“Everybody Was Thinking Easy Money”
The New York Post. “The number of New Yorkers forced into foreclosure is skyrocketing, especially in Nassau County, where foreclosures have jumped a stunning 82 percent in the past year. According to RealtyTrac, the number of city foreclosures went up 15 percent in 2006 from the year before, while Long Island jumped 55 percent. The national rate surged by 42 percent.”
“‘People in general are living outside of their means,’ said wealth manager J.J. Burns. ‘This generation wants everything now. People are not saving for the rainy day.’”
“In the city, Staten Island led the pack with a 47 percent rise in foreclosures, usually initiated by banks when homeowners can’t pay their mortgages. Foreclosures in Brooklyn and The Bronx rose about 25 percent each and Manhattan saw a 4 percent increase.”
“Foreclosure increases are higher in the suburbs - Westchester jumped 44 percent, Suffolk County shot up 32 percent and Nassau County rose a shocking 82 percent.”
The Boston Globe. “Petitions to foreclose on Massachusetts homeowners rose nearly 70 percent in 2006, and the number of distressed properties that went to auction increased 46 percent, a report said today.”
“In Suffolk County, which includes Boston, petitions to foreclose jumped 79 percent in 2006, the report said. In 2006, mortgage lenders filed 18,926 petitions to foreclose, compared with 11,155 in 2005, the Warren Group said; lenders announced 6,729 foreclosure auctions in 2006, versus 4,620 in 2005.”
“‘As housing prices decline, people who had borrowed 90, 95, or even 100 percent of the value of their home now find themselves owing more than their homes are worth,’ the Warren Group’s chief executive, Timothy Warren Jr., said.”
The Boston Herald. “Banks auctioned off nearly twice as many Boston homes for mortgage nonpayment during 2006 as they did in 2005, new figures show. The Warren Group reported yesterday that lenders advertised 1,007 foreclosure auctions in 2006 for Suffolk County, which primarily consists of Boston. That’s up from just 521 auctions in 2005. ‘This certainly indicates a lot of pain for (Boston) residents,’ Warren Group CEO Tim Warren said.”
“Warren attributed the increased auction activity to 2006’s chilly housing market. He said that during the recent housing boom, people who got into financial trouble could easily refinance or sell properties and avoid foreclosure. But no more.”
“‘You can’t take out another home-equity loan when prices are falling, because there isn’t enough equity left to solve your problems,’ Warren said.”
“Advertised foreclosure auctions also rose sharply in other Eastern Massachusetts locales during 2006. Warren reported big gains for Middlesex County (up 58.2 percent), Bristol County (54.3 percent), Worcester County (53.8 percent) and Essex County (52.2 percent).”
The Telegram. “The decline in housing sales and prices followed a red-hot housing market in Massachusetts, when the median price of single-family homes had increased for 12 consecutive years. The booming housing market, combined with low interest rates, enticed many people to buy homes through attractive loan offers.”
“When the housing market fell and interest rates went up, many homeowners were caught in the middle, said Barry Bluestone, dean of Northeastern University’s School of Social Science, Urban Affairs and Public Policy. ‘There were significant numbers of people who were able to get mortgages who wouldn’t have qualified before,’ said Bluestone.”
The Standard Times from Massachusetts. “In New Bedford, there were 422 foreclosure petitions in 2006, a 128 percent increase from 2005, when there were 185.”
“In explaining why more people are in danger of losing their homes, analysts and mortgage brokers pointed to a complex ‘perfect storm’ of factors. They cited rising interest rates that keep new lenders from entering the market and make it harder for current homeowners to sell. Meanwhile, home values and sales have been depreciating since 2005, leaving homeowners who signed adjustable rate mortgage agreements two years ago paying higher rates and stuck with houses they now cannot afford.”
“Paul Matos, owner of SouthCoast Mortgage, said many homeowners who purchased houses from 2003 to 2005 expected to turn around and sell their houses for big profits. ‘Everybody was thinking easy money,’ he said. ‘Everybody was buying houses. It was absolutely crazy. People were buying houses that were worth $35,000 (more) a year later, and all they did was mow the lawn.’”
“But when the housing market ground to a halt in late 2005, Mr. Matos said many homeowners were stuck with houses they obtained through adjustable-rate mortgage agreements that now have higher monthly payments. ‘It happens when people get into adjustable rates,’ he said. ‘The market corrects, and you no longer have the equity.’”
“Eric Gedstad, a spokesman for a statewide affordable housing bank, pointed to what he labeled ‘exotic’ mortgage packages popular during the housing bubble. ‘Several years ago when the housing market was strong, these products were more manageable. People could refinance them and get a new loan,’ Mr. Gedstad said.”
