[Fearful]

[quote=SD Realtor]
What about the guy that bought the 900k home and really could only afford the equivalent payment of a 600k home. Maybe he got a 5/1 option arm in 05 or 04. Why wouldn’t his loan be reworked into that new 600k payment? [/quote]

Thank you for your insights and taking the time to post them.

Maybe bailouts for “rich” homeowners are even less politically palatable than for the general public.

Overdue, yes. Imminent? Who knows.

[Fearful]

[quote=SD Realtor]
What about the guy that bought the 900k home and really could only afford the equivalent payment of a 600k home. Maybe he got a 5/1 option arm in 05 or 04. Why wouldn’t his loan be reworked into that new 600k payment? [/quote]

Thank you for your insights and taking the time to post them.

Maybe bailouts for “rich” homeowners are even less politically palatable than for the general public.

Overdue, yes. Imminent? Who knows.

[Fearful]

[quote=SD Realtor]
What about the guy that bought the 900k home and really could only afford the equivalent payment of a 600k home. Maybe he got a 5/1 option arm in 05 or 04. Why wouldn’t his loan be reworked into that new 600k payment? [/quote]

Thank you for your insights and taking the time to post them.

Maybe bailouts for “rich” homeowners are even less politically palatable than for the general public.

Overdue, yes. Imminent? Who knows.

[Fearful]

[quote=SD Realtor]
My hope is that I am wrong. I am not saying foreclosures or distressed properties will halt. However there will indeed be a reduction, more then people care to admit. Rather then a huge second wave I think it will be more like a long drawn out rising tide, slowing and inexhaustibly washing in. Again, some markets have already hit a point where alot of risk has been washed out. What will be particularly interesting to me will be the dilema of the distressed homes in the 600k-2M range. My hope is that nothing will happen to these homes.

[/quote]
Perhaps this topic is worthy of its own thread. It looked to me like Schwarzenegger’s foreclosure moratorium talk was more an attempt to muscle the banks into doing workouts on loans – the moratorium would not apply to banks that have workout programs in place. I believe – I hope – that the Administration understands that a true moratorium would further impair bank asset prices and would make the situation with the financial and economic systems worse.

For a moratorium to be popular, it would also have to exempt the higher end houses, as I think your final two sentences suggest.

[Fearful]

[quote=SD Realtor]
My hope is that I am wrong. I am not saying foreclosures or distressed properties will halt. However there will indeed be a reduction, more then people care to admit. Rather then a huge second wave I think it will be more like a long drawn out rising tide, slowing and inexhaustibly washing in. Again, some markets have already hit a point where alot of risk has been washed out. What will be particularly interesting to me will be the dilema of the distressed homes in the 600k-2M range. My hope is that nothing will happen to these homes.

[/quote]
Perhaps this topic is worthy of its own thread. It looked to me like Schwarzenegger’s foreclosure moratorium talk was more an attempt to muscle the banks into doing workouts on loans – the moratorium would not apply to banks that have workout programs in place. I believe – I hope – that the Administration understands that a true moratorium would further impair bank asset prices and would make the situation with the financial and economic systems worse.

For a moratorium to be popular, it would also have to exempt the higher end houses, as I think your final two sentences suggest.

[Fearful]

[quote=SD Realtor]
My hope is that I am wrong. I am not saying foreclosures or distressed properties will halt. However there will indeed be a reduction, more then people care to admit. Rather then a huge second wave I think it will be more like a long drawn out rising tide, slowing and inexhaustibly washing in. Again, some markets have already hit a point where alot of risk has been washed out. What will be particularly interesting to me will be the dilema of the distressed homes in the 600k-2M range. My hope is that nothing will happen to these homes.

[/quote]
Perhaps this topic is worthy of its own thread. It looked to me like Schwarzenegger’s foreclosure moratorium talk was more an attempt to muscle the banks into doing workouts on loans – the moratorium would not apply to banks that have workout programs in place. I believe – I hope – that the Administration understands that a true moratorium would further impair bank asset prices and would make the situation with the financial and economic systems worse.

For a moratorium to be popular, it would also have to exempt the higher end houses, as I think your final two sentences suggest.

[Fearful]

[quote=SD Realtor]
My hope is that I am wrong. I am not saying foreclosures or distressed properties will halt. However there will indeed be a reduction, more then people care to admit. Rather then a huge second wave I think it will be more like a long drawn out rising tide, slowing and inexhaustibly washing in. Again, some markets have already hit a point where alot of risk has been washed out. What will be particularly interesting to me will be the dilema of the distressed homes in the 600k-2M range. My hope is that nothing will happen to these homes.

[/quote]
Perhaps this topic is worthy of its own thread. It looked to me like Schwarzenegger’s foreclosure moratorium talk was more an attempt to muscle the banks into doing workouts on loans – the moratorium would not apply to banks that have workout programs in place. I believe – I hope – that the Administration understands that a true moratorium would further impair bank asset prices and would make the situation with the financial and economic systems worse.

For a moratorium to be popular, it would also have to exempt the higher end houses, as I think your final two sentences suggest.

