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I think the complexity of loan docs is a huge problem. People with finance degrees have a hard time understanding the math. I think a significant number of people don’t even try and rely on their mortgage broker to spell it out for them. The mortgage broker, however, just wants to get the borrower’s name on the bottom line so they can get paid. The borrower ends up looking at just one number – the initial payment.

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My savings account at USAA paid 6.24% last month. 🙂
I am getting an extra percent for signing up (the program ended 9/15) that will last for another four months.

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He may not have bashed Bush in that particular post but he has done so before. I just think we should try to keep politics in the off topic forum.

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Perry, you are frequently unable to resist. You take every opportunity to beat your anti-Bush, anti-Iraq drum and don’t seem to care that you are forcing your politics on everybody.

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I have been wondering what would happen if the dollar collapses. A dollar collapse would make real estate much more affordable to international buyers. I live in Coronado where there is a high percentage of foreign ownership (based on what I have observed). Would this prop up certain highly desirable areas?

Without taking the former into consideration, I do not think you will see 10% drop in one area and 50% in another. There will be a difference, but I don’t think it will be that severe. There is a lot of big money here but there are also a lot of people who have really stretched themselves with their mortgage. If prices became that disassociated then people here might move out because the main consideration shifts from location to price. How do you justify living in Coronado when the price goes from twice as expensive to four times as expensive as other, good areas?

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I have Best Buy puts too. 🙁
Most of my other options are in the black (some just barely) so I’m still doing okay overall. I’m short some homebuilders but did it a couple of months ago and am solidily in the black there too.
Maybe we were a little too early with Best Buy? I prefer to think that their increase in earnings were the last crazy gasp of the housing bubble. People see financial doom in front of them and at least want to be able to watch it unfold on a brand new plasma TV…

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No recession: 2009 – 2010 35% drop
Recession: 2010 – 2011 45% drop
Depression: 2014 – 2015 60% drop

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Powayseller has a good point. Are there clauses in some of these contracts that state that if the value of the home drops below a certain level, the interest resets or the FB must start paying principle?

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Thanks for the link. Good info.

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Trying to predict the bottom is not silly. We won’t know for sure when we are at the bottom but we should be able to make a good guess as to when we are near it. Buying in the “bottom range” is a smart thing to aim for.

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Buying real estate NOW is not smart. Buying real estate four years ago was very smart. Getting an ARM NOW is not smart because we are entering a down cycle and it increases your risk because adjustments may force a sale at a loss. Getting an ARM four years ago was neither smart nor stupid. It depended very much on your situation.

Renting is the smart play for 2006 – 2008. Beyond that, it might be smart to buy again.

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I was having a conversation with a realtor last week about prices and whether they would go down. He was a believer that prices in Coronado would not go down and that any previous downturns in price would not happen again. He said, “Coronado was discovered in 1998.” Prices started going up then, of course. I did not say it, but I was thinking that the rest of San Diego had been discovered then as well, as prices started going up everywhere.

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Has Iran ever been a good little country and behaved itself?

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Vrudny, I actually think that shorting homebuilders is a safer play than shorting the market right now. Homebuilders are beaten down but ask yourself if there is any chance that their earnings are going to recover? If their earnings are not going to recover then there is only downside for their price. Look at their graph over the last five years. It matches with the RE boom. Do you think there is any chance that their value is going disassociate from RE bust? I am actually encouraged that so many people think they are done going down. That tells me that the gravy train is far from full. Choo, Choo!

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Could there be a rally? Sure. I am not going to jump in feet first, however, as the threat of a recession creates significant doubt in my mind. If we move into a recession, I think it is going to last far longer than two quarters and may even flirt with depression numbers. I am long medical, water, and alternative energy stocks. I am short or have puts on homebuilders and lenders. I also have a few puts on Best Buy. I do not think they can keep up with their earnings. Fewer people are going to be pulling money out of their houses to buy plasma TVs. I think Christmas sales numbers are going be way down from last year. I have some calls on eBay as I think they might do very well in a recession as people are going to be looking for bargains. They made some changes in the Spring that were a bad move (I sold my position at that time) but seem to correcting their mistake.

PS, I don’t think you need anyone to help you out unless you plan on really making big trades. I think you are going to have to look for a LONG time before you find someone who knows enough to pass your test. You are smart and you have the data. Trust yourself and go for it. Apply for options trading. It took almost two months for my brokerage firm to approve me, which irritated me a great deal.

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