‘Going Through The Refinancing Game’ In California
The Daily News has this update on debt levels in California. “Many families set off on a borrowing binge in recent years as low interest rates allowed lenders to loosen standards. Mortgage payments as a percentage of disposable income topped 11 percent at the end of last year, a historic high.”
“The debt buildup can be blamed largely on the availability of home loans, and on homeowners spending in many cases under the assumption that rates would stay low until they could pay them off. Now that they are rising again, consumers who took out variable-rate loans are getting hit.”
“‘I think they’re going to be shocked, particularly in the the area of mortgages,’ said Phillip Shrotman, a financial planner in Long Beach. ‘If they bought on an adjustable-rate mortgage, they’ve already seen at least a 100 percent increase.’”
“Philip Board, a financial adviser in Upland, said he’s hearing the same concerns. ‘I had a gentleman call me yesterday to ask if he should cash out his retirement to pay off his home equity line,’ he said. ‘He’s been going through the refinancing game and he’s been having fun and now he can’t sell his house for what he wants. He makes a fair amount of money but he spends, too, and now he’s living paycheck to paycheck.’”
“Advisers urge clients to convert variable home loans to fixed, if at all possible.”
The cover story of the NYT Magazine last Sunday was Americans’ Debt Addiction. With higher interest rates on the way, it’s bound to get ugly.
Another new high for inventory in Phoenix. As of 7am Sunday Jun 25, 2006 Phoenix inventory (Maricopa & Pinal counties) stood at 50,440 and continues to rise on average at 1.5-2% per week!!!! Un-freaking-believable!!! Phoenix will be the ground zero of the housing crash. Expect by this time next year prices down 20-30% IMHO.
Consumerism is out of control out here in california. I was hearing about a study of how americans are losing their friends too. I beleive the study revealed we only have about 2 close friends now. We are so caught up in buying shit that we don’t have time for relationships. All this stuff is connected to the unhealthy levels of consumerism going on. People are living way beyond their means so they can pretend they are somebody and other people will care about them because they have money and stuff.
Nitpick: Boston is already going down, population dropping, etc. So I would consider that area the true ground zero.
However, Phoenix, Florida, DC, Las Vegas, and Sacramento will all take it hard. I see no way that OC and then (trailing by only months) LA country. The recession is going to hit the West coast economies like a high school metal band on stage at 9:30 am on new years day. (It won’t be good nor welcome.)
Neil
See link below, good report on the investors/ speculators buy economics with current interest rates. One conclusion only R.E. prices and rates must go back down soon!
see PARADOX Of HOUSING below
http://www.financialsense.com/fsu/editorials/schiff/2006/0623.html
fl already seems to be taking it hard. I want to rent a house in the Ft. Myers/Naples area and everything is new with out of state owners (for halve or less than the mort payment.) Crazy
Panic will begin July 4, 2006. How many desperate buyers will be left to go look at houses in 119 degreee temperature? How many lazy real estate agents will sit open houses for free with no prospects when the lake, the mountains or their back yard pool will be avaiable? Lets call this horror show “Panic on Camelback”
It is sort of funny when a discussion turns to a down housing market. It is like people do not want to believe what is going on. They honestly think that houses are like some type of precious metal. There is some serious housing price denial in California right now. Home prices can’t fall because we are running out of land and builders build only to satisfy current demand. I have had some conversations with home owners and the conversation can almost become hostile in seconds, when I mention the “bubble” word. Don’t mention the “B” word or else, it can be little weird at times. Has anyone seen or heard of or even been involved in a violent response to the expression of a thought that there is a down housing market and it will only worsen as the time progresses???? Also, can anybody tell me how in the world will an increase in the divorce rate cause an increase in home prices? I read that scenario on a blog article a few days ago and cannot even begin to understand how that is possible.
houses are like some precious metals as both are going DOWN.
“Also, can anybody tell me how in the world will an increase in the divorce rate cause an increase in home prices?”
I think the theory is that divorce splits a family in 2, meaning before 2 house was enough, now the same people need 2 homes, and this leads to increased demand.
I have seen this many times at work! I had one guy basically attack me verbally and tell me how he bought a rental property in Watts a few years ago and it has tripled in value. He made me feel like I was the biggest idiot for not buying right now! He said real estate always goes up over the long run and everyone wants to live here! If I hear this again I will scream!! These people are just plain nuts! Maybe the sun has fried their brains???
