[temeculaguy]

My apologies, I assumed you were the husband, there are so many husbands who pop up here becuase their pregnant wife or just had a baby, just needs that new house (I’m thinking of coming up with a syndrome name as soon as my research is done with regards to granite counters and estrogen). Your loan person is a liar, an idiot, or works for the builder and knows you can’t afford it. Interest only is so wrong for someone who plans to be there long term. When does the loan convert to principal, is there a prepayment penaly, what are the adjustment terms? Just about when you decide to have a second kid or take time off work, your mortgage will double, you will need to refinance out of your interest only and rates will likely be higher. Find out the fully amortized, 30 year fixed payment and if you can’t afford it, then you have your answer. Mortgage calculators are all over the internet.

Interest only is for certain situations and markets, barely being able to afford the I/O payment in a falling market with rising rates and long term plans is not one of those situations. Quick, read some of the posts about getting your deposit back.

[temeculaguy]

Price aside, what is the down payment and the loan specifics. If you are interest only, or anything other than 20% down with a fixed traditional, you won’t survive the very real possibility that this is not the bottom, even if it goes flat you lose. It is totally normal for a young couple to be house poor for a few years. The stress of resetting payments is far greater than the stress you get from a young woman with a child and her instinct to “nest.”

If you truly can afford it, 4-s is very nice for a young family and will always be. I think that because so many of the homes were purchased during the peak, it has room to fall and waiting until after the summer has passed will be worth it.

[temeculaguy]

Price aside, what is the down payment and the loan specifics. If you are interest only, or anything other than 20% down with a fixed traditional, you won’t survive the very real possibility that this is not the bottom, even if it goes flat you lose. It is totally normal for a young couple to be house poor for a few years. The stress of resetting payments is far greater than the stress you get from a young woman with a child and her instinct to “nest.”

If you truly can afford it, 4-s is very nice for a young family and will always be. I think that because so many of the homes were purchased during the peak, it has room to fall and waiting until after the summer has passed will be worth it.

[temeculaguy]

Where are these loans? California Baby! And San Diego is the king!

Here’s a gem from exactly two years ago.

http://www.msnbc.msn.com/id/8171385/

BusinessWeek Interest-Only Loans across the U.S.

Rank Metro area Interest-only mortgages as share of total, 2004
1. San Diego 47.6%
2. Atlanta 45.5%
3. San Francisco 45.3%
4. Denver 43.4%
5. Oakland, Calif. 43.1%
6. San Jose, Calif. 41.1%
7. Phoenix-Mesa 38.3%
8. Seattle-Bellevue-Everett 37.2%
9. Orange County, Calif. 37.0%
10. Ventura, Calif. 35.3%

Roughly half of the peak buyers in San Diego owe their entire loan if not more and it makes them more exposed if rates were to rise, or should I say, continue to rise. Interest only doesnt mean interest only forever. It is merely a way to rent and freeze the price for 2-10 years, then pay the remaining 20-28 years at a higher payment than the 30 yr fixed that they couldn’t afford. It is a bet, like any other, that home prices will rise and interest rates will not. Looking back over the last two years, it wasn’t the right play.

According to the chart, the reaper has come calling on these people and he will stick around for about 2-3 years. I used to be excited that I was right but now I am starting to worry about friends and co-workers who drank the kool aid. You only get so much satisfaction from “I told you so.”

[temeculaguy]

Where are these loans? California Baby! And San Diego is the king!

Here’s a gem from exactly two years ago.

http://www.msnbc.msn.com/id/8171385/

BusinessWeek Interest-Only Loans across the U.S.

Rank Metro area Interest-only mortgages as share of total, 2004
1. San Diego 47.6%
2. Atlanta 45.5%
3. San Francisco 45.3%
4. Denver 43.4%
5. Oakland, Calif. 43.1%
6. San Jose, Calif. 41.1%
7. Phoenix-Mesa 38.3%
8. Seattle-Bellevue-Everett 37.2%
9. Orange County, Calif. 37.0%
10. Ventura, Calif. 35.3%

Roughly half of the peak buyers in San Diego owe their entire loan if not more and it makes them more exposed if rates were to rise, or should I say, continue to rise. Interest only doesnt mean interest only forever. It is merely a way to rent and freeze the price for 2-10 years, then pay the remaining 20-28 years at a higher payment than the 30 yr fixed that they couldn’t afford. It is a bet, like any other, that home prices will rise and interest rates will not. Looking back over the last two years, it wasn’t the right play.

