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I’m sorry, maybe I am naive or too conservative financially but I just don’t see any benefit to an I/O loan, outside a few extreme circumstances.

These loans are among the “innovative products” Greenspan hailed as extending the hand of homeownership to new classes of people – the same products that have led to skyrocketing foreclosures.

The only way you can benefit from this is if your equity grows at a rate greater than your interest rate. With prices dropping I see it as one of the worst ways to go, unless – you plan to sell before your start paying the principal AND can sell at a higher price (unlikely for the next several years), OR – you will be making substantially more money by the time you start paying the principal. But who can really say they will triple their income in 5 years?

Cyphire the only flaw in your logic is it assumes prices will rise during the I/O period. Even if they do and it IS more than the rate of the loan, you still only benefit if you sell or can afford the higher payments, and even then you’re paying more on the rest of the loan than you would have you paid towards the principal in the beginning.

I just don’t see the benefit. These worked when home prices were sky rocketing. In reality they are practical for very few people.

[cr]

Very telling graph, but as we know national information though insightful, is only somewhat relevant. The question is where are these loans resetting? I tend o think from what we hear that most are in the higher priced areas like So-Cal, but does anyone have any info on loans types by city, zip or even county would be interesting?

[cr]

Very telling graph, but as we know national information though insightful, is only somewhat relevant. The question is where are these loans resetting? I tend o think from what we hear that most are in the higher priced areas like So-Cal, but does anyone have any info on loans types by city, zip or even county would be interesting?

[cr]

I get paid in meatballs. I’ve been getting 2 meatballs a week but the talk is I might be able to hold out for 3 meatballs.

MMMMMmmmmm……..Meatballs…..arglagrlagrlarglarglral

That was funny bugs. I can’t top that.

[cr]

I get paid in meatballs. I’ve been getting 2 meatballs a week but the talk is I might be able to hold out for 3 meatballs.

MMMMMmmmmm……..Meatballs…..arglagrlagrlarglarglral

That was funny bugs. I can’t top that.

[cr]

I hear talk on the news that a lot of it is based on speculation that rates will not go down and bail out housing (so they hope).

Not even that rates will go up, or did go up like they did in EU, but that they won’t go down. Sounds like a fragile market to me.

Has the bull been slain?

[cr]

I hear talk on the news that a lot of it is based on speculation that rates will not go down and bail out housing (so they hope).

Not even that rates will go up, or did go up like they did in EU, but that they won’t go down. Sounds like a fragile market to me.

Has the bull been slain?

[cr]

This brings up a good issue to touch on: income – the true measure of housing affordability, and what should be the main determining factor of home prices.

My wife and I are late 20’s, pay less than a grand for rent, only loan is school at less than 5%, and saving for a 20% down payment, though our area is still way overpriced and we are nowhere near able to afford anything.

The good ol’ NAR says average income in CA is $61,536, and we are above that, but still priced out.

Even if that number is right, it sure seems prices have a lot farther to fall. Then add to that tighter lending, and lowest average savings in history.

[cr]

This brings up a good issue to touch on: income – the true measure of housing affordability, and what should be the main determining factor of home prices.

My wife and I are late 20’s, pay less than a grand for rent, only loan is school at less than 5%, and saving for a 20% down payment, though our area is still way overpriced and we are nowhere near able to afford anything.

The good ol’ NAR says average income in CA is $61,536, and we are above that, but still priced out.

Even if that number is right, it sure seems prices have a lot farther to fall. Then add to that tighter lending, and lowest average savings in history.

[cr]

I agree, and tend to think that as a % more people on these boards have enough cash on hand than most consumers.

I’m in LA and can’t understand how people can spend $700,000 on a 1500sq’ house, tear it down and build a 4000sq’ one, while buying a yellow H2, BMWs for the kids, and a new Mercedes for the wife who just got new boobs and a 4ct ring, and don’t forget the granite countertops, Ethan Allen furnishings in every room, and brand new swimming pool.

Then it hits me: minimum credit card payments – Buy now pay the rest of your life.

I just don’t think most people feel cash on hand is a necessity. As down payments become a requirement again, demand will probably continue to decline.

Then there is the dynamic of college grads, arguably the prime market for first time home buyers, delaying their purcahses until they are into their 30’s or later.

