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ParticipantPatience, patience. The FBs are doubling down their bets with borrowed money. Comment #43 from this post over on SoCalMtgGuy’s website reports that many people carrying I/O loans refinanced last year and took cash out. They probably believe they can use that money to ride out the storm. $200K can float a big spender a loooooooong time, especially if they still have some other income coming in.
http://housingbubblecasualty.com/too-littletoo-late/#comments
This is going to take a long time, and the declines may only be in the single digit percentages each year. Speaking of which, cawireman posted this great excel template that lets you compare renting vs. buying. Plug in some negative appreciation numbers (even 1-2% is enough) to get a real feel for just how screwed these people are.
http://office.microsoft.com/en-us/templates/TC010566171033.aspx?pid=CT101444811033
December 27, 2006 at 1:58 PM in reply to: nesting young 4s Ranch experiences and puzzling questions #42332ParticipantThat Microsoft Excel “rent vs. buy” template is great. It really shows you just how screwed up things are right now. Make sure to experiment with negative annual appreciation numbers to really get a feel for how much more expensive buying is, even if houses are “only” going down 1-2% a year. Also, if you work from home (and for yourself) don’t forget that you can write off a portion of your rent for your office. This can make up some of the difference you lose by not being able to detuct mortgage interest and property taxes.
ParticipantPerhaps home loans will be the new credit cards. CC companies don’t care if the balance is ever paid off because they make so much in interest and fees.
ParticipantI read somewhere (maybe SoCalMtgGuy?) that there were tons of cash-out refinancings in the last year; FBs may use this money to stave off the reaper for another year or two which could slow down the collapse a bit.
Okay, here’s where I got this from. It’s in comment #43…
ParticipantTemecula isn’t all bad. The wineries are nice. That Vail Lake resort has some awesome mountain biking and great scenery. But yeah, the housing developments are definitely of the cookie-cutter variety.
ParticipantParticipantYet another reason to move to Amarillo — it’s where the Pantex plant is located! For those who don’t know what Pantex is, it’s where they dismantle and store all of our extra nuclear warheads. According to this story, one almost detonated last year in an accident. Let’s all move to Amarillo!!!
ParticipantMy rent’s not going up. I just signed a new year lease for the same as my last lease.
ParticipantOkay, strike SD from the comments, but the situation here is similar to the one in LA, SF, Seattle, NYC, and probably a few other places that combined, are bound to have a big effect on the US economy. I’m still not convinced that buyers are going to be lining up in droves to buy those properties at 25% off. Maybe in Austin, maybe in Charlotte. Certainly, the loss of the interest from the aggregate of the loans is not that big, as you point out. But what about the loss to the population that has seen their “savings” disappear overnight? What about the lost jobs in construction, mortgage lending, real estate, etc… I don’t know that we’ll see a depression, but I think we may see a realignment of national priorities towards more productive activities than building McMansions in Amarillo…
ParticipantWho’s going to buy all of those foreclosed homes, even at 25% off? The $600K house is now $450K. Here in SD, that will still be out of reach of many first time homebuyers, assuming we return to the standard of 20% down, fixed rate mortgages. Maybe there enough first-time buyers renting right now with $100K ready to spend on a down payment/closing costs, I don’t know. Or maybe everyone is just going to use option ARMs from here on out. Perhaps if incomes go up between now and the time this plays out, a 25% maximum drop is possible. Of course if incomes are rising, we will have inflation which means interest rates are likely to rise as well which means payments will go up which means… Well, you get the idea. Also, if interest rates go up, are people going to want to use their $100K as a down payment when they could just buy CDs and collect interest? Certainly no one is going to be counting on home appreciation for a while, the group psychology will have been spoiled by the bubble casualty stories just now beginning to hit the news.
Who knows? It’s interesting that the question is now not, “are home prices going to drop?” but rather “how bad is this going to get?”
ParticipantFor a hint of that good life you’re missing in Texas, check out the NOAA 2005 Weather Year in Review for Amarillo. It gets HOT and COLD out there in the panhandle. They are pretty close to the beautiful Palo Duro Canyon, though. There’s probably some nice hiking out that way…
December 12, 2006 at 7:54 AM in reply to: The End of Suburbia: Oil Depletion and Collapse of the American Dream #41507ParticipantSorry for the confusion Matt.
Participantsdrealtor, you just hit on what’s going to really drive these prices down. There are a lot of folks out there that aren’t “the brightest bulb in the box”. So many of us on this board are successful, high-earning, highly-educated types that we tend to think everyone else in the world is just like us. People who make poor financial decisions end up getting into trouble more frequently than those who don’t, and they’ll be forced to sell, declare bankruptcy, give the keys back to the bank, what have you in large numbers once the fuzes light on these thermonuclear loans. Those properties will set low watermarks in the comps and competing sellers will be forced to lower their asking prices, if they can afford it. If they can’t, well then they’ll join the ranks of those turning their keys over to the bank. 2007 is just going to be a warm up for the real action in 2008 and 2009. Just my $0.02…
December 11, 2006 at 9:29 PM in reply to: The End of Suburbia: Oil Depletion and Collapse of the American Dream #41493ParticipantI wrote:
Yes, it uses water as fuel and produces only water as exhaust as it propels you down the highway at 80mph. It’s parked right over there next to that perpetual motion machine.
To which carlislematthew replied:
Where? I want one.
I’m also interested in those solar panels that produce more energy than actually falls on the panels from the sun. Want!
From http://www.m-w.com:
irony: a pretense of ignorance and of willingness to learn from another assumed in order to make the other’s false conceptions conspicuous by adroit questioning.
I thought the “perpetual motion machine” reference would be sufficient to indicate that I was being ironic. It seemed the least cruel approach to mock the original poster’s unfamiliarity with the Second Law of Thermodynamics.
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