NationStates Jolt Archive

Some people are already saying that the hard landing is here (http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&CFID=8162040&CFTOKEN=76697441&category=Market%20Commentary&newsletterid=1263&menugroup=Home). Now what I don't know about the housing market and economics in general could just about fill the Grand Canyon, but I can look at these statistics and see that something bad is going to happen, and soon.
32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000

Ø 43% of first-time home buyers in 2005 put no money down.

Ø 15.2% of 2005 home buyers owe at least 10% more than their home is worth.

Ø 10% of all home owners have no equity in their homes

Ø $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.

Ø 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.

Ø Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.

Ø According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.

Ø The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.

Ø New home sales are down 22% and existing home sales down 11%.

Ø The NASB housing market index has recorded an all-time decline.

Ø The housing affordability index is at a 15-year low.

Ø The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.

Ø The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.

Ø According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.

Ø Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.

Ø Sales incentives are now estimated at 3% to 7% of selling prices.
Factor in that something like 40% of the job growth in the last 5 years has been in construction and financial services sectors, and you're looking at some real potential economic damage here.

On the upside, if I can keep my job for the next five years or so, the market might collapse to the point where I can actually afford a house. Yay other peoples' misery?

On the upside, if I can keep my job for the next five years or so, the market might collapse to the point where I can actually afford a house. Yay other peoples' misery?

on the upside you dont own a house and dont have to worry about how to make your payments now that the chickens are coming home to roost on the stupid decisions you made when buying a house.

interest only adjustable rate mortgages are a fool's bet. im wondering how the various financial instutions are going to cope with the massive numbers of forclosures. are they hoping that after they own all the excess housing stock they can make the price start to climb again?

The reason the housing market is going to collapse is because of my friend Nicole. She recently got a $500,000.00 loan for a condominium. It's an ARM loan and she was approved as soon as she walked through the door. She makes maybe $30,000/year as a bartender at a cheesy topless bar.

The reason the housing market is going to collapse is because of my friend Nicole. She recently got a $500,000.00 loan for a condominium. It's an ARM loan and she was approved as soon as she walked through the door. She makes maybe $30,000/year as a bartender at a cheesy topless bar.

What kind of nitwit buys a $500,000 home on a $30,000 a year income? Just to pay off the principle on a thirty year loan would be $1388.88 a month as a payment, to say nothing of the interest rate, property taxes, insurance..

Suddenly, I don't feel so bad about buying a 100 year old house in a bad area that is almost paid for. :)

The reason the housing market is going to collapse is because of my friend Nicole. She recently got a $500,000.00 loan for a condominium. It's an ARM loan and she was approved as soon as she walked through the door. She makes maybe $30,000/year as a bartender at a cheesy topless bar.

how can she possibly make the payments? $500k is over 3000/month isnt it?

I sold my previous home/bought my new home just in time. I was able to get nearly twice what I paid for the home I sold- I only had it for four years.

This house is larger with much more property, but lower taxes. We paid the mortgage way down and the cost of living is less.
If I waited any longer, I would have been hurt by this slowdown.

how can she possibly make the payments? $500k is over 3000/month isnt it?

I am currently looking for a house and one of the banks that I was researching had a 60 year mortgage available with interest only due on the first 15 years then they added the principle back into your payments after that plus what you didn't pay on it during the first 15 years. :eek:

What kind of nitwit buys a $500,000 home on a $30,000 a year income? Just to pay off the principle on a thirty year loan would be $1388.88 a month as a payment, to say nothing of the interest rate, property taxes, insurance..

I don't know. I'm sure she won't. She'll be in default soon enough. That's the point, though. They're throwing these loans at people that could have never qualified ten years ago and they've been doing that ever since about 2000. We're about to have a wave of defaults because thw lending standards are so low and income verification is so lax. I'm sure she fudged some of her financial information, but the point is that she could.

I have no idea what's going on in here.

But.. um..

My house could get 10 times more profit than the houses 5 miles away..

