‘Own A California Home With 600 Easy Payments!’
A couple of readers suggested this article and topic. “Topic: Article on 50 yr mortgage. Buy a house when your 15, and it may or may not be paid off when you retire.”
“You, too, can own a home in California, with 600 easy monthly payments! Just get a 50-year mortgage! With any luck, you’ll have paid it off before you die!”
“The 50-year mortgage won’t keep monthly payments very low because it’s not really a 50-year mortgage at all. It’s an adjustable-rate mortgage with a 50-year amortization (meaning it’s paid off after 50 years). The interest rate is fixed for the first five years, then moves up or down thereafter, meaning the monthly payment fluctuates as well.”
“‘The monthly payment on the 50-year mortgage would actually be higher than it would be on the 40-year, because the (higher) interest rate overwhelms the (longer) term,’ Kieth Gumbinger explains. Someone who takes out a 50-year, $300,000 mortgage will repay $300,000 in principal and $714,000 in interest over the life of the loan. That compares to $382,000 in interest for a 30-year fixed-rate loan, and $543,000 in interest for a 40-year fixed-rate.”
The Sacramento Bee. “Last year there was no place where people stretched their pay harder to buy one than California. A new analysis of housing and financial data portrays the state’s homeowners as the nation’s most financially stressed.”
“Moody’s survey shows the growing financial pressures on California households by ranking 10 more Golden State areas in the nation’s top 11. All are places where housing prices have skyrocketed ahead of wages since 2000. The findings have implications in a state where nearly three-fourths of recent homebuyers have adjustable-rate mortgages that are scheduled to take even bigger chunks of their monthly pay.”
“None of this is new in a state where both gushing happily and fuming over rising home prices have become part of the psyche. ‘We had a campaign 25 years ago called, ‘Where will our children live?’ said Leslie Appleton Young, chief economist of the California Association of Realtors.”
“Sandy Sargent, a Sacramento real estate agent, believes many new Sacramento-area homeowners spend 60 percent of their paychecks for housing-related expenses that include a mortgage, utilities and taxes. ‘People will do almost anything to get themselves in a home,’ she said.”
“‘We lost 900 kids this year in the Salinas school district,’ Salinas Mayor Pro Tem Jyl Lutes said. ‘Where I teach, we lost 30. It has that ripple effect. It hurts everything.’ Salinas, like much of the Central Valley, is home to thousands of employees with hourly wages that are no match for escalating home prices.”
“‘Nobody who cleans hotel rooms is going to move into a $3 million house,’ Lutes said.”
“‘We bought six years ago for $200,000,’ said Lutes. ‘The same house is selling for $900,000. You’re either getting three or four families together or several generations together or the houses are just sitting on the market. There’s no magic wand you can wave over this and it all goes away.’”
A related article:
‘Seller financing, once used to attract buyers forced out of the market by high interest rates on conventional loans, may be making a comeback thanks to California’s handsomely appreciated market and the ceiling on tax-free home-sale profits. Although Irvine resident and radio-show producer Benson D. Evans has qualified for a $600,000 mortgage, he wants to buy a seller-financed home. ‘I want to find someone who will sell their property and hold the paper for one or two years,’ he said. ‘I just want to get in.’
I think you may see some Ben, but I don’t think it will be wide spread….Problem being the lack of a strong downpayment to insulate the seller from having to take the property back while they are basking in the sun in Hawaii…More likely we will see 2nd’s that allow the seller to mitigate higher interest rates will with cheap secoundary interest rates thereby blending the ultimate rate the buyer pays…Also, the 2nd’s likely allow the seller to hold to their price easier since the 1st lender will only be providing a 80% 1st…We saw a lot of this in 1981-82
The only sane way for a seller to take back a loan is if it can be a 1st.
If a seller takes back a 2nd or worse yet, a third, he’s likely to find himself in a position of having to buy out the 1st when the purchaser defaults. It’s like the margin call from hell.
I disagree Landlard;…In a soft market when the buyers have the leverage one way of holding the price is to offer the secoundary financing with the blended rate…(Major Home builders use cheep financing a a vehicle to hold the price.)….The seller has risk in taking the property back but the only alterbnative may be to lower the price significantly in essence making it a net wash….A lot of risk in carrying a 2nd can be mitigated by proper due diligence into the buyers credit history and job security IMHO…..