“‘Now, we’ve got this perfect storm that is brewing in the mortgage industry and with home prices falling, people who took out these riskier mortgage loans can’t escape them the way they used to,’ Mr. Gedstad said.”
“He noted one particular example — known as ‘negative amortization,’ that has come back to haunt thousands of homeowners. ‘With a lot of these types of loans, a lot of people didn’t know what they were getting into,’ Mr. Gedstad said. “The mortgage loan process is very confusing. There is a lot of paperwork, and frankly, a lot of people don’t read the fine print.’”
“Jeremy Shapiro, president of ForeclosuresMass.com, said many homeowners overextended themselves during the housing bubble. ‘Homeowners looked at their options, and said, ‘Heck, if I go for the adjustable rate, I’ll have a bigger home,’ Mr. Shapiro said.”
The Eagle Tribune from Massachusetts. “Police Chief John Romero has launched an investigation into mortgage broker scams, focusing on the involvement of local lawyers who he says took ‘under-the-table money’ from home buyers who got duped into taking out loans they couldn’t afford.”
“‘We are looking into a situation brought to us by members of the legal profession, which involves a few unscrupulous lawyers who were just out to make a quick buck,’ Romero said.”
“The ‘kickbacks’ Romero was referring to were checks totaling up to $20,000 written by the lender to the home buyer, which were immediately cashed and turned over to the broker and lawyer involved in the suspected scam. Those brokers and lawyers, police say, charged the fee to assist loan applicants with fudging financial information, like monthly income and expenses, so poor people could qualify for home loans.”
“‘These unscrupulous lawyers and mortgage brokers are finding people who in some cases are desperate to get a loan,’ said police Detective Michael Simard. ‘They switch them to a high-interest, hard-money loan. They claim it’s only going to be for a short time, and it’s not going to cost them a lot of money, when in reality, it does. When the loan is applied for through the lender, the mortgage broker and lawyer will overstate the needed amount. That’s where their cash profit comes in.’”
“‘Something that can only be described as a cash kickback is certainly severe and would raise eyebrows. You hear whispers about things like this, but it’s a very hard thing to prove,’ said Boston lawyer David L. Yas, publisher of Massachusetts Lawyers Weekly. ‘For a lawyer to be collecting a kickback like this, it boggles the mind to think that’s happening. As long as there is a nefarious sect of the bar of lawyers - which is a very small minority - there will be practices like this.’”
“‘With all of the foreclosures going on in Lawrence right now, we’re concerned about the potential for arson,’ police Capt. Michael Driscoll said. ‘A lot of the arson in the ’90s was attributed to people who could no longer afford their properties and were looking for a way out. We don’t want to return to that kind of situation.’”
“‘People in general are living outside of their means,’ said wealth manager J.J. Burns. ‘This generation wants everything now. People are not saving for the rainy day.’”
I think the situation is far more dire then that. The problem is not the lack of saving, or of losing jobs, etc. The problem is that the people just cannot keep up with the debt load, even without any major events (job change/sickness) occuring in their lives. The debt is just crushing them; and eventually they can’t play the shell game anymore. That’s what I am seeing in my limited exposure to those in foreclosure, anyone care to comment?
–
“The problem is that the people just cannot keep up with the debt load, even without any major events (job change/sickness) occurring in their lives. The debt is just crushing them; and eventually they can’t play the shell game anymore.”
Michael,
That is exactly what I foresaw during 2004-05 and coined the term Debt Concentration Camps. Financial Holocaust can’t be far away — my estimate is 30,000,000 financial deaths in the US over the next five years. With another 30,0000,000 with near-zero wealth, we shall have close to 60,000,000 households in America hand-to-mouth and with 20,000,000 of them unemployed one can picture the setting for explosion in violence.
The question is: Who has been primarily responsible for this coming fiasco??
Jas
Greedy morons watching too many episodes of “Flip That House” and taking out HELOC to buy $400 pocketbooks, “granite and stainless steel,” and $50,000 Hummers.
Greedy morons can only flourish when the rules of the game and enforcement thereof create the right environment for them to do so.
Exactly. Who ultimately CREATED the monster ? THE FED. The gangters from the FED with their easy money policy that unleashed an orgy of speculation. You can also put in the bastards from the BOJ. The real morons are the Central Bankers.
That is kind of insulting to those targeted in the actual Holocaust. These people willingly took on the debt that is going to burn them. Regardless of whether or not they could be bothered to properly analyze the long term consequences ahead of time, the fact remains that it is a path that they chose and were not physically forced into. That is hardly comparable to the Jews, et al, who were physically forced into concentration camps during the Holocaust, and who were not there due to a choice of their own.
