- badqat, on 12/15/2008, -3/+34And USA Today reports it may be decades before housing prices recover!
- alanr19, on 12/16/2008, -3/+24USA Today says a lot of things.
- piratearggghhh, on 12/16/2008, -2/+41Maybe this IS the recovery and homes were never meant to be so high. Do we really need to go back to the days when a small house in Southern California is over half a million dollars?
- Nerys, on 12/16/2008, -0/+11EXACTLY. they are not losing home value. They are losing "false" high value on homes that never should have been worth that much.
Home prices are totally out of line with reality. I would say homes prices need to fall by roughly 50% to even approach reality. - mockupscaledown, on 12/16/2008, -0/+1But apartment rental prices are skyrocketing as the foreclosed are looking for something in the sub-$6000/month range to live in.
My apartment in Santa Monica's rent increased 50% in 2 years. Luckily it was rent-controlled, but when I moved out, the new asking price was through the roof. - techmaster, on 12/17/2008, -0/+1The value of the houses isn't changing...the value of the dollar in relation to the value of those houses is changing. Meaning: the dollar is actually strengthening. However, Congress is doing everything in their power to make sure that doesn't happen, unfortunately. So much for a free market economy...
- Nerys, on 12/16/2008, -0/+11EXACTLY. they are not losing home value. They are losing "false" high value on homes that never should have been worth that much.
- eadnams, on 12/16/2008, -0/+6Canadians are snatching up winter homes in the warmer southern climates like they're goin outta style! Awesome deals to be had by those that have/had smarter bank systems.
- unreg, on 12/16/2008, -2/+2Citation?
- TimDigg, on 12/16/2008, -1/+1You realize Canada had a bank bailout too right?
http://www.google.com/search?hl=en&q=canada+ba ...
I will admit though, there system is still much better.... - sinurgy, on 12/16/2008, -1/+1I don't know why, it's not like homes are suddenly a great deal. $150,000 home jumps to $400,000 for absolutely no reason, then starts dropping like a rock. You swoop in at $250,000 and brag about how you saved $150,000 but what you don't realize if you just overpaid by $100,000.
- EarlOfLade, on 12/16/2008, -1/+33What *****!
The houses haven't lost damn dollar. What went down was the expected willingness to pay a price far above the real value of the house. Most houses are in reality valued far above their real worth based on intangibles.- unreg, on 12/16/2008, -14/+2Ye of little understanding.
- jabberwolff, on 12/16/2008, -0/+8It will not take decades... they are actually close to their true value.
It will take decades for the true value to reach what was lost... a fake run up value.
Housing works in 8-10 year cycles... more than anything housing will probably start to take a rise starting in 1-2 years. Then in 10 years it will be at its peak until another downturn in housing prices hits. Its kinda predictable actually. This most recent downturn was actually 1-2 years late. - DanOnTheMoon, on 12/16/2008, -1/+1http://digg.com/political_opinion/U_S_Economy_The_ ...
Ever wonder why? - BESTenemy, on 12/16/2008, -0/+1 Economists and historians are coming to the conclusion that this recession resembles the path that Japan took some 20 years ago after their housing bubble exploded. They're calling it Japan's 2 lost decades, as the market is still 30% off its peak. The Japanese government had put in place multiple bailouts and the infrastructure replacement projects to provide employment (better known as "highways and bridges to nowhere").
God knows how long the Great Depression would've lasted if we didn't have the post Weimar Nazi Germany to invest in during the 30's and then have the same country to go to the war against.
Today we have many negatives to look forward to. The credit market is going to freeze further. The demand will continue to decline for industrial goods. The corporate profits and tax revenues for the government are going to go down. The average pay is going to decline and the net worth of an individual is going to keep deflating. Many companies in January (especially retailers) are going to announce bankruptcies, hit by abysmal Christmas sales figures. More layoffs, more cuts, more feedback loop action.
Before one is to expect recovery one has to have something to look forward to - a positive event in a not too distant future. Think of one if you can. I know I can't. Short of WW3 there is no sudden investment opportunity coming down the road for us in order to restore the capital base.