I agree with you that it’s a good way to hold the price.
A seller can mitigate the risk if he can maintain enough liquidity to buy out the 1st on demand. Not many individual sellers will be able to do this, IMHO. There is no guarantee that the seller can take it back and re-fi the 1st at a reasonable rate two years from now, thus becoming an FB. And if the seller does manage to hold the price, he runs the risk of creating another FB, no matter how good the buyer’s credit is at the time of sale. Imaging selling to a construction worker who has been making 100K for the last five years, has good credit, but is about to lose his job…
That said, if an owner needs to sell and insists on getting his price, your are correct.
Landlord;…Imaging selling to a construction worker who has been making 100K for the last five years, has good credit
In today’s enviorement, this would not be considered a stable job….Lets insert;….Local couple with two children and family in the area….One is a teacher at a local high school and the other works at the local library…got 10% down and want the seller to carry a 10% 2nd…FICO score @ 700…
did any one see page 21 of realestate sectin of LA times?
there is a mention of more than 10% decline in some markets including Los angeles in the next year by Mark Zandi of economy.com.
Whole thing is conveniently hidden all the way in back pages… shame on them - LA TIMES.
I noticed it. Pretty blatant to those of us who think and analyze. That’s why I only pay $1 per week - it’s worth that much, but no more.
I loved this. 2 mini paragraphs saying most of California could go down by at least 10%. Priceless!
What in the world makes anyone imagine someone 15 years old today will be able, eeven allowed, to retire at 65? I was 7-8 years old when my dad explained to me the statistical certainty of my not being of “retirement age” until 72 1/2. In the intervening 4 decades he has been proven absolutely correct.
The whole state of california is living way beyond their means. There is going to be a heavy price to pay for all the frivilous consumerism. The whole situation is just disgusting. Being judged for what you have is a shallow and sad existence. It’s all about the money out here. When you base your life on what you can buy you are in piss poor shape.
I agree Dude…..If I leave this earth only acheiving one basic principal passed to my children, it would be the one you expressed above….
Posted on TDCC.blogspot.com Tuesday, January 10, 2006 and thought it was relevant to your comments!
Trucido Appositus
Return your Mercedes, dock your boats, give back your Rolex and go to church. Aren’t these just good philosophies to live by anyways? Women; tend to your children at home, cook your family dinner, do the laundry and respect your husband. Men; stop your gambling, drinking, smoking and sports addictions. Teach your children, hug your daughters, wrestle with your sons and praise your wife. Children; do as your parents say, restrain from sex, listen to your teachers, be kind to your friends and love your siblings. Teachers; do what is right for your students, prepare them to honestly compete and cherish your self-modesty. Lawyers; do what is right, not what is right for you. Doctors; help the sick, read the Hippocratic oath, drive a ford, trust in God. Businesses; take only what you need, honor your employees, support charities, and slow down. Politicians; do the same as lawyers.
These are the principals that any society, in any time and in any region of the globe need to live by in order to sustain.
The nature of this blog is primarily focused on the American National Real Estate Industry, which from all economies are made. You see, the lawyer and the doctor and the teacher and the child and the parent will all eventually come home at the end of the day. Even the President lives in the ‘White House,’ which is a symbolic capital asset to the principles of democracy to the rest of the world.
But with democracy comes freedom and with freedom comes responsibility and with responsibility comes restraint. And without restraint, capitalism is doomed. Hence the rise of dictators, kings and tyrants throughout the ages.
Societies that loose self control eventually become controlled.
Live within your means, visit with your neighbors, walk your dog, (if you don’t have a dog, adopt one from the pound), take care of your own yard (if you have kids, make them do it for an allowance) and drive the speed limit.
These are the values people will eventually return to when the International real estate bust happens. Those who are already practicing this type of lifestyle will have nothing to fret about, those who we think are wealthy and moving ahead will soon be humbled and the true perpetrators will be dealt with.
If your house is not in order, do it now and do it quickly. Get ready to hunker down, re-kindle ties with relatives and apologize to those you have wronged. You are going to need their help and they are going to need yours.
The real estate bust is inevitable; any properly trained economist can see the indicators. Many are already warning us, but fail to give advice on what to do.
