[powayseller]

PD is right. Many people whose homes should be paid off, started riding the MEW wave in 1999 – 2004, to buy new kitchens, college degrees, vacations, cars, business expansions, remodels, 2nd homes, stocks, and more.

While I had my realtytrac.com membership, I could go into the NOD’s loan history. In Poway, there were about 6 foreclosures (many more NODs), and half of those (3) were owned by borrowers who made their home purchase in 1980 – 1983. The other 3 bought at the top of the market in 2002 – 204.

So for Poway, although a small sample, 50% of the foreclosures are from people whose homes should have been paid off, the group that Diego Mamani describes as settled in their homes. Far from it! Even my neighbor’s mom just took out a HELOC to build her dream kitchen. PD’s mom did this too, right? A journalist wrote that her parents refied the equity out to go on a spending spree.

Now for the details: these 3 couples in Poway started taking equity out of their homes around 2000 – 2002. Once, twice, or more. They almost doubled their mortgage amount during that time. The streets are Country Creek, Millards Lane, and Bridlewood. Only 1 of these homes was for sale. The other 2 NOD people were not listed for sale! Why? Were they hoping to come up with the money?

So don’t assume you know anything about anybody’s finances. “The Millionaire Next Door” should have taught us all that what somebody has in the bank has nothing to do with what they choose to buy. Debt is easy to get. Actually, the more stuff someone has, the more debt they probably have.

This NOD wave is going to hit the retired people, the long-time homeowners, the doctors and lawyers, just as hard as it will hit the lab technician who bought his house with an I/O loan.

Schahrzad Berkland

[powayseller]

SD Realtor, my apologies for this error. I just reviewed my loan docs from 2000, and I saw we put 20% down. It was a family loan, so although we did finance the entire amount, the 30 year loan was at 80% LTV, thus no PMI.

[powayseller]

“The price to income ratio is the basic affordability measure for housing in a given area. It is generally the ratio of median house prices to median familial disposable incomes, expressed as a percentage or as years of income”

Rich used per capita income, not median family disposable income. I know he also used the OFHEO data, and now the Case-Shiller index.

I don’t know of anyone else who charted this by city.

[powayseller]

30 year fixed in 2000. no second, just one loan. I don’t recall why we didn’t have to pay PMI. After rates dropped and we built a new house after the fire, we got another 30 year fixed, but by then we had enough equity that we didn’t need PMI anyway.

[powayseller]

We can’t get new buyers as a nation. Historically, housing ownership is around 64%, and in the last few years, by reducing lending standards, we increased this to 69%. This extra increase of 5 points is going to be, in hindsight, an error. These people who were brought in, did not qualify before because they have low credit score, low income, unstable histories, bankrupcies, no down payment; in other wors, they are subprime borrowers who should never have qualified for any loans of any type. Let’s face it: not every American is stable enough to own a mortgage.

So anyone who could fog a mirror and wanted to buy a house, has done so.

Now, where will the new buyers come from? Who are today’s buyers anyway? Moveup buyers? Some first time buyers? The latter group is shrinking as they are most interest rate sensitive.

The buyer pool is shrinking, because we are at a record homeownership rate now, interest rates are too high for current prices, prices are too high, and people are afraid of falling prices.

A problem for sellers is that there isn’t any group left to sell homes to. People moving from other states have less money from their homes, so they don’t have enough money to put down to get a CA home.

[powayseller]

This is the beginning of the end for retailers in this cycle. Is anybody shorting retailers?

[powayseller]

Childless couples, or couples whose kids have left home, also like downtown living. I still wonder why they like it, and what they seek.

[powayseller]

duplicate

[powayseller]

Rich is the most analytical and accurate real estate forecaster in the U.S., IMO. Nobody else has made any charts like his. I wonder how he came up with the idea of charting price/income. He could also have done price/rents, which is the usual metric quoted by economists. But even those guys with the price/rent metric have not made any graphs showing the data back several decades.

The piggington price/income chart is the most powerful picture of our current situation. I took one look at that, and decided it was time to sell. Thank goodness my husband was ready , too.

I will forever owe my decision to sell my house, to the excellent information that was provided by Rich Toscano. And remember, back when he did all this work, the real estate frenzy was still in full force. He was a true contrarian. And he ‘s not only smart, he’s very nice too. I met him at the piggington meetu-up. And he has the most beautiful wife.