According to the chart, the reaper has come calling on these people and he will stick around for about 2-3 years. I used to be excited that I was right but now I am starting to worry about friends and co-workers who drank the kool aid. You only get so much satisfaction from “I told you so.”

[temeculaguy]

Based on that graph it should go up by I think it will be multiplied. Last year’s resets were less than half or next years and we’ve seen the effect that had. The upcoming resets will have an ever harder time. There are twice as many of them, resales prices are lower, time on market is longer, the availability of the exotic loans is diminishing and more of them were buyers at the peak so more will be upside down. The forclosures and distress sales that hit the market in the last year had more cusion than those in the upcoming 12 months. Today’s repos represent only the dumbest buyers who went exotic 0 down and heloc’d out all their equity that they gained 2003-2006. The next twelve months almost all of the exotic 0 downs will fail because they won’t be able to roll into another loan like that, they won’t be able to sell because they bought at peak and they don’t qualify for conventional financing. Even the few exotic lenders left won’t want to make a loan for 110% ltv in todays climate. So instead of 15% of the loans going bad, 30-50% will and there are twice as many, further depessing prices and making the fundamentals even worse. It’s a snowball effect. It takes most borrowers a little bit of time to get into trouble, after their reset they usually make the higher payments for a while, then it’s about 6 months before foreclosure so we see the real effects much later than the timeline of the graph, which means this fall the other shoe starts to drop and we don’t see the end until 2010.

[temeculaguy]

Based on that graph it should go up by I think it will be multiplied. Last year’s resets were less than half or next years and we’ve seen the effect that had. The upcoming resets will have an ever harder time. There are twice as many of them, resales prices are lower, time on market is longer, the availability of the exotic loans is diminishing and more of them were buyers at the peak so more will be upside down. The forclosures and distress sales that hit the market in the last year had more cusion than those in the upcoming 12 months. Today’s repos represent only the dumbest buyers who went exotic 0 down and heloc’d out all their equity that they gained 2003-2006. The next twelve months almost all of the exotic 0 downs will fail because they won’t be able to roll into another loan like that, they won’t be able to sell because they bought at peak and they don’t qualify for conventional financing. Even the few exotic lenders left won’t want to make a loan for 110% ltv in todays climate. So instead of 15% of the loans going bad, 30-50% will and there are twice as many, further depessing prices and making the fundamentals even worse. It’s a snowball effect. It takes most borrowers a little bit of time to get into trouble, after their reset they usually make the higher payments for a while, then it’s about 6 months before foreclosure so we see the real effects much later than the timeline of the graph, which means this fall the other shoe starts to drop and we don’t see the end until 2010.

[temeculaguy]

Not rolling the proceeds from a primary res into the next primary res so you can invest it in stocks is the same as taking out a second mortgage from your equity and investing it if you had stayed put. If you haven’t borrowed all of your equity you can’t give advice for someone else to invest theirs just because they are in the midst of a transaction.

To add to cellar and AN’s tax deduction debate and to side with cellar, you can’t use your top tax bracket percentage to determine you tax benefit. Asianautica, it is a common misconception to think you pay 37% in income taxes, therefore you can reduce your taxes by 37% for every dollar of increased deduction, you can’t, it doesn’t work that way, they are brackets. Income tax doesn’t work like sales tax, you probably only paid 37% on the last 10k of your income and you paid 15% on the first 20k, the stuff in the middle each has it’s own rate. If sales tax worked like income tax and you wanted to buy a $10,000 item, the first 1k is taxed at 1%, the next 3k is at 2%, the next 2k is at 4%, the next 3k is 5% the last 1k is at 7% (income tax is even wackier, this is for illustration purposes). You choose to buy the item on e-bay, avoid the sales tax and think you saved $700, you didn’t. Or if you and the seller agreed to report the sale as 5k, you figure you saved $350, you didn’t do that either. So you see, the more you deduct, the smaller the percentage. If you increase your mortgage deduction by 50k by taking on a bigger mortgage, some would be 37%, some 33% and some 28%, so you have to look at the actual tax return and adjust the percentage downward, taking on more debt, lowers the the average percentage further. The only way to determine the cost/benefit analysis is to run the real numbers through your own tax software, modifying last years return will come close, using your top bracket is pure realtor/lender misconception or snake oil.

discliamer-I have used turbo tax for years so I guessed at the brackets and their percentages but the point is the same.

