June 30, 2006

Defaults For Property ‘Bought With The Intent To Sell’

The Frederick News Post has this from Virginia. “Worried Fredericksburg-area homeowners may start calling Ken Scruggs if the Federal Reserve raises rates. The (mortgage broker) in Fredericksburg said people with adjustable-rate mortgages, or ARMs, are getting anxious to lock in a fixed-interest rate.”

“‘We’re seeing people coming in now out of fear,’ he said. ‘They’d rather refinance now than take a chance that [interest rates] will reach 9 [percent] or 10 percent in a few years.’”

“An increase of just a few percentage points can make a huge difference in mortgage payments. A monthly payment of $1,500 on a $500,000 ARM, for example, doubles to $3,000 when interest rates climb from 3 to 6 percent. ‘There are not a lot of people who can come up with $3,000 a month,’ Scruggs said.”

“Some residents are struggling to hold onto their houses. The number of foreclosures in the Fredericksburg region has climbed from 19 in the first quarter of 2005 to 80 during the same time period this year.”

“Stafford and Spotsylvania counties had the most foreclosures locally. The number jumped from 10 in the first quarter of 2005 to 36 in the first quarter of 2006 in Spotsylvania, and from 3 to 29 during the same time frames in Stafford. Those also are among the fastest growing counties in Virginia and the country, which means that more people have been taking out mortgages on houses, second homes and investment properties, pointed out Mike Fratantoni, senior economist for the Mortgage Bankers Association.”

“The handful of foreclosures that Ron Davis, CEO of Virginia Heartland Bank, has seen, for example, involved people who had bought property with the intent to sell, but got stuck with unanticipated mortgage payments when the real estate boom started to stall.”

“‘Between the fourth quarter of 2005 and the first quarter of 2006, there was an increase of $300 billion in mortgage debt outstanding nationally,’ he said. ‘It’s a $9 trillion dollar market that’s been growing at a double-digit rate.’”

“That’s small comfort, however, for the people who wind up coming to Deanna Hathaway for advice. She’s an attorney for Boleman Law Firm in Richmond, which specializes in bankruptcies and foreclosures. One of the first steps they tend to take is to pay off their debts by tapping into their house’s equity or refinancing, Hathaway said. Mortgage lenders have come out with a number of new loans that can make this attractive.”

“‘Anyone considering refinancing should come in with a long-range financial plan rather than in a panic,’ Scruggs warned. ‘They shouldn’t refinance just because they want to buy a pickup. That catches up with you.’”




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74 Comments »

Comment by Ben Jones
2006-06-30 12:40:16

’stuck with unanticipated mortgage payments’

That’s a new one.

Comment by dwr
2006-06-30 13:00:47

So much for the “If rates rise I’ll just sell” plan.

Comment by Ben Jones
2006-06-30 13:04:07

I know a few folks in that boat.

‘They shouldn’t refinance just because they want to buy a pickup.’

Sounds like that has come across his desk once or twice.

Comment by txchick57
2006-06-30 13:12:14

Any in Sedona or Flagstaff (evil laugh) who might cave for cash?

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Comment by Housing Wizard
2006-06-30 14:49:45

My neighbor just caved a little for a cash offer on a rental they had on the market ,(about 20% reduction ). My neighbor got sick of offers subject to the buyer selling their houses.

 
Comment by seattle price drop
2006-06-30 20:25:02

Excellent. Been waiting for news of that happening. So much goes off and on the market again, a lot of it presumably because lack of funding.

Seemed like just a matter of time before cash started looking good to sellers.

 
 
Comment by rm
2006-06-30 15:20:13

He’s not the only one who sees that sort of thing on a regular basis:

http://tinyurl.com/eobcc

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Comment by huggybear
2006-06-30 16:25:58

“We are going to be in foreclosure city here come July 5th”

Someone “in the know” in OC also is predicting a possible increase in FB panic after this 4th of Jul weekend.

