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Old 08-12-2008, 06:02 AM   #81
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I sure do not know where this stuff is headed, but, the trend line does not appear positive (at least to me): A dead end on the road to housing recovery - Aug. 12, 2008
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Old 08-12-2008, 08:32 AM   #82
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Originally Posted by siamamerican View Post
I agree, and I was speaking from my personal experience with challenging loan to value issues. 2001-late 2007 lenders could work through bad loans. For example, help the borrower improve their credit or just wait 6 months for the property value go up. With decreasing borrower equity, it is extremely hard to fix loans suspended or returned by investors.

This downturn gained more and more steam as home values dropped. Not only were lenders loan portfolios performing poorly, investors drastically curtailed their appetite for these loans. Lenders without sufficient cash to fund their portfolios went belly up.

Who is to blame:
Many Lenders
Many Borrowers
Many Investors
Greenspan
Bernanke

Better yet, why waste your time blaming anyone and learn from the experience. When something is too good to be true, usually it is. For those that purchased their home 10 years ago, they have done quite well. This market correction was well overdue.

As for why the financial sector is rebounding, investors are forward looking and are anticipating the bottom. I don't think we are near a bottom, but I also thought the market would peak in 2003. Hard to say where the market is going, even with historical home value data showing homes are still over valued.
A couple things... when you talk about financials rebounding, it is forward looking. Them crashing was too... look at the writedowns (lack thereof) when the financials started going down the tubes... they were all having ridiculously high P/E (ttm though), and were looking forward to the writedowns and mark to markets that were inevitable. The stock market looks in advance, so that right now the market may be predicting how they'll recover in 12, 18 or 60 months... I don't know.

Also, I understand the gravity and severity of the whole subprime / Alt-A loans, but I feel you overstate the crisis too much. Like CFB said, to be 40% under you would need to buy RIGHT at the top with 0% down in the highest bubble areas. Most of the areas in the country have dropped less than 10%, and when you think of the number of people who have loans older than 3 years ("most" of the people... getting back to that word), the people who are underwater is not a large(it is a significant) segment of the population. The people who will default on their loans will bring other property values down, which may have a slight self-feeding cycle, but the extent to which you think that it will crash I feel is slightly overstated.

P.S. I still don't think there will be a big real estate "recovery" for 2 years (but then again real estate is local, so it may be very different for different people)

P.P.S. Heartfelt apology to CFB for quoting someone on the iggy list.
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Old 08-12-2008, 09:56 AM   #83
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A couple things... when you talk about financials rebounding, it is forward looking. Them crashing was too... look at the writedowns (lack thereof) when the financials started going down the tubes... they were all having ridiculously high P/E (ttm though), and were looking forward to the writedowns and mark to markets that were inevitable. The stock market looks in advance, so that right now the market may be predicting how they'll recover in 12, 18 or 60 months... I don't know.

Also, I understand the gravity and severity of the whole subprime / Alt-A loans, but I feel you overstate the crisis too much. Like CFB said, to be 40% under you would need to buy RIGHT at the top with 0% down in the highest bubble areas. Most of the areas in the country have dropped less than 10%, and when you think of the number of people who have loans older than 3 years ("most" of the people... getting back to that word), the people who are underwater is not a large(it is a significant) segment of the population. The people who will default on their loans will bring other property values down, which may have a slight self-feeding cycle, but the extent to which you think that it will crash I feel is slightly overstated.

P.S. I still don't think there will be a big real estate "recovery" for 2 years (but then again real estate is local, so it may be very different for different people)

P.P.S. Heartfelt apology to CFB for quoting someone on the iggy list.
No argument here. The problem I had with CFB is that he was a little touchy about the word MANY. Many borrowers are 40% under In California, Arizona, Nevada and Florida is what I stated. Never said the majority and that was the definition he used for many.

CFB owns property in the Stockton area and I understand the pain. Many of the people that work for me bought homes in this area in 2006-2007 are 40% underwater.

I agree with your comments about stock market - who really knows.

I'm on the iggy list (Iggy Pop)?
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Old 08-12-2008, 10:50 AM   #84
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I went with some clam chowder. Clams sort of look like brains.
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Old 08-14-2008, 09:03 PM   #85
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My aunt was in real estate for a long time and ended up working at a brokerage in SoCal at the end of her career. She got a ringside seat for the beginings of this nice little situation we've found ourselves in.

In the end, she had to retire because of the nasty office bullying she got for refusing to go along with ridiculous and irresponsible loans. In fact the bullying mostly took the form of 'you're an old hag who is too old to understand how credit works now..."

What makes the sad story interesting to me is that she retired more than 4 years ago...so just how long was all that nasty credit getting issued before the *crisis* came along?
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Old 08-15-2008, 03:00 AM   #86
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With the caveat that plural of anecdote is not data, let me share one.