Please return your life back to reality to what is right. Cherish the simple and wake up happy!
Nice post Matt;…Just one question…Who or What is;
Trucido Appositus ???
I did a greek to english translation and I think it means something like a looming or coming collapse or something along that meaning.
It’s Latin meaning
(Trucido) slaughter or massacre
(Appositus) approaching or near by
Now that is a wonderful post. Remember that the average IQ in the US is 100. Look at the marketing that is on televsion. The rediculous television shows and the ads that accompany them. People buy into the fact that they need the latest car, TV, whatever. It is utterly insulting in my opinion. Men, women and the young being told they need plastic surgery. My goodness, I even read an article about middle aged women getting plastic surgery on their labias. What has happened to us as a country. It is no wonder we are seen as weak and decadent. Lets get back to basics. No matter how many plastic surgeries you have, you are going to die. Live life well and you will be so much happier in the end.
By the way, it seems that you have also been to the Dark Side. Welcome home.
Amen! And thank you for taking the time to post this!
Also do not forget to pray five times daily and keep your women wearing their burqas so as not to tempt men from their work.
Those of us who believe their is a housing bubble are not saints. We are simply people who believe we will lose money buying a house right now. We have arrived at this conclusion (correctly so I think) in whatever fashion. When we believe houses will appreciate, will we not buy? Do we not appreciate what we have, whether it be cash in the bank instead of a Hummer in the driveway?
Perhaps we ARE better informed. But does being better informed not initially come from humility? Then why toss that suddenly aside?
There is a point at which being right becomes dangerous in it’s own right.
“The whole state of california is living way beyond their means.”
Well, not the whole state but much of it. CA isn’t alone either…
It seems that “common sense” have been declared outlaw in this society.
“spend until bankruptcy”, that is new American motto. Nothing short of bankruptcy is going to stop our government and people form excessive spendings.
I love it. I got together socially with some of the housewives in my neighborhood yesterday, and they seemed really stressed out about money, all of a sudden. Two of them mentioned that they have to go out and look for a job, even though they have school-aged kids. I know for a fact one has a big ARM, and the other pulled money out of her house about a year ago, could it be the rate increases are starting to take their toll???
What do you think…largest % corrrections of all the bubble areas will be in CA?
They’re nowhere near selling, but their quality of life will sure suffer to keep what they’ve got.
I think most of the bubble markets are in cali. People having been cashing out equity and going all over the usa looking for deals on property. Debt is out of control out here. People are trying to live the high life on home equity and credit cards. The golden state certainly is not so golden to me anymore. There is a lot of stress keeping up w/ the jones out here. There was an article in the sac bee about the dysfunctional neighborhoods we live in out here. No one knows their neighbors and could give a rats @ss about them.
I have a real problem with that term”the Golden state” as it applies to California( It should be referred as “the illegal alien State”). Here’s the real deal: CA(esp. LA) has the worst trafic jams in the country, the longest commutes, The most rediculous coastal RE prices in the country, the biggest State Gov’t deficit, the highest taxes, the worst beach access, The fastest rate of farmland disappearing before tract development, LA Smog levels in Sequoia Nat park, Nasty pollution levels along the Scal beaches, overcrowding of State by swarms of illegals , ad infinum, ad nauseum. Now we will witness millions of financially strained Cal homeowners and sharply increased foreclosure rates as all those teaser rates come home to roost. The middle classes will be forced to find affordable homes in the swealtering Boonies of the Central valley and the Riverside /San Bernardino regions or even out into the Scal desert areas, or migrate out of state altogether, and the void will be filled by another wave of illegal immigrants ready to flood into the US after they hear of the latest Ammesty by the appeaseing gutless cowards we have in the Federal( and State Government).
Well;…Tell us how you realy feel Peter….