China has announced 17% planned expansion of the monetary base over 2009. In a command economy their cash is a lot more capable of getting through to the general economy. They can devalue their currency quicker in order to boost export capabilities. It's them we are competing against when we talk marketability. It's them that are controlling most of our outsourced manufacturing base. If we deflate, we become more competitive, but when everyone tries to deflate quicker, we're stuck exactly where we were.
We truly have the potential of experiencing Japanese style multi-decade recession, as our government are doing everything that Japan did - bailing out banks, bailing out consumers and planning 2.5 million infrastructure related jobs. The more our government does, the graver the consequences will be. - ASfinkterSezWut, on 12/16/2008, -0/+1Market estimates put the full real-estate market "over-valuation" at $27Trillion (homes and businesses).
Seems like a little more devaluation to go before the upswing...
- WordsnCollision, on 12/15/2008, -4/+51"Some 11.7 million Americans owe more on their mortgages than their homes are worth." Payback really is a biatch...
- mike17032, on 12/16/2008, -1/+8Unless you are planning to move or were trying to flip it, this doesnt really matter. Either you can afford the payments you agreed to or you cant.
- equanimist, on 12/16/2008, -4/+4(1) People are often transfered between offices. One might not be planning a move and be "forced" to move. The result is, then, that one must sell a home at a steep loss.
(2) Job losses, as the article notes, will adversely affect those who can currently afford their mortgage payments.
(3) Plummeting home values adversely affect consumer spending. - JohnFlux, on 12/16/2008, -2/+7> People are often transfered between offices. One might not be planning a move and be "forced" to move. The result is, then, that one must sell a home at a steep loss.
Yes, but they buy their next house really cheaply. One house is still worth one house. - simg, on 12/16/2008, -1/+2or unless you understand compound interest and work out how much extra this will cost you in mortgage payments compared to waiting and buying a house at the cheaper price ....
- equanimist, on 12/16/2008, -0/+2@JohnFlux One house isn't exactly worth one house. If a homeowner's equity is wiped out then s/he must come up with a down payment (many thousands of dollars). Moreover, a move is costly and closing costs run high (many more thousands of dollars). And, moreover, (2) & (3) remain.
- badgerpoison, on 12/16/2008, -0/+2One house is not worth one house. Someone has 170k left to pay for his mortgage, the most he can sell his house for is 130k. He needs to transfer jobs.
His options are:
1) Sell the house and come up with 40k from some where to pay back the mortgage (where would the 40k come from? not going to happen).
2) Hand the keys over to the bank, have bad credit and no debt.
3) Stay where he is and find a new job.
That person will simply hand the keys back to the bank move to the new job location and rent for awhile. No matter what, he cannot buy a new house.
- equanimist, on 12/16/2008, -4/+4(1) People are often transfered between offices. One might not be planning a move and be "forced" to move. The result is, then, that one must sell a home at a steep loss.
- vizeroth, on 12/16/2008, -2/+6and beyond that, some of them borrowed more than their home was worth before the prices dropped.
I don't know how people convinced themselves they could afford whatever payments they're making, but it doesn't take much to realize that you can't afford a house that costs more than 10x your current annual salary, even on a 30-year mortgage.- ksadya, on 12/16/2008, -0/+1I sat through a few lender's offerings. It's incredible how they do a credit check, write a few numbers in a table, hand waive about 10% off the price due to tax credits, assume that by this time next year, you can refinance down another 15% off the price, 5 years from now you'll be making double, and this house will somehow be affordable. Since it'll take 5 years for your pay to double, we'll give you a low intro-apr of 0.9% with an ARM reset at 8% variable thereafter. I ask: 8% how much could that be... about as much as renting, from an increase in interest alone.
- pantone287, on 12/16/2008, -1/+4There is an upside to being poor. My "house" hasn't lost a dime in value.
- nesagwa, on 12/16/2008, -1/+5Your "rent" is going to go up very "soon."
- Nerys, on 12/16/2008, -1/+5And property taxes are going to sky rocket as localities and states try to squeeze people for needed funds that they figure will magically appear if they demand it.
even before this happens we currently pay almost $500 a month JUST in property taxes. I know people who pay less than that in rent.