*says sorry and leaves*

I am currently looking for a house and one of the banks that I was researching had a 60 year mortgage available with interest only due on the first 15 years then they added the principle back into your payments after that plus what you didn't pay on it during the first 15 years. :eek:

60 year mortgage! :eek: I don't think I'll still be alive in 60 more years! And no equity after 15 years? :eek: :eek:

What kind of nitwit buys a $500,000 home on a $30,000 a year income? Just to pay off the principle on a thirty year loan would be $1388.88 a month as a payment, to say nothing of the interest rate, property taxes, insurance..

I make more than twice what she makes and wouldnt consider assuming a mortgage for half of what she did.

And there's me thinking it's just the UK where the housing prices have gone through the roof. :eek:

60 year mortgage! :eek: I don't think I'll still be alive in 60 more years! And no equity after 15 years? :eek: :eek:

yeah, I think it's pretty bad if you can talk someone into that. I try to steer my clients away from such crap.

I did have a mortgage company today offer 100% financing, when I explained that we were going 80/20 and already had a letter of pre-qualifying I could almost hear the confusion in her head that someone could actually do an 80/20 on their first home purchase.

She asked about 5 times "how old are you again?" and "you do know that's 20% down right?" it really irked her.

I make more than twice what she makes and wouldnt consider assuming a mortgage for half of what she did.

I make roughly the same as her, and a 100,000 morgage makes me cringe. Fortunately with housing prices rapidly dropping like stones I can wait a bit and snag something dirt cheap.

I make more than twice what she makes and wouldnt consider assuming a mortgage for half of what she did.

I make nearly three times what she makes and live in the same market and begged her not to do it. She works in a bar. She has no real education. To her she was just think "house house house house..." She has no idea what she's doing but these mortgage brokers don't care. It's not their money they are lending.

I am currently looking for a house and one of the banks that I was researching had a 60 year mortgage available with interest only due on the first 15 years then they added the principle back into your payments after that plus what you didn't pay on it during the first 15 years. :eek:

Its bad enough people dont have equity in car loans- I would never take a 60 year mortgage-If you're buying a house, you have to have equity very early in the loan or you really dont have any business buying it.

People used to buy a starter home- less lavish, less features-and make some improvements themselves and gain some equity and sell- OR borrow against it for further improvements or college.
Now people are getting too much house, too early and feeding the foreclosure market. And contributing to a nasty bankrupt trend.

I make nearly three times what she makes and live in the same market and begged her not to do it. She works in a bar. She has no real education. To her she was just think "house house house house..." She has no idea what she's doing but these mortgage brokers don't care. It's not their money they are lending.

Yeah-and they'll have blown their commission before she defaults.

I make roughly the same as her, and a 100,000 morgage makes me cringe. Fortunately with housing prices rapidly dropping like stones I can wait a bit and snag something dirt cheap.

Keep saving towards your downpayment. Some people get the nasty surprise when they cant put enough down and have to have that PMI on the loan-this can add hundreds of dollars a month for years- its just money thrown out the window to the consumer.

I did have a mortgage company today offer 100% financing, when I explained that we were going 80/20 and already had a letter of pre-qualifying I could almost hear the confusion in her head that someone could actually do an 80/20 on their first home purchase.


I may be betraying my age, but I remember when 10-20% down was typical for home loans.

I make nearly three times what she makes and live in the same market and begged her not to do it. She works in a bar. She has no real education. To her she was just think "house house house house..." She has no idea what she's doing but these mortgage brokers don't care. It's not their money they are lending.

Buying a home should not be an impulse decision. About a year ago I tried to buy some land for 30k, sellers wouldn't play ball. Bet they would now. Oh well. I just want a nice, very tiny, house outside of the city.

Its bad enough people dont have equity in car loans- I would never take a 60 year mortgage-If you're buying a house, you have to have equity very early in the loan or you really dont have any business buying it.

