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powayseller
ParticipantThis story has an example of a 50% increase in payments.
I forgot that the going ARM rate was 3.5%. A $300K loan at 3.5% had payments of $1300.
They will go up to $1800 to $2100 this year.
This is the $1 trillion of resets they keep talking about. It’s the glut of 3/1 ARMs, made at very low rates 3 years ago.
If each ARM is $200K average, that’s 5 million people whose mortgages will increase, mostly at 50% increases. That is a huge deal!
5 million homeowners will see their mortgages go up 50% next year.
Has anyone stopped to think about this? I’ve never heard it put in those terms. Just $1 trillion of loans. But never in terms of the number of people. Or the amount of increase.
powayseller
ParticipantKids have better opportunities at high API schools. Poway High has the best band program in the County, Twin Peaks Middle School in Poway has the 2nd best PE program in CA for a middle school. Your kids will be surrounded by other high achieving kids, and the school will have donations for equipment and programs that the poor parents cannot provide. I stand by my assertion that kids are better off in high API scores.
If you send your kids to a low API school, you are busy justifying the decision. You didn’t want to pay the school premium, but put the money into a bigger house. I gave up square footage for a higher API.
powayseller
ParticipantWe moved to Poway in 1999 for the schools. The high API means more than just a high score. It means my kids are surrounded by other kids whose parents value education.
After moving to Poway, I found out what else is hidden in the API: the higher socieconomic group that implies a high API provides the PTA and Foundation money to buy computers, art teachers, PE teacfhers, music programs. Fewer kids left home alone after school means less bad kids to influence my kids. High API means classmates’ parents are educated and spend time to do volunteer work, teach their kids, give them opportunities, help in the classroom.
I also saw that the best teachers compete for the few openings in the Poway schools. Poway has the pick of the best teachers, and the San Diego magazine ranking was for the quality of Poway High teachers, with many having masters degrees. My son’s elementary school has many teachers near retirement age, with decades of teaching experience. New openings go to the cream of the crop. The good teachers don’t end up in National City. Sorry, but teachers have choices too, and they like to work at the schools where kids come with breakfast in their tummies. This is a better environment for *my* kids. So I give my kids the best environment, with a gifted program. I found all this at Poway schools, even though it is so underfunded, that I envy lostkitty.
In any case, people with kids who can afford Poway schools, come here. If they have no kids, they don’t care about schools yet and get a starter home elsewhere. If they cannot afford Poway, they convince themselves their kids can get a good education elsewhere. asianautica made the best of the Mira Mesa environment. Why didn’t his parents live in Poway? That’s what I would like to know. Also, how did he beat the odds in Mira Mesa? I think that colleges give an advantage to those poor districts, so he was given a few extra points in the admittance process for coming from a disadvantaged school. That may be another factor to keep in mind.
My sister in law is in the Chula Vista district, and they can’t seem to fine enough parents to help with anything down there.
Our Tierra Bonita Education Foundation raised $50K last year to replace the elementary school computers.
I will keep putting my kids in a high-scoring school, because I want to provide a high-learning environment. I got that, and I am grateful. My daughter compares herself with gifted kids, whose parents are physicist, lawyer, doctor, engineers, etc. Those are her peers. She wouldn’t have that in Chula Vista.
powayseller
ParticipantNow we have 3 piggington forum members renting in east Poway. I forgot the name of the other guy who just moved out here.
You got a great deal on the rental, since you have a detached home with yard. We rent a townhouse for $2200/month, it’s 2200 sq ft and has A/C and a small yard. It includes the HOA fee for the community gardener. The kitchen is decent. I turned down all rentals with tile counters in the kitchen.
powayseller
ParticipantWow! Why isn’t your mom speaking to you? Did your brother sell his condo? Did your mom sell her house?
powayseller
Participantdesmond, it is worth it to sell for people who have a fraction of the equity you had, if:
1) they have an ARM, I/O, or other resetting type of mortgage, and they won’t be able to afford the adjustedpayments.
2) their job is in the real estate related industries (construction, loan officer, appraiser, realtor, title officer, home inspector, termite inspector, escrow officer, home improvement, selling home materials such as shutters and carpets and wood floors, architects, interior designers). Only a fraction of people in these industries will have a job left by 2008. I would include jobs in retail and restaurants in this category. Government income will dip by 40%, so many government positions will be gone.
3) there is a possibility of them wanting to downsize, leave the area, divorce, or other reasons for selling in the next 10 years.
4) anyone counting on their home equity for retirement, college for kids. In 2008, you won’t get a HELOC to fund that college tuition, because the home value won’t be there, and bank lending will become conservative again. If you try to sell in 2010 to fund your retirement, you’ll be very disappointed.