Well said, Anon. That analogy didn’t sit well with me, either.
‘That is exactly what I foresaw during 2004-05 and coined the term Debt Concentration Camps. Financial Holocaust can’t be far away — my estimate is 30,000,000 financial deaths in the US over the next five years.’
What are you talking about? I know people that have been through multiple bankruptcies, and yet they live on. Using words like concentration camps and deaths may get attention, but doesn’t really clear things up.
Remember the Texas bust? No soup lines. Were financial institutions brought down? Sure, but Texans survived and moved on. IMO, the biggest change was the mental acknowledgment that the state wasn’t super-rich like Jed Clampett. Even though it was very humbling. the people are probably better off for it.
ben, i’m surprised at your response given the purpose of and discussions on your blog. the texas bust did not include suicide loans, liar loans, helocs, maximum consumer debt levels, zero savings, etc. and was STILL bad. what makes you think we won’t see soup lines? i think jas is probably not far off base.
jacko,
There was plenty of crazy lending in Texas, just not so much concentrated on homes. It seemed really bleak at the time, but I never knew anyone who went without food, personally. IMO, the biggest shock to people was the step-down in personal spending habits. There was some major attitude adjustment.
But you know what I remember most from that time? All the opportunity that opened up in RE. Whole buildings in Dallas could be had for less than $100k. Raw land dropped like a rock. Houses in Austin were dirt cheap. IMO, a correction will be a good thing, overall.
Soup lines, or selling apples or pencils on street corners, features of the Great Depression, are a million miles from the forced removal and slaughter of 6 million jews, and several million more socialists,labor union members, disabled people, gays and gypsies.
Using “holocaust” in a financial context debases the language.
Let’s just hope it plays out as Ben described this time.
I’m with Ben on this one. The “blood in the streets” thing doesn’t resonate with me.
I prefer to see it as a cleansing of some really counterproductive habits. This whole society will be better off after all’s said and done.
and as far as the drop in RE prices goes, there’s going to be different categories of response to that. Some will be taking a lifestyle hit (anything from out in the streets to cutting back on discretionary spending to support their way-too-high mortgage payment).
Some will be merely sorely disappointed that their home wasn’t their ticket to riches after all - they’ll get over it eventually.
Then there’ll be that HUGE category of people who will really benefit from low prices. Like everybody who’s between the ages of 12 and 30 right now for starters.- (and those of us who’ve been stubbornly waiting for prices to go down before we’ll buy!)
And every business and enterprise that’s depending on people with income left over after they pay their mortgage to buy stuff.
My dream come true would be that Americans start paying for stuff with cash again! Don’t know how “bad” things wuld have to get for that to happen.
Sorry Jas,
The answer is easy–anyone who participated in this mess and is now holding the bag–MBS holders, FBs, local banks,soon to be unemployed realtors, mortgage brokers, title company employees, greedy local governments. gov’ts-federal and local with their stupid “assistance programs” and now dumbazz Dodd, who wants to finish destroying any integrity left in the economy.
Who is not responsible–the honest, the hard-working, the frugal.
The ultimate minority group.
Very tacky making parallels between the Holocaust, and all the FBs whose “gotta have it now” mentality led to their financial undoing.
OK guys, lighten up. Yes, it was an overly dramatic wording with no resemblance to the real event. But I use the phrase “debt slavery” all the time. Are debtors going to chained together, whipped without recourse, and have every basic human right taken away? Of course not. But they will (metaphorically) feel chained and the self-flagellation (again metaphorically) as they financially destruct will be severe.
Maybe a more hopeful way to put this is that this will be the worst of times for many people. They will get through (I hope) but it will be at a high cost. Thankfully in this country we do not (yet) have to worry about a true holocaust against a religious group, a sexual orientation, or a political belief.
San Diego Bear-
Your point was well made.
I regarded your use of the term Holocaust, to demonstrate the seriousness of the issue, and took no offense.
My father who was (he died 3 weeks ago) a 100% disabled WW II vet who was drafted and greviously wounded at the Battle of the Bulge.
I am always astounded at how easily all the liberators are now forgotten at the expense of those who deemed it never appropriate until the Warsaw Uprising to to pick up a weapon to defend themselves and their familiies from certain extermination.
Sure the f*ck never heard my old man whine after nearly gettin’ cut in half by schrapnel from a German 88mm.
I
“That’s what I am seeing in my limited exposure to those in foreclosure, anyone care to comment?”
You can’t squeeze blood out of a turnip.
Follow-on thought: Expect future transfusions of blood into turnips, stolen from the veins of anyone with a viable circulatory system.
