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renterclint
ParticipantChris, very well put.
I am also skeptical of the practical impact of a real $$ decline in housing. It does not seem terribly helpful. When it came time for the annual salary/raise negotiation with my employers, I do not ever recall them putting my % wage increase in inflation-adjusted terms! I do believe inflation has an impact on wage increases, but that is an in-direct, delayed impact at best – IMO – but I’m no economist.
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Participantjg
This is very interesting. Keep up the good work & best of luck keeping the wife out of the “home-buying mentality”.
ParticipantThe stable environment comes from the parents, not the box that the parents live in…
CONCHO, I whole-heartedly agree with that. When I said "same stable environment", I should probably have put an emphasis on "same". We were quite content with our current rental, but now through no control of our own, we must move. Rentals are thin in my kids school district, and now we're moving into a much smaller (albeit cheaper) rental 4 houses down the street. And this new rental is a long-time rental property… very out-dated. I don't care much, but my stay-at-home wife has to live in it all day long. Truth is, we're lucky it came up when it did. If it did not, we would be moving school districts. A lot of people don't mind moving their kids around a lot ,"kids are resilient" they say. Different strokes… I personally do mind and I do not think my view of that is particularly unique. In addition to the "paint & improve the way you want" thing about home ownership, it is especially nice to know if you want your family to stay put, they can.
All the points people have made here about the advantages of renting are valid. I especially like Diego Mamani's example of 2 years of free rent – very good. I also do not buy into the "renters are losers meme". I'm not even sure what a "meme" is:)
I would just like to point out (maybe the obvious) that there are some nice advantages to owning the "box" you live in beside the tangible financial reasons. Unfortunately at this time in San Diego, those ownership advantages clearly come at a very high price.
ParticipantPC,
I really think you’re right, but 5yrs is a long time to be a renter. I personally can not break free of the home-owner psychology. I guess it’s the whole watching your kids grow up in the same stable environment thing. Our landlord has just decided to put our very nice North Cty Coastal rental on the market, so guess who gets to move in a couple weeks. My wife is less than thrilled. Very fortunately, we found another rental in the same school district. Rentals in this district do not pop up very often, so I feel blessed at timing!
Anyway, eventually we’ll choose home-ownership over sunshine, and it is very unlikely that we will hold out 5 years. Especially if we’re forced to move out of the next rental too.
But I love the “Stucco Albatross” comment!!
ParticipantYep! I hear what you’re saying about your income (& exotic loan or move options).
I’m a professional & make a fair amount over the SD median income. I grew up here, moved away, and now I’m back (w/wife & kids in tow) with a decent career & a little $$ from selling my out-of-state home for a decent gain. Yet I still can’t touch anything in the areas I want to live with conventional financing.
I ran into a nice, seemingly intelligent woman at my younger son’s preschool a few months ago. We started talking about housing, and she gradually divulged that she & her husband are in a neg-am & can only afford the minimum pmt each month. They have some equity (bought 3yrs ago), and looked into selling only to be surprised by a $25,000 “pre-payment” penalty they would have to pay not only if they refinanced, but if the SOLD THE HOUSE! This isn’t some weird fly-by-night mtg broker, but Downey Savings. So they are basically forced to keep their house & suicide loan, and slowly burn up their equity praying things will turn out okay somehow.
Now – whenever a get the urge to jump into the market w/ an exotic loan, I think of this poor woman.
To be honest, I am bitter. The bankers w/ all their cheap $$ have ruined my hometown’s housing market. In two years, if things don’t look different, I’ll be moving as well.
ParticipantJames,
Those are some great questions. I personally haven’t heard the answers as of yet.
On a side note, have you noticed the overall tone of the threads of this website are turning a little less bearish lately? Maybe it’s just me. Sometimes I miss the over-the-top super-bear commentary of Powayseller. I found the content from a couple months ago to be more encouraging for us wannabe homeowners.
I personally am slowly coming to the conclusion that maybe the “downturn” is beginning to turn in the direction of flat prices for many years until incomes catch up a little. For my own situation, I would need houses to come down a good 30% before I can afford one. I’m really beginning to doubt that is going to happen (even with the increased short sales SD Realtor has been posting).
I say all this understanding that the real estate market is a sluggish animal, and the price declines we’ve experienced so far developed very quickly relatively speaking.
I look forward to the January data as well.
ParticipantLOL! bgates, you are such a nut!
PS, did I read your NCTimes comment right? Have you changed your tune regarding the 50% decline in home values? What did I miss? Maybe someone highjacked your name there as well?
ParticipantPS is right on the mark. I worked in banking for a couple of years, and from what I’ve seen, the banks are not really that different from a individual seller. It depends on the state, but usually the lender is legally required to offer the property to the public prior to taking posession. The banks that I’ve worked with will not typically sell the property for less than FMV at auction unless there are issues with the property. If there are no market value bids from the public, the property becomes an REO. The banks I’ve worked for simply hire a realtor just like you or I would, and they then try to get top dollar for the property. That being said, if the loan balance at the date of foreclosure was significantly less than market value, the bank may budge over time (much like an individual seller who has a lot of equity in the home for sale).