All the above ought to sell now, while prices are high. The longer they wait, the more paper profits will evaporate.
The only group that ought to stay put is those who’ve paid off their homes, or those who are very confident their job is secure *and* they can service their mortgage through the down cycle *and* they will not care if their house loses 50% of value. Everyone else, sell now.
This downturn will financially devastate millions of households. Americans have counted on rising home equity to finance their everyday living expenses, increase consumption, and build dreams of a secure retirement. This is about to be shattered. How will Americans pay their daily living expenses without rising home equities? I realize that each person that is helped comes at the expense of one person’s loss…Each person that is convinced to hold off buying means that one seller is stuck with his overpriced home.
powayseller
ParticipantWhat do you mean “kept a lid on it”. What did the realtors day that you dealt with? You were a courageous contrarian. At least I had the data from piggington to help me with my decision. You were acting boldly on your own. Way to go! Do you try to get others to sell also? Have you read Sell Now by John Talbott?
powayseller
Participantdesmond, good move! What was your thought process in selling? Last October, when you closed… that means you listed in September? At that time, the median was all over the “real estate only goes up” stories. Selling to cash out was relatively rare. I did the same thing, listing in October 05. I also was nervous during escrow, because I thought my buyers would figure out we are in a housing bubble that was just starting to leak air.
So, where did you get your information to decide it was a bubble, and that the peak was here?
powayseller
Participantpicpoule, that’s what I’ve been saying for months. Exotic lending (which includes subpar borrowers qualifying for morgages) are leading to high foreclosures. You don’t need a housing bubble to lead to foreclosures, just poor lending practices. Whether you are in foreclosure on a $110K house or a $800K house really doesn’t matter. It doesn’t matter that your house appreciated 20% a year before you bought it, only that you cannot make your mortgage payment.
I was getting frustrated with comments on this forum which said that only CA and other bubblicious regions would see price declines. The truth is that any region which used exotic lending will see price declines. Show me an area of the US that did not sell exotic mortgages, and that region would be exempt from a downturn. I don’t know of any. Even my little Midwest conservative town of Omaha, NE is seeing price reductions and rising foreclosures, a new housing glut, and overuse of exotic lending.
However, no one is exempt from job loss in 2007-2008 recession. During the recession, even conservative borrowers will face foreclosure, as they lose their jobs and cannot make their payments. They will be sel
Anyone with a mortgage is susceptible to having to sell into a declining market. If you read this, think about whether your job will be safe in a recession. If not, or if you may be moving in the next 5 years, sell your house now, before your paper profits evaporate. Sell before your job loss forces you to sell into a lower market.
For the life of me, I don’t know why anyone would want to own a house right now. But then again, there is so much I don’t understand.
powayseller
ParticipantThe runup in prices is regional, but the drop in prices will be national.
Exotic lending and overbuilding are national phenomena, and they are the fundamental reason behind the impending price collapse in San Diego, besides the fact that all excesses correct.
The recession will further lower house prices, as people who lose jobs will be forced into foreclosure. Even people with 15 year or 30 year mortgages will be forced to sell, and in many cases their home value will be less than their mortgage.
I hope everyone reading this get the point: the housing prices will go down nationwide. Expect a 50% drop in nominal prices in San Diego, a 5-15% drop in places like Omaha, NE and Des Moines, IA.
LicketiSplit, did you read my post about the lady in Georgia in foreclosure? That’s not a bubble region, but it has one of the the highest foreclosure rates in the country.
Foreclosures in the US are up 28% over May 2005. Colorado, Texas, Georgia, and California lead the pack.
QUOTES
“…foreclosure activity in Massachusetts was reaching an epidemic level and clogging the court system. ”
“The problem of home loans going into default has caused Indiana to be dubbed the foreclosure capital of the country, a title it recently lost to Georgia.”
The Kansas City Star has this on foreclosures in that state. “The number of home foreclosures in Kansas has increased over the past year, a new report says. There were 436 mortgage foreclosures in the state in April, slightly more than double the number from April 2005. Through the first three months of 2006, lenders foreclosed on 600 homes, about one-third more than the 440 foreclosed during the same period a year ago.”
“Kirk McClure, at the University of Kansas, said he thinks declining home values in western Kansas contributed to many of the foreclosures. For example, McClure said someone holding a $100,000 mortgage on a home valued at $90,000 has little incentive to keep making payments.”
“‘One of the best tools for our housing market in western Kansas is a big bulldozer,’ he said. ‘We’ve got too many units.'”