TAXES. not mortgage payment. JUST the damned taxes.
EVERYONE rents. NO ONE owns there home. "Property Tax" is a misnomer. You can not charge tax on something you already paid for and own.
ahh but theres the rub. you don't OWN it. HENCE its legal. Fee Simple Title is all you have which is another word for Government RENT.
Except in Texas and in the past Nevada its NOT POSSIBLE for an american to OWN a home or land. Its just impossible. and you wonder why our rights are going to *****. (rights are derived from property no property no rights) - NachoBusiness, on 12/16/2008, -0/+1Yeah property tax is pretty lame. My roommates and I split up all bills into a monthly payment we all owe and property tax is actually the biggest per-month fee. We pay almost $200 a month in property tax... it's a nice house but not a mansion or anything. Living in a city with decent schools, parks, etc. isn't free! I do enjoy the amenities, but being aware of how high property tax is makes me take an interest in how our local government manages (and sometimes mismanages) money.
Most people in this city are middle class... I don't get how they can see property taxes sailing up due to poor planning, and keep reelecting the same danged city council people. Do they not get the connection? Don't get me wrong, I want to pay some property taxes so I can have nice parks to go to, safe streets to travel on, etc. but some things city governments spend money on are rather boneheaded.
- KaseyCarbone, on 12/16/2008, -1/+6Do you really think all 11.7 million people underwater right now were flipping or biting off more than they could chew? Or might there be a lot of smart, well intentioned folks who simply fulfilled their dream of home ownership at a really unfortunate moment?
It really sucks to see so much ill will expressed toward such a large segment of the population based on the assumption that all of them were doing something sneaky or immoral simply by buying a freaking house at market value. These are your fellow Americans, who dream big and can feel big fear just like you. A bit of sympathy for your countrymen would be nice.
- Y0tsuya, on 12/16/2008, -1/+1Nope, they drank the real-estate kool-aid. There were plenty of warning from various sources that the real-estate market is a massive bubble waiting to pop. Those buyers ignored those warning and instead chose to believe their Realtors(tm).
I also thought about buying a house in 2005-2006, but thought the prices are crazy. After reading various material online I've concluded that we were in a classic bubble, and that if I buy a house I would lose a massive amount of money in the coming years. So I chose not to, and stayed financially solvent. The upside-down people were either too lazy to spend a few hours doing their own research on home values vs inflation, on what is the biggest purchase in their lives, or chose to ignore the warning signs. In either case, the fool and his money are soon parted. - NachoBusiness, on 12/16/2008, -1/+1Well, I do some foreclosures. Our average person being foreclosed on isn't Joe Q. Steadyjob who bought a nice, but reasonable, home in 2005 and has been stabbed in the back by Wall Street. If we deal with him it's still because he lost his job, got some horrible disease or injury and couldn't work... same as ever. Hard luck, slightly poor planning (buy supplemental insurance and fight to collect it!), but it happens. But he's still the minority. The average person being foreclosed on took out a mortgage while unemployed/collecting some sort of fixed income, had irregular employment and knew it, or simply thought they could live in a million dollar house on a $70k salary. A real common thread is that the vast majority of people being foreclosed on took out a no down payment loan... ugh. If you can't save up 10 grand, you really have no business borrowing several hundred grand, yet 9 out of 10 foreclosures seem to involve those people. There's a lot less slack in the system now so these people get in bad shape faster, but it's still the same people as 5 years ago.
At least that's my experience. Irresponsible people still make up the majority of people in trouble... the truth hurts. I'm sure I'll get called a jerk for saying people are irresponsible if they don't save up a down payment and get proper insurance before buying a house... but the bottom line is we've stopped thinking people have any obligation to be responsible, and instead blame the system any time it doesn't bend over backwards to prevent people from being stupid with their money. And that's how we got in this jam.
- Y0tsuya, on 12/16/2008, -1/+1Nope, they drank the real-estate kool-aid. There were plenty of warning from various sources that the real-estate market is a massive bubble waiting to pop. Those buyers ignored those warning and instead chose to believe their Realtors(tm).
