never sell or get pulled off the market. And new home prices start dropping. Hopefully most people that bought homes in 2005/2006 plan to stay in them for a good while, or they are screwed. Also, they will have to deal with seeing friends purchase similar homes for much less money.

[BikeRider]

At Bankrate.com they state- “For most people, 15% of after-tax monthly income is appropriate for total monthly car payments.” So, that should determine how much car (or cars) you can afford in the family. If your household income is $4k after tax, then you can afford a $600 car payment. One expensive car or a couple of Civics.

http://www.bankrate.com/brm/auto-advisers/auto-afford.asp

Most people lose their mind when they enter a car dealership. My wife and I were buying a Mazda 626 years ago and the dealership was a Mazda/BMW place. In the cube beside us was this young guy, with I think his wife, and he really, really wanted this new BMW model. He was already upside down in some other BMW they had and was trying to work a deal on the new one, trading in the older one. I actually heard the salesman say to him that he would be crazy to buy the new car because they were going to add even more money to the loan to pay off the current car he was driving. He’d be so upside down that it just didn’t make sense. He’d be stuck in the new BMW for years and the car would end up costing him about three times the sticker price. The salesman asked him to not buy the car, but the young guy would not be swayed.

I restore old machinery and take it to tractor shows. I wanted a powerful truck to haul my tractors. My current truck is wearing out. I’ve been looking at Ford F250’s with diesel engines. New they sell for $46,000. I can afford the truck, but it is just too crazy to buy new. You lose so much money. I found a five year old F250 that had been very well maintained with only 32K miles on it. I paid cash and got it for $21,000. Less than half the cost of new and very low miles considering that the 7.3L diesel has a life expectancy of 300K miles. Plus, property tax will be much lower, as is insurance on the vehicle.

The best deal is a one to two year old vehicle. Let someone else take the hit on paying for the new car smell. People saw my truck and thought I had bought a brand new truck.

[BikeRider]

Let me have some of what you’re drinking! There are already too many come-heres to our country. I love our country, but I fear we’re off course. I think a lot of Americans have gotten fat and lazy. Just because something has been a certain way in the past, doesn’t mean it will stay that way. The one thing that I found in life that is constant is that things always change. And not always for the best. I do hope you are right, but I fear you drank the cool-aide.

[BikeRider]

gold_dredger_phd, It is sad to say, but most Americans don’t have just one credit card….they have two, three, twelve of them. With high limits on all. Some of these people keep moving balances from one zero percent card to another, but still racking up more debt and digging the hole deeper. They free up a card by moving the balance or getting a HELOC, then run the cards back up to the limit. My sister got a credit card, immediatedly took it up to the limit. Now, since she really couldn’t afford the loan she gave herself, she pays down the card a little bit, then when there is a tiny bit of credit limit, she takes it right back up. So, she is constantly paying interest on the full amount of the card. It is crazy. I’d bail her out, but then I am just an enabler, and she would just do it again. I read all sorts of articles on this crazy spending. I think we are going to have a whole lot of destitute Americans in the future, living in their Hummers.

[BikeRider]

Well, the wife and I built new on five acres, so we have some buffer from neighbors, but the home was new when we moved in. Older homes can be better, or much worse, according to when built, what building codes were in force, how many termites have moved in, etc, etc. An old home does have charm, but someone like me, that knows what can be wrong or go wrong, I opt for new. I don’t want to spend my time fixing the old warn out stuff just for having charm. Old homes on the east coast typically mean old wiring, narrow rooms (no A/C back then, so rooms were narrow for good cross winds through windows), possible termite damage…many things. Of course a good home inspection can bring out most problems and sale price can be adjusted. I guess when I think old, I’m thinking real old. I would definitely not consider a home built in the 40’s, 50’s or 60’s. I think the building quality would be questionable. I’d have to research more on that age home for what building codes were in force and how well they were inforced. If the home is on a well, copper pipe can get eaten up by the minerals in the water. I’ve seen whole copper piping systems in a home start to get pin hole leaks behind walls, requiring everything to be ripped out and re-piped….walls repaired. These flippers that go in, replace the appliances, paint the walls….they sell you a really pretty home and you wonder, what’s under the hood?

[BikeRider]

PD, you hit the nail on the head. Looking at monthly payment amount only. I think someone posted here a while back how in Lowes the cost of a washer and dryer aren’t posted, just the monthly payment amount (figured by the minimum payment on your Lowe’s card I guess). When my wife and I decided some years back to pay everything off and stop using credit, it was a huge eye opener. It took us a while to get down to zero debt, but it has been worth it. What we know now is that we were constantly juggling payments. When we wanted something, the main questions we asked ourselves were 1. Can we fit the payment into our ‘budget’ (I quote that, because the fact we had a budget back then was a joke) and 2. what time of the month did we want the payment (middle or 1st of the month)?. And at some point, you get to a point where you can’t fit in another payment, you are slave to the lender, and you are years away from actually owning anything. Imagine on the other hand if the only bills you recieved in the mail were phone, electric, insurance and taxes. Imagine what you can do with the remainder of your paycheck. I have to tell you, it is nice.

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