27-30% of mortgages are under water

default on your loans whenever possible.

mcgato wrote:

gayguysarecooltoo wrote:

Do you really think that the house will be worth less five years from now?

I think that it is more than likely. Cute graph here looking at the Japanese housing bubble and public sentiment along the way.

http://blog.competitivefutures.com/2009/07/13/will-house-values-drop-like-they-did-in-japan/

True story from 2005. I am in a golf league at work, and a guy I am playing against is also from my home town of Hoboken, NJ. We were complaining about the high housing prices in town. I said that I saw no reason to buy, because housing prices would not be higher in five years time, and most likely quite a bit lower. I had been reading a housing bubble blog for a while at that point. It is here:

http://www.thehousingbubbleblog.com/index.html

Interesting. I read thehousingbubbleblog.com for several years leading up to when the shit hit the fan. Haven't been back there in a few years. They pretty much called the meltdown perfectly.

I don't have much time to go to the site and read up. What is everyone's take on there now?

Housing still has to fall nearly 20% to reach fair value. Andy anyone who has spent any time in markets will tell you that markets that overshoot on the upside overshoot on the downside.

The market hasn't even started clearing yet. The trades haven't happened yet. It is similar to how the market feels in a bond issue when there are tons of sellers and no buyers. The sellers are in denial (I can't sell it for 60! - I paid 100 for it!) and the buyers are few and far between. The market won't clear until that cataclysmic flurry of activity when the sellers finally break down (OK, I'll take 40! It is only going to go lower tomorrow!) and sell the paper or the property for what they can get for it, period.

We aren't even remotely close to that point yet.

sofa king wrote:

Interesting. I read thehousingbubbleblog.com for several years leading up to when the shit hit the fan. Haven't been back there in a few years. They pretty much called the meltdown perfectly.

I don't have much time to go to the site and read up. What is everyone's take on there now?

I still visit when I have time. As the bubble was popping, they called the market crash that ensued. For the most part since then it has devolved into political sniping, schadenfreude, interesting anecdotes, and the such. It did its job well, but it may be time to wind it down.

In both cases I mentioned the homeowners carry the primary mortgage, are still living in the house, have filed to renegotiate the mortgage at the current market value, and are NOT paying a dime to the lender. They figure, why should they be the only one suffering the loss. I know of others who walked away and left the bank with the house, and others who foreclosed due to loss of job, serious illness, etc. I was raised in the 1960s by Great Depression-era parents, so I never wasted money on new cars and stuff, i.e. my 2 homes are paid off and mine, I drive a 1997 Previa with 350,000 miles original engine/trans, I shop at Walmart and buy generics.

You also left out the part where banks decide how much your house is worth before they give you a loan. When the wolves are watching the chicken coop of course things go awry. They decide your house is worth 500k, give you a no interest loan that they tell you is affordable and suddenly, the house is worth 500k. The bank decided how much the house they own was worth. When shockingly, the no interest term ends, no one can actually pay (ie no real money behind these valuations), the bank is forced to lower what they say it's is worth. Of course, they've lost no money in this because they just collected interest( and perhaps bailout money as well) before selling the house/loan to someone else.

The only way this will get better is to get the wolves out of the coop. It is the exact situation as the dot-com bubble and the savings and loan bubble. Whe the folks that own something are allowed to set the price, it all falls apart at some point ( and a lucky few get rich).

I hope a 2nd dip can be avoided but it doesn't look like it the way things are going. Housing foreclosures, bank failures, gov't pension fund failures, st/county/city/school bankruptcies, etc. will cause a catastrophic recession and add to the current recession. A 3rd dip awaits us as us baby boomers (people my age) push Social Security and Medicare to insolvency. Already California Governor Jerry Brown has eliminated 300,000 "community redevelopment agency" bureaucrats. Look for other massive state cuts and mandates, the defunding of which will eliminate entire public school districts, entire cities, entire transit districts, entire police departments, entire fire departments, etc.

If you have a 15 year loan, then 10 years in a house is ok. The problem with planning to be in a house less than 15 years with a 30-year loan is that you won't have made much of a dent in the principle (unless you pay more toward it) and by the time you pay to move your stuff, pay Realtor commissions, and fix it up so you can sell it, you might lose money even if the house rose in value. I see people buy homes all the time when they PLAN to be in it only 4-5 years. Just foolish. These people should rent.

Your sister and her husband are doing what a LOT of people are doing, and I find it shameful. They have the money. They signed up for the mortgage...they should pay it. EVENTUALLY the value of the home will come back. The housing market isn't guaranteed to go up up up.

2nd Wave wrote:

My sister/hubby stopped paying on their $750k mortgage in La Jolla. A running buddy stopped paying on his $1.7M harbor home in Newport Beach. They have the money, but the mortgage is 50% higher than the property value. They say in So Cal 1/4 of the beach properties are being foreclosed on or are in default. Add to that the State of California is bankrupt. State pension funds are insolvent. If Governor Jerry Brown's proposal to extend tax increases gets shot down by voters in a few months, droves of teachers, firemen, and cops will be working at Oil Changers. It seems the 2nd wave of the Great Recession is coming to California.