Divorces usually cause most assets to be liquidated to end the marriage.
If they own a house, that too gets liquidated. The two individuals just want OUT of the marriage and usually that includes the house.
If FBs don’t like the word bubble, try mania.
Or the more innocuous most people are bad at math.
Bubble heads and “RE Professionals” - like locking pro-choicers and pro-lifers in a room together for 15 hours straight.
Both sides KNOW they’re right.
However, with this debate time will tell decisively. And one group will be able to look back and say “I told you so.” (And oh pleeeeeeease let it be the bubbleheads.
)
I don’t think there is going to be a downward price panic in the real estate market. Those who have bought into this madness would see it as inconceivable to sell at a loss in the tens or even hundreds of thousands of dollars. That would put them in debt forever, and loosing money like that just wasn’t supposed to happen. They’ll hold onto things until foreclosed by the banks, which will happen gradually over the next couple of years as ARMs reset, jobs are lost, divorces happen, medical bills, whatever.
I don’t think there is going to be a downward price panic in the real estate market.
There was an upward price panic; there will certainly be a down one. Historically, the same thing happens with any crashing “investment”. That said, some will always ride it all the way down in denial.
In Real Estate terms, nothing about this bubble has been gradual (certainly not the dramatic price increases, or more recently the huge buildup in inventory and tremendous fall-off in sales activity.) While the bust may not seem seem very fast if you were expecting a Nasdaq-style crash or a “Black Monday” event, nothing will undercut prices and destroy comps faster than a ton of foreclosures that flood onto the market. These foreclosures may or may not cause a price panic per se, but they will cause a massive recession and huge job losses at the very least, and probably something much, much worse.
I think the very best emotion a seller could have right now is a little panic. At least that way, they’ll price the property agressively and it will move. That’s a lot better than following the reverse property ladder down to hell.
I agree with 4th of July too because of its psychological implications. It’s only a week from this Tue but so much economic news is coming out next week that even Joe Sixpack may get the message:
1. Bernanke raises rates
2. Another bad (maybe worse) week on Wall St.
3. More terrible econ. news from the msm TV
4. The number of For Sale signs is “in your face”
5. It’s getting very hot temperature wise
6. More bad political news
7. Bad news from Iraq which leads to:
8. J. 6pak feels a little quesy and not overly patriotic on 4th of July because something isn’t “feeling” right about the U.S.
9. Slowly building PANIC
Did I miss anything?
the real panic will hit when jobs numbers start trailing down and unemployment rate starts inching up, these are the two numbers the nightly newscasts report and j-sixpack actually understands. All these pundit idiots repeat over and over “as long as the job market stays strong housing will be fine”
Q2 earnings start this week too, as mentioned on other threads. Lots of opportunities for missed earnings, poor projections, etc. Some of these have been the News Of The Day in the past couple of months.
now 50,628. seems to have really popped in the last 3 or 4 days.
[‘He’s been going through the refinancing game and he’s been having fun]
I guess that getting gobs of free money must be intoxicating. Surely people must understand that good times don’t last forever. Whatever happened to climbing a wall of worry?
[He makes a fair amount of money but he spends, too, and now he’s living paycheck to paycheck.’”]
I always reasoned that people that make a lot of money are older as they have the experience to make it behind them. Or they’re very lucky. These older people should have been through bad times through where you learn to save for a rainy day.
I guess that this guy really wants to have fun paid by someone else. Even if he did get his price for his house, though, I’d guess that it would take a while to get out of the spending habit.
You have to be pretty desperate to empty your retirement account. Or pretty young.
>You have to be pretty desperate to empty your
>retirement account. Or pretty young.
He doesn’t have to worry; Social Security will take care of him in his old age.
actually… no… it will be all the wise people who did not spent all their money, lived frugally, and saved… who will be taxed to allow this poor person who got caught in the housing bubble survive.
Sad but perhaps true. There are so many people caught up in this that if things do get dicey, some kind of publicly financed bailout or loan forgiveness is probably inevitable. Too many potential votes for the aspiring politico.
It dosen’t seem to matter. My husband and I are the only people we know that didn’t re-fi for every penny of equity. The appraiser laughed at us and practicaly called us stupid. Sold last day of Aug last year. Who’s laughing now.
