[SDEngineer]

Just as a reasonably educated guess, I’d guess it’s a combination of a few factors.

Primarily, I think that for many of them, their loans – even at bubble prices – are still largely affordable, hence you don’t have the massive downward pressure caused by forced sales (either short or foreclosed). A couple of reasons for this:

1) Upper middle class buyers have larger reserves, and can hold out longer when rates reset, etc, before they have to give it up (typically, their credit rating is also substantially more important to them as well, meaning that they are more likely to cut expenses to continue to make payments. They also probably had more discretionary expenses that can be cut out to be able to stretch to make the payment.)
2) They probably weren’t subprime, meaning that for many (most?) of them, they’re still making probably the same payment they bought at. This might change when the alt-A neg-am mortgages start to hit their caps and go bad en masse, which I believe is predicted to start this year.
3) Many were move-up buyers, so they probably entered these markets with a down payment that was just as inflated by the bubble as the real estate they bought. It’s probably a lot easier for a household making 100K a year to afford a 600K home they bought in 2005 when they went in with a 300K downpayment from the sale of their previous Mira Mesa home for 450K that they bought for 200K 10 years before than it would be for a first time buyer who neg-am financed that 600K home. Dunno how common this was though, or whether most of these type of move up buyers took their bubble appreciation as a windfall and spent it.

My personal feeling is that they’ll still get hit (over the long run, they have to come down to the historical relationship between move-up housing and entry level housing), but it will probably take longer (though I expect them to get hit with the alt-A tidal wave this year most likely). They’ll probably also bounce along at their areas bottom for longer while inflation raises other areas that bottomed sooner and lower to the point where they reach that historical price relationship between entry level housing and move-up housing.

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

[quote=j]I believe there is no PMI on FHA loans.[/quote]

It’s not called PMI, but it’s there, and I believe it’s mandatory on all FHA loans which are above 90%LTV and greater than 15yrs (i.e., any 30 year product, no matter the LTV, requires the FHA mortgage insurance). I believe that it can be removed after 5 years if/when the LTV drops below 80%, but for the first 5 years, it’s mandatory.

The MIP (mortgage insurance premium, the FHA’s version of PMI) right now for the 3.5% down FHA mortgage (the minimum down payment FHA mortgage) is 0.55%/yr. However, the FHA also requires the borrower to pay an upfront mortgage insurance fee (which is the source of the FHA’s high costs compared to Fannie/Freddie conforming loans) of 1.75% of the mortgage amount.

In other words, FHA is quite expensive fee-wise compared to a conforming loan. However, it is about the only way to get a low-down mortgage these days from what I’ve been able to find. Given the state of the economy, I can easily understand why a lot of people are willing to pay the extra fees to keep more of their own cash available (in fact, I will probably be buying in the next year, and am leaning towards going the FHA route for just that reason – I can afford 10% down, but it would seriously deplete my cash reserves, and in this economy, I’d rather keep those reserves just in case – it’s the difference between having 9 months of cash reserves, and 3 months).

[SDEngineer]

Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.

[SDEngineer]

Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.

[SDEngineer]

Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.

[SDEngineer]

Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.

[SDEngineer]

Another potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.

Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.

[SDEngineer]

[quote=bobby]$28/hour. that’s engineer’s wage. A typical engineer is an above average student that have gone on to higher education for 4 years or more.
an typical UAW member is likely a HS graduate with likely average work ethics.

UAW does not play by free market pricing. market pricing for these folks is not $28/hour.
their spending habits are not supported by their skill level.

http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

[/quote]

Huh? $28/hr is what an engineer can expect to make the day they graduate from college – it’s far from the “average” engineers wage. An engineer at the midpoint of their career track (say with 10-15 years of experience) should be making close to double that.

I’m pretty sure that the wages for a UAW worker aren’t anywhere near that when they get out of their trade school.

As others have pointed out here, a large portion of that $73/hr that some are quoting here is the result of the overly generous packages that the current UAW workers no longer get. And, frankly, I don’t see much wrong with the average UAW worker in the prime of his career making a bit more than the local waiter makes for doing a much tougher and more physically demanding job – and the wages and benefits packages currently offered are not out of line with the packages which their non-union competitors pay. The problem that GM has, as others have again pointed out, is that they are living with the legacy of much higher compensation packages in the past, which they didn’t fund properly, and so they “jimmy” the books now to fund their PAST compensation packages by paying the CURRENT employees a phantom wage that is appropriated into their PAST pension obligations.