“People are trying to live the high life on home equity and credit cards. The golden state certainly is not so golden to me anymore. There is a lot of stress keeping up w/ the jones out here. There was an article in the sac bee about the dysfunctional neighborhoods we live in out here. No one knows their neighbors and could give a rats @ss about them. ”
From personal experience, the dysfunction is in the people (speculators) who have turned our neighborhoods into transient compounds where people who stay in the same residence for more than 90 days is considered a squatter. I don’t know my neighbors anymore, and they (new neighbors) don’t seem to give a rats @ss about getting to know those of us who have been here long enough to tell them to what day the trash is collected…and how often. I can’t even get my “neighbor” to say Hello or “Morning…” The other day her mail was mistakenly deposited in my box. I thought, maybe this will be a good icebreaker…It was not. I knocked on the door, heard several people open and close doors, but no one ever came to the front door to see why I was at their door…SAD!!! These “neighbors” are about the 4th set of new “neighbors” I’ve noticed to own this house in the last two and a half years. Nuf said!
10 to 15%, max.
Lol! You’re funny!
of the present value.
This will be interesting, as housewives joining the labor force will tend to raise the nominal unemployment rate. So in addition to the loss of construction jobs, we’ll see growth in the labor force. Maybe we’ll actually see something like the ‘89 effect, but this time with help from supply push.
Of course, if more Moms go to work, it means higher absorption of immigrant nannys, but that won’t show up in the labor statistics because the nanny supply is mostly, err.., undocumented.
They aren’t going to be hiring Mexican nannys. They will pack the babyslaves in to day care, or vote for Prop 81 or 82, whichever that state-funded pre-school tax is.
I ran into this website, it’s about the fund that buys CA mortgages.
Just look at the first 2 loans, already late or non-payment.
By the way, the fund says you can buy it any time, but getting
out is not easy!
http://www.rescapfunds.com/loansforsale.asp
Wow those loans are real dogs. I would never, ever buy them unless I had a lot of bucks and wanted to speculate with a small portion of my portfolio. FICO scores in the 400s, late account status on lots and lots, and cash advances right out of the loans. Dogs.
They can become real estate agents! (Low barrier to entry)
“‘We bought six years ago for $200,000,’ said Lutes. ‘The same house is selling for $900,000.”
Neighbor’s dad told me yesterday that he bought his house here in Salinas for $215K and sold for $515K three years ago and now the people want $900K for the same house.He moved to Arizona three years ago, paid cash and collects interest on rest.
People here in Salinas will pay anything for anything and there doesn’t appear any codes in place as to how many can live in an individual residence…what you have built here for the future is single family condo appartments with no HOA fees (the property taxes on the over priced property is in essence the HOA fees to the city coffers)…most people are like us, as soon as you can retire run fast in another direction to buy for retirement and then rent a week in the winter in Carmel.
5/21/2006 46734
NEW RECORD IN PHOENIX
oh c’mon! i want to see the whole list!!
Yesterday while driving I was listening to a RE talk show. One mentioned a foreclosure in Fresno. Said that the owners walked away from property with 80K in equity rather then trying to sell and save some equity. I think if he’d have checked further that he would have found HELOC loans in excess of that amount. Then another caller said that he’d just bought some new property in Mississippi for around $200K because it was cheap compared to Visalia. The man was on disability making about $3000/mo. with a new home in Visalia he purchased 3 yrs ago. He’s 64 yrs old and has 12 more years to pay on that mortgage, but he could use the Mississippi property as a rental because rents are $1000 a month. The host agreed that Mississippi was a new hot area. My wife almost had to put me in a straight jacket while I was yelling back at the radio.
“My wife almost had to put me in a straight jacket while I was yelling back at the radio.”
LOL…sounds familiar
A couple I know bought 2 waterfront condos in Pas Christian Miss. about 4 months before Katrina. The hurricane wiped both condos off the map. They were insured, but of course insurance has skyrocketed.
I grew up in New Orleans. My family was driving from Pensacola back to New Orleans the day Hurricane Camille hit in 1969. We stopped in Biloxi and checked into a hotel to stay overnight. My dad turned on the TV, saw the hurricane was heading toward Biloxi, and put us in the car to get back to New Orleans, which we did right before the storm hit. It did a fair amount of damage to New Orleans but it wiped the hotel we were in in Biloxi off the face of the earth. I was just a little kid and don’t really remember it but still get cold sweats thinking about it, almost 40 years later.
I was in graduate school in 1969 and remember watching the reports about Camille on television. I had one fraternity brother who was from Biloxi and was dating a girl from Pas Christian. It was awful how the area where the storm hit was flattened. In those days, people tended to accept the fact that they lived there of free choice and that it was not other citizens’ responsibility to support them or to pay for the repairs. Seems like a really long time ago but I remember vividly those images. Must have been terrible for you, but at least you got out, so to speak.