Consumerism is out of control out here. I was hearing about a study of how americans are losing their friends too. I beleive the study revealed we only have about 2 close friends now. We are so caught up in buying shit that we don’t have time for relationships. All this stuff is connected to the unhealthy levels of consumerism going on. People are living way beyond their means so they can pretend they are somebody and other people will care about them because they have money.
I forget the so-called expert that recently said that Californian would be insulated from a down turn due to the large equity homeowners have built up in their homes over the last several years (actually, I think Bernanke has made reference to this in the past, as well as others) This is a ridiculous notion. The housing ATM has been on full tilt for the last few years nation wide, but especially in Cal. I wish I could see the actually percentage of people that sat back and let their equity build without touching it. For the most part, that equity is gone! It’s found it’s way into SUV’s, swimming pools, elaborate vacations, college tuitions, boob jobs, and you could on and on. One thing that Californians are good at, and that’s worshipping at the altar of consumption. Like an addict, they must feed the addiction at any cost. The supplier in this case has been MEW’s.
I’ll say it again, that equity, for the most part, is long gone!
Yes, and this is the reason you see so much of this “sellers won’t budge on their price” stuff in the media and anecdotally.
Even those who are not planning to sell will be locked into their HELOCs, which will depress demand for housing.
I recently got an Equity Line of Credit on one of my rental homes. When I asked for 75k, they said if I go for 100k, I can get a lower rate. They were encouraging me to get a bigger loan, which I didn’t need.
No wonder so many people are in trouble. Banks are practically giving money away.
I just had a thought. Could this be the next S&L or Enron,Worldcom etc. I read in the news yesterday that the SEC is trying to regulate theses huge hedge funds but they have been unsucessful in doing this. Perhaps this need to loan bigger and bigger mounts of money is some elaborate but huge ponzi scheme in these hedge funds that wil eventually come crashing down. I mean does any one really know what is going on with these hedge funds and what derivatives really do. And if you dont think they will be bailed out, just remember Long Term Capital.
A good summertime read: Liar’s Poker
Hedge funds are a huge systemic risk. The D.C. Circuit on Friday rejected a very minor SEC requirement that they be regulated if they’re managing over $30M. You’ve seen the 2-3 guys from those funds who post here. They think they are bulletproof. Someone some day is going to make a fortune in a hedge fund meltdown on their index put positions, that is, if there is anyone to buy the puts back from them.
“…that is, if there is anyone to buy the puts back from them.”
I don’t know enought about these funds to contribute to the discussion other than my deduction that this observation of TxChick’s is a biggie.
yup. just the general concept of hedge funds and the total $ they hold. Kinda reminiscent of program trading. It’s all fun and games until they look in the trunk.
Even Buffett has been burned by derivatives with one or two companies that he bought that had existing commitments.
His term is Weapons of Financial Mass Destruction.
BTW, you don’t really know if you’ve made money if the counterparty defaults. It helps if you have some kind of insurance but you need to make sure that the insurance company can handle the amount. The problem is that without regulation, there’s no way to know what the risk is.
“Advisers urge clients to convert variable home loans to fixed, if at all possible.”
That “if at all possible” part is the kicker. It’s sort of implicit that people who took out variable loans in the past 2-3 years did not put much if anything down, so any equity is restricted to the supposed increase in the resale value of their property since purchase.
100% re-financing on a fixed should be a lot harder to come by than a 100% ARM on the initial purchase, except through the use of a piggyback, in which case, what will happen to the monthly payments? Over and over we’ve discussed that the great majority of recent-year ARM buyers who intended to occupy the property, used ARM financing because it’s the only way they could get into the home. In other words, it’s the only monthly payment they could manage. So even if they can convince a lender to switch them to an 80+20, how will they make more than the first payment or so? And at that point they’ve burdened themselves with the additional debt of loan #2 acquisition fees and possibly a stiff penalty for getting out of loan #1.
It reminds me of the sniper quip: “Don’t bother to run — you’ll just die tired.”
Exactly, in 1990 when I bought my first home I got an ARM because rates were high and I thought they would be coming down, this is what ARMs were used for in the past as well as people who only expected to be in a home for a few years. Now they are using them because it is the only way they can afford a house payment. The only problem that only works if home prices go up 10-15%, forever. If prices dont go up:1)You cant convert to fixed-you cant afford the payment 2)You cant sell-you owe more than the house is worth. The music has stopped-game over.