- mike17032, on 12/16/2008, -1/+8Unless you are planning to move or were trying to flip it, this doesnt really matter. Either you can afford the payments you agreed to or you cant.
- Haoie, on 12/15/2008, -17/+24Help people before banks.
- minoss, on 12/16/2008, -8/+65No, help no one. Stop punishing those who made good decisions.
- equanimist, on 12/16/2008, -12/+8You, and those of your ilk, are missing the point. Poor, homeless, shiftless people aren't conducive to democracy much less prosperity and innovation. The ramifications of current trends will adversely affect "responsible" and "irresponsible" people alike. Grin and bear it (or don't but) the results will be borne. Likewise, to the extent that the blow can be softened we will all benefit.
- briLo, on 12/16/2008, -4/+22And how do those of us who didn't get in balls deep benefit from these bailouts?!?? I haven't lived above my means, I've saved a bit and made sacrifices while ***** went out and bought $300,000 homes and $50,000 cars and the ***** banks lent them the money while barely raising an eyebrow!!!!
So the people who lived within their means should have to pay for you ignorant ***** that can't understand the basic idea of living within your means. - jfreeman, on 12/16/2008, -3/+7Actually, help people, but only through private charity. Do not force the poor to subsidize the wealthy banks and investors.
- unreg, on 12/16/2008, -1/+15Agree.
I bought a house I could afford. I dutifully paid my mortgage every month, along with my property taxes, insurance, etc, etc. I paid a little extra every month in a effort to reduce my payback period.
Last month I paid off the house in year 17 of the 30 year mortgage. This in spite of the fact that I lost my job of 22 years.
Wheres my reward? - equanimist, on 12/16/2008, -4/+2@briLo While I can can appreciate your frustration, your anger is misplaced. I have not lived beyond my means. I am not in debt. Until six months ago, I never even had a credit card. And, I use that card for emergencies only. "Cash," as they say, "is king." (Maybe should be amended to gold.)
Equally, I did not assert and do not assert that the current crop of bailouts (focused on "recapitalizing" financial institutions) has benefited anybody but financiers. I insist that it would be better to address the crisis than to let it fester and balloon. To that end, it might be wise to bail out individuals.
This is not really the place, but, I would invite you to visit my blog where (among other things) I have considered this issue much more thoroughly than I shall do at this very moment within this small space. http://equanimist.blogspot.com - uberchaoslord, on 12/16/2008, -0/+1Agreed. Let the banks who made ***** decisions fail, because then the banks that didn't will be validated as well-managed, and inter-bank lending will resume.
- kaelyiesta, on 12/16/2008, -0/+1"Actually, help people, but only through private charity. Do not force the poor to subsidize the wealthy banks and investors."
Well said. Oppression in any form is never justified. Theft is theft, no matter the name given to it and arguing which people get the money stolen from us is beside the point. - Nerys, on 12/16/2008, -1/+1"And how do those of us who didn't get in balls deep benefit from these bailouts?!??"
When the economy collapses around you its not going to MATTER how "within your means" you were when it started. YOUR MEANS is going to change.
Thats why. - Y0tsuya, on 12/16/2008, -0/+2"When the economy collapses around you"
We'll survive. The smart ones have both savings and portable wealth to make it through the lean time. - designerutah, on 12/16/2008, -0/+1Helping out the idiots MAY help the economy in the short term. But what happens when those same idiots extend themselves again? (I know, not all the people in trouble are idiots, but as a general rule of thumb, most of them are.) I'm far more willing to help those who were smart and just had too many negatives stacked against them than those who bought way beyond their means, lived high, and now expect help. If I had bought stock the same way, would you want to give me my money back when the highly risky venture failed? Of course not. It would be stupid to do so. Same thing here. People need the help, sure. But don't trust them with the money. They're idiots. They've proven it already.
1. Bankers that got us into this need to be fired, lose their bonuses, etc. and have at least most of their assets seized to pay back their losses.
2. Idiots who got in over their head need to have to live in tenement type housing at a very reduced rate, with incentives to get a good job and buy a new home (within their means). Let them out of their current obligations with less penalty than normal, but ONLY IF they agree to have their finances (in terms of credit) overseen somehow.