My 29 year old niece and her husband recently bought a house in Riverside, CA which is pretty much ground zero for the bubble bursting and foreclosures. It took them almost 4 months because twice they were outbid on houses in foreclosure. It is true that the houses that had sold for 500-600K were now being listed at 1/2 that price but the bids were over that.

On there 3rd attempt they were successful. The house is 4 Bdr 2 bath 15 years old and just about 2,000 ft. It is in a nice neighbor with only a few foreclosures in the neighborhood. It within walking distance for the oldest of their 3 kids to walk to elementary school and good schools by Riverside standards.

They put 20% down (having previously sold a house in Arrowhead near the peak) fixed 30 mortgage in the 5.75% range. So here is the question for you real estate experts, what is their household income?
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Old 08-15-2008, 06:30 AM   #87
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Beats me. What did they pay? If they got a 600K place for 1/2 that would have been 300K minus 20% down would be a mortgage of 240K (or 500K at 1/2 price or 250K minus 50K down would be mortgage of 200K). If they got a mortgage fixed in the 5.75% "range" I assume they have a very good credit rating (of course a single number is not a "range"). In the old days they either got a chunk of $$ in the bank where they got the mortgage or a household income (original question # 86) in the 80K range (or a combination of the two).
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Old 08-15-2008, 07:13 AM   #88
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With the caveat that plural of anecdote is not data, let me share one.

My 29 year old niece and her husband recently bought a house in Riverside, CA which is pretty much ground zero for the bubble bursting and foreclosures. It took them almost 4 months because twice they were outbid on houses in foreclosure. It is true that the houses that had sold for 500-600K were now being listed at 1/2 that price but the bids were over that.

On there 3rd attempt they were successful. The house is 4 Bdr 2 bath 15 years old and just about 2,000 ft. It is in a nice neighbor with only a few foreclosures in the neighborhood. It within walking distance for the oldest of their 3 kids to walk to elementary school and good schools by Riverside standards.

They put 20% down (having previously sold a house in Arrowhead near the peak) fixed 30 mortgage in the 5.75% range. So here is the question for you real estate experts, what is their household income?
Following up on OAG's post, and assuming the house sold for 300,000, the monthly principal/interest payment on a 30-yr fixed rate of 5.75% on 240,000 would be 1,400, or 16,800 per year. Add in RE taxes of 5,000 (my estimate) and insurance of 1,200 (again my estimate), and we have an annual expenditure of 23,000.

In the "old days" when I was taking out mortgages, the annual expenditure could be 28% of your pre-tax income. Assuming lenders have gone back to something close to this old standard, their annual income should be around 82,000.
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Old 08-15-2008, 07:54 AM   #89
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I'll bet a shiny nickel they make 95K between them ... now I need to go find that nickel
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Old 08-15-2008, 09:01 AM   #90
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Hey, I remember this one. So if a train leaves cleveland at 4:30, and another train leaves milwaukee at 12:10, and the airspeed of a european swallow is roughly 11 meters per second, then they make about 65,000 between them.
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Old 08-15-2008, 09:41 AM   #91
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Please do not tell me that someone took on that large a mortgage and housing expense load with less than $90,000 annual income. Getting back to the original thread, it amazes that people could have been so stupid to take out ARMs and other gimmick mortgages with very small down payments on housing that was obviously overvalued. I have trouble feeling sorry for stupid people. Perhaps they should lose their homes and go homeless for long enough to learn something from all this. I do think the overall problem is not as serious as the financial pundits want us to think it is and that the problem is worsened by all the negative reporting. Fear and greed have amazing impact in all markets.
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Old 08-15-2008, 09:45 AM   #92
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CFB owns property in the Stockton area and I understand the pain. Many of the people that work for me bought homes in this area in 2006-2007 are 40% underwater.
siamamerican,
...You actually pay good money to people who are that stupid. You may want to rethink your hiring practices.
Jeff
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Old 08-15-2008, 09:49 AM   #93
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Ooh I missed that part. Man, there were a lot of good opportunities...darned ignore list.

I missed the part where I own property in the stockton area. Stockton is about 2.5 hours drive away from where I live. Is that still considered "in the stockton area"?

I think what we had here is someone who got THEMSELVES in 40% underwater ltv, and probably talked all their employees into making the same bad decision. So to make that situation more palatable, its best to believe that MANY people are in the same situation.
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Old 08-15-2008, 10:35 AM   #94
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Ooh I missed that part. Man, there were a lot of good opportunities...darned ignore list.

I missed the part where I own property in the stockton area. Stockton is about 2.5 hours drive away from where I live. Is that still considered "in the stockton area"?

I think what we had here is someone who got THEMSELVES in 40% underwater ltv, and probably talked all their employees into making the same bad decision. So to make that situation more palatable, its best to believe that MANY people are in the same situation.
I think you guys are pessimistic because you live in areas that have WAY overpriced real estate. Where I live, housing sales are 11% down fron last year, but the area had an overall appreciation of 1%. What we really need is the gov to quit bailing out everyone who makes bad financial decisions..........
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Old 08-15-2008, 10:36 AM   #95
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Ooh I missed that part. Man, there were a lot of good opportunities...darned ignore list.