“McClure also said lenders offering ‘100 percent financed, no-money-down’ loans haven’t helped people with inconsistent incomes. ‘If we take someone whose income is very low and it’s irregular, and we get them into a home that they can’t sustain two years, three years down the road, we have not done them a service,’ he said. ‘There’s a reason a bank turns somebody down.'”
“Kirk Lowry, vice president of Farmers State Bank in Atwood, also blamed ‘brain-dead finance companies’ for approving loans worth more than the property. The companies, few of which regularly do business in the area, roll fees into the mortgage payment, meaning that if the owner defaults, he or she is left with almost no equity.”
END QUOTES
I think you get the idea: Nationwide housing price drops!!!
I will ask Rich to update his Housing Bubble reports to include the national stuff, because even our well-read piggington members are still in the dark about the national lending bubble and its housing implications. I guess I thought it’s clear, but I’ve had several people the last couple days, who didn’t know about the national housing glut.
powayseller
Participantanxvariety, what do you mean most cars expire worthless? We expect cars to lose value. We expect our investments to gain value. I don’t get the analogy.
powayseller
Participantnadorenter, some very smart people are bearish on stocks. Yamamoto Forecast, Barry at TheBigPicture, Bill Fleckenstein.
If you want to see what happens when the consumer stops spending, read the very data-heavy (Federal Reserve and IMF data) Dollar Crisis, written by a former consultant to the IMF.
Also read Ahead of the Curve, from Goldman Sachs analysist Joseph Ellis. He was the #1 retail analyst for 18 years in a row. See aheadofthecurve-thebook.com, for updated charts, and you can see graphically why we are heading into a recession.
Also read iTulip.com, run by a venture capitalist who warned about internet stock bubbles in 1999. All 3 of these guys are brilliant, and all are warning of a recession, based on the excesses of the government deficit and housing bubble.
Read my favorite realtor, Bob Casagrand’s web site. He has the best data on real estate in San Diego. I don’t remember his web address, so you can google him. He tells you what’s going on now in the market, how sales are down, etc.
Read the bubble bloggers, esp. Calculated Risk for the MEW information. Read my analysis of the UCLA Anderson report, from a few weeks ago. Read Part 1, where I dismiss their report for their faulty and weak analysis, and why we are going into a recession.
Tell you husband, that 70% of the US GDP is from consumer spending, and with flat wages and high inflation, consumer spending is due solely to MEW (mortgage equity withdrawal). We don’t even need prices to go down for that gig to stop. Even flat housing prices will eliminate the MEW.Here’s another book: Sell Now by John Talbott.
I sold my house, I cashed out, and I moved all mutual fund and stock and index fund money to cash. My house proceeds are in cash.
I use about 10% of my cash to dabble in stocks, based on the info in the Zeal newsletter. Several of us on this site subscribe to Zeal, and they are very good.
If your husband loves devouring economic and stock stuff, he will like the brilliance and clear thinking of the resources I cited here. Good luck. We cashed out our index funds just a couple weeks before the sell-off in May.
powayseller
ParticipantI also inquire about the vacant lots before purchasing. When we bought our last property, in rural Poway (but with the Lakeside zip code hahaha), we were surrounded with open space. I checked it out. I found out about the County’s zoning plan, and that my area was zoned for minimum 4 acre parcels. I was surrounded by preserves. So far, so good.
I found out the view to my west was an open space preserve. The vacant parcels around me could be built out, and they were, with one house every 4-6 acres. I found out I was in the unincorporated area of the County, with no fire department having jurisdiction. Schools are Poway, post office is Lakeside, fire service from the CA station in Ramona, and police service from whoever could get there first.
At the time, I didn’t know that just a few years prior, Scripps Poway Parkway was completed to go to my main cross street, Highway 67, and that Highway 67 was widened. I thought those roads had been there forever. I also didn’t know that the county has contemplated continuing Scripps Poway Parkway through my neighborhood, to continue to Barona Mesa. I didn’t know that a few years before my purchase, the residents defeated an offroad vehicle park just 1/2 mile to the south. If built, the noise would have been bothersome.
I didn’t know that the County did not maintain brush control, had inadequate fire protection and an underfunded fire department.
So even if you check out your property, I think you can still miss lots of things.
In the Bressi Ranch case, the homeowners could check the zoning, and hope it is not industrial. If it is residential, they would need to find out if the city has a history of changing residential to other uses.
Anytime you have a view of vacant land, you take a chance of losing that view, unless that land is a Preserve.
powayseller
ParticipantFrom his comments, I doubt he is getting any 0% offers. He doesn’t have established credit. Interesting idea, though.
Can you transfer student loans to credit cards? If you use the free checks, then don’t you pay a higher rate, i.e. the cash advance fees. To get the 0%, you have to make a balance transfer and give the other credit card account number and it’s done electronically.
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