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powayseller
ParticipantI need to talk with Cheryl Mason at the Labor Market Office to get the detail on the employment numbers. When I can get a hold of her, I will write up my report. Their weaknesses are that they completely omitted MEW and ARMs. I want to dig into their employment numbers, which they failed to do…
And thank you for your kind tone in your recent posts.
ParticipantYour compliments about my brain mean more to me than the looks I get in my bikini. Thanks so much!
ParticipantIf someone gives you the sideliner comment, just ask them where they heard it or got their data. I mean, the homeownership rate is the highest its ever been. Many people own several homes. Who could possibly be sitting on the sidelines???
ParticipantMCE is launching the product on May 22.
(How could I resist looking this up for you when you lay on the charm?)
ParticipantMCE is launching the product on May 22.
(How could I resist looking this up for you when you lay on the charm?)
ParticipantPoint taken. Thank you for taking the time to educate me.
ParticipantMovers…4 guys, 12 hours @ $125/hr, = $1550. Plus lunch and dinner for 4 guys and $200 tip. ACME Moving, Vista. I used them twice in 6 months. Responsible, hard working crew.
May 16, 2006 at 5:52 AM in reply to: San Diego Housing Market = Dead Zone, 67% overpriced !!! #25449ParticipantAre you able to get the W-2 wages, or do you get total income, which can include capital gains?
Corporations are definitely “on fire”, and flush with cash, and thus the K-1 increase makes sense.
ParticipantWill do. I’ve enjoyed reading his posts on MSN, and agree with everything he says. Now I’m up to 5 subscriptions – I might get dizzy.
ParticipantMy reason for 50% price drop is the the chart on the piggington Bubble Primer, titled Per Capita Income/Median Price. Where would you pencil in the line from today to 2012?
A 12% foreclosure rate is high. Is it possible? Yes. In recent financial history, except for the Great Depression, we have not had the magnitude of this speculation and excess in lending. The global liquidity bubble and investor demand for high yields created risky loan products. Without the risky loans, prices could not have become so imbalanced. If prices had gone up with people getting 30 yr mortgages, and if wages had kept pace, the current housing prices would be sustainable.
I would like to compliment you on carrying on a debate in a gentlemanly manner. You are setting a good examaple in this regard, and it just goes to show, you can disagree with someone’s ideas, debate their points, and have fun doing it because you are nice about it. I do appreciate your style.
ParticipantThe time to leverage debt in RE has passed.
We are well served to mind the quote given by 4plexowner: it is far better to collect interest than to pay it. That’s the position I am in now. Individuals’ net worth is improved when cash, which would go to pay interest on cars, credit cards, houses, furniture, is instead used to invest in savings, education, or other appreciating assets. Using cash to service debt is a horrible use of resources and shows a lack of discipline in financial matters. Americans love to take on debt to buy what they want when they don’t have the money. Imagine the average American spends $300/mo. paying interest on her car and credit cards. Imagine she didn’t have those debts, and instead used the $300/mo. to put into a savings account, sends it to orphanages or Doctors Without Borders, or uses it to get a Masters Degree. What a more productive world we would have. Interest paid enriches financial institutions, but doesn’t create anything of value.
Corporations can use debt to invest in their future: expansion, research and development, mergers.
The quote made about interest is a good one. I am in agreement with 4plexowner on this one. His post refers to individual debt, not a corporate leveraged buyout.
I do love a good debate, and am open-minded to being corrected. Did I make any mistakes in my argument? Do you see a benefit to an individual taking on debt, specifically the debt discussed in the post, mortgage debt?ParticipantMore great advice from 4plex. I can only add something I read from Susan Bies, Fed Reserve Governor: expect CPI to increase, bec. as housing prices drop, rents go up.
Did you try a google search on housing values and rents? Or the Federal Reserve website?
Also wonder why you wouldn’t just sell the house now, and buy it back for 1/2 the price in 5 years. For the money you’ve got into the current house, you can buy 2 rentals in 5 years.
ParticipantI agree completely. When we sold our house in 1/06, the title company charged double the fee from 2000 when we bought it. The realtor wanted double the fee. Hey, I said, it’s the same house. I called to complain about the exorbitant fee, but the title officer said they charge based on a commission scale. I couldn’t complain too much, because I made out like a bandit too and didn’t have to work for it. OTOH, appraisers and home inspectors charge a fixed fee. It doesn’t make sense. I think we need more fixed pricing with realtors, loan officers, and title/escrow personnel. They don’t take on more risk with higher priced products.
ParticipantPrices already dropped 5% in many SD areas, and we’re just coming off the top. We have to agree to disagree on the depth of the price drop. I put my money on my beliefs, you put your money on yours. Only time will tell… Steve, were you an appraiser in the 90’s? Privatebanker posted that he worked in an REO department for a major bank in SD, and they were selling homes for 20% of previous prices. Some homes got that cheap.