 
 
 
Comment by Kiya
2006-06-30 16:46:21

What really - scares me - is that all of my friends who have brought homes/own homes (other than me) have I/O and/or ARM loans - and THIS is what they tell me.
Oh yeah, they’ve HELOC’d to pay off student loans and buy new Mercedes, and they assume they are going to get an easy 100K when they ‘decide’ to sell.
I’ve tried to gently tell them that might NOT happen - but really, how do you talk to someone who is ALREADY throughed F’d in the borrowing way?

Comment by michael
2006-06-30 18:20:16

Paying off student loans may not be a bad idea. They never go away.

BTW, there’s a nice article about Student Loans in the NYT today: Forgive Us Our Student Debts

The replies in the forums sound like homeowners in trouble.

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Comment by mobilehomeparkqueen
2006-06-30 21:02:28

I could not not find the NYT article. advise?

 
 
 
 
 
Comment by Bubble Watcher
2006-06-30 12:45:21

Where did that mortgate payment come from?!!

Comment by feepness
2006-06-30 14:59:42

Or more accurately… where the hell is it going to come from??!

 
Comment by Pen
2006-06-30 16:20:06

How much do you truly (not by lender guidelines, more-so by non-FB guidelines) have to earn (gross) to swing a $3,000 mtge pmt…assuming you aren’t stretched elsewhere..

 
 
Comment by need 2 leave ca
2006-06-30 12:59:32

When a house is $500,000 and up, what kind of payment are these mushheads expecting it to be? Even the most half-witted dimwit should be able to figure out that $1000 a month would not begin to pay off a loan of $500K and up, if they stopped and thought for a minute and tried to do it on paper. I guess these folks are dumber than a dimwit, or get greed get in the way of logic. Hummm - wonder which one.

Comment by foobeca
2006-06-30 13:52:38

Yeah, it’s funny that people get upset when they have to make real world payments on their $500k loan. Another casualty of the “what’s my payment” thinking. It’s been my experience that most people are only willing/able to pay $1000-$2000/mo for a mortgage payment. $2000 doesn’t even cover the interest on a $500k loan.

 
 
Comment by Mort
2006-06-30 13:02:55

They shouldn’t refinance just because they want to buy a pickup. That catches up with you.

I do what I want, my house is beautiful. ;-)

Comment by Death_spiral
2006-06-30 16:21:04

This is America, so don’t tell me what to do. I do what I want when I want. Got it?

 
 
Comment by keb
2006-06-30 13:04:52

“‘Anyone considering refinancing should come in with a long-range financial plan rather than in a panic,’

Long range financial plan? Bwahahahahahahaha, many of these FB’s didn’t even submit proof of income let alone a long range financial plan.

Comment by Mo Money
2006-06-30 13:10:07

“Long range financial plan?”

The problem is their long range financial plan was for housing to increase 20% a year to infinity. As my spendthrift sister said to me last year when I begged her not to buy a more expensive townhouse “thats how I make money” .

Comment by HARM
2006-06-30 13:24:51

But liberating equity is how most Americans “make money” these days:

http://photos1.blogger.com/hello/243/2888/640/GDPMEW.jpg

Comment by Davey Jones
2006-06-30 13:30:05

I’ve read that the long range financial retirement plan for 10% of Americans is winning the lottery. They are betting the farm on that win (so to speak).

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Comment by mad_tiger
2006-06-30 14:14:49

No more worries about how to “liberate” equity. Equity is escaping all by itself.

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Comment by deflation guy
2006-06-30 16:29:30

lol

 
 
 
 
Comment by feepness
2006-06-30 14:15:31

Bubblefucious say:

“Those without long-term financial plan end up in long-term financial pain.”

 
 
Comment by watcher
2006-06-30 13:07:45

‘They’d rather refinance now than take a chance that [interest rates] will reach 9 [percent] or 10 percent in a few years.’”