The time to capitalize on a home heading for foreclosure is before the property reaches the point of foreclosure proceedings. If you get to a troubled borrower (who has a lot of equity in a home) just before the foreclosure process begins, you might get a deal.
For example, a house w/ market value of $500k – if the borrower only owes $300k, you can swoop in at the 11th hour and offer them $400k. They might take it if desperate enough. I’ve seen a few situations similar to this. The part I can’t figure out is why the troubled borrow does not wake up and hire a realtor earlier on (like when they get their first couple NODs). It’s not uncommon for the borrower to sit & do nothing until it’s too late. I guess they just get too attached to the home or think some financial miracle will happen. It’s sad really.
ParticipantFSD,
I wouldn’t go rushing off to the “soft-landing scenario” based on Quarterly reporting of GDP… this macro-economic analysis is a tough gig. There are so many different ways to spin macro data…
GDP is up = economic recovery = housing recovery.
OR…
GDP is up = inflationary pressures typically follow = higher interest rates = downward pressure on housing prices.
I wonder why so many economists are wrong all the time… too many moving parts.
ParticipantKristenJM,
“ALL option arms are resetting next year because of these guidelines.”
Can you elaborate on this? What has the new guidelines have to do with already written Option-ARMS?
Thanks!
ParticipantYeah, I know what you mean. There’s that one guy who’s the president of Paramount Equity Mortgage or something like that. Who in a creepy whispery voice keeps claiming “I will beat any written rate or fee structure” over & over again… “give me a chance to blow you away.” Creepy I tells ya! Or how about those ads on the internet that say “$400,000 mortgage w/ a $800/month payment”. Is that advertisement even legal?
Cardiffbaseball, It’s the 5yr fixed loans at 1.25% that get me wondering. I know it’s probably some cheap ploy to hook you in or maybe a loss leader on a very small percent of borrowers that qualify. But if all of these people with their ARMs resetting in the next year can simply roll the debt over into a new teaser-rate loan, then the bottom of the market my be closer than many of us think. My son plays soccer with a boy whose mom is a mortgage banker for WAMU. I mentioned the resetting loans to her, and she just shrugged and said “we’ll just get them into new loans…” I asked her if there would be difficulty getting appraisals that would allow for a refi in this declining market, and she did not seem to think it would be a problem.
I recently worked in the finance department of a local SD bank, and I’ve got to say that a lot of the appraisals have me scratching my head. The bank was proud of their “strong” portfolio which was 80% in ARMS and I/O, because they only had one loan with an LTV higher than 75% (and it had PMI). When I came across a troubled loan that was getting close to default, the LTV was supposedly at 60% (original), but when I looked at comps to this property the current LTV was more like 110%. I know there are some solid, honest appraisers out there, but it seems there are a lot out there that do what they have to in order to make the deal happen & keep there lender relationships.
I guess the point of that tangent is that I’m not so sure that the troubled-borrower facing ARM reset will…
1) Have too much trouble getting refinanced into another teaser ARM.
2) Have too much trouble finding a lender w/ an appraiser who will magically find the right value to get the deal done.
November 14, 2006 at 2:16 PM in reply to: Has a political post on here ever changed anyone’s mind? #39967ParticipantBeing about as “center” as they come. I can be swayed by factual, logical arguments, but most of the time, I see the comments in the political strings as mostly unfounded opinion (which ultimatley leads no-where… me thinks). I do recall a little Bush-bashing thread started from very-regular poster a while back. I’m not fond of W, and enjoyed the dialogue, but a really conservative person entered the debate with some serious facts that were well articulated, and I he made me view ol’ Jr in a different light… at least for a moment or two. I could be wrong, but I think the conservative voice was bgates. That guys seems to know his stuff…
Participant“Who cares? If you can’t put down 20% on a house, how can you afford it?”
It must be nice having $100k in cold cash sitting in the bank just waiting for your every whim.
I personally believe you can buy a home with more than 80% financing and still manage to continue as a going concern. “Who cares?” I do. It’s a great question and a good answer – thanks for the insight, bubba99.
ParticipantSdrealtor, I really hope you’re right. I make a fair amount over the median income, and all I can really afford on a conventional 30yr loan is about $2500/month max. With PITI, HOA and/or Mello Roos combined, that puts me around $300k & I need at least 3bdrms.
I grew up here, moved away for a few years and owned a couple homes out of state. I thought I wouldn’t mind renting as long as I was back home, but I miss owning a lot more than I expected. Renting sucks (especially when you have kids). I love it here, and I really want to stay, but if there isn’t reasonable housing available at a realistic price in a couple years, I’m leaving CA for good.
Let’s hope there really will be new banking rules (with teeth) soon to stop the madness on the exotic loans, and bring first time home-buyer back into the market with a mortgage they can live with.
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