[temeculaguy]

Not rolling the proceeds from a primary res into the next primary res so you can invest it in stocks is the same as taking out a second mortgage from your equity and investing it if you had stayed put. If you haven’t borrowed all of your equity you can’t give advice for someone else to invest theirs just because they are in the midst of a transaction.

To add to cellar and AN’s tax deduction debate and to side with cellar, you can’t use your top tax bracket percentage to determine you tax benefit. Asianautica, it is a common misconception to think you pay 37% in income taxes, therefore you can reduce your taxes by 37% for every dollar of increased deduction, you can’t, it doesn’t work that way, they are brackets. Income tax doesn’t work like sales tax, you probably only paid 37% on the last 10k of your income and you paid 15% on the first 20k, the stuff in the middle each has it’s own rate. If sales tax worked like income tax and you wanted to buy a $10,000 item, the first 1k is taxed at 1%, the next 3k is at 2%, the next 2k is at 4%, the next 3k is 5% the last 1k is at 7% (income tax is even wackier, this is for illustration purposes). You choose to buy the item on e-bay, avoid the sales tax and think you saved $700, you didn’t. Or if you and the seller agreed to report the sale as 5k, you figure you saved $350, you didn’t do that either. So you see, the more you deduct, the smaller the percentage. If you increase your mortgage deduction by 50k by taking on a bigger mortgage, some would be 37%, some 33% and some 28%, so you have to look at the actual tax return and adjust the percentage downward, taking on more debt, lowers the the average percentage further. The only way to determine the cost/benefit analysis is to run the real numbers through your own tax software, modifying last years return will come close, using your top bracket is pure realtor/lender misconception or snake oil.

discliamer-I have used turbo tax for years so I guessed at the brackets and their percentages but the point is the same.

[temeculaguy]

Sdhousehunter, thanks for the redfin tip, thier mls searches provide more historical data than zillow or the other public mls sites I use, no wonder the NAR is trying to sue them out of business. I know morgan hill is down 100k, but it wasn’t competetively priced compared to builders within 3 miles, now it’s just as overpriced as the rest of the zip code. Morgan should be priced below other south temecula developments because it’s taxes are significantly higher, it’s not in the city and it doesn’t have paramedic services among other things, pay more, get less shouldn’t equate to higher prices. On average a 600k house pays 3k more per year in taxes by being in morgan vs redhawk and services are inferior. A guestimate is that it needs to be priced 50k less to break even on the taxes. That site you mentioned gave me the proof on the taxes, it lists thier appraised tax value and taxes paid last year, redfin is cool.

Sorry my previous post was on the crabby side, I guess I was in a bad mood yesterday.

[temeculaguy]

Sdhousehunter, thanks for the redfin tip, thier mls searches provide more historical data than zillow or the other public mls sites I use, no wonder the NAR is trying to sue them out of business. I know morgan hill is down 100k, but it wasn’t competetively priced compared to builders within 3 miles, now it’s just as overpriced as the rest of the zip code. Morgan should be priced below other south temecula developments because it’s taxes are significantly higher, it’s not in the city and it doesn’t have paramedic services among other things, pay more, get less shouldn’t equate to higher prices. On average a 600k house pays 3k more per year in taxes by being in morgan vs redhawk and services are inferior. A guestimate is that it needs to be priced 50k less to break even on the taxes. That site you mentioned gave me the proof on the taxes, it lists thier appraised tax value and taxes paid last year, redfin is cool.

Sorry my previous post was on the crabby side, I guess I was in a bad mood yesterday.