If you plan to be in the house for 20-30 years, then I agree that you shouldn't give a crap about whether you're under water or not. I'm not down on you for only putting 3.5% down. I did that when I bought my house in 1999...3% down. Threw extra money at it, and then when the rates dropped 2 years later along with a rise in value, I refinanced and got rid of the PMI.I agree that Americans like to be mobile. Those that really like that ought to consider not buying a home. A home does not guarantee financial stability, and you can rent and save a LOT if you really want to.

Anyone considering to do a short sale should check out this thread:

http://www.letsrun.com/forum/flat_read.php?thread=2806587

"&page=0

Read the last page especially. It contains instructions. Good luck!

I believe the mind set towards buying a home today has changed and it is healthy.

10 years ago the climate was just different.

Home values were going up every month.

If you didn't own a home you felt like you were losing ground and felt compelled to buy one whether you would be there long term or not.

Get it before it gets too high was the mentality.

If you wanted to move just sell and use the gain as a down payment on the next house to keep your payments affordable.

Values went up year after year after year.

Of course the banks didn't help with their creative financing and no credit or sufficient income needed.

Now you had to compete to bid on a house against people with Monopoly money.

People bought at high prices on fear of missing out.

Sure, people saw the bubble but no one knew when it would pop.

Some sold and then rented in 2003 thinking they were hot stuff only to regret the huge gain they missed over the next three years.

It was just a wild time and it's gone, for the better in the long run.

boom times wrote:

X-Runner wrote:

Outside of an economic boom or special programs there does not seem to be many forces in play that would push values up.

Whatever. Flagpole says manufacturing is BOOMING. The housing rebound is on its way.

ditto me in wrote:

Yep. And even worse is the people who have had loans modified for homes they could never afford. So they still live in nicer houses for a lower cost than those of us who were conservative and bought within our means in the first place.

What do you mean "had their loans modified?"

Are you talking about some sort of debt repayment plan with a credit counselor? If so, they are f***ed b/c kills your credit score.

If you are just talking about a low interest rate, why would that bother you? That is like getting mad at someone for finding a good deal at Wal-Mart or haggling the price of a car down to a their level.

I am not flaming you, just trying to get a sense of what you are talking about.

I assume the loan modification that they speak of is a reduction in principle owed.

Which is the same as just giving someone money for nothing.

But from the banks perspective this is better than foreclosing in which they wouldn't get the entire principle back anyway and go through an expensive process of evicting, not collecting cash for a while, listing, selling and receiving less than the former owner owed.

The key is that the new payment has to be affordable and the borrower keep up with the new payments.

X-Runner wrote:

I assume the loan modification that they speak of is a reduction in principle owed.

Which is the same as just giving someone money for nothing.

But from the banks perspective this is better than foreclosing in which they wouldn't get the entire principle back anyway and go through an expensive process of evicting, not collecting cash for a while, listing, selling and receiving less than the former owner owed.

The key is that the new payment has to be affordable and the borrower keep up with the new payments.

Is there no punishment for this? What a crock of shit; I agree.

Just buy a Mac wrote:

Is there no punishment for this? What a crock of shit; I agree.

I think loan forgiveness is taxable. So if someone had their loan amount reduced by $40,000, they would have to pay taxes on that $40,000. If it weren't taxable, Goldman Sachs would just be giving their execs $12 million loans and then forgiving the loans to reduce the tax burden.

Umm...I didn't say it was booming. I've said it is expanding, and it is; 17 months in a row now. I also didn't say the housing (price) rebound was "on its way" only that it will happen eventually.Finally, I'm hardly a shill for Obama. I just look at economic indicators and tell the facts:1) Market up dramatically from March 2009.2) Recession ended under his watch.3) Consumer confidence is up.4) Unemployment is down (though still high).5) Personal saving AND now spending is up.6) Manufacturing has expanded for 17 straight months.7) Lots of TARP money has been paid back WITH INTEREST.8) Just TODAY we get a report that initial filers for unemployment is the lowest in 2.5 years.I would have spouted those facts even if a Republican were in office now. I don't care too much about politics as I'm responsible for me and I don't expect the government to do anything for me. Too many people expect that, and it's lame to the nth degree.

I was you, 25 years ago wrote:

boom times wrote:

Whatever. Flagpole says manufacturing is BOOMING. The housing rebound is on its way.

Flagpole is a shill for Obama.

Flagpole wrote:

1) Market up dramatically from March 2009.

2) Recession ended under his watch.

3) Consumer confidence is up.

4) Unemployment is down (though still high).

5) Personal saving AND now spending is up.

6) Manufacturing has expanded for 17 straight months.

7) Lots of TARP money has been paid back WITH INTEREST.

8) Just TODAY we get a report that initial filers for unemployment is the lowest in 2.5 years.

I would have spouted those facts even if a Republican were in office now. I don't care too much about politics as I'm responsible for me and I don't expect the government to do anything for me. Too many people expect that, and it's lame to the nth degree.

This is certainly all true and your comments regarding politics are a healthy, and in my opinion, correct way to view things.

However, I believe that many of the positives in this list happened as a direct result of TARP, QE1 and more recently QE2. This policy frightens me as it is simply a band aid rather than a cure; kicking the can down the road if you will.

It's my contention that this is a short-term fix that will unravel at some point. Was it worth it? I'm not sure. It certainly stopped the bleeding, but the wound is still there.

If the government didn't take these actions, we certainly would've had much more short-term pain, but would a real recovery occur sooner? I'm not sure.

Thoughts?