As far as listening to the experts, that hasn’t got me very far. As I posted earlier today, Dean Baker wrote to me about the poor track record of economists. In 2/01, the 50 top economists wrote their predictions in the Blue Chip report. Although the stock market was already unraveling, not one of them predicted a recession. The lowest GDP projected for 2001 was 2.4%. Neither economists nor Wall Street financial advisors recommended that I flip RE or buy PMs. So now I get my financial ideas from reading piggington, Calculated Risk, GlobalEconomicAnalysis, TheMessThatGreenspanMade, OfTwoMinds, iTulip, and IAmAFuturesTrader. I subscribe to Zeal and Yamamoto Forecast, and may join Iacono and Chris J’s services. I am sorely disappointed in the quality of economic forecasts!
S&L: I remember the S&L bailout, and the LTCM hedge fund bailout. More to come! What you saw before will be peanuts compared to what we’ll see in 2010 and 2011. Banks have failed before. Now, with lending standards lowered to the point that we have increased homeownership rates from a stable historical rate of 65% to 69%, and the credit quality has gone way down as investors chased the higher yields of the most risky products, the foreclosure risk has intensified. Main culprit: staggering of risky products: no doc, stated income, 0% down, adjustable rate, negative amortization. The main problem is the layering of these products. 100% financing is risky, no documentation of income is risky, but giving someone a no doc 100% loan is more than 2x as risky. I’ve written about this before.
Re: quality of SD loans. You have a IO loan. I don’t want to pick on you, but let’s examine the typical reason that you, or anyone got a loan like that. The buyer qualifies for a 30 yr loan on a $800K house, but wants the $1.5mil house. He opts for the IO loan to get a house more expensive than he could get with a 15 yr or 30 yr fixed loan.
Further, he gets the house based on the highest payment for which he qualifies, typically a 35%-40% DTI. So now you’ve got a 40% DTI IO loan. The buyer is not paying down any principal, so basically he’s renting the house from the bank, and getting equity only if the house keeps appreciating. Today this homeowner is losing equity on a house he’s renting from the bank.
So we’ve got a borrower who stretched to get a house he couldn’t afford with a fixed rate product. When the market cools, he’s underwater on the mortgage. If his job is RE related, his risk of job loss is high, and he can be foreclosed on. When his IO period ends, or his interest rate adjusts, how will he make his payment. Steve, you said your loan is IO for 10 years. I am guessing that the higher interest is being tacked onto the principal. The most popular product was the 1/1, 2/1, 3/1, or 5/1 ARM. $2 trillion of ARMs are adjusting nationwide next year. The adjustment will be 10%-50% higher! Since people are already maxed on the payment, how will they handle the higher payment? Add rising gas cost, doubled credit card minimums….Perhaps you are safe for 10 years, but most people are not. Every day, newspapers across the country report on people losing their homes to foreclosure because their ARM did what its name tells you it’s going to do: adjust.
This trend will really pick up in SD this year, and grow as a problem in 2007, 2008, and peak in 2009. This puts distressed property on the market.
Please let me know if you would like links to these stories. I can dig up data for everything I have written. For example, Christopher Cagan of First American Real Estate Solutions said 29% of people who got a mortgage in 2005 have 0% or negative equity in their homes. Douglas Duncan, chief economist with Mortgage Bankers Association said 35% of loans since 003 are not a traditional 30 yr fixed, and the March delinquency rate was 4.7%. ABC News reports foreclosure rates are up because people stretched into homes with ARMs and IOs, relaxed lending standards, 0 or no equity, and people’s reliance on equity buildup through price appreciation rather than through paying down principal. You fit into this last category. Reliance on price appreciation as a way to cover debt loans cannot continue, per ABC News. In Denver, thousands of ARMS were obtained 3 years ago, and will cause tens of millions of dollars in extra mortgage payments and drive up foreclosures. In 2005, there were 14,000 foreclosures in Denver, and this is not due to any recent job loss. Foreclosures are rising in Columbus and Georgia due to these loans. It’s really a nationwide problem.
American Real Estate Solutions estimates that 1/8 of pepole who took out ARMs, 1 million people, are expected to default on their loans.
An LA/Bloomberg poll found that in March, 26% of ARM holders were worried about making mortgage payments if interest rates go up.
Anyone with an ARM needs to make sure they can handle their mortgage payment when the interest rate to to which their loan is pegged rises to 6%. That would be probably a 9% interest rate. If they can’t, they should get a fixed rate loan or sell their house. The only other option is foreclosure, and that’s the path most will take, bec. they cannot afford their current home with a 30 yr fixed. If they could, that’s the product they would have obtained.
And to prove my point, ask yourself how many times in the life of your IO loan, you made more than that minimum interest payment. Ask yourself if you’re banking on appreciation to pay off your house, if you can make the payments if you had to switch to a 30 yr fixed….Most people cannot. And that’s the problem.
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