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2008: The Yard Sale Economy?
12-23-2007, 09:17 PM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,003
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2008: The Yard Sale Economy?
According to columnist Scott Burns, a byproduct of the residential real estate mortgage crunch could be a national yard sale.
"Query: Where do you find the money to cover your mortgage when it resets to, say, 7 percent and a new monthly payment of $1,331? That’s another $257 a month.
Answer: You cover the increased payment by selling a car. You replace it with a less expensive car. Hopefully, a no-payment car. That can reduce monthly debt service by as much as $495.
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Will everyone do this? No way. But enough will do it to shift the supply/demand balance and make it a buyer’s market."
Cars, boats and other “stuff” eventually depreciate to zip. But houses usually appreciate. Millions of financially strained households will empty their closets and garages before they give up their houses. That’s why I think a substantial portion of the ongoing real estate story will play out in other markets. That’s where the solutions are. Those with cash get the silver lining: 2008 will be a good year for bargain-hunting."
Craigslist.org anyone?
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Numbers is hard
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01-01-2008, 08:21 AM
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#2
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,299
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I think he worries too much. Or maybe I don't understand why anyone would use an ARM to buy a house if they're not planning on moving before it reset.
But then again, I don't understand the mind set of someone who would take out a home equity loan to take a vacation - if they don't have the cash they can't afford it. I always thought the object was to eliminate debt, not dig the hole deeper.
Admittedly when I was in the fraud section all of us were sometimes amazed at how creative people can be at screwing up their lives.
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When I was a kid I wanted to be older. This is not what I expected.
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01-01-2008, 08:30 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,003
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Quote:
Originally Posted by Walt34
Admittedly when I was in the fraud section all of us were sometimes amazed at how creative people can be at screwing up their lives.
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And those were just the ones who came to your attention by committing a crime. Imagine the many thousands of creative citizens who screw up their financial lives without ever breaking the law!
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Numbers is hard
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01-01-2008, 07:23 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,610
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Yep, it's happening. I'm boat shopping and I saw one the other day that said, "HELP ME SAVE MY HOUSE--BUY MY BOAT."
Sadly, this was not the boat I am looking for.
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01-01-2008, 10:06 PM
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#5
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Full time employment: Posting here.
Join Date: Dec 2005
Posts: 567
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My nephew isn't stupid but you wouldn't know that from the way he treats money. He had a gambling problem when young but stopped that over ten years ago. He got married and bought a house 10 years ago spending 125K on the house using money borrowed from his grandma for the down payment. Now he has refinanced several times, tells me he is still sub prime and owes 200K now. The rate resets next August to over 10% and he has a prepayment penalty until then. I asked him if he hadn't improved his credit since he got his mortgage and he said it went down because he spent too much. They have two new vehicles and other debts. He asked me if he could borrow 50K to pay off cars and things next August so he could get a better rate refinancing but I told him no.
At least he knows what if mortgage is, nobody tricked him, he has steady work, his wife has a job but lost a couple of months work at the end of 2006. He is putting a little in his 401K plan in international funds that grew good last year but no other savings.
He will need to think through his problems but at least he knows they were caused by overspending so maybe soon he can think up the idea of spending less than they earn. You would think a bright 38 year old could think up the concept of living below your means.
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01-01-2008, 10:29 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
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Quote:
But then again, I don't understand the mind set of someone who would take out a home equity loan to take a vacation.
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This may sound silly - how about taking out a home equity loan from Penfed at 4.99% as part of the down payment for bargain hunting on houses? Rent it out and wait for the recovery. However, it's hard to know when will the bottom occur based on the home-price index: Image:Shiller IE2 Fig 2-1.png - Wikipedia, the free encyclopedia.
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