9 or 10? Try 13-15. I remember when I bought 7 years ago. I thought 8.65 was a great deal.

Comment by sfbayqt
2006-06-30 16:05:49

Absolutely, watcher. I bought a piece of income property (1031)7 years ago and my rate at the time was 11%. Back in the late 70s they were like 12-16%….somewhere in that ballpark.

Housing Wizard…that’s about right, isn’t it, for late 70s?

BayQT~

Comment by Housing Wizard
2006-06-30 17:24:18

Sfbayqt, …….That about right between 12% and 16% ,(more for second trust deeds ). In late 1982 the rates started coming down again ,(almost overnight ), and the market kicked up again . The rate increases started around 1979 and started getting affordable again around 1983 . In the early 80″s is when the adjustable first came on the market in a big way .

Comment by Housing Wizard
2006-06-30 17:48:08

Can I also mention that back in the early 80″s you had to qualify on the adjustable and you had to put 10 to 20% down . The down payment requirement and rate was higher for a investor ,( and boy was that checked out ).

The adjustables in those days had 1.50% to 1.75% margins over usually the cost of funds index ,( not 2.50% to 3.50% spread margins like today ). By the way , the margin is what the lender charges you over and above what the index they use is at. The margin over the index is what determines what your rate will be at adjustment times . The 1980’s adjustables use to only adjust one a year . The new adjustables adjust monthly I believe ,( even if the payment stays the same for a year or 5 years ,whatever ). There are so many different types of adjustables out there now with different margins , tied to different indexes ,that one needs to know what they are really getting . Some indexes have the potential to go higher than other indexes.

I bet alot of borrowers don’t even know what their margin is on their adjustable loan or what index they are tied to .

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Comment by sfbayqt
2006-06-30 17:54:28

Thanks, Wiz. Yes, my 2nd house was bought in the late 80s and that was the one and only time I had an adjustable rate mortgage. It was a 5/1 or a 6/1…something like that…and the final reset was definitely manageable. It was nothing like what people are doing now. In fact, we didn’t have 2 incomes…I was an at-home Mom for several years. The mortgage, resets, etc was all based on 1 salary. If we ever ran into trouble, we had a way out…Mom would go back to work.

For a couple of young whipper-snappers I’d say we were pretty smart. ;-)

BayQT~

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Comment by Housing Wizard
2006-06-30 21:48:13

Right , the early adjustables of the early 80’s never cracked peoples backs . Like I said , people had to qualify also . I actually used one of the early adjustables on a house that I owned for a long time and I averaged way below the fixed rate . Of course when the fixed rate got as low as it did I switched to the fixed rate note . i really do not understand why people did not take advantage of the lower fixed rate note being offered .
All I can determine is that people were not thinking long term .

 
 
 
Comment by Pismobear
2006-07-01 05:03:08

i’VE GOT SOME PAID OFF Development Loans at 23%. We were selling and carrying back short term paper at 13% and the buyers were standing in line.

 
 
Comment by Death_spiral
2006-06-30 16:24:56

Let’s see………8% of 500K is $40K per annum on interest only loan…huh! That comes to $3333 per month while keeping the principal intact. I love it!

 
 
Comment by John Fontain
2006-06-30 13:13:43

My mom lives in Fredericksburg and I can tell you they are in for a heapin’ helpin’ of trouble down there. It’s about an hour south of DC if there is abosolutely no traffic (which is never) and a good 1.5 to 2 hours during the daily rush hour commute. Home prices more than doubled there in the last few years even though there is an unlimited amount of land left to develop (lots and lots of farm land).

Prices got driven up so high that homes cost almost as much comparable homes located much closer to DC. People used to buy homes in Fredericksburg and suffer through the commute because of the large disparity in prices. Now, the price disparity is largely gone and the commute is way worse.