I'm sure there's a lot of problems with these two ideas, and hidden expenses. But there are at least in the right idea. Make them responsible for their choices, and give them just enough help to motivate them to change for the better. Otherwise, punish those to stupid or lazy to change! I'm sure there's much better solutions than the idea's I have listed, but all I keep hearing is "bail them out" with little cost to the idiots that got in trouble, or the bankers that helped. Fix the lack of punishment and responsibility, and I'm far more interested in "helping out"! - briLo, 10 hr 15 min ago, -0/+0Equanimistequanimist-
Bailing out the Financial Institutions will only prolong the inevitable. We're going to pump a ***** ton of money that we're producing out of thin air (devalue the dollar) and receive loans from countries outside of the US; more debt.
Why do this? So we can patch up our current system and live happily for 10-15 more years before we hit a depression as our luxurious lifestyle has more than overwhelmed us? Personally I'm for taking the hit now and getting it over with and allowing ourselves to build an economic system with a lot more guidance and measures instead of corporate greed and wealth.
Go back to your banker position and keep your blog to yourself.
Green Death Monkey Pie - World Domination
- mike17032, on 12/16/2008, -3/+25No.
All those idiots in CA who agreed to pay 1 Million bucks for a garage on 60k a year need to hit the ***** streets. - trollick, on 12/16/2008, -4/+19***** you. If you want to help some ***** who grabbed a house he cannot possibly afford, just go and write him a check.
- Nerys, on 12/16/2008, -3/+1If the system was not so corrupt a lot more people could afford a home.
there is no reason why interest should be 100% of mortgages. (and anything above an APR of 4.8% is more than 100% interest!!)
- Nerys, on 12/16/2008, -3/+1If the system was not so corrupt a lot more people could afford a home.
- duderdude, on 12/16/2008, -1/+11How about increasing funding for math education, that's what would really prevent this from happening again.
- Y0tsuya, on 12/16/2008, -0/+1It's not an issue of understanding MATH. Math teachers in California are upside-down because they didn't understand ECONOMICS. They actually believed the NAR's ridiculous line of "We've reached a permanently high plateau." How is increasing funding to these idiots going help our kids?
- sinurgy, on 12/16/2008, -0/+1That's not an issue of understanding economics, that's an issue of understanding sales. If you take your advice from the people who financially benefit from you taking their advice don't be surprised when you get burned.
- jabberwolff, on 12/16/2008, -4/+17***** THE PEOPLE WHO MADE BAD CHOICES!
Sorry but getting loans on bad decisions, hoping that they would never go down in value, is YOUR fault not everyone elses. Because of people allowed to make bad decisions... those people screwed with the economy.
Take their houses away and remind them that fools and their money are soon parted... fools!!- Nerys, on 12/16/2008, -1/+1Except the FOOLS are the banks and they were not parted with there money. We gave them 700billion more.
Not so much fools are they it seems. They conned everyone.
The bad guys are the ones made these regulations The ones who MADE these loans. to EXPECT everyone to gets a house to be an expert on home loans is silly and preposterous. They spent years getting educated to do there jobs. Lets make them DO THERE JOBS. - DaffyDuck, on 12/17/2008, -0/+1THEIR.
- Nerys, on 12/17/2008, -0/+1I do not recognize the existence of there and their ONLY there since there is no logical or needed reason for the existence of 2 spellings of a word that is NEVER EVER defined by its spelling buy by its context alone.
So I only use there except when I forget.
- Nerys, on 12/16/2008, -1/+1Except the FOOLS are the banks and they were not parted with there money. We gave them 700billion more.
- falser, on 12/16/2008, -4/+1Why would bankers and oil tycoons want to do that?
- scamper22, on 12/16/2008, -0/+7Define help please?
Help keep home prices high helps investors and home owners.
Helping the poor would mean not doing ***** and letting home prices collapse to affordable levels.
The government cannot help. It can only pick winners and losers.- Nerys, on 12/16/2008, -2/+1The government can help. It can REDO these home loans with REASONABLE payments and interest rates.