… this is what ARMs were used for in the past as well as people who only expected to be in a home for a few years
Remember also that this is the lender’s way of transferring their interest rate risk onto YOU. It would be more prudent to begin with a fixed rate mortgage and then refinance IF rates go down later.
An ARM is an insurance policy the borrower is selling the lenders against rising interest rates.
The “savings” is the premium payment for such an insurance policy.
paraphrased from John T. Reed
I agree, when I first started selling RE in affluent markets everyone was using this stuff in the 80s and 90s——Big But—our market was old and very big money on the north shore of LI, not a pedestrian home in wherever. I kinda am joe 6 and I can’t think that these loans are any thing but suicide for anyone who is not REAL WEALTHY.
well said
Yeah, how much longer til people can’t even get a fixed to cover the ARM. At some point in the near future, banks will realize that the loan they’re reqesting is more than what the house is worth now that prices are starting to slide. What does a FB do then? Continuing making payments if they can, get foreclosed on. I suspect that’s where the foreclosures will start to come from, people that truly can’t get out of their loans and go under. Seems like a lot of these people just assumed they could go to a fixed when the time was ‘right’. Not so, the bank will only lend you as much is the house is worth, particularly on the way down. The banks made a mistake lending money on the way up with the inflated prices, unlikely they’ll be in a position to make the same mistake twice on the way down.
“Many families set off on a borrowing binge in recent years as low interest rates allowed lenders to loosen standards.”
Can someone explain to me the correlation between low interest rates and loose standards because I don’t see it. Wouldn’t you be just as eager to loan money when rates were at record highs ?
Because the spread was pretty wide at the low rates. The borrowing cost for the lenders dropped a lot (look at fed funds rate), and they passed through only part of that to the customers (look at mortgage rates). Since they passed any savings to the customers, the customers could afford larger loans. Larger loans generate larger closing costs. Closing costs at low interest rates become a proportionally larger part of the lender’s income. Both of these incentivize increasing volumes. When rates go up, the spread narrows, and the size of the loan shrinks. then it makes sense to be more sure the loans will pay off.
That’s correct, especially early in this past cycle. But a lot of competition was drawn into the lending game so spreads narrowed and lenders tried to keep up the profits by increasing volume on even tighter spreads… Soon they got caught by severe margin erosion, lower demand AND rate increases at the same time… now they will be seeing defaults so the walls are closing in on them. Think AmeriQuest.
It’s about the natural interest rate. The Fed rate is the cost for the banks, but it is uncorrelated with the natural rate that is embedded within the economy. So, when the Fed rate is low, the banks flourish on the difference between the natural and Fed rates. The bigger the difference, the larger the profit for the banks, the looser are their lending criteria.
When Fed funds become more expensive, the difference vanishes, and banks move into a safer lending mode.
Low interest rates generally increase the value of financial assets, including stocks, bonds, and real estate. If interest rates are held low for a protracted period (as they were in the post-9/11 period), then real estate price appreciation can take on a life of its own, as gains outside the historic norm attract speculators to come along for the ride on the free money train. Some speculators happen to be in the lending business, and there is less risk of losing money on subprime loans when home prices are going up at double-digit rates, especially when cashout home equity ATM financing is available to help homeowners tap up their domiciles for an extra paycheck.
Conversely, the transition from low rates to high rates will be accompanied by flat or falling real estate prices. It is far riskier to a lender for a homeowner to go into default when home prices are falling, as the REO property is more likely to be underwater (especially after several years of a home-equity-ATM-fueled consumption binge). What is worse, the end of the home equity ATM represents the loss of the artificial income stream which enabled consumers to finance a life style beyond the means of their labor income, further increasing the risk of bankruptcy. So in summary, we have a problem of correlated risk — rising intererest rates (which ultimately lead to high interest rates) are typically accompanied by a rising rate of defaults, falling home prices, and underwater properties returned to the bank, which tends to lead lenders to become more precautious about underwriting risk.