I missed the part where I own property in the stockton area. Stockton is about 2.5 hours drive away from where I live. Is that still considered "in the stockton area"?
Stockton and Modesto have been hit by a triple whammy: a general softening in housing overall, the popping of the bubble in California and the devaluation of real estate in the exurbs where long, expensive commutes are required for most decent jobs.

When gas was cheap people flocked there while holding jobs in Silicon Valley or San Francisco, able to buy a house for half the price (or less) of a house in the Bay Area proper. Now that gas prices have conspired to make the overall cost of living in these far-flung areas less attractive, look out below...
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Old 08-15-2008, 11:24 AM   #96
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I think you guys are pessimistic because you live in areas that have WAY overpriced real estate. Where I live, housing sales are 11% down fron last year, but the area had an overall appreciation of 1%. What we really need is the gov to quit bailing out everyone who makes bad financial decisions..........
But its California..it should be worth this much..


Damn Ive lived out here too long. Im losing my soul..
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Old 08-15-2008, 12:54 PM   #97
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Stockton and Modesto have been hit by a triple whammy: a general softening in housing overall, the popping of the bubble in California and the devaluation of real estate in the exurbs where long, expensive commutes are required for most decent jobs.

When gas was cheap people flocked there while holding jobs in Silicon Valley or San Francisco, able to buy a house for half the price (or less) of a house in the Bay Area proper. Now that gas prices have conspired to make the overall cost of living in these far-flung areas less attractive, look out below...
I agree completely.

The flogging is about a particular poster who claimed that "many" people are 40% underwater LTV. It may be that a some people in the worst bubble areas who bought at exactly at the wrong time and did a 100% finance are 40% under. The comment made no sense since only a few people nationwide find themselves in that situation, and I doubt the term 'many' applies to people living right in the bubble areas.

The poster then became rude and tried to argue that the dictionary definition of the word 'many' was incorrect.

The truth is that MOST people who live in the worst bubble areas bought before 2004 and may still be up, even after the beating. My house in Yuba City, beaten up as badly as the stockton/modesto area, sold for $175 in 2002, $250 in 2003, $350 in late 2004 and close to $400 in early 2005. I sold it in 2007 for $310. I could still get $240-250 for it today. Not much sold in 05-07 in my subdivision there. Some people paid a little more than their house is worth today. Most bought them for less than their current value.

The only homes that went into foreclosure in the subdivision were due to people buying other homes, putting their old house up for sale at bubble prices when the bubble was quite certainly over, and then sticking with their price. For a year.

So what you have are SOME people that severely overpaid for their homes, did stupid finance tricks and/or were stubborn about selling at a price people would be willing to pay.

I have as much sympathy for them as the folks who piled into the NASDAQ in early 2000 because "everyone else is doing it".
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Old 08-15-2008, 01:10 PM   #98
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Stockton and Modesto have been hit by a triple whammy: a general softening in housing overall, the popping of the bubble in California and the devaluation of real estate in the exurbs where long, expensive commutes are required for most decent jobs.

When gas was cheap people flocked there while holding jobs in Silicon Valley or San Francisco, able to buy a house for half the price (or less) of a house in the Bay Area proper. Now that gas prices have conspired to make the overall cost of living in these far-flung areas less attractive, look out below...
I've brought it up before and I will again... will oil prices and the global changing economy lead to a deflating in exurb and suburb pricing, with the benefits going to inner city real estate values and gentrification? I think it may have a small, but noticable effect in years to come, but obviously it depends on what city, what industry, what houses, etc. etc.
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Old 08-15-2008, 01:11 PM   #99
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They put 20% down (having previously sold a house in Arrowhead near the peak) fixed 30 mortgage in the 5.75% range.
Can you tell me where and when they got this 5.75% for 30FRM? Even with excellent credit, 5.75% is awfully low for a recent mortgage loan...

tmm

P.S. BTW, my calculation shows they need to make at least $77,167/yr to buy a $300K house with 20% down (with 1.1% prop tax and 5.75% mortgage rate no debt)
I used http://www.katebransfield.com/r_mortgage-calculator_qualifier.asp
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Old 08-15-2008, 01:18 PM   #100
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They put 20% down (having previously sold a house in Arrowhead near the peak) fixed 30 mortgage in the 5.75% range. So here is the question for you real estate experts, what is their household income?
Smells like a trick question... At the very least, there's no data to make a statement.

1) < $10k earned income. Large portfolio, good credit, dividends.

2a) > $200k. They just wanted to buy less house than they needed.
2b) > $200k. And even with that much income and good credit they still had a hard time getting the loan because so many banks are scared to lend.

3) ~$80k. They bought the most house they could afford because they think it's a good buy.

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