[powayseller]

The letter in its entirety, from the MBARL website.

Another snippet:
“Some banks doing business nationwide are reporting that close to 80% of loans originated are stated income loans.”

We already know that most stated income loans are “stated” because the borrower is lying about his income. Can you imagine what will happen now that 80% of loans originated are made to borrowers who are not able to make their payments?

“Between 40-50% of all outstanding loans in the United States are owned by the federal government.”

“Consumers have access to loans where a home can be purchased with 0% of a down payment, stated income AND stated assets. This same loan will allow a very low credit score of 620 (680 is average). Lastly this loan program will allow someone to borrow up to $950,000 dollars.”

Without the exotic lending, my predictions for a housing price bust would be 25-30%. But this lending stuff is downright scary.

Now, why do people state their income? Why would anyone put themselves into a situation of a higher mortgage than they could afford?

Let’s get our answer from the pro, SoCalMtgGuy at housingbubblecasualty.com

“Making a low teaser payment for 2, 3 or 5 years only works when prices go up. Many people are going to have that sick feeling in the pit of their stomachs when their teaser ARM adjusts and their property is worth 100k less than they ‘paid’ for it….and there is nothing that the great econoMISSED Leslie Appleton-Young can say to take that feeling away. The thinking was, “Why should I get a fixed rate loan when I can just ’state’ my income, not put any money down, and make 6-figures in appreciation a year?” (SoCalMtgGuy)

Schahrzad Berkland

[powayseller]

deadzone and Daniel, can you both please post how you do your shorts and puts, and list your own positions so I can follow them. If they go well, I will definitely consider going to you for advice in the future.

I am a subscriber to Chris Johnston’s bond futures trading service. He is up 33% this year, and has the track record and openness about his track record on his website. I trust him completely, and put 5% of my money into this service. I asked his opinion on shorting homebuilders and lenders, and he advised against it. I am following his advice.

[powayseller]

equalizer, thank you. Curiously, I don’t miss the house at all. I am so happy with being debt free and having money in the bank, living in town, close to neighbors. Regarding the house, I am proud of my design choices, and how it turned out, but I lived too far out of town on a crappy road, bumpy, steep, desolate. My life is enriched with the choice that I made. But I wanted to point out that without the housing bubble, we would have stayed. It was the housing bubble and the prospect of losing 50% of the home’s value, that made us sell. That was a financial loss we could not afford.

On the other hand, my husband does miss the house, and the views.

[powayseller]

zk, anybody who claims “this time is different” carries a big burden of proof. Docteur thinks it is different this time. In his view, housing cannot drop to the historic baseline because it would violate his principle of replacement cost. I addressed the weakness in his argument earlier. I think he believes his own neighborhood is fairly immune from price drops. Perhaps the exclusive La Jolla and Rancho Santa Fe homes are less prone to price drops, but Carmel Valley is just another tract home subdivision, that will fall with everything else. Prices have dropped there already, if you check the Solds, and there is one NOD over there.

It would be interesting to do an analysis of historic pricing by neighborhood or location, so we could improve our analysis of specific homes. Right now, all I know is that the baseline is a price/income ratio of 7. Is it higher for certain neighborhoods, lower for others? The answer is likely Yes. The $3 mil and up homes are not dependent on wages at all, but more on the stock market. They have nothing to do with median income. But anything $2 mil and below is wage dependent, right, so we could analyze it by multiple of wages.

Perhaps Carlsbad is typically 8 x wages, while Mira Mesa is 4 x median wages. With lower wage earners in Mira Mesa, and cheaper housing over there, it makes sense that historically their homes are priced at a lower multiple of per capita income.

Schahrzad Berkland

[powayseller]

Daniel, I would put all my money on the homebuilders and lenders going down, but I am not skilled enough to navigate the stock market’s up and downs in the interim. Long term trend is down, but one good rally, and I lose it all…. Timing is everything, and something like 75% or 90% of options expire worthless. My two stocks are Berkshire Hathaway and Conoco Phillips. I will add more stock positions in energy per Zeal’s recommendations- I think oil is more valuable than gold.

How can you buy swiss francs? I e-mailed my family in Switzerland about this, and have not heard back yet. I am sure they are checking in to this, and I will post back what I find out.

nancy_s_soothsayer – yes, I have these same questions. The economists that I so much admire, give these brilliant insightful predictions, and then stop. That’s like having sex without an orgasm. Why can’t they just finish the job…I mean, tell us what to do with our money, for crying out loud. Even Nouriel Roubini, who charges $3,000 annually for his commentary and news reports, does not give investment advice. If you are interested in energy and metals, subscribe to Zeal Intelligence. They have done very well in that sector.

Perry Chase, I will start a separate link about vastu houses.

[powayseller]

Carlsbadliving, I am honored to do my duty to educate the newbies, like our friend from Amarillo. When I must do this with a seasoned investors or long-time piggington readers, it’s just repetitive and I lose my patience.

[powayseller]

I like SD Realtor. The other guy is a pompous a@@.

[powayseller]

I tried to go back to edit my post,but couldn’t. Here’s the problem. We have people like docteur, an old timer who has seen bubbles come and go, and he is in thick denial. He goes around and checks with his neighbors on their financial situation to reassure himself that it can’t happen in his neighborhood. After all, they have all told him they can afford their homes. Wake up, docteur! You’ve got one NOD in your neighborhood already, and none of your neighbors are going to tell you if they are sleepless at night because they don’t know how to make their payments in 2008 when their I/O loan adjusts. You should have been a leader, a guide for us. Instead you bring around a bunch of BS about replacement cost. Land is 80% overvalued, labor and material costs are too high because of the building glut. In 2 years, you’ll be able to hire contractors and buy supplies for a fraction of today’s cost. I am disappointed that someone of your caliber is in such deep denial.