Good question, maybe it’s the fact that investors are finding it tougher to find returns in bonds when interest rates are low so they’re forced to take on riskier investments. The riskier investments are Mortgage Backed Securities in this case. I think Fannie Mae artificailly lowers risks for lenders as well because they’ll buy up just about any loan you can throw at ‘em. Of course your tax dollars are standing at the ready to bail out the inevitable GSE crisis.
Fannie Mae artificailly lowers risks for lenders as well because they’ll buy up just about any loan you can throw at ‘em.
Are you sure about that? A friend of mine that works at FNM tells me they don’t buy sub-prime loans and they buy loans that below a certain amount..like 300K or something.
Remember that St Petersburg Times report on the homeless guy who ‘owned’ a handful of houses? The loans ended up with Fannie Mae, even though he had no income and paid up to 40% over the homes appraised value. One of them had a huge hole in the roof.
From a National Housing Institute article
Good question, maybe it’s the fact that investors are finding it tougher to find returns in bonds when interest rates are low so they’re forced to take on riskier investments. The riskier investments are Mortgage Backed Securities in this case.
__________________________
I will supplement KirkH’s comment with:
Interest rates are the **cost of money**. The more money there is to lend (greater supply), the lower the cost will get until it reaches supply/demand equilibrim. If there there is more money to lend than there are borrowers, the cost of money will go down (interest rates fall) and lenders will compete with one another to get new customers (borrowers) to borrow their money. This is where standards are lowered in order to attract more customers.
As central banks lowered interest rates, it caused a domino effect whereby fixed-rate returns were lowered across the board. There are a lot of investors in fixed-rate products (think pension funds, bond funds, hedge funds, etc.). They needed to chase higher rates, and mortgages are considered (historically) to be very safe as fixed-rate investments — it is backed by collateral. As more money was attracted to that sector (MBS), they offered up different ways to attract more borrowers, even to the extent of scraping the barrel for low-FICO, no-doc, high debt-to-income loans, etc.
At least that’s my understanding of it.
There is a special place in Hell waiting for Greenspan.
It’s the 10th layer, where every luxury is for sale, but money is worthless, so you can only eat dollar bills, drink dollars bills, wear a loin cloth made from dollar bills, and sleep under mounds of dollar bills.
“There is a special place in Hell waiting for Greenspan.”
He’ll be late to the marshmallow roast, though — he’ll be parked at the gates blathering on, obliquely, about anything and everything for half his sentence. The first guy who could B.S. Satan.
It’s a very old story. “I just love the working class as long as I don’t have to see them.” Much like the children of pchyopaths (can’t spell, sorry.)
“Mortgage payments as a percentage of disposable income topped 11 percent at the end of last year, a historic high”
I don’t have a clue what this means, given the affordability crisis. The way I read it is on average people only spend 11% of disposable on mortgage. First of all, doesn’t disposable get calculated AFTER shelter. Then, it was my understanding that mortgage now accounts for greater than 1/2 of most gross incomes and higher in super-bubble pricey areas, including SoCAL.
Can anyone explain this because the Daily News sure didn’t do a good job of it…
AZ_BubblePopper,
I was thinking the same thing as you. I had to go back to the article to read that sentence myself..
I thought disposable was after all housing, food, regular monthly bills (utilities, phone, etc).
That had to be a misprint. Mortgage payments for most people are greater than there disposable income, not 11% of it. I wonder if was supposed to be something more like 111%…..hmm…..even that may seem low…
For example….you gross $4,000 a month (48,000 a year). Taxes take out about 25% of that. That leaves you with $3,000 a month. Mortgage payment….let’s say…. $1,500 a month (conservative these days). Food, utilities, etc…. another $1,000 a month. That leaves you with $500 for disposable income? In that case, the mortgage payment would be 300% of the disposable….unless I am completely lost (very possible).
Anyone else have any thoughts?
Disposable income is what you have if you are already rich. If you aren’t, it should be more accurately called investable income.
My guess is that they’re including all of the people that don’t have mortgages like renters and those that own their homes (the real ones that own their homes that is).
Michael nailed it.
One of the favorite tricks of the RE industrial complex incuding Harvard’s JCHS is to compare the ongoing RE market (about 10% churn every year) with the total universe of homes to improve their numbers.
It actually takes a relatively small percentage of distressed homes to move the market. Markets are made at the margins.
I think it’s more likely sellnrun below figured out this mystery.