If you WHACKED the more than 100% interest they charge on these loans (people are FOOLED into thinking OH I am getting this at 5% or 8% but little do they realized that this is an APR and its for 30 years and the interest is calculated FIRST not LAST so in reality your going to pay 100 to 150 % value of the home in INTEREST.
If the interest was a reasonable 10% (TOTAL VALUE 10%) then suddenly I bet almost ALL these people could afford to keep there homes.
Home values are nuts high. WAY higher than reality supports but its really the INTEREST RATES and the way they are calculated and factored in thats OUT OF TOUCH with reality. - Y0tsuya, on 12/16/2008, -0/+2Nerys,
You seem to have very little understanding of how interest rates are supposed to work... Your proposed method of total return of 10% on entire loan over 30 years is absurd. It will guarantee 0 lending activity because interest rate will be 0.65% yearly. As an investor, would you lead $100K to someone, only to get $650 back the 1st year for your troubles? I think not. - Nerys, on 12/17/2008, -1/+1well the 10% is mostly for credit cards. I have no idea where the "balance" is but I can tell you this.
you have NO RIGHT to loan me $100,000 and expect $200,000 or $250,000 in return or MORE (which is what a mortgage is)
At least not morally legally your ok.
I thought we had LOAN SHARKING laws in this country.?
So whats FAIR? I think a PROFIT of $10,000 with almost ZERO risk is pretty damned good.
With a personal loan there is RISK. with a home loan there is almost ZERO risk (if the houses are priced FAIRLY at least)
If I loan you $100k for a house I OWN the house till its paid off. I will DEMAND you have Insurance on that house and if now I will PUT insurance on it and make you pay for it.
Where is the risk? if something happens to the house you have the insurance. If something happens to the home owner YOU TAKE the house back and make EVEN MORE MONEY because now you get to sell it to someone else and you already GOT whatever payments you got from the first guy.
Its a win win for the bank. WHATS the downside?
$650? where the hell did you get that? If I am talking TOTAL interest then clearly when I give MY interests I am ALSO talking TOTAL interest.
10% of 100 grand is 10 grand. Come on man at least get your math right.
Do you not realize how simple this would make things?
Your monthly payment would be $305 and the your FIRST payment your LAST payment and every payment inbetween would be PRECISELY the same.
No surprises. No Gotcha's No Whining.
What is so hard about that? OR make it a sliding scale where the first payment is the largest and the payments become lower and lower as time goes on. (this actually makes more sense) but the TOTAL AMOUNT of the loan should be FIXED in advance none of this APR crap and it should be REASONABLE
100+% is NOT reasonable in ANY book.
WHY do they deserve a 100+% return on a virtually ZERO risk investment? I did the math 4.8% is the magic number. at 4.8% (I could be off by .1 or so) they make MORE MONEY in interest than the cost of the house IE you pay DOUBLE the value of the house.
You say what if the value drops? well thats YOUR fault for having "fake" valuations on the houses to begin with. A house is a house its value does not change.
For everything else there is insurance.
WHY do you think they deserve SO MUCH MONEY ESPECIALLY considering the virtually non existent risk. - trollick, 11 hr 43 min ago, -0/+1Nerys,
You are seriously confused. "ZERO risk"??? Were hiding under a rock for last 2 years???
- Nerys, on 12/16/2008, -2/+1The government can help. It can REDO these home loans with REASONABLE payments and interest rates.
- roddack, on 12/16/2008, -0/+4Help no one at the point of a government gun.
- ASfinkterSezWut, on 12/16/2008, -0/+4I didn't buy.
I was presented with the same information they were. I was presented with the same opportunities they were. I was offered the same mortgages they were.
I still didn't buy.
Now my tax dollars are going to support those who did buy so they can stay in their over-priced homes they can't afford to pay the mortgages on?
Where's the bailout for those of us who were fiscally responsible?
Anybody out there foolish enough to "help" me pay my rent... ?
- minoss, on 12/16/2008, -8/+65No, help no one. Stop punishing those who made good decisions.
- nondouchebag, on 12/15/2008, -6/+30Yep, and most of the homes that are collapsing in value are cheap and quickly build. They'll have to be bulldozed in 20 years anyway.