People used to buy a starter home- less lavish, less features-and make some improvements themselves and gain some equity and sell- OR borrow against it for further improvements or college.
Now people are getting too much house, too early and feeding the foreclosure market. And contributing to a nasty bankrupt trend.

yeah, right now we are looking for a rental house (meaning we are going to buy it, fix it up, live in it for about 5 years and then rent it out) we are actually searching about 40K less than we are preapproved for, so it's fun. (and yeah we have the 20% for the pre-approval amount so we really won't have to borrow much at all and will probably get the loan paid off in 2-3 years)

and you are right about cars, we always pay cash for our cars, it's just idiotic to me not to. (but I understand why some people have to, I guess)

and you are right about cars, we always pay cash for our cars, it's just idiotic to me not to. (but I understand why some people have to, I guess)

Depends on what kind of interest rate you get on your money versus what you'd earn from investing the cash. I had a 5 year loan for my pickup which worked out to about $300 a month in payments. After interest rates dropped through the floor I refinanced and now only pay about $130. Granted I could pay it off (could have a couple years ago), but why? The money I haven't spent on it is making me more money.

Its bad enough people dont have equity in car loans- I would never take a 60 year mortgage-If you're buying a house, you have to have equity very early in the loan or you really dont have any business buying it.


My first house was a house I took over from my mom. She took a 30 year because of the lower payments, and complained that the principal took forever to go down. When I took it over, I paid twice the payment amount, and even then it took a long time for the principal to drop.

Depends on what kind of interest rate you get on your money versus what you'd earn from investing the cash. I had a 5 year loan for my pickup which worked out to about $300 a month in payments. After interest rates dropped through the floor I refinanced and now only pay about $130. Granted I could pay it off (could have a couple years ago), but why? The money I haven't spent on it is making me more money.

meh, I am sorta anti-debt. I figure if I am able to save up some money and buy a suitible car, and then not be in debt and not have to make payments, and not have that stress, then it's all good.

I live on less than half of what we make now anyway because we save for things that we need. We don't even have a credit card.

Depends on what kind of interest rate you get on your money versus what you'd earn from investing the cash. I had a 5 year loan for my pickup which worked out to about $300 a month in payments. After interest rates dropped through the floor I refinanced and now only pay about $130. Granted I could pay it off (could have a couple years ago), but why? The money I haven't spent on it is making me more money.

I got a 5 year 0% loan on my car. That was right after digging myself out of a deep debt hole, and I couldn't have paid cash for it then. I could easily pay it off now, but I don't have any reason to.

meh, I am sorta anti-debt. I figure if I am able to save up some money and buy a suitible car, and then not be in debt and not have to make payments, and not have that stress, then it's all good.

I live on less than half of what we make now anyway because we save for things that we need. We don't even have a credit card.

I have a credit card solely for the purpose of building up more credit. Found out last year my damn bank hadn't credited me for the loan. After they did that suddenly I got offers left right and center.

I have a credit card solely for the purpose of building up more credit. Found out last year my damn bank hadn't credited me for the loan. After they did that suddenly I got offers left right and center.

I have some credit, but not really a lot, I have found that the only real way to keep a good fico score is to be perpetually in debt, so that's really not an option for me.

My credit is clean enough that I can get a good rate, so I should be happy about that. Last year I finished paying off the medical bills from when my youngest was in the hospital, so being out of that debt is nice. (it's apparently way expensive for a kid to be in the hospital for a few months straight, did you know that stuff they put in the feeding tube is like $3K a day?!)

No one can afford to get sick in this country, which is a tragedy when people hesitate to see a doctor because they simply can't afford the cost.

No one can afford to get sick in this country, which is a tragedy when people hesitate to see a doctor because they simply can't afford the cost.

we have health insurance now, but back then we couldn't get her covered because of her health problems, we ended up oweing more than we are going to pay for a house.

I racked up enough debt in the 90's to keep my score high for the rest of my life. I don't need to rack up any more! :p For the last 4 years, my only debts have been my house & car, and both of those should get paid off in late 2007! :D :D :D

My first house was a house I took over from my mom. She took a 30 year because of the lower payments, and complained that the principal took forever to go down. When I took it over, I paid twice the payment amount, and even then it took a long time for the principal to drop.

This is good -and another tip to some that might not be aware- You absolutely MUST avoid late payment interest- this is interest acruing on the balance that should have been reduced on the due date, but your payment was late. Some people continually do this over the life of the loan and add years to a mortgage.

Try to at the very least, round your monthly payment up to the next hundred dollar mark- If your payments are $1,660.00 per month, try to always send at least and even $1,700.00 per month. This little extra shouldnt hurt, but will help knock the principal down quicker.

