I have been warning FReepers for about 8 months. I think you have as well.
While the economy will affect me, the good news is after next month we own our home outright. ;) So we may be in for a rough ride, but my husband & I have got a seat belt.
|
My husband and I have been very skeptical of how some of our friends are buying their homes. Many are doing $0 down/interest only. We always figured this would come back and bite them in the butt. Looks like it might be happening very soon.
Our decision - in order to own a home in less risky manner - is to relocate our family. My husband has a good job in Reno and next month we will begin looking for a house. We also are ready to leave the California liberals and the schools.
Is it possible that some people, those who purchased with ARM's and such, will panic and sell? Will they be more willing to deal? Being first time home buyers we have questions. Being a Freeper - I know I can count on y'all for good advice. Thanks!
At the same time, a boom in real estate in the already developed municipal areas is expected to amount to $trillions of new construction in the next 20 years.
Are financial institutions getting too loose with their lending/underwriting practices? Yes.
Are there new and dangerous mortgage products that allow borrowers to qualfy for loan that they cannot afford if interest rates go up? Yes.
Are Fannie Mae and Freddie Mac evil? Yes, if you listen to FMWatch and that dink from Oklahoma, JC Watts.
Who is behind FMWatch? Ex-Citibank people among others. That's right - the very commercial banks that stand to benefit if Fannie Mae and Freddie Mac leave the market. Does the Federal Reserve know this? Of course. This Fannie and Freddie hysteria is fanned by the commercial banks and THEIR lobbyists.
It always stuns me that conservatives get confused on this issue. In a free market, you cannot have protected enterprises like commercial banks trying to eliminate competition through legislation. Unless you are a RINO.
Is there a bubble? Well, we will see. Maybe in vacation areas and places like San Diego, LA and SF. Bubbles simply mean that demand has exceeded supply - so in areas with supply constraints and growing demand, prices rise. What kills the "bubble" is either declining demand or increases in supply. Period.
Buying an interest only house is "renting" under a new guise. Renters don't have the money to buy a house, so someone with wherewithal buys a house and "loans" the use of the house for a fee. The traditional problem with renters is property maintenance. This system solves that. The "renter" has a stake.
He (interest only loan holder) pays hundreds of dollars more a month and maintains the property. The "renter" no more "owns" the house than the old style renter.
save
This would appear to be a fairly comprehensive analysis of the worst-case, doomsday scenario for residential real estate. If every negative thing falls into place, this might happen. Then again, it's more likely that this will not happen.
I also have a great deal of difficulty taking this person seriously, when he doesn't know the difference between "then" and "than," and spells "cheap" as "cheep"... doesn't do much to enhance that all-important, authoritative tone, when trying to shill gold futures or what-have-you, know what I mean?
I've come to like the responses to your posts more than your actual posts...
Excellent warning! I know you have become unpopular with some people for beating the drum on this topic, but I think you will be proven to be on the right side of history..
Congress will be called upon to bail out the people that took the "interest only" loans in order to buy more house than they could normally afford. Just watch!
What's this guy talking about? Loans over 80% have been routine for decades. Even ignoring the obvious example of FHA loans, 81% - 95% conventional loans with PMI have been a huge portion of originations for at least 25 years.
Anybody who still has an ARM in the present environment of unbelievably low fixed rate mortgages deserves what they get. There is no excuse.
I suspect that housing price rises have been closer to the inflation rate than officially shown. The average rise in the price of gold is a pretty accurate measure of the rate of inflation. That shows a doubling in maybe 6 years.
The official CPI removes inconvenient factors by being re-presented as the "core" rate of inflation, i.e those prices that are rising faster than the desired pereived rate are removed from the calculation. Oil and housing are thus not included. That's like in a famine saying that all-in-all people are healthy and happy as shown by the "core" rate of health because food availability has been removed from consideration due to its abnormal situation.
The 500K tax exclusion added at least 20% premium. This analysis ignores that.
Nope. I bought my two houses at sane prices with good, old-fashioned, 15 year fixed rate loans and I no longer have to worry about such matters.
Three million home owners with ARM loans just got a BIG surprise in the mail.
That's nothing compared to the orchietomies that those who have stretched their budgets to buy over-priced real estate with Interest Only loans will get when the "interest only" grace period expires.
We're all going to be eating dirt some day.
Try and enjoy the ride until then.
bump for later read . . . bought my house to live in and not for profit. Hopefully, if prices fall (as they should), my son can do the same -- until then, he'll be fine renting. Houses in my neighborhood are NOT selling like they did 6 months ago. The housing fever in Northern Virginia was fueled by speculators (1/4 of the housing sales were to speculators).