Thanks to Rich, bugs, privatebanker, lindismith, hs, rseiser, jepsd, Jim Klinge, Bob Casagrand (my MAIN teacher on real estate), 4plexowner, Chris Johnston, SD Realtor (Adam), John Hokkannen, asianautica, and any others I may have forgot. You were my true teachers on this board.

Perhaps someday this forum will mature.

For now, we need to stop debating whether housing will collapse 50%. Who cares if it is 48% or 52%? It is going down, crashing, far. It is beyond debate.

What we need to focus on now is what to do with our money, how to find financial security, how to survive the biggest recession of our lifetimes.

Until this forum moves in that direction, I just don’t have time to hang out here anymore. There are much more presssing needs to which I must attend.

goodnight, and good luck

[powayseller]

I tried to go back to edit my post,but couldn’t. Here’s the problem. We have people like docteur, an old timer who has seen bubbles come and go, and he is in thick denial. He goes around and checks with his neighbors on their financial situation to reassure himself that it can’t happen in his neighborhood. After all, they have all told him they can afford their homes. Wake up, docteur! You’ve got one NOD in your neighborhood already, and none of your neighbors are going to tell you if they are sleepless at night because they don’t know how to make their payments in 2008 when their I/O loan adjusts. You should have been a leader, a guide for us. Instead you bring around a bunch of BS about replacement cost. Land is 80% overvalued, labor and material costs are too high because of the building glut. In 2 years, you’ll be able to hire contractors and buy supplies for a fraction of today’s cost. I am disappointed that someone of your caliber is in such deep denial.

Thanks to Rich, bugs, privatebanker, lindismith, hs, rseiser, jepsd, Jim Klinge, Bob Casagrand (my MAIN teacher on real estate), 4plexowner, Chris Johnston, SD Realtor (Adam), John Hokkannen, asianautica, and any others I may have forgot. You were my true teachers on this board.

Perhaps someday this forum will mature.

For now, we need to stop debating whether housing will collapse 50%. Who cares if it is 48% or 52%? It is going down, crashing, far. It is beyond debate.

What we need to focus on now is what to do with our money, how to find financial security, how to survive the biggest recession of our lifetimes.

Until this forum moves in that direction, I just don’t have time to hang out here anymore. There are much more presssing needs to which I must attend.

goodnight, and good luck

[powayseller]

sduuude, what? I have been the main contributor of useful information on this board. I have weathered the useless silly wasteful comments of you, sdrealtor, and docteur, to the point that I have given up. It’s a waste of time to try educating people in denial.

Just as I was early in selling my house, cashing in my stocks, and renting, and the media is just now warning of foreclosures and exotic lending, you are behind in understanding how bad this will get. By Q1 07 we will be in the recession.

Take me seriously. This is my last warning. I am done wasting my time on fools like you!

One last thing. sdrealtor is a rude arrogant asshole. Goodbye docteur, thick in denial about his Carmel Valley home losing 50% of value. Goodbye sduuuuude and your silly comments.

Addicted to piggington? No longer. My greatest disappointment is the oldtimers who have been through past cycles, in thick denial, who need constant education, and the lack of intellectual capability on my questions on economy, investing. My posts on recession, investing get almost no responses. I need to find a group that is ready to move forward, and is not stuck in denial about the SD economy (which is in dire straits) and the future of housing, which will fall 50% in the biggest recession since the Great Depression.

I am moving forward, to preparing financially for the recession and the 50% housing loss. THAT is where the focus needs to be now. Wake up, guys! Housing will fall far and hard. That is beyond needing to be debated. Move on to preparing for the recession. It is real and coming hard.
So long,
Powayseller

[powayseller]

sduuude, what? I have been the main contributor of useful information on this board. I have weathered the useless silly wasteful comments of you, sdrealtor, and docteur, to the point that I have given up. It’s a waste of time to try educating people in denial.

Just as I was early in selling my house, cashing in my stocks, and renting, and the media is just now warning of foreclosures and exotic lending, you are behind in understanding how bad this will get. By Q1 07 we will be in the recession.

Take me seriously. This is my last warning. I am done wasting my time on fools like you!

One last thing. sdrealtor is a rude arrogant asshole. Goodbye docteur, thick in denial about his Carmel Valley home losing 50% of value. Goodbye sduuuuude and your silly comments.

Addicted to piggington? No longer. My greatest disappointment is the oldtimers who have been through past cycles, in thick denial, who need constant education, and the lack of intellectual capability on my questions on economy, investing. My posts on recession, investing get almost no responses. I need to find a group that is ready to move forward, and is not stuck in denial about the SD economy (which is in dire straits) and the future of housing, which will fall 50% in the biggest recession since the Great Depression.

[powayseller]

teamtrim – Read the Bubble Primer on this site, and read Sell Now by economist John Talbott. Then make a decision. But hurry and read the stuff today. If you choose to sell, your chances for finding a buyer, and having to seriously reduce your price, will be much lower after summer. Condos will get hit hardest. End of this thread for me. Good luck.

[powayseller]

The UCLA Anderson Forecast predicts a vulnerable period ahead for all government, as property and tax revenues decrease. Thorberg said Arnie’s infrastructure dreams won’t materialize. Many city governments are already in the red, and today the Voice published a story about Chula Vista’s pension problems.

[powayseller]

deleted

[powayseller]

Who has any savings to pump into the economy? the consumer only has money borrowed from their houses, the government has money borrowed from other countries. The stock market is toast, rocket man. There will be a couple rallies after the pause, by the bulls who do not understand the situation. Cash is king. Stocks are heading downhill, and gold is overpriced.

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