Demand is going to go down for quite some time IMO. Particularly if rates go up again, and the number people that can truly a afford a house continues to dwindle.

[cr]

I agree, and tend to think that as a % more people on these boards have enough cash on hand than most consumers.

I’m in LA and can’t understand how people can spend $700,000 on a 1500sq’ house, tear it down and build a 4000sq’ one, while buying a yellow H2, BMWs for the kids, and a new Mercedes for the wife who just got new boobs and a 4ct ring, and don’t forget the granite countertops, Ethan Allen furnishings in every room, and brand new swimming pool.

Then it hits me: minimum credit card payments – Buy now pay the rest of your life.

I just don’t think most people feel cash on hand is a necessity. As down payments become a requirement again, demand will probably continue to decline.

Then there is the dynamic of college grads, arguably the prime market for first time home buyers, delaying their purcahses until they are into their 30’s or later.

Demand is going to go down for quite some time IMO. Particularly if rates go up again, and the number people that can truly a afford a house continues to dwindle.

[cr]

There are several banks offering FDIC insured savings/checking accounts at decent rates. I have one at a little over 5%, higher than my school and auto loans. It’s not the 10% YTD gain of the stock market, but with the likelihood of rates going up, but benefits are inverse.

I think everyone here has pretty much covered the answer.

The value of the dollar is falling daily to the Yuan also, decreasing our buying power in China. The devalued dollar is going to be the bigger issue.

The FED will have no choice but to raise rates, and you can infer as more of the widespread dishonesty in housing the last 5 years surfaces, it’s more likely that lenders will be expected to help those facing foreclosure rather than the government.

I don’t think anyone who bought a house they couldn’t afford in 2003 is going to be happy with their decision in 2010, when those who saved money for the last 7 years put a 20% down payment on the same house at a 30-50% lower price than today. Even if rates don’t go up, and savings loses value to inflation, it’s still better than a mountain of debt and negative equity.

[cr]

There are several banks offering FDIC insured savings/checking accounts at decent rates. I have one at a little over 5%, higher than my school and auto loans. It’s not the 10% YTD gain of the stock market, but with the likelihood of rates going up, but benefits are inverse.

I think everyone here has pretty much covered the answer.

The value of the dollar is falling daily to the Yuan also, decreasing our buying power in China. The devalued dollar is going to be the bigger issue.

The FED will have no choice but to raise rates, and you can infer as more of the widespread dishonesty in housing the last 5 years surfaces, it’s more likely that lenders will be expected to help those facing foreclosure rather than the government.

I don’t think anyone who bought a house they couldn’t afford in 2003 is going to be happy with their decision in 2010, when those who saved money for the last 7 years put a 20% down payment on the same house at a 30-50% lower price than today. Even if rates don’t go up, and savings loses value to inflation, it’s still better than a mountain of debt and negative equity.

[cr]

One comment he makes in a November 2006 three-part series on Youtube is that prices today will be where prices are in 2012.

Clearly it depends on the location, but I disagree with this for California and contend that they will go lower based simply on income. To support the current average price in CA somewhere around $500,000 incomes, currently at an average of less than $50,000, will basically need to double in the next 5-6 years.

Based on the current rate of pay increase, no more than 4% for the West, a number that is arguably declining, the income required will need to more than double.

Criticize this guy for making specific guesses, but at least it’s based on data and not desired results.

I think nationally his numbers are more accurate, but for CA and it’s hot markets in particular, I think it’s going to take a lot longer than 6 years to correct. I just don’t see incomes doubling in that time.

[cr]

One comment he makes in a November 2006 three-part series on Youtube is that prices today will be where prices are in 2012.

Clearly it depends on the location, but I disagree with this for California and contend that they will go lower based simply on income. To support the current average price in CA somewhere around $500,000 incomes, currently at an average of less than $50,000, will basically need to double in the next 5-6 years.

Based on the current rate of pay increase, no more than 4% for the West, a number that is arguably declining, the income required will need to more than double.

Criticize this guy for making specific guesses, but at least it’s based on data and not desired results.

I think nationally his numbers are more accurate, but for CA and it’s hot markets in particular, I think it’s going to take a lot longer than 6 years to correct. I just don’t see incomes doubling in that time.

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