[temeculaguy]

I have never read here and seen so many delusional posts. I am still laughing because I know waiting hawk is playing Jedi Mind Tricks on you guys by joining in and encouraging it. Temecula is not Carlsbad and never will be, the market here will fall before S.D. and will recover afterwards, but to think high density untis, liquor stores, check cashing places and blight will overtake the town is just silly. The poster about white fight had me rolling, here is why those predisctions will not happen.

Here is why it will not happen.

1. The video is not shot in Temecula, it is on the furthest Northern edge of Murrieta, 15 miles from central Temecula, two school districts away and some of it’s problems have to do with a publicity surrounding a sex offender that moved into that tract, not the entire reason, but a contributing one. That tract is almost the same Distance from the most populous zip code in Temecula as Carlsbad is to Escondido.

2. The entire city limits of Temecula is zoned and almost all of it is under construction or permitted, the actual city is approaching build out.

3. The $530,000,000 in annual tourism and inordinate retail has given the city more discretional income than almost any city it’s size. It’s Police per resident ratio is higher than any S.D. or Riverside county town with the exception of Carlsbad (tied) and has crime rates lower than almost any S.D. city.

4. It does not have a single apartment building in 92592, it’s most populous zip code in excess of 50k residents. It is routinely is in trouble for lack of affordable housing and is routinely in danger of losing it’s gas tax revenues because it lacks mandated section 8 housing minimums, it cleverly avoids penalties by expanding city owned or rent controlled senior housing. The city is so strict they didn’t want a hooters and when they couldn’t stop it they refused to let them have their signature orange sign.

5. The schools aren’t just good, they are in a league with Poway and North Coastal districts. In Riverside and San Bernadino counties combined, 16 of the top 20 schools in those two couties were in the Temecula Unified, #1 Elementary and #1 High School, I compared the API’s to Poway and it’s almost a dead heat (edge going to Poway), to compare them to Santee is just goofy.

6. The bust of a massage parlor is because they actually have undercover cops working on those things, think that stuff doesn’t happen in your town, check craigs list and search in your town in the erotics services section, you’ll be surprised. The reality is most cities don’t have the manpower to deal with that stuff, they do.

7. Demographics- use Yahoo neigborhood profiles, SanDag (you can get crime rates there too), whatever demographics you want to, look at houshold income, education, home ownership rates, married rates, race, whatever you want and then check your town and you will see that the potential for temecula to become National City is non existent.

Finally, I only defend my neck of the woods because the sterotypes on this post are outrageous. I should play it like Hawk does and try to keep my island for myself. I did however sell in early 2006 because I firmly believe things will fall dramatically here and if S.D. falls the commuters can return so prices will fall further here. Then I will buy back in. Gas is a factor but mostly the reason it will fall first is that more homes were built and bought during the boom and the the rate of exotic loans is higher, plus there are more builders trying to finish off what they started. In the three neighborhoods I’ve lived in almost 90% of my neighbors moved here from S.D. or O.C. so the wife could stay home because she had to work in order for them to live in O.C. or S.D., the PTA volunteer hours are staggering. This is hardly the recepie for urban blight.

Or you could chalk me up as a homer and then agree to stay off my island.

[temeculaguy]

I have never read here and seen so many delusional posts. I am still laughing because I know waiting hawk is playing Jedi Mind Tricks on you guys by joining in and encouraging it. Temecula is not Carlsbad and never will be, the market here will fall before S.D. and will recover afterwards, but to think high density untis, liquor stores, check cashing places and blight will overtake the town is just silly. The poster about white fight had me rolling, here is why those predisctions will not happen.

Here is why it will not happen.

1. The video is not shot in Temecula, it is on the furthest Northern edge of Murrieta, 15 miles from central Temecula, two school districts away and some of it’s problems have to do with a publicity surrounding a sex offender that moved into that tract, not the entire reason, but a contributing one. That tract is almost the same Distance from the most populous zip code in Temecula as Carlsbad is to Escondido.

2. The entire city limits of Temecula is zoned and almost all of it is under construction or permitted, the actual city is approaching build out.