Exactly GS! While they can’t squeeze the debt out of the bankrupt you can bet your bottom dollar that the gov will want to get it from somewhere to bail out the banks and that where is the only sector with anything left that they are willing to touch, us. Heaven forbid that those who made the many mistakes have to suffer for the mistakes.
Wow what a strong methaphor ! Count Dracula Grenspan would appreciate your prose.
The problem is that the people just cannot keep up with the debt load, even without any major events (job change/sickness)
Hell with a simple job change or sickness…this is penny ante stuff compared with divorce, which now runs at a 50% rate for the US.
hehehe…wonder how all those women who bought condo’s over the last 4 years after dumping hubs are makin’ it these days.
The MSM gloating and fawning over how women have been the primarily purchasers during this period, sends me right into hysterics.
Rock on, all you man-hatin’ sista’s-LMFAO!!!!!!!!!!!!
“In explaining why more people are in danger of losing their homes, analysts and mortgage brokers pointed to a complex ‘perfect storm’ of factors……
“Paul Matos, owner of SouthCoast Mortgage, said many homeowners who purchased houses from 2003 to 2005 expected to turn around and sell their houses for big profits. ‘Everybody was thinking easy money,’
I still think the fundamental problem was one of affordability combined with an overall fear of being ‘priced out forever’. I don’t think this mess can be blamed on people’s greed (in most cases). People just want a place to live and the exotic loans made unaffordable houses affordable (for a period of time…).
I actually agree with that. The problem, however, is what to do about it when it unravels? I disagree, in most cases, with gov’t assistance and lawsuits. I think for the most part it has to be a you-made-your-bed-now-lie-in-it deal.
There was enough information out there about the riskiness of going this route to make informed decisions IF you wanted to do your homework. (It kept me out of diving into the shallow end.)
I disagree - for young people (less than 35 years old) - there is a huge cultural movement in the way they see housing. Housing is an investment more than a place to live. I am in this age group and many of my peers are constantly theorizing on what neighborhoods are turning for the better and how can they find the right jewel in the rough. Younger people have started to pick houses with the same speculative fever that they joined dot com companies just a few years ago. It’s a different mind set. Nobody thinks “wow - this is a nice place, I could spruce it up a bit and settle in and raise a family.” A lot of people in my age group are thinking about resale when they are signing the papers to buy.
“A lot of people in my age group are thinking about resale when they are signing the papers to buy.”
I think about that BEFORE I even think about signing any papers. Only an idiot sinks that much money into something w/o considering an exit strategy; both short and long term……
Yes - but a lot of my peers no longer think about a house as a place to live. It’s an investment. There is a big paradigm shift in that. For example, when I bought my car, it was for transportation. I bought a few upgrades (nicer speakers, cruise control, etc..) because I would enjoy these features. I was simply thinking of utility. Before the mid 1990’s it people generally viewed housing with the same utility. Now, it’s all about resale – at least for young people. Sure you have to consider resale at some point, but some younger people are using resale as their primary decision factor. That is why they are willing to take out weird loans, live in wrecks while running up their credit cards, etc… They’re going to be rich in 3 years. However, historically, housing has appreciated at about 2% above inflation. So, from a historical prespective, it’s a lousy short term investment.
Use value versus exchange value. Marx wrote all about it, the shift as it relates to housing, however, should have actually been quite predictable. It’s merely a milestone in capital’s quest for more capital. When it will really get interesting is when folks start seeing their organs, offspring, and spouses for their exchange value.
It’s already the case in Moldavia, Ukraine, China and many places where Marx was popular.
I bought in December ‘05 and I followed the classic rule of buying one of the cheapest houses in one of the nicest towns in MA. I am 36. I knew full well that the housing market might decline, however, this was primarily a place for me to live and secondarily an investment. I cannot say I regret my decision one bit. I have noticed that properties in my town have lost little value (if any at my price range) compared to other towns. However, I had also done well on some investments in equities and I was able to roll over my profits and put 20% down and have money to spare to fix up the property and save for a rainy day. I would not have bought my house without putting at least 10% down and securing a 30% mortgage. To each his own, but I invest conservatively and I diversify between equities, bonds, real estate and cash. In fact, I bought a bunch of PIMCO bonds last year and some of my friends thought I was nuts. I sleep well at night. To each his own.
Have fun payiin’ all those Mazzholeland public employee retirement pensions.
I’m under 35, and no one forced me to buy. It doesn’t matter to me that people all around me are doing this theorizing/investing. I’m not buying if it doesn’t make financial sense on paper . Just because “everyone else is doing it” isn’t a good enough reason to get into too much debt for a house, hoping for easy money.
