[powayseller]

28% of gross income for PITI (principal, interest, tax, insurance). 33% of gross for all debt payments (student loans, credit card, auto loans). Plan on spending more on repairs and improvements. After we bought our first house, we were dismayed that at the first rain our roof leaked in many places. The home inspector had not gone up on the roof (and I found out later that home inspectors are notoriously lazy about getting into attics, crawls spaces, and up on roofs). We had barely scraped together the down payment for the house, so we had no money for the roof, and had to borrow against our 401(k).

Lenders will let people spend much more than 28% though. I think lending has become so lax, you can spend 50% on PITI, or they will do 33% PI and not include the TI. But if you spend more than 28% of your income on housing, how will you afford the repairs, any emergencies, retirement saving? I think that’s why the debt ratio has gone up so much. The largest expense that people have is their mortgage, and if you can just keep your mortgage low, you have so much money left over for other investments.

I read a book about a family in Iowa living on $18K/year for a family of four. They can manage because they live in a very simple small home. They reduced the largest expense, the mortgage, to about $500/month. I think that’s very smart. Personally, I don’t see the point of spending a large percentage of income on a house. Financial independence is achieved by spending less than one earns, and investing the difference.

[powayseller]

So people who are willing to double up as renters, are still willing to move to San Diego? Was the Georgia guy then a young fella, i.e. one of the groups I suggested that will come here, have some fun in So CA, and then leave if he can’t afford a house when he’s ready to settle down? I got this theory from someone at the piggington meeting (was it zk?)

[powayseller]

In about 3-5 years, I think you’ll find plenty of properties 50% off peak prices. But as of now, it seems banks are very very reluctant to lower prices. There’s a bank REO near my son’s school, and it’s said Bank Owned on the sign out front since August, when they failed to sell it at auction. This house is owned by Wells Fargo. Why wouldn’t they lower the price enough to move it?

Auctions generate a lot of hype, and people end up overpaying. Plus, you cannot do inspections, and you could end up with a house requiring a new roof, new foundation, anything….. plus you need to bring a cashier’s check for the full amount. So unless you’re an investor with deep pockets, it’s a big risk I think.

I have not heard of any foreclosures which sell below market prices.

Just think about it, why would a bank or homeowner sell anything below market price? Because they like you so much?

Foreclosures will be very cheap only when there are so few buyers, that you could hardly give away a house. LIke in the 1990’s, when banks couldn’t sell their homes. Even nice homes on the beach in Laguna Niguel had to be rented out for several years, until the market turned around and the banks could sell them.

As my landlord, a housing investor says, “Foreclosures are nothing!”

Good question though!

I hope someone who has actually dealt with foreclosures can add to this discussion.

[powayseller]

He predicts, “Expect the USFed to surprise the markets sometime between January and March with a desperate rate cut. Watch the USDollar then descend rapidly, then approach the DX=80 mark. Gold will react positively in anticipation.”

[powayseller]

His advice right now is to short the market, since it is overbought.

[powayseller]

I found the article. Down and Out in Bloomfield Hills

The town is an enclave of the wealthy. The country club has a waiting list of people trying to get out of their membership, and has reduced its membership fee from $15,000 to $45,000. So you see, this city is for the wealthy. But even the wealthy cut back on their expenses.

Excerpt
“Anna DiMaria, 65, ran beauty businesses in the area for nearly four decades. But last summer, she closed down her once-thriving Capelli Spa because she says at least 30% of her wealthy client base had cut back on visits or stopped coming. “Instead of getting facials every month, they’d get them every three months,” she says. “They’d say, ‘My husband and I have talked it over. We’re taking a cut in our luxuries.’ ”

Some clients were getting their false nails taken off to save the $70 monthly maintenance fee, says Ms. DiMaria. “They’d tell me, ‘I want to let my nails breath.’ They didn’t want to reveal it was an economic decision.”

[powayseller]

Nail salons will definitely go! Just look at what happened in Bloomfield Hills as a result of the auto industry layoffs. Upper-level executives cut back on spending. The wife of the local nursery store said the rich people were planting fewer annuals in the spring, so she had to cut back on her shopping, including getting her nails done. Several nail salons and hair dressers went out of business, and restaurants saw big sales declines. I can’t find the link now – it’s bookmarked on my other computer I think. When you can’t pay your mortgage, and you lost your job, you don’t go out to eat, you don’t buy coffee at Starbucks, you don’t get your nails done. Just imagine you lost your job today. You’d stop sending your kids to activities, drop the private school, sell the extra car, etc. People can be frugal when forced.

[powayseller]

Former Owner, thanks for the movie recommendations. I will check them out. There is another way Japan can get dollars to buy oil: currency exchange.

Another very important resource is water. Peter Schiff of Euro Pacific Capital has 2 water companies he’s recommending. The developing world needs lots of water. My friend’s husband is in sales for Siemens, selling water/sewer treatment equipment, and his business and sales are just booming in the Far East.

[powayseller]

[powayseller]

duplicate

[powayseller]

Nancy, so you think they are closing shop to avoid having to repurchase the loans? In the case of Ownit, which was 15% owned by Merrill Lynch, is Merrill responsible for repurchasing the bad loans?

Why hasn’t CA adopted the new lending guidelines, and what do the federally regulated banks think about this uneven playing field? Wells Fargo and Washington Mutual and Citibank have new lending constraints, but their state regulated competitors do not. How long until they complain to the state about this?

[powayseller]

Nancy, so you think they are closing shop to avoid having to repurchase the loans? In the case of Ownit, which was 15% owned by Merrill Lynch, is Merrill responsible for repurchasing the bad loans?

Why hasn’t CA adopted the new lending guidelines, and what do the federally regulated banks think about this uneven playing field? Wells Fargo and Washington Mutual and Citibank have new lending constraints, but their state regulated competitors do not. How long until they complain to the state about this?

[powayseller]

Nancy, so you think they are closing shop to avoid having to repurchase the loans? In the case of Ownit, which was 15% owned by Merrill Lynch, is Merrill responsible for repurchasing the bad loans?

Why hasn’t CA adopted the new lending guidelines, and what do the federally regulated banks think about this uneven playing field? Wells Fargo and Washington Mutual and Citibank have new lending constraints, but their state regulated competitors do not. How long until they complain to the state about this?

[powayseller]

Nancy, so you think they are closing shop to avoid having to repurchase the loans? In the case of Ownit, which was 15% owned by Merrill Lynch, is Merrill responsible for repurchasing the bad loans?

Why hasn’t CA adopted the new lending guidelines, and what do the federally regulated banks think about this uneven playing field? Wells Fargo and Washington Mutual and Citibank have new lending constraints, but their state regulated competitors do not. How long until they complain to the state about this?

[powayseller]

Nancy, so you think they are closing shop to avoid having to repurchase the loans? In the case of Ownit, which was 15% owned by Merrill Lynch, is Merrill responsible for repurchasing the bad loans?

Why hasn’t CA adopted the new lending guidelines, and what do the federally regulated banks think about this uneven playing field? Wells Fargo and Washington Mutual and Citibank have new lending constraints, but their state regulated competitors do not. How long until they complain to the state about this?

[Author]

Posts