And shockingly, everyone spends money (er, should I say “equity”) like mad down there. The main shopping area, aspirationally named Central Park, is jam-packed dawn to dusk with people driving the newest cars and filling the restaurants to capacity at all hours. Go to lunch at 3pm to avoid the crowds and you’ll be lucky if there isn’t a 15 minute wait for a table. And the residents of Fredericksburg generally aren’t among the biggest bread winners in northern Virginia, if you know what I mean.

As the article shows, there are already some cracks in the market there. Home prices are starting to come down, as reluctant sellers reduce prices after months and months on the market. It tooks more than 8 months and several price reductions before my mom’s neighbor found a buyer recently.

Here is a link showing the rise in the number of unsold homes two counties closer to DC, so you can imagine the situation is even worse down in Fredericksburg.

http://www.virginiamls.com/charts/PrinceWilliam.htm

Comment by mad_tiger
2006-06-30 14:27:07

Wow. Yr/Yr inventory looks to be around 4x.

 
Comment by Thomas
2006-06-30 15:25:04

To paraphrase a young southern gentleman just east of Fredericksburg in December 1862, “a chicken won’t be able to make his mortgage payments in that town once the adjusting exotic mortgages open up on it.”

 
Comment by sfbayqt
2006-06-30 16:16:40

Prices got driven up so high that homes cost almost as much comparable homes located much closer to DC. People used to buy homes in Fredericksburg and suffer through the commute because of the large disparity in prices. Now, the price disparity is largely gone and the commute is way worse.

Plug in “East Bay area” for DC, and any number of smaller suburban communities outside of Oakland in place of Fredericksburg and that’s exactly what has happened here.

There was a time when someone could save money buying in Gilroy or Morgan Hill rather than buying in San Jose or Santa Clara….not anymore. Once Tracy was (one of the communities) where people moved to to get away from the higher housing cost of the Bay Area…not anymore. The prices are SO ridiculous all over. Some changes (reductions) are happening…not fast, but they are happening….and that is a good thing. I, for one, will be so glad when the prices get more in line with the fundamentals.

BayQT~

 
Comment by Arwen U.
2006-06-30 18:58:55

We live about 40 minutes from Fredericksburg and I’ve been to the shopping center and was amazed by it all. When we drive through there I think of my great-great grandfather whose letters we have; he sent them from Manassas and also from Spotsylvania Courthouse when he was camped there during the Civil War. (He was from PA and I always feel a little bit like I’m on the wrong side of the Mason Dixon line).

My landlord complained that he now has two empty houses . . . both priced too high, of course. I had to educate him on the market today. He didn’t understand that renters wouldn’t magically show up and make his full mortgage payment. He’s looking at $4,500 out of pocket this month alone. Ouch.

 
 
Comment by huggybear
2006-06-30 13:20:39

‘There are not a lot of people who can come up with $3,000 a month,’ Scruggs said

This mortgage broker admits knowing people don’t make enough money to cover the payments. But these same borrowers must have somehow qualified for the loan in the first place. Something doesn’t sound right.

Comment by Marc Authier
2006-06-30 13:28:25

Well you can try pimping, prostitution, drug traficking and being a cronie of George W. Bush.

Comment by Pismobear
2006-07-01 05:08:36

Don’t leave out Jessie Jerkson and his Rainbow Push group.

 
 
Comment by Lisa
2006-06-30 13:53:17

Borrowers have been qualified based on their initial payment, not the reset payment that kicks in in 1, 3, 5 years, whatever. That is part of the new Fed guidelines for mortgage loans, qualifying applicants based on the “reset” payment as well. Of course most people can’t afford the higher payments, who could???

Comment by Max
2006-06-30 14:24:58

You mean like paying that thingy, I forgot what it’s called… princi… something like that? What is that btw?

Comment by huggybear
2006-06-30 16:33:45

Yeah, I know and besides I heard on the news that some dude named “Ben” who plays with the Bare Naked Ladies or something. Well he keeps raising internet rates and it’s making home prices go up.

