Housing Crisis

[32shutout]

Hey all-
I thought that there was an interesting debate on the oil thread that got way off track, but thought that it could be continued here in it's own forum.
I would be very interested in hearing what the forum feels should be done in regards to the housing crisis. I personally feel that government intervention is not the answer, and that an agreement freely entered upon by two parties should be enforced. I tend to believe that it is a result of people making ill-informed decisions taking an adjustable loan, perhaps not fully understanding the situation they are getting themselves into.
But i'm no expert, and i would love to hear some opposing views

[Bryan]

Crisis? What Crisis?

[influenza]

i think the banks should eat it. they pay people millions of dollars a year to figure out how to profit. they should have known this would happen, and they should have stayed clear from it. it's a combination of the war, adjustable mortgages, bad government, all causing a down turn in the economy. it's starting give me a headache, and i live in canada!

[Aaron]

ARM's are just like gambling. When I bought my house 6 years ago, I could have gotten an ARM or a 30yr loan at %5 1/4. I took the 5 1/4 and I'm happy I did.

[sloth2946]

I, like Bryan wouldn't call it a crisis per se, rather a major correction for about a decade of stupid decisions by banks and more importantly potential home owners.

They, the home owners say they were duped into signing what they didn't understand...I say bull****. Read the ****ing papers. Don't just take the word of some high school drop out who works off of a commission to tell you that you can afford it when you really can't.

Banks made some risky decisions....so what...they have to deal with it too.

Any government money put into this is a mistake. This correction needs to occur to right our economy. People need to be foreclosed upon because they can't afford their houses. Banks need to lose money so that they can be more prudent with their lending.

And realtors need to realize that their collusion techniques that artificially drove up house prices have massively aided in this so they should quit their bitching about the market and their smaller commissions.

Guys like me, who could have gotten a very nice home with an ARM realized that it was gambling, like Aaron said. So I decided to wait it out so prices could become more reasonable again and fixed interest rates on 30yr mortgages is where they make sense for us.

I should hear by next friday on whether I get the home that I have been pursuing which when I am done fixing it I will have gotten it 60-70K below market. There will be winners in this and it is likes of me and other investors who pick up these short sales and foreclosures to turn them around at the right time.

[Bryan]

Originally Posted by sloth2946

I, like Bryan wouldn't call it a crisis per se, rather a major correction for about a decade of stupid decisions by banks and more importantly potential home owners.

They, the home owners say they were duped into signing what they didn't understand...I say bull****. Read the ****ing papers. Don't just take the word of some high school drop out who works off of a commission to tell you that you can afford it when you really can't.

Banks made some risky decisions....so what...they have to deal with it too.

Any government money put into this is a mistake. This correction needs to occur to right our economy. People need to be foreclosed upon because they can't afford their houses. Banks need to lose money so that they can be more prudent with their lending.

And realtors need to realize that their collusion techniques that artificially drove up house prices have massively aided in this so they should quit their bitching about the market and their smaller commissions.

Guys like me, who could have gotten a very nice home with an ARM realized that it was gambling, like Aaron said. So I decided to wait it out so prices could become more reasonable again and fixed interest rates on 30yr mortgages is where they make sense for us.

I should hear by next friday on whether I get the home that I have been pursuing which when I am done fixing it I will have gotten it 60-70K below market. There will be winners in this and it is likes of me and other investors who pick up these short sales and foreclosures to turn them around at the right time.

FWIW, I mostly commenting on the difference between the US and Canadian housing situation, where ours is booming (best it's ever been, my house has more than doubled in value in the last 5 years).

But you are totally spot on that the problems people in the US are having are almost entirely their own doing. I remember on this forum a few years ago I commented that people are crazy to let themselves get saddled with such huge mortgages, and a few people chimed in with "well, my bank thinks it's a good investment".

Seriously, there's people out there who make less than 50k/yr household, and they got into half million dollar mortgages, and they are surprised that they couldn't afford it? If there is a crisis, it's a crisis of stupidity.

[PSULion22]

Originally Posted by sloth2946

I should hear by next friday on whether I get the home that I have been pursuing which when I am done fixing it I will have gotten it 60-70K below market. There will be winners in this and it is likes of me and other investors who pick up these short sales and foreclosures to turn them around at the right time.