Was that the three clowns on “Free Radio FM” ? Someone has to be paying to broadcast that pack of lies.
Let’s pause for a moment and consider the All-American notion of home ownership. This is something that is so deeply ingrained in our thinking - the whole concept is much bigger than what can be written by me on blog comments, so bear with my rambling.
The hope for ownership came from the oppressive, feudal Old World and arrived into a New World, where there was abundance and unending amounts of land. Territory and ownership of land is important to us, as a species.
But now, the genetic urge has morphed into something else entirely. Consumption, rivalry, jealousy, and a “me first” mindset has replaced a previously necessary desire to root oneself to the land and stay there, raising food and children. Now it’s McMansions, granite countertops, investments, Hummers, hyper personal technology - all stuff that would make Marshall McLuhan giddy.
And all the while, the population dispersal in this world makes ownership, true ownership sorta obsolete. We buy our food, we don’t need land anymore…it’s all about image and perception.
The best any of us can do is rent our space while here on earth.
Market conditions currently dictate who we are currently renting from.
Big thoughts for a lazy Sunday.
As the majority of souls become gratified via outside inputs (selfishness) vs. friendly output (giving), the more technology will be developed to feed to “ME.” When Attention becomes a commodity, it becomes worth less in its true value (friendship, family, community).
Will technology save us? enslave us? or isolate us?
I think we already have the answer to that.
I vote…isolate.
Just like any other tool, technology will only serve to extend our power and amplify our nature whether it is about giving or taking. Nuclear weapons amplified the need to form multinational coalitions, and they’ve been around for 60 years without the most dire predictions having come true… Yet. Bu$hco has pretty much guaranteed a WMD attack on the US.
Who do we credit for guaranteeing us the first attack?
I think, bubble rubble, that you jumped so fast through the premise of your argument to the details about WMD, that the point was lost.
Technology is a tool. As such it has no use but what we give it. If we use it for the wrong job, it will be a problem. For the right job, a godsend.
For every instance of isolation, there is an instance of connectedness. For every instance of ’saving’, there is an instance of ‘wasting’
The only thing that is sure is that we are enslaved. Once the tool becomes part of the fabric of your life, you are enslaved: you can’t go back. We, as a country, are enslaved to human created energy. Without it, our society crumbles.
Yeah, I miss the halcyon days of the Clinton admin, when people were plotting to run airplanes into skyscrapers, but would never have dreamed of using chemical or nuclear weapons.
For me, ownership is ideal to renting because of a number of reasons you left out:
– Stability - the landlord’s not going to say, “Rent’s going up next month!” or “At the end of this lease I’m selling the place.”
– More control - want to paint the house fuscia? Go for it, if it’s your own place
Now I know these two concerns don’t apply to those who took out ARMs or those who live in subdivisions where an HOA can crack the whip about home appearances and whatnot. Also, I get your general point, those that use land as a status symbol or think that they’re “smart investors”…
Stability - your job says bye-bye, and you have to move. The house might become an anchor. Utilities, nat. gas, taxes, insurance, maintenance - do go up, and you are not protected from inflation. I can tell my landlord to fix everything around the house.
More control - don’t care one way or the other. I consider those who waste so much time remodeling their dwelling douchebags. If I owned, I wouldn’t touch a thing.
Great post Catherine . You know even the animals try to stake out territory ,the known hunting grounds . The flippers flipping to flippers, resulting in ghost towns . Are there any people who really want to live in a home left?
Have you hear that Mercedes-Benz radio advertisement in south-CA where it says “ where do you want us to deliver your new MB?! to your work where your co-workers can see, or to your soccer practice, or etc. etc… where your in-laws can see……”
I think this advertisement epitomizes how shallow, superficial & phony some segment of population have become.
YES, I hear it on KFI AM640 all the time. I live in San Diego. Had to move So Clownifornia from Chicago ( a real city) in 2004. I swear i see so many idiots running around in Mercedes C230s it’s not even funny. I believe they advertise it at $299/month so I don’t know who these people think they’re fooling.