[Fearful]

[quote=SD Realtor]
My hope is that I am wrong. I am not saying foreclosures or distressed properties will halt. However there will indeed be a reduction, more then people care to admit. Rather then a huge second wave I think it will be more like a long drawn out rising tide, slowing and inexhaustibly washing in. Again, some markets have already hit a point where alot of risk has been washed out. What will be particularly interesting to me will be the dilema of the distressed homes in the 600k-2M range. My hope is that nothing will happen to these homes.

[/quote]
Perhaps this topic is worthy of its own thread. It looked to me like Schwarzenegger’s foreclosure moratorium talk was more an attempt to muscle the banks into doing workouts on loans – the moratorium would not apply to banks that have workout programs in place. I believe – I hope – that the Administration understands that a true moratorium would further impair bank asset prices and would make the situation with the financial and economic systems worse.

For a moratorium to be popular, it would also have to exempt the higher end houses, as I think your final two sentences suggest.

[Fearful]

[quote=urbanrealtor]While I agree with your basic thesis, the one thing I would add is the investment dimension.

For the people buying for the purpose of renting the property out, the magic number I am seeing is 8% return on their investment annually.

If someone feels that they are getting about 1/12th of their money back each year, that seems to make sense for them.[/quote]
That accepted metric, often called the cap rate, will change substantially. I still hear it said that the reason one accepts single digit returns on real estate is because of the upside potential. That will shift to demanding double digit returns to compensate for downside potential.

It is hard to imagine a rational investor accepting 8% returns on a risky, illiquid asset. Then again, the owner of the house I am renting is accepting -9%. Yes, that is a minus sign. Go figure.

[Fearful]

[quote=urbanrealtor]While I agree with your basic thesis, the one thing I would add is the investment dimension.

For the people buying for the purpose of renting the property out, the magic number I am seeing is 8% return on their investment annually.

If someone feels that they are getting about 1/12th of their money back each year, that seems to make sense for them.[/quote]
That accepted metric, often called the cap rate, will change substantially. I still hear it said that the reason one accepts single digit returns on real estate is because of the upside potential. That will shift to demanding double digit returns to compensate for downside potential.

It is hard to imagine a rational investor accepting 8% returns on a risky, illiquid asset. Then again, the owner of the house I am renting is accepting -9%. Yes, that is a minus sign. Go figure.

[Fearful]

[quote=urbanrealtor]While I agree with your basic thesis, the one thing I would add is the investment dimension.

For the people buying for the purpose of renting the property out, the magic number I am seeing is 8% return on their investment annually.

If someone feels that they are getting about 1/12th of their money back each year, that seems to make sense for them.[/quote]
That accepted metric, often called the cap rate, will change substantially. I still hear it said that the reason one accepts single digit returns on real estate is because of the upside potential. That will shift to demanding double digit returns to compensate for downside potential.

It is hard to imagine a rational investor accepting 8% returns on a risky, illiquid asset. Then again, the owner of the house I am renting is accepting -9%. Yes, that is a minus sign. Go figure.

[Fearful]

[quote=urbanrealtor]While I agree with your basic thesis, the one thing I would add is the investment dimension.

For the people buying for the purpose of renting the property out, the magic number I am seeing is 8% return on their investment annually.

If someone feels that they are getting about 1/12th of their money back each year, that seems to make sense for them.[/quote]
That accepted metric, often called the cap rate, will change substantially. I still hear it said that the reason one accepts single digit returns on real estate is because of the upside potential. That will shift to demanding double digit returns to compensate for downside potential.

It is hard to imagine a rational investor accepting 8% returns on a risky, illiquid asset. Then again, the owner of the house I am renting is accepting -9%. Yes, that is a minus sign. Go figure.

[Fearful]

[quote=urbanrealtor]While I agree with your basic thesis, the one thing I would add is the investment dimension.

For the people buying for the purpose of renting the property out, the magic number I am seeing is 8% return on their investment annually.

If someone feels that they are getting about 1/12th of their money back each year, that seems to make sense for them.[/quote]
That accepted metric, often called the cap rate, will change substantially. I still hear it said that the reason one accepts single digit returns on real estate is because of the upside potential. That will shift to demanding double digit returns to compensate for downside potential.

It is hard to imagine a rational investor accepting 8% returns on a risky, illiquid asset. Then again, the owner of the house I am renting is accepting -9%. Yes, that is a minus sign. Go figure.

[Fearful]

[quote=kewp]
But there’s the catch, why would they want to dump a currency that is gaining purchasing power against everything else? [/quote]
They might well be inclined to bias against adding more of a currency that has recently gained purchasing power.

No one will fully divest their foreign exchange reserves of dollars. Doing so, particularly when they hold nearly two trillion dollars, would devalue the remainder of the holdings; not even the largest market is that liquid.

They might do it solely for purposes of diversification. A trade-weighted or GDP weighted currency basket would hold only about a quarter in dollars.

[Fearful]

[quote=kewp]
But there’s the catch, why would they want to dump a currency that is gaining purchasing power against everything else? [/quote]
They might well be inclined to bias against adding more of a currency that has recently gained purchasing power.

No one will fully divest their foreign exchange reserves of dollars. Doing so, particularly when they hold nearly two trillion dollars, would devalue the remainder of the holdings; not even the largest market is that liquid.

They might do it solely for purposes of diversification. A trade-weighted or GDP weighted currency basket would hold only about a quarter in dollars.

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