March 24, 2013

Will Home Owners Reap What They Sowed

A reader asked these questions. “My wife and I, along with a handful of smart economists & others, feel the coming burst of the USA gov debt bubble will wreak havoc on not only interest rates and inflation, and USA and world finances, and on the middle class thru-out the USA & world, but also on residential & commercial real estate values. We are positioning ourselves to sell our home, a home where we stand to make a $100K+ profit if we sell in the summer of 2013. What was the average % loss of value of residential real estate values in the 2008 bubble burst? And what do you anticipate the average % of loss of value of residential real estate values when the next bubble bursts?”

“I feel if we can settle out mortgage obligations, become 100% debt free and walk with $100K+ in 2013, we should, then start renting. As over the long term, we will never recoup the money spent on payments & interest should we decide to stay put in our home until the 30-year fixed (we re-fi’d at 3.9%) is free & clear when we are 79 (we are 50 now). Is it safe to assume that real estate values, post the next big crash, will never recover to allow most home owners reap what they sowed in payments & interest over the course of a 30-yr fixed mortgage?”

One said, “One fixation hasn’t died yet, quick profits. Everyone hates capitalists unless there’s a chance for personal gain. That lure of easy money keeps the suckers coming back to Wall Street despite the thorough shagging last time round. Losers!”

And another, “Resistance Level: In technical analysis, a price that a security does not, or only rarely, rise above. Technical analysts identify a resistance level by looking at past performance. When the security approaches the resistance level, it is seen as an indication to sell the security, which will increase the supply, causing the security’s price to fall back below the resistance level. If there are too many buyers, however, the security rises above the resistance level. When this occurs, the price of the security will likely continue to rise until it finds another resistance level. It is also called the overhead resistance level. See also: Price ceiling, Support (Support level).”

“When alot of people buy at a peak that sets the resistance level, Because when they get even after many years they tend to sell. After that IF the price goes up we get new peaks very fast. What will real estate do? As will approach the resistance level set in 2006 it should get interesting. This reader reminds me of this.”

And finally, “From a boater’s perspective: Relative safety is greater when reliance on assumptions is reduced.”

“It sounds like you have set out on a cruise in a tippy boat with plenty of leaks and sense a storm front is headed your way. On a boat, a low center of gravity is desired in case of weather, because it gives stability. A 30 year mortgage at age 50 has a pretty high center of gravity which is a lot of instability. Having 300% of your assets in a house during the worst weather of your life is like putting all the heavy cargo up on deck. Most people I know in their 70s have had many major assumptions about their lives altered and the long term debt is a bet against this process.”

“None of us know really what is going to happen to the housing market in the near future, the past decade has surprised us a lot. As far as safety advice goes: Get out of debt. You can’t captain the ship if you are 24/7 at the bilge pump.”

The Pocono Record. “Monroe County residents threatened with home foreclosure came armed with paperwork and stories to a state-sponsored forum at East Stroudsburg University’s Innovation Center. One of those attending was Everett Branch of A Pocono Country Place. ‘I was looking to retire here,’ said Branch, who has seen his mortgage and property tax bill steadily climb since moving here from Brooklyn, N.Y., in 2009.”

“Branch said he paid $186,900 for a newly built two-story, four-bedroom home with Classic Quality Homes, but was part of a successful class-action property tax assessment appeal in which his property was appraised at just $120,000. ‘I paid more for the home than it’s definitely worth,’ Branch said. ‘Does it violate the Truth in Lending Act? I don’t know.’”

“Branch, 56, is a New York City sanitation worker who is supporting a wife and two young children. He had a home built here after a fruitless search to buy an affordable home in New York. He hopes a counselor can help him succeed where he was unable to negotiate new loan terms with his lender.”

“Carla Carter, 63, of Stroudsburg is recently a widow, out of work and trying to survive on a veterans pension and Social Security. ‘I’m not in foreclosure, technically, now,’ Carter said while awaiting her home counseling session. ‘I’m trying to avoid that. The wolf is at the door, sort to speak.’”

Bits Bucket for March 24, 2013

Post off-topic ideas, links, and Craigslist finds here.