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Comment by Brad
2006-06-30 13:36:16

A lot of these FBs will have common sense forced on them. They will call it “bad luck.” They will blame everyone but themselves: it will be the realtor’s fault, the bank, speculators, the government, buyers, neighbors, anyone and everyone but them.

 
Comment by cabinbound
2006-06-30 13:38:19

The spread between a 1-year ARM and a 30-year fixed is only 1/2 percent, the narrowest spread in years. If you can refinance to a fixed and don’t, you’re nuts; if you can’t refinance at only 1/2 percent higher, you’re screwed.

Comment by WaitingInOC
2006-06-30 13:52:42

The problem is, these people took out ARMs a few years ago, when the rates were much lower, so re-financing now to a fixed rate would essentially add 2% or more to their interest rate. If their rate was originally around 4-4.5%, that’s going to come close to doubling their interest. And they were stretching to pay the 4% interest, so these people are screwed.

I’m just waiting for the carnage, so that prices come back down to reality so that I can buy. I’ve been working hard and have put myself in a financial position where I can finally afford to buy my first home, if only prices revert back to fundamentals. In the meantime, I’m just waiting - which really sucks. But the crash isn’t too far away, and that gives me some hope.

Comment by Lake Hills Renter
2006-06-30 14:19:44

I’ve been working hard and have put myself in a financial position where I can finally afford to buy my first home, if only prices revert back to fundamentals.

I’m in exactly the same boat outside Seattle. My finances are in order and I’m saving money by paying low rent on a nice place, most of it going into either retirement or savings for a down payment. When the prices get back to reality, I’m ready to buy, but I’m not in a hurry about it. I’ll only consider a 30yr fixed, and would rather pay high interest than high price — you can always refinance when rates come down. And I don’t want or need a huge house or McMansion. Just a nice little 2 or 3 bedroom house on a plot of land, preferrably with nice trees.

Comment by Jim A.
2006-06-30 18:23:19

Just keep in mind that lenders will REQUIRE real downpayments and real financial ability to pay. Just another way foreclosures will lower prices: harder to get, more expensive loans.

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Comment by azdan
2006-06-30 13:41:08

In regards to affordability, does anyone expect prices to ever get to the level where property values will be equal to their investment value or rental value?

Since speculative excess and appreciation are being wrung out of the market, why should the price of a house not be fairly close to the return that the property can generate?

Or am I missing something?

Thanks.

Comment by Sunsetbeachguy
2006-06-30 14:44:06

You are missing something. It is called PAN.

Perpetual Appreciation Number - there was a great discussion on the now defunct satirical There is no housing bubble blog.

Nope you really aren’t missing anything.

One bond trader on a another board liked this definition of a bubble.

When an asset is worth more sold today than the ongoing discounted cashflows from that asset it is a bubble.

 
Comment by deflation guy
2006-06-30 16:45:14

You are not missing anything. The next great buying opportunity will happen. The best way to know is when it costs about the same to rent as it does to buy. When I bought my first home back in ‘92 it was an 1800 square foot 3br/1bath home for about the same price as rent on a 2br/1bath townhome. That was financing it with 3% down/30 yr fixed at about 8.5%.

Comment by ajh
2006-06-30 23:38:18

The next great buying opportunity will happen.

Exactly. And it won’t happen while the specuvestors and FB’s are screaming in pain, because that signifies they’re still alive (in the RE sense ;)).

Wait until they’re dead.

 
 
 
Comment by Mo Money
2006-06-30 13:48:49

“Bubbleologists have created the impression that the entire housing market consists of rental-property, second-home, flip, fix-and-flip, and buyer-panic-above-list speculation. The reality is the reverse: people buy homes to live in them.”