[SDEngineer]

[quote=bobby]$28/hour. that’s engineer’s wage. A typical engineer is an above average student that have gone on to higher education for 4 years or more.
an typical UAW member is likely a HS graduate with likely average work ethics.

UAW does not play by free market pricing. market pricing for these folks is not $28/hour.
their spending habits are not supported by their skill level.

http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

[/quote]

Huh? $28/hr is what an engineer can expect to make the day they graduate from college – it’s far from the “average” engineers wage. An engineer at the midpoint of their career track (say with 10-15 years of experience) should be making close to double that.

I’m pretty sure that the wages for a UAW worker aren’t anywhere near that when they get out of their trade school.

As others have pointed out here, a large portion of that $73/hr that some are quoting here is the result of the overly generous packages that the current UAW workers no longer get. And, frankly, I don’t see much wrong with the average UAW worker in the prime of his career making a bit more than the local waiter makes for doing a much tougher and more physically demanding job – and the wages and benefits packages currently offered are not out of line with the packages which their non-union competitors pay. The problem that GM has, as others have again pointed out, is that they are living with the legacy of much higher compensation packages in the past, which they didn’t fund properly, and so they “jimmy” the books now to fund their PAST compensation packages by paying the CURRENT employees a phantom wage that is appropriated into their PAST pension obligations.

[SDEngineer]

[quote=bobby]$28/hour. that’s engineer’s wage. A typical engineer is an above average student that have gone on to higher education for 4 years or more.
an typical UAW member is likely a HS graduate with likely average work ethics.

UAW does not play by free market pricing. market pricing for these folks is not $28/hour.
their spending habits are not supported by their skill level.

http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

[/quote]

Huh? $28/hr is what an engineer can expect to make the day they graduate from college – it’s far from the “average” engineers wage. An engineer at the midpoint of their career track (say with 10-15 years of experience) should be making close to double that.

I’m pretty sure that the wages for a UAW worker aren’t anywhere near that when they get out of their trade school.

As others have pointed out here, a large portion of that $73/hr that some are quoting here is the result of the overly generous packages that the current UAW workers no longer get. And, frankly, I don’t see much wrong with the average UAW worker in the prime of his career making a bit more than the local waiter makes for doing a much tougher and more physically demanding job – and the wages and benefits packages currently offered are not out of line with the packages which their non-union competitors pay. The problem that GM has, as others have again pointed out, is that they are living with the legacy of much higher compensation packages in the past, which they didn’t fund properly, and so they “jimmy” the books now to fund their PAST compensation packages by paying the CURRENT employees a phantom wage that is appropriated into their PAST pension obligations.

[SDEngineer]

[quote=bobby]$28/hour. that’s engineer’s wage. A typical engineer is an above average student that have gone on to higher education for 4 years or more.
an typical UAW member is likely a HS graduate with likely average work ethics.

UAW does not play by free market pricing. market pricing for these folks is not $28/hour.
their spending habits are not supported by their skill level.

http://www.detnews.com/2005/autosinsider/0509/18/A01-318432.htm

[/quote]

Huh? $28/hr is what an engineer can expect to make the day they graduate from college – it’s far from the “average” engineers wage. An engineer at the midpoint of their career track (say with 10-15 years of experience) should be making close to double that.

I’m pretty sure that the wages for a UAW worker aren’t anywhere near that when they get out of their trade school.

As others have pointed out here, a large portion of that $73/hr that some are quoting here is the result of the overly generous packages that the current UAW workers no longer get. And, frankly, I don’t see much wrong with the average UAW worker in the prime of his career making a bit more than the local waiter makes for doing a much tougher and more physically demanding job – and the wages and benefits packages currently offered are not out of line with the packages which their non-union competitors pay. The problem that GM has, as others have again pointed out, is that they are living with the legacy of much higher compensation packages in the past, which they didn’t fund properly, and so they “jimmy” the books now to fund their PAST compensation packages by paying the CURRENT employees a phantom wage that is appropriated into their PAST pension obligations.

[Author]

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