3. The $530,000,000 in annual tourism and inordinate retail has given the city more discretional income than almost any city it’s size. It’s Police per resident ratio is higher than any S.D. or Riverside county town with the exception of Carlsbad (tied) and has crime rates lower than almost any S.D. city.

4. It does not have a single apartment building in 92592, it’s most populous zip code in excess of 50k residents. It is routinely is in trouble for lack of affordable housing and is routinely in danger of losing it’s gas tax revenues because it lacks mandated section 8 housing minimums, it cleverly avoids penalties by expanding city owned or rent controlled senior housing. The city is so strict they didn’t want a hooters and when they couldn’t stop it they refused to let them have their signature orange sign.

5. The schools aren’t just good, they are in a league with Poway and North Coastal districts. In Riverside and San Bernadino counties combined, 16 of the top 20 schools in those two couties were in the Temecula Unified, #1 Elementary and #1 High School, I compared the API’s to Poway and it’s almost a dead heat (edge going to Poway), to compare them to Santee is just goofy.

6. The bust of a massage parlor is because they actually have undercover cops working on those things, think that stuff doesn’t happen in your town, check craigs list and search in your town in the erotics services section, you’ll be surprised. The reality is most cities don’t have the manpower to deal with that stuff, they do.

7. Demographics- use Yahoo neigborhood profiles, SanDag (you can get crime rates there too), whatever demographics you want to, look at houshold income, education, home ownership rates, married rates, race, whatever you want and then check your town and you will see that the potential for temecula to become National City is non existent.

Finally, I only defend my neck of the woods because the sterotypes on this post are outrageous. I should play it like Hawk does and try to keep my island for myself. I did however sell in early 2006 because I firmly believe things will fall dramatically here and if S.D. falls the commuters can return so prices will fall further here. Then I will buy back in. Gas is a factor but mostly the reason it will fall first is that more homes were built and bought during the boom and the the rate of exotic loans is higher, plus there are more builders trying to finish off what they started. In the three neighborhoods I’ve lived in almost 90% of my neighbors moved here from S.D. or O.C. so the wife could stay home because she had to work in order for them to live in O.C. or S.D., the PTA volunteer hours are staggering. This is hardly the recepie for urban blight.

Or you could chalk me up as a homer and then agree to stay off my island.

[temeculaguy]

Here’s an update to a mystery from 9 weeks ago.

http://www.immobel.com/personal/1_3_1/listingDetails.do?maxsurface=4000&featured_int=0&c_mtype=res&searchId=0&c_type=&minprice=1&xml=1&serverId=0&c_year-built=&rpp=15&c_garage=&la=EN&cu=USD&ssid=0&per=mrmls&c_zipcode=92592&c_city=&minsurface=3800&st=0&maxprice=900000&back1=%2Fpersonal%2F1_3_1%2FsearchResults.do&of=18185156

The listing agent on the mls is actually the builder, it is the same street and approx the same size. This is in morgan hill and the first case I’ve found of the builders cutting off the existing owners off at the knees in South Temecula. The only difference is 9 weeks and 160k. It’s too late for creativity, it’s time for lotto tickets.

A check of mcmillans website, the sq ft matches, the new going rate for a Blackstone plan 3 is 650k from the builder.

[temeculaguy]

Here’s an update to a mystery from 9 weeks ago.

http://www.immobel.com/personal/1_3_1/listingDetails.do?maxsurface=4000&featured_int=0&c_mtype=res&searchId=0&c_type=&minprice=1&xml=1&serverId=0&c_year-built=&rpp=15&c_garage=&la=EN&cu=USD&ssid=0&per=mrmls&c_zipcode=92592&c_city=&minsurface=3800&st=0&maxprice=900000&back1=%2Fpersonal%2F1_3_1%2FsearchResults.do&of=18185156

The listing agent on the mls is actually the builder, it is the same street and approx the same size. This is in morgan hill and the first case I’ve found of the builders cutting off the existing owners off at the knees in South Temecula. The only difference is 9 weeks and 160k. It’s too late for creativity, it’s time for lotto tickets.

A check of mcmillans website, the sq ft matches, the new going rate for a Blackstone plan 3 is 650k from the builder.

[Author]

Posts