I agree 100%. As someone who is ~30 and has friends in this group I see it all the time. Everyone has a ‘plan’- how they will ‘buy in’ now and sell in a few years for megabucks and then move up to their ‘dream house*’.
* ‘dream house’ = +3000sqft tract home in the exurbs…
Yep, and that’s one reason why the urban condo markets are toast. Once all the aspiring yups are done slumming and sowing their oats in the concrete jungle, they’ll want to flip their granite for greener pastures. At some point urban America might just see a repeat of the epic 1950s-1970s disinvestment.
-”I disagree - for young people (less than 35 years old) - there is a huge cultural movement in the way they see housing.”
The older generation had one difference…we put CASH downpayments on the purchase. Is your generation thinking the same way? It takes time to save that cash and no one seems willing to wait and show fiscal responsibility.
agreed, to add, bought “dumps” as first homes and put a lot of sweat into making them better, than laddered up a notch to a better home.
You were not expected acquire your “Dream” home your first shot into the game.
But, we didn’t have shows on like pimp my ride or cribs either.
A lot of younger people see a down payment as a good idea but not necessary - if you are able to save the money or your parents are willing to help you out - great. Otherwise, do an 80/20 loan. But the logic goes “no matter what - get into a house fast.” It’s time to get the money leverage machine going. And as their realtor and mortgage broker tells them - there is no down side to housing - it only can go up from here. If you have to really squeeze for the payments and get into credit card debt, it’s seen as part of the housing investment not as living beyond your means.
Actually I’m in that boat - 33 and married ready to buy a house to start a family in.
I’ve saved up cash for a downpayment - but I can’t find anything in my price range here in Portland without moving out to the strip mall suburbia hell.
It’s pretty messed up - I earn a decent wage as well - almost double the median income for the area.
I’m just going to wait a while and see what happens.
you can see this on the fatwallet finance forum. a lot of younger people are into mortgaging their home to the max and investing the cash in something that yields more than the mortgage costs.
funny thing is that they expect stocks or some other investment to return a certain amount of returns because most of them haven’t been through a crisis where their investments are temporarily worth less than the original principal and the home is upside down as well.
Roger, there’s a REASON your generation thinks of housing as an investment rather than a place to live. And the reason is: for the past 10 years the REIC has gone whole hog on presenting it as such.
On an individual level, it starts with the RE Agent. 20 years ago, when an agent took you around, they talked about houses and neighborhoods as places to live. 10 years ago, I was astounded at how the “pitch” had changed, overnight. As in, suddenly there WAS a pitch. It was as if they’d all been handed the same memo from on high -lol!- after watching the NAR through this blog the past year, I’m sure that IS what happened!
The first time an agent mentioned “equity” while taking me to look at a house, I was surprised and thinking “Why the heck can’t this guy get off of the equity idea?” I thought he was a wierdo. After a few more agents pitching the same line, it was clear that RE Agents had been taught a new line.
So start there, agents pitching homes as “investments ” and “equity”, a stock market play so to speak, and then compound it by the fact that this 10 year bubble has lasted a LOT longer than any previous one. If you’re under the age of 35, of COURSE you would think that RE is an investment vehicle! (At least til lately anyway).
You guys have been sorely used by the REIC. Housing Wizard suggested anti REIC Public Service Announcements. I think he’s right. They have screwed a lot of younger people with their nonsense.
For me, the ultimate was last spring when the Seattle Times came out with this huge article blathering about the price of homes and how they’d completely outstipped incomes. It’s advice to young buyers?: Since it’s imposssible to afford a home on one , or even TWO incomes, go in on your first home with another couple! Priceless!! Brought to you by your friendly realtor who has only your best interests at heart.
So again: you guys have been USED. And if I were 30 right now, I’d be mad as hell at these people who fed you this crock. (Okay, I’ll admit it, I’m not 30 but I’m mad anyway! What a sick joke, but at least older people knew the other side of the RE story.
“A lot of people in my age group are thinking about resale when they are signing the papers to buy.”
If this were actually the case you’d think a little more “due diligence” would be performed first. All I’ve seen over the past five years by families of mostly limited means is this “buy it now” mentality.
Today, while filling my gas tank during lunch, a haggardly woman in front of me at the counter pulls out $100 cash, and she purchases a carton of cigarettes and a stack of lotto tickets with the difference. Wow!
as a person who lives in ny i can tell you it is really expensive to do anything here. but that does not mean you should be spending like a drunken sailor. don’t get me wrong there are plenty of wealthy people here but there are more keeping up with the jones’ types as well. nassau county is the j6p-soccer mom capitol of ny
When there is nothing to do except outdo, what can you do?
Sir, you just described Dallas perfectly.