While you might be right about the markets being driven by what occurs on the margins you may be grossly underestimating the number of FBs and the poor condition of their finances. Considering those that actually own their residences outright in this mix is almost irrelevant IMO and not even worth mentioning - even by the RE Complex when they attempt to distort.
I agree with Michael.
Just so I understand, Michael said what?
That renters who have a mortgage payment of ZERO drive down average mortgage payments? Those that own outright push down mortgage payments to an average of 11% of average disposable income for all the rest that pay on average $3K/mo in CA?
Sorry guys. I like the HELOC payment accounting for 11% of disposable. It sounds as though it’s plausible, at least.
That, and the top few percent of the population with the top 80% of the income (and probably top 90% of disposable income) push the average down as well.
People misunderstand the nature of the coming panic.
No: “Everybody Run, The Homecoming Queen’s Got A Gun!”
Yes: “Hanging on in quiet desperation is the English way…”
Where would FB Kalifornicators go? What would they do? There is no exit strategy. I insist they stay put and pay my interest income and disgorge their assets and pledge their and their children’s fealty… to me.
You forgot to insert the evil laugh at the end of that post.
On, no I didn’t. >:-> :devil
Or possibly,
Yes: Offer me solutions, offer me alternatives
and I decline.
It’s the end of the world as we know it and I feel fine.
Dang. Now I will have that song in my head all day.
I knew it! Snidely Whiplash lives!
Just trimmed my moustashe.
The mass of FBs lead lives of quiet desperation.
Agree–
There will be plenty of BKs and defaults, but they won’t be during a specific timeframe. People will largely suffer in silence, since everyone will be embarrased to talk about housing.
(Indeed, many, if not most, people in Southern California reside within the debt danger zone.)
that’s going to hurt.
add new york
The wording in this article seems peculiar. It sounds as though the “mortgage payment” to which the author is referring is the HELOC payment. Apparently HELOC payments, as they adjust (they are ARMs), are chewing up disposable income.
That sounds like a reasonable interpretation. I don’t know how you came to that conclusion but… Congratulations for solving the mystery puzzle, if you’re right.
AND… that presupposes those that needed o take HELOCs had any disposable income to begin with… which is probably flawed.
Costa Mesa hanging steady at about 425 houses for sale on Zip, as Price Reduced goes up a house or two a day. Gotta love the “multiple fotos” on there. EVERY kitchen EVERY ONE ok with a few exceptions, has Granite Countertops… a great Investment no doubt…
284k+ tax liens currently in CA. That has got to cut into the the old bottom line. Yesterday’s howling homedebtor who ridiculed others as being “bitter renters” will themselves become “bitter renters” when they are forced out into the street by the tax collector. My guess is that they will have ten times the rancor too. Can you spell “auction at the courthouse” class?
In OC it takes about 5 years to lose a house to tax liens, per the OCR.
Tax liens aren’t helping the market but they won’t move the market quickly.
I’m sorry, but why haven’t more people seen this coming? I really enjoy reading all the great comments and well-made points on this blog, but I often wonder why there aren’t ten times the number of people posting. I admittedly am no financial genius, but even I could see this coming. I’m amazed so many people are just beginning to realize the financial disaster they have gotten into.
I think that Ben and his software, monitors the postings to manage the blog.
Otherwise we would be overrun by bitter realtors and other irrational perma-bull types.
I haven’t seen any all out perma-bulls slip through lately.
If you want interaction with the general public, try the San Jose Mercury blog, OC Register Blog, North County Times (SD) blog or AZ Republic blogs.
I tire of the general public’s poor grasp of economics and finance. It is kind of like potty training a puppy with no payoff of an eternally loving dog, instead they hate your for bursting their “psychological bubble”.
The NAR and the real estate cheerleaders were spining a tale that the real estate would continue to appreciate for another 5 years and than it would level out .
EZ money and credit along with low interest rates made alot of unqualified buyers/flippers think it was their chance to get in on real estate before they got priced out forever . At least this was the spin the NAR , realtors ,and mortgage brokers were pushing . Maybe realtors in the news believed what they were pitching or maybe they just liked the big paychecks and knew it would end with bagholders . The real estate industry sure had a lot of power in the last 5 years .