One of the oldest, and proven successful, sales tricks in the books is to ask the person who bought from you, “So, how do your friends like your new (car/house/TV, whatever)?” The Mercedes ploy is a variant of that.
just go to a casino and you’ll see this type of ads all over the place.
“‘We bought six years ago for $200,000,’ said Lutes. ‘The same house is selling for $900,000. ”
————————————————————
Read the new book Sell Now by John. R. Talbott. Your $900K house will go back to $200K.
There’s no magic wand you can wave over this and it all goes away.
Yes, there is. It’s called a moving van. No one is forcing you to live in a $900,000 ranch in California with 15 relatives. You simply pack up and move to a place where it’s more affordable.
That’s exactly what we did, CA to WA.
But…buying a house is the only way to become wealthy! ABCNews said so today.
http://abcnews.go.com/2020/Business/story?id=1978618&page=1
Wonder if they’ll revisit these folks in 2008 to see how they’re doing.
What a crock of shit. This guy should be in jail.
I saw that. Just another Kiyosaki, Trump, Sheets, De Roos asswipe.
He even had a bling’d out tour bus to be interviewed on.
I would have loved to see ABC have him “help” a renter own, when the renter is an knowledgeable bear in a bubble market.
“Sandy Sargent, a Sacramento real estate agent, believes many new Sacramento-area homeowners spend 60 percent of their paychecks for housing-related expenses that include a mortgage, utilities and taxes.”
She’s closer to the truth than the fancy pricks that publish professional economic reports. Simple fact is that no family can make it over the long term if 60% of their household income goes toward shelter.
Salinas is losing kids because there are so many Mexicans they closed all the libraries!
“‘Nobody who cleans hotel rooms is going to move into a $3 million house,’ Lutes said.”
Last time I asked a chambermaid for directions to the coke machine she couldn’t answer because she didn’t know any english. And It’s everywhere I go, Yosemite, Davis, San Jose, PHX, Poughkeepsie NY ,the amount of illegals employed in the U.S. is staggering.
A house in our neighborhood just sold. There are 4 adults and 3 small children living in it now. Four pickups and one minivan come and go.
These folks sold a condo to move up but had to add 2 adult relatives to the mix to help pay the monthly expenses.
All 4 adults work in construction.
“All 4 adults work in construction”
Not for long…..
I’m waiting for a shred of evidence that all of these hokey loans that have enabled the price runup in the first place are going to be out of the picture. Instead, they keep getting worse and worse.
Is there anybody out there who has any knowledge that something, anything! is being done to control these lending practises?
Is anyone in power talking about reigning this industry in?
My fear is that, without it, Americans have become too stupid financially to know what’s good for them. These loans could keep the price of housing way up.
If I see any evidence that we’re going back to 20% down, 15-30 year fixed, then I’ll know we’re on our way back to a healthy housing situation in the US.
Otherwise, I’m still scared.
Majority of people are financially illiterate (e.g. they don’t know why or how when prices of bonds go up then yields go down).
Proliferation of these risky loans is not going to stop until the borrowers themselves see how detrimental these loans are (may be in hard way). Sure, no body is educating them. Neither the f*&^ing media (who constantly quotes from f&$#ing National Association of Realtor) is going to educate the public, nor the lenders. These loans are recipe for disaster.
But you know, THERE IS NO EXCUSE FOR INGORANCE.
See, d*mn, that’s what scares me. After seeing the extent that the average American will go to screw themselves financially, I’m beginning to think that the only way is to have an adult step in to save them fom themselves.
And I should add, that it mystifies me that banks are coming out with these 40 and 50 yr. loans when they KNOW how stupid their average customer is.
I mean, could they have come out with these new loan options at a WORST time? Unless the reason is to perpetuate high prices - that seems pretty obvious to me.
very simply put real estate loans have had NO RISK PREMIUM,they are packaged and sold as mbs to investors…..who are also going to need lots of preparation H real soon.and who will refuse to buy more once they realize they have also been had,or will require an excessive premium ( they always overreact) for a while.what i am beginning to see is a divergence,the subprime lenders doing more “loan to own” where the borrower brings a copy of the house keys to the loan closing,and the beginning of actual underwriting by those lenders who want to sell their packaged loans without taking a hit because of the increasing perception of risk…don’t worry the train is still 100 yards away! is still the thinking of most lenders.ego has a whole lot more to do with the decisions big lenders/investors make than reality does.