I, like you, will be a winner in all of this. I close on my house on May 19th. It is a foreclosed home that I am buying $125K below what the previous owner paid for it, two years ago. That's a 36% drop in price, about $25k below appraisal, and about $75k below comparable homes. It's also in great condition, which is something that can be risky with foreclosures. It needs about $3000 of work, mostly general maintenance and a fridge and washer. I'm putting in wood floors which will run about another $3000. When I am all done, and have spent maybe $7500-8000 in upgrades/repairs, I would gain about $50+K in appraised value. And, my loan is a low fixed 30 yr. The rate is yet to be determined as we think the banks will lower rates a little on the cusp of the Fed's rate cut today. Regardless, it will be less that 5.75%.

[mcboz44]

Originally Posted by PSULion22

I, like you, will be a winner in all of this. I close on my house on May 19th. It is a foreclosed home that I am buying $125K below what the previous owner paid for it, two years ago. That's a 36% drop in price, about $25k below appraisal, and about $75k below comparable homes. It's also in great condition, which is something that can be risky with foreclosures. It needs about $3000 of work, mostly general maintenance and a fridge and washer. I'm putting in wood floors which will run about another $3000. When I am all done, and have spent maybe $7500-8000 in upgrades/repairs, I would gain about $50+K in appraised value. And, my loan is a low fixed 30 yr. The rate is yet to be determined as we think the banks will lower rates a little on the cusp of the Fed's rate cut today. Regardless, it will be less that 5.75%.

That is my exact story word for word, right down to the closing date. I am buying a house that sold in March of '06 for 573k for 290k. The house appraised for 425k last week. It is a house that a police officer with 3 kids on a single income has absolutely no business living in. I was able to turn a nice profit on the house I bought four years ago because I bought within my means and went with a 30 year fixed.

[TIMMAAYY]

Housing prices are still dropping, with the exception of the very short list of "can't lose" markets in each state.

I think we're in for at least another year, if not two years, of falling real estate prices and markets. Why?

You have to remember how long they offered these silly jumbo loans and consolidation loans and how long they lowered and reduced the requirements for FHA lending. MILLIONS bought way beyond their means. None of those people planned ahead and ended up with payments FAR beyond what they could afford if interest rates rose... and now they can't afford it and have to go. They've lost their ass and have nothing to show for it. It's not just the real estate people, it's the lenders, and the stupid people taking the sucker's bet that bought into it. Sounded great at the time.... sure.... if you're a moron. It's not just low and middle class housing, there are lots and lots of high dollar losers too. The FHA limit was well into the $300k range ( I think it's lower now ).

Between that and the general loss of the dollar's buying power, if you are trying to sell your house as the average Joe with intentions of making a decent return and upgrading, good luck. It's going to be awhile. It may be a buyer's market, but it's not even close to ending yet.

[kwm13]

Hey that's my house. I am the the total moron that bought it even though it was way out of my price range. By the way its everybody else's fault but mine. The bank gave me the mortgage so I should have no responsibility, let the government bail us all out.
Seriously, if you find yourself in the face of foreclosure because of an A/R mortgage not only should you lose your house but you should not be allowed to reproduce.

[Aaron]

I love the fact that my house value dropped about $4000 but my property taxes went up

[Matt The Hammer]

Buy my house.

I have had like 30-40 showings since the end of February when I listed it.

Cable tv in the bathroom alone is worth it.

[Steve L]

Originally Posted by Bryan

Crisis? What Crisis?

What does Supertramp have to do with this?

[PSULion22]

Originally Posted by Aaron

I love the fact that my house value dropped about $4000 but my property taxes went up

That sucks! It's kind of like down here in West Palm Beach. Two years ago, during hurricane season, Lake Okeechobee, which is the main water source for South Florida, overflowed. So, last year, the County drained part of the lake to accomodate the increased rain. Well, we didn't get any major hurricanes, and therefore no surplus rain. The lake level has been low since, and we have been on water restrictions. Last month, West Palm Beach increased its water rates to compensate for the lost revenue from the water restrictions! WTF?!?!?! If you use too much water, you get fined, but if you don't you pay more since you didn't use enough water!

[Steve L]

Originally Posted by Aaron

I love the fact that my house value dropped about $4000 but my property taxes went up

One of the few good things in California was "Prop 13" that passed into law many years ago. Basically, it says that the assessed value of your home is fixed at the time of purchase, and can only be completely reassessed if sold to a new owner. If you do a major addition or something to increase the value, they can only reassess for the increased of the addition, not the whole "current value" of the property.

That does create some disparity in how much people pay in taxes. I have been in my house about 10 years, and my next door neighbor moved in about two years ago (right at the peak of value). He pays about three times the property tax that I do, but he also paid about three times the price for the house than I did.

There are many people, both liberal and conservative, that want to do away with Prop 13 as it clearly cost the government a lot of tax revenue. That won't happen.