[powayseller]

I also wondered what happened to PMI. We bought in 2000, with 3% down, no PMI. I was surprised we could put so little down, and no PMI. We had a 30 year fixed loan. I was also surprised my in-laws bought their home with a piggback loan, an 80/20 to avoid PMI. I had never heard of such a thing before.

The first time I realized the extent of exotic financing is when I read AnotherF*ckedBorrower.com, now called HousingBubbleCasualty.com, in late fall. Before that, I thought everybody made 3x as much money as we did. Now I know it was due to MEW.

[powayseller]

Downtown living is for people without kids, IMO. So for me, it holds no appeal at this point in my life. I live on a cul-de-sac, in a townhouse, with a dozen kids around me, of various ages. Right now, my boys are riding their bikes with the neighbor kids, who just stopped by while we ate dinner, and the dog is running around behind them. I could never have this kind of close and spontaneous playtime for my kids in most San Diego neighborhoods, and definitely not downtown. Yet we live close enough to shops that my son rides his bike to the gym, and my kids can walk to Robeks juice or the movies. So I feel I have the density of downtown, but without the noise. I have the trees, the quiet, the large park w/ pool and tennis courts and dog park nearby, the trails to go running…What does downtown have over this? Perhaps it has proximity to the airport, the freeways, but that is just noise and pollution. It doesn’t have the city feel of German cities, because the Gaslamp is just a bunch of restaurants; very boring if you just ate and want something to do.

So my first question, what do you like about downtown living?

What it is missing right now…what downtown SD needs to be a vibrant place where you can do more than go barhopping, and dining.

It seems if more of the condo owners actually lived in their condos, a critical mass of people would be reached, which would draw in shopping, theaters, art galleries, book stores, coffee houses…

Encouraging employers to move there would help too. In Germany, there is a very cute style of shops/businesses on the first floor, condos above. Why didn’t the condo developers develop their buildings with this in mind? Or did they? I have never set foot in a downtown SD condo.

[powayseller]

With a “10-month supply of town houses and other owned shared-wall housing” and “a 9-month supply of houses in July, up sharply from the 6-month supply in March”, North County is definitely ready for price cuts.
NC Times: Home sales plunge 31 percent in July

[powayseller]

I e-mailed Ms. Simon to tell her this was a fabulous real estate expose. I heard that the ARM resets number is larger than they quoted: $2 trillion in the next 18 months.

As you said ybc, most of this is still in the pipeline. ARMs gained popularity in 2004, and most sales occur in summer. Thus, I think that most of the 2004 ARMs originated in summer 04, making them reset in summer 06. That will be the first big chunk of ARMs that reset.

With rising gas prices, we’ve got our first crop of squeezed ARM holders opening their higher mortgage payment notices in June – August 06. They will start exhausting their savings, finally either listing for sale or falling behind on their mortgage by end Dec. This means the bank will issue the first big crop of NODs in Q1 07, right when the recession hits. The Fed will be hit with high NOD data right when unemployment rises, and GDP hits a negative rate.

I expect the rate of NODs to make a big jump in winter 06, and keep climbing from then on. Until now, NODs have been very low, as the ARMs are still in the pipeline. Foreclosures are a very small subset of NODs, but that will change next year also.

[powayseller]

PD, could we add more info about each participant if we have it, like age/race, renter vs. owner, occupation, comments. Then VCJIM can tally it as he wants. So far, the younger people, who are not as well read, are not as well informed. So far, they tend to think it’s a great time to buy, but none of them have the money to buy. The educated people, w/ money to buy, are staying away from housing. That’s why a profile matters.

[powayseller]

Monster, you got that right! Our wages do not support the current prices, and the only reason they got this high is reckless financing. Stupid investors who bought MBS, backed by a home financed on 0% down, on stated income, with a negative amortization interest only loan. What kind of stupid investor bought this MBS? Anyway, that’s what caused it. And reckless FDIC which allowed the lending guidelines to be thrown out the window. Crooked executives at Fannie Mae, whose earnings have to be restated many years back, and nobody really knows what their earnings really are.

That’s why the Bubble Primer shows the median price/per capita income is at the highest ever since data going back to the 1970s: ratio is 14. If people could really afford these homes, the ratio would have remained at 7.

[Author]

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