Many of my friends are nassau county soccor moms (and family) There is a quiet desperation going on just under the surface of all those suvs, quaffed hair and painted fingernails. They’re still looking like they’re keeping up with the jones’ but suddenly the kids bday parties aren’t at chuckecheese or kiddie hair salon. they either don’t have it or they have it at home. I’m starting to bump into other PTA members at my usual haunts….the thrift shop, dollar tree, etc. Outwardly they look the same but many of them are doing they’re own nails, going to supercuts and wearing alot of old jewlry from back in the day and I smell fear.
You are right. First is the cut back of non-essential expenditures like eating out regularly (maybe a switch from Cheesecake Factory & PF Chang’s to McDonald’s, note that PF Chang’s recently decided to advertise). Next new clothes purchases, hair, nails, etc. will be gone. Next will be the cancellation of things that are probably necessary but can be done without with a risk (such as life insurance, etc.). And finally, the keys back to the lender and the cars back to the bank. Then “gee our new apartment is soooo nice…”
Don’t you think they might be in divorce court before going to an apartment?
My new neighbors (landlord finally rented the 1st floor of the house next to me afeter 1 year) are former homedebtors whose nut climbed to 2400 per month before mailing in the keys. Still have the brand new 30K suv’s though, and what is worse is that they drive a hotel shuttle. I knmow what they do because they park the damn thing in the back of the garage!. I live in SE mass…
I do not think that shuttle bus drivers could handle 2 new SUV’s plus a house, but then again, it is the new economy!
Speaking of Supercuts, I just walked by one on my way home today and there was a new , handwritten sign in the window “Sorry, We do Not Accept Personal Checks Anymore”.
Perhaps some of those who’ve been newly downgraded to Supercuts are writing worthless checks on top of all there other woes?
These GenX-ers with small kids are truly fooked.
Want to know why “this generation” cannot “save for the rainy day”, you “wealth manager” a**, you? It’s because the Boomers took away most any chance that the generations behind them ever will have of living a luxxxxxxxurrrry lifestyle.
The other posters are right. Debt loads are crushing families, in some parts of the country you can’t sneeze without someone charging $1.50 for a Kleenex, and inheritances just ain’t what they used to be with today’s tax burden and medical expenses skyrocketing.
Have we ever stopped to think that this whole bubble (like the stock market bubble before it) are not problems but symptoms of a society which sees no future before it but figures it must live for today because today may be all you get?
Observed behavior does not seem implausible based on the premise of your last paragraph.
“and inheritances just ain’t what they used to be with today’s tax burden and medical expenses skyrocketing.”
Doesn’t the inheritance tax rate go to zero next year?
Wait… are you saying the problem is rising costs and scaled-back inheritances? Rising costs are called inflation, and the Boomers had to deal with that too. So are the Boomers causing the debt load/housing bubble/stock bubble by not leaving us enough money?
No one starts with a debt load. Debt may be required to buy a house (few of us can pay cash for the whole thing), but otherwise it is entirely possible to feed, house, clothe and entertain yourself and your family without incurring debt. Not only without debt, but while saving for retirement and the inevitable rainy day.
The only thing the Boomers did to cause this situation was fail to teach their children financial discipline. I agree with you that this bubble is a symptom of society, but it is symptomatic of laziness, greed, pride, shortsightedness and a general lack of what used to be called common sense.
Agreed.
“‘People in general are living outside of their means,’ said wealth manager J.J. Burns. ‘This generation wants everything now. People are not saving for the rainy day.’”
Eventually the broken window fallacy hits home at the household level: You cannot shop your way into economic prosperity.
i love the one that goes like this.
i saved thousands of dollars by purchasing x and store y.
did you really need x? how much would you have saved if you did not buy x at all?
i am a saver who saves for rainy days
Wonder who gave them the illusion that borrowing was a way of wealth creation ? “You richer than you think.” Scotia Bank. “Let show you how.”
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‘This generation wants everything now. People are not saving for the rainy day.’
That is why I coined the term Baby Doomers. They were born to cause America’s doom. And they will before they are gone.
Has anyone read or heard of The Forth Turning? The book came out in 1997 (?) but the Turning will happen during 2007-11. It would be interesting to watch.
Jas
Jas Jain,
I hope you take this constructively because I generally enjoy your writing over on safe haven, but the silly name making up game gets tiresome pretty quick. Like the mogumbo (sp) guy , with his repeating acronyms, it makes you unreadable for me.
Can I vote for a K.I.S.S. style of prose?
YOU CAN”T save for a rainy day……..not here because it is next to impossible to get a NON-luxury upgraded apartment anymore. Yet i see tons of buildings with big signs Luxury rentals available.
You almost have no choice but to throw away another 20% of your pay on the only apartments that are available. Some of us are NOT luxury people.
