[Diego Mamani]

Good local realtors usually keep copies of the floorplans.

[Diego Mamani]

Transplant is right. CNN Money readers are far more affluent and financially sophisticated than the average person. Not only that, but only a fraction of the CNN readers, those who feel strongly about this issue (like us) bother to vote on this online poll.

For all we know, most of the 9% “yes” votes may be fellow Piggingtonians who clicked on the wrong button by mistake!

[Diego Mamani]

Rockem, what the owner is paying is irrelevant. Rents are set by the market, not by cost.

What is legitimate is to investigate to what extent the owner could be facing foreclosure. Other than that, knowing how much the owner pays every month is irrelevant for setting rent. Owners charge the highest rent that the market can bear, regradless of cost.

Of course, if the property has negative cash flow, the owner won’t be in business for long.

[Diego Mamani]

Careful Scotia… Here in the blogosphere, and Professor Pigginton’s site is no exception, we routinely disregard grammar and spelling rules, just like the FSBO posters do.

Some believe that “alot” and “prolly” are actual words. Others can’t see that “its” and “it’s” are not the same, not to mention “principle” and “principal,” “effect” and “affect,” to name only a few. Heck, we can’t even spell “grammatically”!

Peace.

[Diego Mamani]

I agree that the OP implicitly made many incorrect assumptions, which explain his confusion. Let’s state the main principle:

Prices are set by the market, and they fluctuate over time. House prices are NOT determined by Zillow, not by the homeowner, not by replacement cost, not by the government, not by “fairness”, not by the present value of future rent income, and not by what the last buyer paid.

Like someone wrote above, a house price today is what someone (not related to the seller) is willing to pay today (of course allowing for a couple of months to properly market the property).

[Diego Mamani]

The foreclosure moratorium would be OK by me, provided these activists make the principal and interest payments for the length of the said moratorium.

Geez… do they think that money grows in trees? Lenders are not charities and they have a duty to work in the best interests of their shareholders/owners. If the activists want to practice charity, that’s fine, as long as they do it with their own money.

[Diego Mamani]

Not just oil prices… since 2001, also gold has doubled, as well as other metals and real estate. Wait a minute… was there really a real estate bubble? Measured in gold bars or oil barrels, houses cost the same now as in 2001. Makes you think.

And no, you can’t blame this administration or the previous one. This has to do with central bankers’ loose monetary policy (not just in the USA), trade deficits (Chinese floating in $$$), and financial innovations (think creative derivatives).

Interesting times indeed.

[Diego Mamani]

Good point Cow_t. The proper jargon to use is “THE NUMBER OF RE BUBBLE BLOGS IS A LAGGING INDICATOR!!!!”

[Diego Mamani]

What is your car loan interest rate? If the rate is higher than 5% and you do have the cash to pay off the balance, then go ahead. But you just mentioned using your rewards credit card? That I wouldn’t do. You are proposing to change bad debt (car loan) into the worst debt (credit card).

Part of your house buying strategy should be reducing debts to a minimum. Credit card debt is the first one that must go. Then car loans, then student loans. If you think you’ll need a new car in the future, consider buying a used car for cash.

(I bought a brand new Camaro in 2001 for 16K after taxes. My brother just bought a used Camry with only 57K miles on it, for less than $5.5K; I think he got a much better deal. New cars are a expensive indulgence.)

Finally, don’t deplete your cash reserves for the sake of paying off the car loan: if an emergency arises, it’d be good to have some cash on hand.

[Diego Mamani]

PS will notice that there’s money to be made from ads and links (as opposed to subscriptions), but first she needs to generate traffic. Traffic can be gained by providing lots of free content and promoting lively discussions. She did a great job fostering dialogue (and arguments!) on this site, hopefully she or someone else can achieve the same for her website.

Ben Jones spends hours gathering info, quotes, and links to articles, which he then posts online for free. His readers then engage in lively discussions. People stop by to read the news, then stay for the forum postings. I’m sure that’s a lot of visitors, some of whom click on the ads, while others make direct donations. So, the lesson here is that we need to create traffic (the horse) before revenue (the cart) comes in.

Unfortunately, the RE bubble web market may be saturated at this late time in the game. But the same thing was said of the PC market when Mike Dell started, and he’s a billionaire now.

[Diego Mamani]

SHILOH: The Chinese sell us all sorts of trinkets. In exchange we pay them with dollars, which is fiat money (not gold). In fact we don’t even pay them with physical dollars, instead, we simply credit their accounts. What do the Chinese do with all this wealth (on paper)? They buy long-term US bonds.

This huge demand for dollar-denominated and US-issued bonds (treasuries and corporate paper) keeps long-term interest rates low. This translates in low interest rates for mortgages. There’s enormous excess liquidity in the system. The subprime crunch only means that deadbeats will always be deadbeats, but there’s still plenty of money available, they only need to figure out who is a better credit risk.

Long-term interest rates will remain low for some time, maybe for years, which will create a floor for how low house prices can drop.

There you go: Trade deficit with China ==> Demand for long-term bonds ==> low long-term interest rates ==> low mortgage rates ==> easy credit to buy a house (provided you have a history of paying your debts).

[Diego Mamani]

I agree that more than a “loaded investor,” this landlady sounds like a “desperate speculator” who has negative cash flow.

Hey, if she stops making payments you may get to live in the house rent-free for several months, wait for it to be foreclosed, then buy it from the bank for a really low price.

[Diego Mamani]

Well said, Perry. I would add that any bailout, however small, would conntribute to keeping house prices inflated and out of the reach of many americans. Bailouts would only benefit lenders and irresponsible borrowers who shouldn’t have bought houses to begin with.

Letting the market run its course will improve housing affordability, especially for responsible citizens who save for a down payment and honor their debts. Bailouts, even if only symbolic, will keep housing overpriced and will encourage irresponsible lending practices. The sooner lenders accept their losses and the sooner foreclosed houses flood the market, the better we’ll be long-term, even if there’s some pain in the short-term.

[Diego Mamani]

If the debt is unsecured, perhaps you get to inherit the assets and not the liabilities.

[Diego Mamani]

We didn’t buy when we moved to Virginia in 2002 and that was a huge mistake. I’m trying to mitigate my foolishness…

You were not foolish, just unlucky. However, buying in SD now would really be foolish. We’re only 5% to 10% down from the market peak, so I can tell you it would not be smart at all to buy at this (overpriced) stage of the cycle.

Renting for a couple of years would allow you to know the region, and watch (as we Piggingtonians do) as house prices drop. By 2010, if you decide to grow roots here, you’ll have prices that, at most, will be as high as today (more likely lower), you’ll have an even bigger down payment, and you’ll know what neighborhood is best for you.

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