Bubbles suck, and the people who prop them up suck more.- cadmiumpaint, on 12/16/2008, -12/+2*****.
Family friends who had to move for a job, took a loss on a house which they've owned for almost 20 years. the house was built in 1943..solid brick, classic architecture, recently remodeled. They had to sell this year and took 25% less than they could have gotten a year or two ago.
learn something before you pwn yourself in public.- Pstmann, on 12/16/2008, -1/+13Well they didn't take a loss then did they you fng prick!
If they bought it a year ago and sold it now then you can say they took a loss but since they bought it 20 years ago for probably a 1/4 of what they sold it for now it is called a huge profit dipsht.
Don't correct someone when you don't know what your talking! - rcollamore, on 12/16/2008, -1/+9i wish the word "pnw" would die
- NJank, on 12/16/2008, -1/+5buried for lack of insight.
- mobislink, on 12/16/2008, -1/+4The house should not have appreciated to the fake value that it was a year or two ago. If they owned it for 20 years and sold it at pre-housing bubble levels they mad a decent profit. Unless of course they took out a home equity loan to put in a $50K kitchen expecting to make $100K back.
- Nerys, on 12/16/2008, -1/+2DOn;t forget to at minimum DOUBLE whatever they paid for it 20 years ago since you have to repay that INTEREST you paid over 20 years before you can even make $1 in profit.
SO if it was a $150,000 home 20 years ago it would need to sell for $300,000 MINIMUM just for you to break even.
There is NO WAY to make a profit on a home you full paid for (unless you paid cash up front in full) or your flipping it.
Any other time the value of the home will NEVER double but thats what you paid for it. Double at least. - Y0tsuya, on 12/16/2008, -1/+2Clueless dorks like cadmiumpaint pining for 2006 home values is the reason Washington is throwing all that taxpayer bailout money around. It was a bubble, let it pop already.
- Pstmann, on 12/16/2008, -1/+13Well they didn't take a loss then did they you fng prick!
- Tbyrd073, on 12/16/2008, -1/+3One example doesn't disqualify what he said.
- cadmiumpaint, on 12/16/2008, -3/+2nor does his sweeping generalization that every house thats depreciating is a drywall mansion. Every home is depreciating...not just the cheap ones.
- Tbyrd073, on 12/16/2008, -0/+1Didn't say it did but sweeping generalizations tend to do that.
- Frixionburne, on 12/16/2008, -0/+3totally correct, I from northern Ohio and the communities around here boomed in the last 5 years with development after development. The catch is that all of the houses are practically made out of paper and bits of glue.
on another note: stocks rose today because the fed reduced its borrowing rate... did anyone notice that the dollar lost $.07 on the euro? 1 euro = 1.40 usd. This is the highest its been since I can remember.
- cadmiumpaint, on 12/16/2008, -12/+2*****.
- AnotherDiggGuy, on 12/15/2008, -5/+11Scenario 1: We bail out the banks that failed to operate as a business, millions of financial workers are canned, the to-big-to-fail banks don't grow or create any new jobs because they're already too big, and those financial jobs will never be recreated and those workers can't find new jobs. Instead those people will compete with other non-skilled jobs, creating an employment mess. The big banks continue to operate under failed practices. Peoples houses continue to drop in value indefinitely because the free markets are too terrified to work with the banks that prove they can't operate without either lying, scamming, working the system, or getting government bailouts. Once everyone's unemployment runs out and still can't find jobs, combined with all the bailout money will eventually fall back into the markets, all this will cause a massive oversupply of money, triggering borderline hyper-inflation, compounding the problems, triggering a never ending loop until there is no more American economy.
Scenario 2: We let the banks that can no longer operate fail, millions of financial workers lose their jobs, tens of millions of customers are more or less forced to goto successful banks. Those legitly operated banks grow rapidly and financial workers have someplace to go work, creating less competition for the rest of the workforce. The winners and losers of the smaller banks will get ironed out over time allow for people to buy houses that can actually afford them, and over time housing values will stabilize and will eventually houses will sell for what they are worth, not what investors speculate the house is worth.- MiddleAmerica, on 12/16/2008, -3/+5AnotherDiggGuy
I completely disagree with both of your scenarios.