So Tom are you saying that the ONLY thing that will put a stop to this is when the original investors say “No thanks”?
Would that be China, Japan, etc?
I really want to know the signs we should be watching for that somebody or something is gearing up to pull the rug out from under this lending fiasco.
What are the signs that we need to see to know that that process has begun? Until that happens, I’m afraid it’s a little too early to claim “victory”.
I’m seeing way too many instances of idiot buyers thinking they got a “deal” on what should be a 300K house just because they bought it for 50K off on 700K asking. And the new 40/50 yr loans are another bad sign.
This latest RE Bubble asset inflation will see the biggest pop of them all precisely because of all these suicide, exotic loans which have never existed before. The Deterioration of bank lending standards seems like the financial/banking/economic equivalent of social darwinism or predatory lending Capitalism combined with consumer greed. Actually it is old-fashioned ruthless business practices applied to a whole new class of naive, financially illiterate borrowers, especially the class of homebuyers who take out subprime loans. And those taking out I/O’s, neg amortizations,ad infinum. They are in fact suckers: the entire history of the Us reveals a trail of fraudulent business practices which reached it’s height during the guilded age of the late 19th century, epitomized by the railroad stock watering scandals. The sad result will be a wave of foreclosures in the worst bubble regions over next several years. Don’t be fooled: that Mortgage lender who sold you that i.o, neg am with a smile knows (or maybe noT)that monthly pmts and rates will shoot up astronomically on those ARM’s and subprimes, but they survive thru extraction of commissions on loan sales , as does the entire RE Lending industry so you are the sucker stuck with lifetime debt.
Perhaps these borrowers are smart. If the system is giving money away, why not taking it? Zero down, what’s the risk to the borrowers?
None.
Even if banks start to foreclose, it still means 6 months of free rent before they are booted out. FICO score is not a concern for these subprime borrowers. It may even provide them an opportunity to sue the lenders for “bad lending practice.”
The Chinese and Japanese will learn another lesson. It’s been said
that the Bank of Japan is incompetent.
The risk is that you will never OWN that house. So have Americans been trained to not care about that small detail?
Or, if by some chance you DID end up owning it eventually, it would be small consolation after the hundreds of thousands of extra dollars you paid in interest.
I just pray we’re not in the midst of redifining the word ” own “.
I know Americans are transient as all get out. Maybe it literally doesn’t matter to the majority of people anymore whether they ever actually own their house or not.
Ultimatly what really matter is having shelter from the elements over your head. Leasing the land or owning the land matter little to you bod. If buying is cheaper (because you will either sell for a gain or walk from the loss with little vested interest–what is the incentive not to buy?) If one doesn’t have credit to lose there is effectivly no downside from that senario.
I don’t know Bluto. All I know is, when I OWNED my house, I made a nice tidy income off of it every year. It was real lifetime security.
I don’t see that scenrio ever coming to fruition for those who take out these crazy pay-the-bank-forever loans. Especially when the priciple is SO high.
A paraphrase of the oft-quoted economist J.M. Keynes: ‘When everyone around you is acting insane, those who act sane do so at their own peril.’
one of the problems with california is heavy regulation preventing supply of home from rising as would in a free market. there’s lots of vested interest in not letting new homes comeup. the land is not scarce - look at empty office buildings in bay area. its really pathetic to see how younger generation is squeezed by this low affordability, paying for social security of seniors, falling value of their dollar savings etc. there was a report recently - after a adjusting for cost of living calif is amongst poorest of states in nation!
You are exactly right. Thank the environmental movement for restricting supply.
