[sdduuuude]

P.S. It’s a good question, though – it gives the bears a chance to qualify their position a bit and point out that we are not, in fact against logical financial decisions and against housing in general. The numbers just don’t work right now.

I predict someday this forum will be the forum of crazy people who want to buy real estate after it collapses when everyone is afraid to. Maybe powayseller will even come back as powaybuyer.

[sdduuuude]

P.S. It’s a good question, though – it gives the bears a chance to qualify their position a bit and point out that we are not, in fact against logical financial decisions and against housing in general. The numbers just don’t work right now.

I predict someday this forum will be the forum of crazy people who want to buy real estate after it collapses when everyone is afraid to. Maybe powayseller will even come back as powaybuyer.

[sdduuuude]

“it’s often said on this board that real estate is traditionally a horrible investment over the long-term.”

I don’t think that is accurate at all. We simply feel it is a timing issue, that’s all. This isn’t a normal market. It is bubble popping.

It is occasionally said, however, (as you also point out) that because you can buy real-estate using leverage, it can be an excellent investment, even if growth is moderate.

Leverage also accentuates the downside risk. a 1% home price reduction in 1 year on a home purchased with 20% down is -5% that year, not adjusting for inflation, and not including interest.

[sdduuuude]

“it’s often said on this board that real estate is traditionally a horrible investment over the long-term.”

I don’t think that is accurate at all. We simply feel it is a timing issue, that’s all. This isn’t a normal market. It is bubble popping.

It is occasionally said, however, (as you also point out) that because you can buy real-estate using leverage, it can be an excellent investment, even if growth is moderate.

Leverage also accentuates the downside risk. a 1% home price reduction in 1 year on a home purchased with 20% down is -5% that year, not adjusting for inflation, and not including interest.

[sdduuuude]

“it’s often said on this board that real estate is traditionally a horrible investment over the long-term.”

I don’t think that is accurate at all. We simply feel it is a timing issue, that’s all. This isn’t a normal market. It is bubble popping.

It is occasionally said, however, (as you also point out) that because you can buy real-estate using leverage, it can be an excellent investment, even if growth is moderate.

Leverage also accentuates the downside risk. a 1% home price reduction in 1 year on a home purchased with 20% down is -5% that year, not adjusting for inflation, and not including interest.

[sdduuuude]

Muggle – interesting comment on your question here:

http://feeds.feedburner.com/~r/TheBigPicture/~3/145107652/quote-of-the–1.html

Answers your question pretty well, I think.

[sdduuuude]

Muggle – interesting comment on your question here:

http://feeds.feedburner.com/~r/TheBigPicture/~3/145107652/quote-of-the–1.html

Answers your question pretty well, I think.

[sdduuuude]

Muggle – interesting comment on your question here:

http://feeds.feedburner.com/~r/TheBigPicture/~3/145107652/quote-of-the–1.html

Answers your question pretty well, I think.

[sdduuuude]

no

[sdduuuude]

no

[sdduuuude]

no

[sdduuuude]

So, lets say I’m a bank and I loan 200K to some guy and his payment is $1000 for a while, then it jumps to $1500 and he defaults.

I’m thinking I want the guy out so I can sell now and get as much as I can for it. If I wait and things get worse, the guy may default anyway at $1000/mo. Then, not only do I have to go through the foreclosure process anyway, but I have have to sell the house for less than I could if I had foreclosed earlier.

Basically, a default to a bank means – this guy is bad news and I want out of the deal.

If it is an interest-only or neg-am loan, the principal isn’t coming down at all anyway and I am 100% owner of a property that has declining value. Or, I am continuing to loan money to someone who has shown they can’t pay it back.

Plus, if I could have $180K back to invest at the prevailing rate, and the prevailng rate is much higher than the rate the guy signed up for, even though he is paying on $200K, I may be better off investing less capital at a higher rate than taking the smaller payment.

i.e. if I can invest any gains from the sale of the house at 8%, I don’t want the 4% teaser rate some guy paying me.

Also, when I said “they would learn nothing” – I meant the banks as well as the borrowers.

[sdduuuude]

So, lets say I’m a bank and I loan 200K to some guy and his payment is $1000 for a while, then it jumps to $1500 and he defaults.

I’m thinking I want the guy out so I can sell now and get as much as I can for it. If I wait and things get worse, the guy may default anyway at $1000/mo. Then, not only do I have to go through the foreclosure process anyway, but I have have to sell the house for less than I could if I had foreclosed earlier.

Basically, a default to a bank means – this guy is bad news and I want out of the deal.

If it is an interest-only or neg-am loan, the principal isn’t coming down at all anyway and I am 100% owner of a property that has declining value. Or, I am continuing to loan money to someone who has shown they can’t pay it back.

Plus, if I could have $180K back to invest at the prevailing rate, and the prevailng rate is much higher than the rate the guy signed up for, even though he is paying on $200K, I may be better off investing less capital at a higher rate than taking the smaller payment.

i.e. if I can invest any gains from the sale of the house at 8%, I don’t want the 4% teaser rate some guy paying me.

Also, when I said “they would learn nothing” – I meant the banks as well as the borrowers.

[sdduuuude]

So, lets say I’m a bank and I loan 200K to some guy and his payment is $1000 for a while, then it jumps to $1500 and he defaults.

I’m thinking I want the guy out so I can sell now and get as much as I can for it. If I wait and things get worse, the guy may default anyway at $1000/mo. Then, not only do I have to go through the foreclosure process anyway, but I have have to sell the house for less than I could if I had foreclosed earlier.

Basically, a default to a bank means – this guy is bad news and I want out of the deal.

If it is an interest-only or neg-am loan, the principal isn’t coming down at all anyway and I am 100% owner of a property that has declining value. Or, I am continuing to loan money to someone who has shown they can’t pay it back.

Plus, if I could have $180K back to invest at the prevailing rate, and the prevailng rate is much higher than the rate the guy signed up for, even though he is paying on $200K, I may be better off investing less capital at a higher rate than taking the smaller payment.

i.e. if I can invest any gains from the sale of the house at 8%, I don’t want the 4% teaser rate some guy paying me.

Also, when I said “they would learn nothing” – I meant the banks as well as the borrowers.

[sdduuuude]

Because people would learn that making the wrong decision is OK and thus they would learn nothing.

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