RE industry wasn’t alone. Dubya made increasing home ownership one of his top priorities and brags about raising the hoem ownership levels above the historic averages. Anyone knows the fate of ill conceived government programs before they even get started. Many of the buyers of the past few years had no business whatsoever owning real estate because their abysmal credit made them risks - for good reason. Lowering the barrier of entry has its price - AND PAYBACK IS HELL!!!
Sounds good, but as a broker for more than 20 years I got to say RE people NEVER have much input into the market, we don’t make it, we don’t break it. It’s all about the consumer and the seller. I’ve worked in up and down markets (and I am no Suzanne.) Honesty never goes out of style.
The ARM resets have barely begun. The inventory figures are only apparant to people who are paying close attention. The Housing Bubble is simply not the first thing on people’’s minds yet. There’s a war on, and the stock market dominates the financial news.
One online estimator says that Ben got about 288,000 visits in the last 30 days, but I’m guessing that’s a high number. Once the fecal matter really hits the rotating air movement device, the numbers will probably go nuts.
If I were Ben, I would already be on the phone to the ISP to make sure that this site will scale behind a load balancer. Otherwise, we’ll all be experiencing some nasty withdrawal symptoms after his server goes up in flames
The are at least 288 million people in the US. So 288,000 hits in a month would be only one in a thousand, even if each were from a different person. But I generate more than a hundred hits a month on this site — if the average visitor generates only ten, only one in ten thousand Americans see this site each month.
I think it’s because RE is more personal (you don’t raise your children in your stock portfolio, after all) and therefore people aren’t as logical about it as they are about other financial decisions.
For example, I have a good friend, an educated businesswoman, who is generally very on the ball, yet she insists that “Berkeley (CA) home prices never go down except in the 6 months after a major earthquake”.
“Never?” I say.
“No, never. Other places yes, but not Berkeley,” she insists.
I avoid the subject with her these days.
Even very bearish pundits will NEVER come out in the MSM and say that the local area will be affected. It is in the rule book.
You must draw that conclusion yourself.
Your asset might go down (tear forms in eye), but mine won’t (steely stare)!
Let me guess. She owns a house in Berkeley.
Berkeley is different. Really different!
I talked to a Realtor in Redondo Beach, CA today about the listed prices of homes. Asked her, who are these people walking around pre-qualified for $900,000 homes in an upper middle class neighborhood. She laughed and said most people are buying interest only hoping to sell in 2 years.
Then she said, if you are serious about buying, we can make offers 15% below list price…cause the list price now doesn’t mean anything.
Thought I would share this with you all.
That’s my area too. Sounds like a great gameplan, but not until prices decline 40% or more from where they are now. Have you seen Bearmaster’s page? We are seeing declines, but I suspect not for a month or two will it really start to sink in.
My wife and I have noticed the open houses in Redondo are plentiful with very little traffic….big change from last summer when everyone was competing to buy.
“Advisers urge clients to convert variable home loans to fixed, if at all possible.”
Advisers will keep saying this for CYA purposes (”I don’t recommend risky loans to my clients”) but those who understand the reality know the futility of this suggestion. If a FB could barely afford the minimum monthly payment on their option ARM when they bought last year, how could they afford a fully-amortizing loan this year at a higher rate (especially when the principle balance has increased due to “deferred interest”)?
lol
. ‘I had a gentleman call me yesterday to ask if he should cash out his retirement to pay off his home equity line,’ he said. ‘He’s been going through the refinancing game and he’s been having fun and now he can’t sell his house for what he wants. He makes a fair amount of money but he spends, too, and now he’s living paycheck to paycheck.’”
I would tell this guy to do whatever he feels he wants. Because in the end, he will wind up broke anyway. He will spend every penny, whether loan or retirement money, on some useless crap and then want a government bailout. What a dip$HIT. Multiply him by a million or more. CA is going to go down in flames.
It’s found it’s way into SUV’s, swimming pools, elaborate vacations, college tuitions, boob jobs, and you could on and on. One thing that Californians are good at, and that’s worshipping at the altar of consumption
We need some pictures of these - especially the BOOB jobs. Before and after pictures. Make sure that they got their HELOC worth! LOL
our local paper said “appreciation has slowed” dq news said down .2% yoy. the sf chron said 3.5% yoy appreciation for sonoma county,dq news? down .2 %. so,they lie.for a while,until they can’t