My wife and I send at the very least and extra $100.00 per month on the mortgage bill and a note advising to put the extra toward principal. Often, we are able to send more. We have also agreed to take money we have saved-Rebates, money saved using coupons, etc...and add that amount to our mortgage payment. Otherwise, it gets pissed away.

Also- we consistantly make our monthly payment a week earlier than its due. It only hurts a little the first time, then you're in place.
Over thirty years, you'll save a fortune.

My credit is so bad that you shouldn't lend me $5.

My parents at one point or another have worked on just about every aspect of the real estate market and it all still sounds like fucking voodoo to me.

I won't be able to buy a house because I have variable income, shit hole credit, and live hand to mouth so I can't save. I don't neccisarily see a light at the end of that tunnel either.

Though there is some mountain land near me that is kinda cheap (as far as I know) that I think it would be cool to own that I'd like to build a little off the grid dwelling. It'd be great. Not gonna happen for the above reasons.

I saw something about a month ago saying that there was a whole lot more unsold houses in San Jose last month than there where that time last year.

I got a 5 year 0% loan on my car. That was right after digging myself out of a deep debt hole, and I couldn't have paid cash for it then. I could easily pay it off now, but I don't have any reason to.

using their money for free is great, especially if you made a good deal on the car you bought and take good care of it.

I'll take it a step further and tell you what my father did- He got 0% for 60 months and figured how much he was saving if he didnt get ZERO and only got 6.9 %- he invests the amount of saving monthly, along with his regular investment amounts and uses their money to make money.
He knows what he's doing and makes more money from investments than he does on his pension and Social Security combined. And he retired 20 years ago.
He only used one credit card ever to earn flyer miles, but paid the entire balance every month no matter what. He has never paid interest on anything except the mortgage on his first house, which has been paid off for 30 years.

I hope I can reach his level of financial stability someday-I'm trying.

How many auto manufacturing jobs will we be down in 2 years?

The last recession was averted by people spending money they borrowed against their houses' inflated value.

When values drop, and the loan ammount exceeds the value of the house, the difference has to be paid.

With what money?

Some people are already saying that the hard landing is here (http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&CFID=8162040&CFTOKEN=76697441&category=Market%20Commentary&newsletterid=1263&menugroup=Home). Now what I don't know about the housing market and economics in general could just about fill the Grand Canyon, but I can look at these statistics and see that something bad is going to happen, and soon.

Factor in that something like 40% of the job growth in the last 5 years has been in construction and financial services sectors, and you're looking at some real potential economic damage here.

On the upside, if I can keep my job for the next five years or so, the market might collapse to the point where I can actually afford a house. Yay other peoples' misery?

All of that economic shit that we didn't catch following 9-11? Get ready for it now.

The Fed shielded the blow from that economic disaster by dropping the bottom out of interest rates to jack up spending. The result was an enormous housing bubble that makes the dot-coms look like nothing.

The vast amount of of lending money that hit the market, jacked up the stock market as well, so you might want to brace yourself for that as well.

Quick!

Someone call the Daily Mail!

Well, I think it's a little early to really see what direction housing is going; we have to remember that the market is coming down from irrational heights, and it is going to be very volatile with so many cross currents in the market pushing it one way or another. Remember, fear can feed fear very easily as a market approaches a top; in a market like housing, this fear can translate in to overcorrection and serious damage to the economy like it did in the early 90's.

Or, we might have a "Black Monday" situation on our hands, where a period of fear hits the market and causes it to crash but it ultimately rebounds and the uptrend continues.

Some good news is the fact that commercial/industrial construction is strong, commodity prices and inflation are moderating, retail sales are accelerating, consumer debt is slowing and incomes look like they are rising more consistently in real terms. These all may help to buffer the economy and avert a recession; it would be even better if enough people get out of their ARMs and in to longer-term fixed mortgages. That would avert forclosures and reduce the impact of rising interest rates on income.

I would say we will not have a recession this year, but it is possible that we might have a "growth recession" by Q2 2007.

