[bmarum]

Isn't the following also a blanket statement : "What DOES bug me is your constant use of blanket statements to make your point."

No, it is not. Had I said she always makes blanket statements, then it would be. Intead, I said she constantly does it.

con·stant ( P ) Pronunciation Key (knstnt)
adj.

1. Continually occurring; persistent.
2. Regularly recurring: plagued by constant interruptions.

 

[bmarum]

PS,

Nobody’s in a huff about your analysis and I don’t disagree with your position that the SD real estate market is heading down. (I do regarding the degree to which it’s going down, but that’s another post.) What DOES bug me is your constant use of blanket statements to make your point. There is no place for such statements in thoughtful analysis and in my opinion your use of them detracts from your otherwise valid points. I used to be like you — constantly seeing things as black and white when they weren’t. Perhaps that’s why it bugs me so much.

[bmarum]

This forum really needs a quote feature, but here goes anyway.

"Bmarum, sounds like you have some very fortunate friends to be in such a cush job. I'd be curious as to what type of profession/industry they are in that "guarantees" steep salary increases. My guess is that there are not too many industries like theirs. These jobs you speak of sound almost too good to be true."

I wouldn't say they're cush jobs — these people work quite a bit. But it is amazing what you can earn with a professional degree in this town.

"Not everyone who drives while intoxicated will get into a car accident. Whould you still advise them to drink and drive? I'm just using your own logic."

Of course not. And I never would have advised these people to take out exotic loans. My point is simply that just because they did so, does not mean they're going to be financially ruined. Your analogy regarding the car accident and the drunk is appropriate. Getting the exotic loan to buy a house you couldn't afford isn't smart, just like getting behind the wheel when drunk isn't smart. But, when people are forecasting a financial disaster based on the simple fact that someone took out an exotic loan, the fact that not all people who took out exotic loans are going to end up in trouble IS relevant. In essence, the doom and gloom forecast for that particular individual depends on the drunk driver getting into an accident, which as we all know doesn't ALWAYS happen.

If I haven't made this clear already, my beef is with the blanket statements people are making, not with the general idea that the exotic loans of the past couple of years are going to cause problems for the real estate market, and a lot of individuals, in the very near future.

It’s just not going to be all of them.

[bmarum]

What I suspect prompts people on this forum to defend these loans is not the fact that they think they’re reasonable in the vast majority of cases, but is instead your (Powayseller’s) constant use of hyperbole to make your point. Are the exotic loans that many people took out over the last couple of years going to be a problem for many of them? Sure. Is every single one of them going to result in a financial disaster for the borrower(s)? Of course not.

Now people can certainly disagree on the percentage of people that took out these loans who’ll end up being screwed, but you CAN’T say that ALL of them will be. (Of course, as you so aptly point out, you can say whatever you want — but that doesn’t mean anybody is going to take what you say seriously. Especially when your blanket statements are so patently ridiculous.) And, the disagreement about the percentage of people who’re going to end up screwed is probably something that we can’t resolve — I’m unaware of any data showing what percentage of exotic loans were taken out by people who really needed them to get into the house they purchased vs. those who could afford a traditional loan but instead chose a lower monthly payment. Common sense, and my perception of the American consumer, tells me that many of the people who took took exotic loans probably did so to get into a place they really couldn’t afford. However, experience with those around me is just the opposite — my friends who have taken such loans are on professional career paths that have pretty steep guaranteed salary increases. And, even some people I know who took out exotic loans in 2003 and 2004 that could have ended up being really hurt are already out of the market. All of this is to say that not EVERYONE who took out an exotic loan, or an ARM, is going to end up being financially ruined.

[bmarum]

“In a market of rising interest rates, anyone who is not converting to a loan that is FIXED and PAYING PRINCIPAL, is in over their heads.”

Blanket statements like these just make me laugh. As much as you would like the world to be black and white, it’s not. Shades of gray Powayseller, shades of gray.

[bmarum]

I don’t know how much stock I’d put in these monthly numbers for individual areas, the number of sales is so low that much of the variation from month to month is just noise. I’ve been following Mission Hills for the last couple of months and it’s all over the place, down big one month, up big the next and now basically flat. It’s probably much more useful to look at the aggregate data for the areas identified in the chart, i.e. Central San Diego, East County, etc. as that data is based on a much larger sample size.

[bmarum]

Ditto to carlislematthew’s post.

[bmarum]

Interesting that the drop was caused by a decline in the price of new homes while resale prices increased. I wonder what, if anything, that means.

[bmarum]

Have you considered what your downside is if you are wrong? What happens if prices only drop 15%? Will you still come out ahead by selling your house and renting?

[bmarum]

I can’t speak for others, but we got an ARM because I know that I won’t be in this house for more than ten years. Therefore a 30-year fixed loan doesn’t make sense for me.

[bmarum]

I don’t disagree that the ARM loans, along with many of the other exotic lending products, will be a substantial factor in the coming price declines. What I do disagree with is the notion that all, or nearly all, of the people who got ARMs in the last two years fall into the category of people who used an ARM to leverage themselves into a house they could not otherwise afford.

People who purchased at 2.5 times income are indeed rare. But, I don’t think 80% of people who got ARMs in 2004-2005 will go into foreclosure in the next couple of years. Perhaps 80% of first-time homebuyers who purchased with ARMs in the last two years will, but that’s an entirely different thing than simply taking the number of ARM loans written in 2004-2005 and saying x number of people are going to go into foreclosure. The latter ignores trade-up buyers (who probably had substantial cash to put down) and those who, like me, refinanced into an ARM despite qualifying for a more traditional loan product.

[bmarum]

I’d just like to chime in on the ARM loan discussion. We too have an ARM, a ten-year one (resetting in 2014), and we will not be in any danger of foreclosure in the coming years. We had a 30-year fixed on the same house and refinanced into the ten-year ARM. At a purchase price of roughly 2.5 times income, we’re doing just fine. While I agree that there are certainly a number of people out there who used ARMs to get into houses that they couldn’t otherwise afford, there are also quite a few out there like me who selected an ARM for other reasons. I have plenty of friends that either purchased with an ARM or refinanced into an ARM despite the fact that they qualified for a 30-year fixed.

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