I dont care the faucets and cabinets are 20 years old or the wiring in the kitchen is not upgraded so i can run the toaster and microwave at the same time…big deal.
This old slap a new coat of paint, 20 year old stove and refridge and just refinish the hardwood floor for a new tenant, is a couple of hundred a month less then the luxury upgraded ones across the street.
This is certainly true in the Boston area. I’ve watched several so-called “luxury apartment” complexes go up north of town, and they mostly stand empty because no one wants to pay $1300+ for a 1-bedroom in a gigantic, cheaply-built building surrounded by 10 or 12 similar buildings, with outside uncovered parking and a “clubhouse” that might have a few cheap pieces of exercise equipment. The only ones that do even marginally well are the ones within walking distance of a T stop or commuter rail, I suppose because one’s less likely to need a car in that case.
And a lot of Boston’s traditionally less expensive housing, for example the triple-deckers, has been condo-ized. And upgraded, so rents are higher. I work near Mission Hill (a gentrifying area with several big, crime-ridden public housing projects nearby) and am seeing these condos asking rents of $2000 or more for 2 bedrooms! Five years ago rent for a 2BR in the area was about $1200 — still high, but not insane.
I live in Manhattan, on the WestSide, and I save plenty. Always have.
And no, I don’t make a 6 figure salary. For 20 somethings who say they can’t–quit drinking. Between Starbucks and booze, you could stash 3-4 grand a year easy on a modest salary.
Course, its easier to say you’re the victim of a new paradigm, that society encourages spendthrift ways, that everybody you know has drunk the kool-aid and that houses are an “investment” et. al.
But that suggests that college was wasted on you–the first and best use of education is to learn to think and evaluate for yourself. Anyone who passed 6th grade math has the required skills to figure out the costs of various mortgage options–and to decide if they are a good deal or a viable option.
No worries though, in your 20s you’re still young enough to course correct, and use your freedom and intelligence to bypass the sinkholes that will bury older people.
I’m moving out of my place on the UWS, a 2BR/2BA, a popular apartment. When I returned my lease renewal I checked the box that said, ‘rent going up too much, apartment too expensive’ just for fun. The rental office called me to see if they could make a deal to keep me. I bet they would have actually lowered my rent. Last year my rental office would not make a deal on the rent when I asked, they said screw you, market rate. I am also beginning to see newly built condos renting units they cant sell. It’s the worst time of year for landlords to rent apartments in NYC, but there are definitely more apartments for rent.
In the building across the street where they charge a higher rent for the saem layouts, same views, I see a ton of empty apartments. Granted these are apartments now facing a new building, but there are more empty than last year.
This year is going to be interesting.
This does seem to happen in bad economic times, but sometimes the logic of setting these fires escapes me (and perhaps escaped the arsonist if he didn’t check his insurance policy first).
If you’re looking to escape that mortgage, you better make sure you have more insurance on the building and contents than you owe on your mortgage. Otherwise, the insurance check goes straight to the bank, and you’re left penniless AND homeless. (Er, unless you get caught, and then you might not be homeless but instead get an invitation for free room and board for, say, the next 5 years.)
Italic tag off?
““In explaining why more people are in danger of losing their homes, analysts and mortgage brokers pointed to a complex ‘perfect storm’ of factors. They cited rising interest rates”
I see this “perfect storm” rubbish all over the place now. This isn’t even a 25 year storm. Wait till the general economy tanks, unemployment shoots up, banks start failing all over the place, MBS of various flavors crash and the stock market plummets.
That will be the ‘perfect storm’, and I for one am not looking forward to it.
–
‘A lot of the arson in the ’90s was attributed to people who could no longer afford their properties and were looking for a way out. We don’t want to return to that kind of situation.’
People trapped in Debt Concentration Camps (inside their own homes!) are likely to do crazy things. It is going to get scary, folks.
Jas
I ask that you consider not insulting Holocaust victims by likening them to people who are victims of their own stupidity.
Concentration/detention camps were not unique to the Holocaust.
Sure, but that is what Jas was referring to. See his comment earlier on this page.
the word “holocaust” existed before ww2 but came to be associated with it. lighten up.
This should be self-evident, but most inhabitants of death camps, concentration camps, etc. did not owe their fate to individual bad judgement, but had the misfortune of being members of a group targeted for systematic elimination or persecution. It is in very poor taste to use terms like “Holocaust” (or the firebombing of Dresden, for that matter) to describe FBs coming to grief, en masse, due to their own individual greed, stupidity, and irresponsibility. While I’m not generally one to let concerns about offending people slow me down, in this case I would ask you to pick a more appropriate comparison or imagery.