Well, I think it's a little early to really see what direction housing is going; we have to remember that the market is coming down from irrational heights, and it is going to be very volatile with so many cross currents in the market pushing it one way or another. Remember, fear can feed fear very easily as a market approaches a top; in a market like housing, this fear can translate in to overcorrection and serious damage to the economy like it did in the early 90's.

Or, we might have a "Black Monday" situation on our hands, where a period of fear hits the market and causes it to crash but it ultimately rebounds and the uptrend continues.

Some good news is the fact that commercial/industrial construction is strong, commodity prices and inflation are moderating, retail sales are accelerating, consumer debt is slowing and incomes look like they are rising more consistently in real terms. These all may help to buffer the economy and avert a recession; it would be even better if enough people get out of their ARMs and in to longer-term fixed mortgages. That would avert forclosures and reduce the impact of rising interest rates on income.

I would say we will not have a recession this year, but it is possible that we might have a "growth recession" by Q2 2007.

http://ec1.images-amazon.com/images/P/B000084TTG.01._AA240_SCLZZZZZZZ_.jpg

You'll be swell! You'll be great!
Gonna have the whole world on the plate!
Starting here, starting now,
honey, everything's coming up roses!

Clear the decks! Clear the tracks!
You've got nothing to do but relax.
Blow a kiss. Take a bow.
Honey, everything's coming up roses!

Now's your inning. Stand the world on it's ear!
Set it spinning! That'll be just the beginning!
Curtain up! Light the lights!
You got nothing to hit but the heights!
You'll be swell. You'll be great.
I can tell. Just you wait.
That lucky star I talk about is due!
Honey, everything's coming up roses for me and for you!

You can do it, all you need is a hand.
We can do it, Mama is gonna see to it!
Curtain up! Light the lights!
We got nothing to hit but the heights!
I can tell, wait and see.
There's the bell! Follow me!
And nothing's gonna stop us 'til we're through!
Honey, everything's coming up roses and daffodils!
Everything's coming up sunshine and Santa Claus!
Everything's gonna be bright lights and lollipops!
Everything's coming up roses for me and for you!

Some people are already saying that the hard landing is here (http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&CFID=8162040&CFTOKEN=76697441&category=Market%20Commentary&newsletterid=1263&menugroup=Home). Now what I don't know about the housing market and economics in general could just about fill the Grand Canyon, but I can look at these statistics and see that something bad is going to happen, and soon.

Factor in that something like 40% of the job growth in the last 5 years has been in construction and financial services sectors, and you're looking at some real potential economic damage here.

On the upside, if I can keep my job for the next five years or so, the market might collapse to the point where I can actually afford a house. Yay other peoples' misery?

I wonder if the housing collapse will hit the whole counrty. I just sold my house here in California it closes at the end of the month. I am moving to Missouri where I can practically buy a house outright because housing is so cheap there. Places like california the housing prices are just unbelievable and I can see the market crashing here. Places like Missouri however you can still get a decent house for under a 100k I do not think parts of the midwest will be as affected unless this housing crash takes the entire American economy with it.

Its bad enough people dont have equity in car loans- I would never take a 60 year mortgage-If you're buying a house, you have to have equity very early in the loan or you really dont have any business buying it.

People used to buy a starter home- less lavish, less features-and make some improvements themselves and gain some equity and sell- OR borrow against it for further improvements or college.
Now people are getting too much house, too early and feeding the foreclosure market. And contributing to a nasty bankrupt trend.

I dont eben like 30 year mortgages but I take em and double up my payments when I have a little breathing room. My house should be paid of after about 12 years this way. I have a mear pathological aversion to paying interest. In 2004 I bought a new bike on a 6 year loan with 12 months interest free. I paid it off in 13 months rather than 12 because I went overboard spending at Xmas.


The character flaw of mine which very nearly prevents me from buying a house is that I read and understand all contracts and documents before I will sign them despite the best efforts of loan corporations real estate agents insurance companies and title holding companies. I had to swallow a lot of spit before I could sign many of the papers regarding the deeds of trust. Most say that if anything goes wrong or if any problems or inconsistencies happen then it is the fault at the sole risk of the perdon buying the house. I could only sign by rationalising that everyone signs the same forms and that pure fraud and property theft are not rampant in the industry.