Bwahhhh ha hah hah ! Stop it you’re killing me !

http://www.inman.com/inmannews.aspx?ID=53914

Comment by foobeca
2006-06-30 13:58:04

About 40% of homes were bought as “investments” last year. The other 60% were bought to live in. But someone that buys a house to live in that gets an option arm with stated income and nothing down is speculating, even though they live in the house.

Comment by Mo Money
2006-06-30 14:01:17

Somebody who is articulate please respond to the editor, I’d be too big of a d*ck :-)

 
 
Comment by Marc Authier
2006-06-30 14:08:11

Yes that is why 40% of real estate is bough by somebody that does not live in the house in question.
It’s a bubble. It’s a bubble. It’s a bubble.

 
Comment by bacon
2006-06-30 14:09:59

“The most exposed are the hybrid adjustables, predominately 5-year stuff closed from ‘02 to ‘04 at rates near 4 percent. Only the very first of those bombs are going off now, and they are easily refinanced. Conversations at my desk make plain more annoyance than discomfort and disinterest in giving up a 3 percent-per-year advantage by refinancing now — the nearly unanimous choice is to wait to refi.”

“easily refinanced”
“more annoyance than discomfort”.
this guy’s in Colorado? apparently he hasn’t seen the news about his state’s national foreclosure ranking.

 
Comment by John Fontain
2006-06-30 18:16:25

“Inventories of unsold homes are piling up, but current estimates of 6.5 months’ supply are not bad. Trouble lies close to a year’s supply, and inventories tend to stop growing before that as sellers give up on cashing in before markets slow.”

So let me get this straight. The market will be in trouble if inventory rises to 12 months, but its impossible for inventory to get to 12 months because sellers give up on “cashing in?” Isn’t this the whacky “nobody HAS to sell” myth we’ve heard so many times before? Gee, thats odd because every other craigslist listing in my hood says “owner desperate - must sell” or “moving - must sell” or “seller has purchased HOC, must sell.”

And what’s this about “cashing in?” If inventory gets close to 12 months it’ll be more like “equitying out.”

 
 
Comment by Mort
2006-06-30 14:02:03

Correct me if I’m wrong with my terms here. Are we the bubbleheads or are the flippers? I looked it up and bubblehead is a term for submariners, so I guess the flippers and Helocers are the bubbleheads because they are all underwater. Bwahaha. Does that make most of the rest of us “bust heads”? That’s even funnier. I crack myself up sometimes.

Comment by Marc Authier
2006-06-30 14:10:37

Busted heads are not nice to see after a car accident or in war. Believe me.

 
 
Comment by John Law
2006-06-30 14:20:17

good lord, only $1,500/month to control a $500,000 property? this will get ugly, and it’ll get ugly because some of these people will try to hang on.

 
Comment by flatffplan
2006-06-30 14:26:50

if you know rates are going up go all in on RYDEX JUNO
I dought it -when the 10yr hit 6 the RE market would put us into a recession pronto
whoops already is at 5.2

 
Comment by Sensible Lender
2006-06-30 14:35:35

I am seeing more people with “Option ARMs” concerned about their rate/increase/negative-amortization (my bank does not do Option ARMs.)
One Couple has an ARM with current monthly adjusting rate of 7.75%, payment of $1,520. Minimum interest only payment at this rate is $2,842. So, their principal increases 1,321 per month and accrues at this high rate. They cannot afford more than the 1,520 per month to refinance into a fixed rate loan at a lower rate, so they are stuck.

Another guy has an Option ARM with a payment of $898. His rate is 7% adjusting monthly. At this rate his interest only payment would be 1,563. To refinance into a 30 year fixed loan, his housing ratio (mortgage, tax, Homeowner’s fee on condo) is 54%. This means he does not qualify and cannot refinance/convert.
I can give you more examples. What this means is that people are qualifying at artificial and unsustainable low payments. A lot more people are buying houses who couldn’t with these high prices, using these loans. Many do not know what kind of loan they have and how it works. The question is whether these loans have benefited the housing market, and the individuals who have them. We will not know this until the future, but I feel the outcome will not be good.