“People trapped in Debt Concentration Camps (inside their own homes!) are likely to do crazy things. It is going to get scary, folks.” Yeah, and in my Iowa town they are rewritting the city tennant regulations. From what I have read, the city proposal is to treat the renters of the city more like criminals than anything else. They propose a master list of renters and landlords, the placing of personal info on websites, similar to our Sexual Predatory List of Statewide Offenders, background and credit checks available to the public as well. With cameras placed all over the regional cities there appears to be an attempt to place controls on the former homeowers who now face a lifetime of debt repayment as well as anyone else who fails to buy now. First they came for the sexual predators no one cared about, now they come for the renters few care about, who is next?
Man, you’re living in the Twilight Zone.
The Twilight Zone no doubt! Far fetched? Maybe. Yet the master online list of renters is a consideration here, right now. Consider that the Nazi party started out as a group of street thugs that no one thought could do any great damage or control the country. If someone said at that time the street thugs were a threat to the country, no one would have believed them! How is that different from now? Who in 1938 in America thought the US gov would lock up innocent Japaneese just because they were Japaneese eventhough they were Americans? In both America and Germany they beat and threatened those who would support such groups. The poster above is incorrect when he says only certain groups were targeted just because of who they were, people were targeted because of what they thought and what they did! So when you see a comparison to the Nazis, perhaps the stage that we are at is the street thug stage and not the controllers of the country stage. Its is the trends you follow in economics, it is the trend you follow in social/government matters. How can anyone not say America is on a path to National Socialism, that is the trend, if not that, perhaps dictorial fascism. When they control the gov and society it is too late to do anything, it is in the street thug stage that anyone stands a chance.
Can you imagine the vast numbers of previously middle class, freshly minted homeless people we will be seeing in the not too distant future?
I wonder how they’ll fit in with the usual mentally disturbed, alcoholic & drugged out denizens, we call the homeless, now?
Ground zero will be a larger city, near you.
test
Not entirely true.
When I bought a place in 1994, the attorneys made fun of me for reading every line of every document I signed. In Massachusetts, that’s a lot of documents: there are many required disclosures to sign to indicate the buyer has read them, on top of the actual loan documents. In the end, I wasted my time: every bank document precisely reflected the terms agreed upon in advance.
Flash forward to today. There are many people out there who went into deals with the same expectations of buyers 15 years ago: honest dealings in good faith–which also happens to be a legal requirement. And they got burned. There are numerous reports of terms switched in the closing documents, and buyers unexpectedly found themselves in negative-am loans, or with prepayment penalties, and the like. I have even read reports of buyers who sent all their docs to their lawyers for approval, not realizing that the docs they actually signed the next day had slight modifications in hard-to-find but critical clauses.
Even where the documents did not bait and switch, some mortgage reps did. Once, they were required to actually explain how programs worked. But in recent years, many have outright misrepresented what they offered. Sure, a buyer could educate himself on the Web that a negative-am loan is a terrible deal. However, he should be able to rely on his broker to tell him honestly whether what he’s signing is a negative-am deal or not.
I’m just not willing to let those in the best position to have information about the deal–the banks and brokers–off the hook.
when i think of easy money i think of the classic rodney dangerfield movie “easy money”
And I think of the classic song “Easy Street” from the musical “Annie,” which is set in the Great Depression.
http://en.wikipedia.org/wiki/Little_Orphan_Annie
I think of crazy japaneese and american central bankers. JAPAMERICA.
Is that the one where Joe Pesci asked the saleslady for a shirt that was “dark black”?
Is it totally wrong to be a little “jealous” that the sh*t is hitting the fan everywhere else but where I live?
where are you?
Baltimore…I know it will, we’ve been about 6-8 months behind DC in prices and volume. It’s not like things aren’t adjusting here, because they certainly are, but when I’m still seeing listings that have been on the market since the summer (relisted in Oct) RAISE their prices even higher than their initial list, it’s obvious to me the message is not clear as it is becoming in other places.
It will eventually . . . I’m renting a place (2 bedroom) in Baltimore that would cost me twice as much to buy, or 3 times as much to buy if it were updated/renovated. Sure, it’s not 100% ideal, but I’ve lived in worse places, so I can wait it out. When a 1 bedroom condo in a decent area would cost me 2 1/2 times to buy, there’s no way I’m buying anytime soon.
test
“‘I never saw values go down like this,’ says Steve Cole, a 32-year real estate veteran in Birmingham. ‘This year will be the bottom.
Now here’s a pro…
Based on what azzhole? Your wishful thinking.
You’d think at least this guy would know about the ‘90/’91 and could put it into perspective that this rout is 10X worse.