Thousands of houses have gone up in southern San Luis Obispo and northern Santa Barbara counties over the past few years…huge tracts. People only listen to the environmentalists when there isn’t money to be made. When the rubber meets the road, they have no real power.
agree! there are communities in Scal which impose strict limitations on increasing the supply of affordable housing( Santa Barbara). Ventura county certainly imposes strict limitations on new tract construction. What is happening is that the middle class is being squeezed out of pricy coastal communities near the Scal coastal areas and being pushed into the interior areas of California such as riverside/san bernardino counties, where housing is still relatively affordable. This creates in turn the massive traffic commutes and logjams we have here in Scal as commuters are forced to commute from the inland areas to the coast to work. I am not saying that a coastal community or city is required to increase the supply of affordable housing for those who cannot afford those 1 million beachfront mcmansions in Newport beach, Santa Barbara or Pacific Palisades but this ultimately leads to the exclusive possession and access of Scal beaches and watewrfront to a relatively tiny percentage of California homeowners who can afford to pay for Million dollar homes in exclusive coastal communities. California indeed is blessed with some really gorgeous coastline and i can understand the desires of Santa Barbara to keep it that way by exclusionary zoning laws designed to keep out low-cost housing which would have probable negative impacts upon their beautiful coastline. However, this has had the effect of pushing population and development into the central valley areas which in turn have caused heavy smog to choke the central valley which has lead to smog levels in Sequoia Natinal Park which are as bad as LA.
not just in santa barbara but zoning is affecting supply all over california in general. supply restrictions and easy credit to anyone who wants has a large role to play for the housing situation.
I second seattle price drop’s point–it’s all about the financing. On a related note: Does anybody know what the status is on the supposed new fed guidance on exotic mortgages? Last I heard the comment period on the new guidance ended in (I think) April. Does anyone know when we’ll see the official new mortgage lending guidelines (or, god help us, have they already come out to no effect whatsoever and I somehow missed it during my recent vacation…)
I would love to know more on what’s happening with that Fed guidance myself. I kept waiting for news on that but so far nothing- just the 50 year loan!
I’d also love to know more about what the heck is going on with Fannie May. I’d like to understand that whole organization a lot better than I do.
I heard That the Fedral Gov’t is spending 800 miilon of tax dollars to hire an army of accountants to go over the messy accounting practices of Fanny Mae/freddie mac.
So when’s the report due out?! And, more importantly, what will they do with that information?
i think its due May 23… Tuesday?
I was at San Francisco airport this morning, and couldn’t help hearing some bit** lady talking on her cell phone about investment property. When she got of the phone, I casually asked her about it…she was on the same flight to Boise but was going there to check out the new property she had purchased late last week, and has yet to see it.
I asked if she planned to rent it out, and, almost comically, said “I really don’t want strangers in my house…” “we are just going to hold it for a little while then sell it.”
I then said “so, you are a flipper?”
Her response: “No, I’m an investor. Boise is waaaay undervalued and it we’ll be easy making a killing there.”
It was really hard to keep from slapping her. All I think about in situations like that are the natives of Boise, who have grown up in a clean, nice, affordable town…all to have it taken away by bimbos from California like this. And, it is not like they are planning to move to the area and invest, pay taxes, contribute, etc., to the area. For them, it is just another means to and end…who cares if all the hardworking people who actually live there and want to live there can no longer afford it?
No wonder the rest of the country hates Californians. I’m beginning to hate them, too.
Don’t worry. Not only will this bitch not make a killing, she’ll be lucky to get out without paying someone to take it off her hands.
Karma is a bitch.
I heard a guy in the Cincinnati airport friday talking on his cell about having 4 townhomes to sell. He sounded pretty desparate and said he’d give the person on the other end of the line a percentage if he/she helped him unload the rest - presumably the other party was looking at buying 1 or possibly 2 of them. The guy also said he had been up really early. Maybe stressed about trying to get off the titanic before it sinks?
I’ve been doing some traveling lately and everywhere I go the topic of real estate prices come up, partly because I say I’m from San Diego and people are amazed at the prices here. Most people I’ve talked to realize the prices are absurd but haven’t really studied the scope of the problem and the ramifications to this country as the bubble aftermath gets in high gear.
Boise should immediately implement a 50% tax rate on short term gain.
socialist.
Areas are depopulating as real estate is bought up by speculators and houses sit empty. Just think about the insanity of that.
When it comes crashing down will the people move back?
NO …..
I am one that was living in CA who left for a less expensive, more family friendly area. ABQ is much cleaner, and reasonably priced. Can’t wait to hear about the CA bubble blowing through. Only question, who will be the fall guy? Will it be Arnold, or willhe be voted out and the next &^^^*( dude get the title. I can only second what Peter said above. That was a great rant. Party on, and see you in the CA sewer (otherwise known as LA, SF, SD, Fresno, Bksfld, etc)