Comment by Housing Wizard
2006-06-30 15:24:14

I can tell you right now the marginal underwriting did not benefit the housing market ,and I don’t need time to tell me what the effect will be .
Not only did the easy underwriting ,(qualifying based on a teaser rate ),put the buyers at risk , it put the Nations funds at risk .

The original idea of the adjustable loan was that with payment increases ,or inflation , wages would go up also ,so people could afford the higher payments as their wages would rise .

In that we are not getting real wage increases in most sectors the theory has failed .

IMHO , a greater down payment should of been required on a adjustable loan, not less . At least the fixed rate borrower qualified for the payment ,so I would of been more willing to give 100% loan on the fixed . The current underwriting is ass backwards .
What did the easy money do? It created a higher demand for housing and house speculation which drove up the prices in almost all cities and states . Now the marginal buyers and speculators need to unload the houses or go into foreclosure . This will raise inventory and prices will fall .
No , it wasn’t good to put people into houses they really couldn’t afford in the long haul .
I contend that a major % of recent buyers bought based on a speculation intent or a response to fear they would be priced out forever .

Really , putting people on loans they can’t afford down the road is a bad faith thing to do IMHO . As we are seeing now , real estate does not always go up ,so people can’t be saved by that .

I am just sick about it .

 
Comment by Jim A.
2006-06-30 18:29:06

Who is buying and or insuring these loans? Exactly what kind of “Yield, I need Yield” moron thinks that they stand ANY chance whatsoever of getting their money back?

Comment by Housing Wizard
2006-06-30 21:39:48

They were betting on real estate going up and people selling ,(along with getting a hefty pre-payment penalty on a lot of adjustables notes ).

 
 
 
Comment by flatffplan
2006-06-30 14:35:59

commercial RE MLS ? does it exist
tia

Comment by mrincomestream
2006-06-30 15:45:17

Yea but it’s real pricey. In the area of 2 grand per mo.

Comment by ajh
2006-06-30 23:48:06

That would sure discourage the tyre-kickers.

 
 
 
Comment by Sammy Schadenfreude
2006-06-30 15:38:14

“The handful of foreclosures that Ron Davis, CEO of Virginia Heartland Bank, has seen, for example, involved people who had bought property with the intent to sell, but got stuck with unanticipated mortgage payments when the real estate boom started to stall.”

Heartwarming!

 
Comment by dennis
2006-06-30 20:26:21

I live here in OC Calif and still rent after selling my home a year ago.What I do not understand ,are all of the new BMW’s,Hummers and the like running around the streets that you did not see several years ago. I know wages and salaries are good but not that good.Could the public go bankrupt this time around instead of the County? RE is still hanging way above where it should be and the RE vertising on the Radio is still promoting any kind of refinancing you need. Where is the end? It does not make economic sense what is going on these days!

 
Comment by tom stone
2006-07-01 07:10:07

no problems here in sonoma county,only 70% of loans last year were arms or i/o,and only about a 1 year inventory,no problem at all…now in the east bay area you have rossmoor with a 10 year inventory…..which indicates some softening in the marrket since last year when it was a 60 day inventory….however,everyone wants to live there,and i’m sure the market will pick up after october 31st…..2020.

 
Comment by NL
2006-07-01 12:07:12

I was in Tokyo last week. Used to be known for high prices. Back in the 1990s I worked briefly for a real estate company there and know the market. I’ve been telling people in the US that New York City condos will eventually go for 100x monthly rent. That’s $200K for a condo that would rent for $2K per month. When you do the numbers the cap rate works out to about 8%. People think I’m nuts. In Tokyo you can now buy beautiful downtown apartments, in the best neighborhoods, for 120x monthly rent, and get a 3% mortgage. That’s after a couple years of appreciation — and full retail, not foreclosure/liquidation etc.

 
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