We have more foreclosures ahead of us in the next two years as predatory loans reset.
See my comment on rewriting the mortgages & therefore saving the banks with little bailout money thrown at the problem.
Oh, & I strongly recommend that we reinstate all of the banking regulations that were dumped by the GOP in favor of "Free Markets".
- Exhibitionist, on 12/16/2008, -2/+7And I strongly recommend that people stop using credit. Is that so ***** hard?
- AnotherDiggGuy, on 12/16/2008, -3/+5I agree with your free market comment, except it was a collection of GOP and Democrat work that made this mess, and free markets are looking grim under Dem leadership
- PeeEqualsNP, on 12/16/2008, -3/+6You mean the like when the Democratic Congress (house and senate majority, http://en.wikipedia.org/wiki/95th_United_States_Co ... and Jimmy Carter (Democrat, http://en.wikipedia.org/wiki/Jimmy_Carter) approved the Community Reinvestment Act. This inserted regulations that the mortgage companies had to make credit more available to lower income families so they could get mortgages.
Before this, the free market determined that owning a home was too expensive for these families and so they rented or lived in not as nice homes.
But after this Act, in which the government undercut the free market aspect of home mortgages by federally backing these CRA loans and inserted regulations to back it, the home values were artificially inflated.
Think about it, I'm the CEO of a mortgage company who was just forced to extend credit and mortgages to people who probably wouldn't handle that very well. I'm reluctant at first, but then I hear that the Fed will back these mortgages. So I think to myself, "Credit is a rating of one's ability to pay back debt. These people don't have a good enough credit score so they are less likely to be able to pay back a home mortgage. The government says I have to ignore this and get benefits for lending to them. Well, if the government is going to back the mortgage, I can pretty much charge whatever I want! I'm going to be rich". This is exactly what happened, home prices artificially went up simply because they could, not because the actual value of the home was higher, this was a bubble... an artificial high.
Now its burst... AND YOU WANT TO DO THE SAME THING OVER AGAIN!?!?! Keep the government out of it. Obviously they aren't financial wizards, they can't even handle their own budget let alone try and help manage ours. Oh, and with half the bailout spent, more on the way and gas prices almost 1/4 of what they were a year ago... how come nothing seems that much better? Companies/banks are still failing and people are still getting foreclosed on.
PS. AMEN Exhibitionist!! - omgwtflawl, on 12/16/2008, -1/+5Bush has been the biggest regulator since Nixon. Which regulations would you like to implement that he already hasn't?
Most of the regulations people are whining about that were removed at the end of the Clinton era have never been present in Europe without consequence. Why should they be present here? What would they have done, except made the takeover of Merrill Lynch by Bank of America impossible? - Nerys, on 12/16/2008, -0/+3"And I strongly recommend that people stop using credit. Is that so ***** hard?"
I agree with you but its a LOT more complicated than that. I will never blame anyone but myself for my "credit" debt. BUT I can and WILL blame the system for making it nearly impossible for me to GET OUT of debt.
The only way to not get nailed by this system if your not wealthy is to NEVER make a mistake. ONE mistake and they rape you.
I goofed and overdrew a bank account by $12.50 on a single charge.
Now consider IF I KNEW I did not have the money in there I WOULD NOT HAVE BOUGHT IT (I am not very good at micro managing my finances THATS WHY I USE A BANK so they can do some of this work for me)
but the banks got greedy. instead of DECLINING the charge as would have happened in the last 20 years they decided OK we will "allow" you to over draw your account (essentially a micro loan) but charge you $35 for the "priviledge"
Well I don't WANT the micro loan. SO I turned that "feature" off.
NOW that feature is COMPULSORY. you can't turn it off. EVER. (they WANT you to over draw so they can screw you for $35)
but thats not enough. The Screwing goes deeper. they mark the charges as PENDING. I have seen charges stay PENDING as long as 2 weeks.
they they "reorganize" the last 10 days of charges into a NEW order so a SINGLE over draw of $35 turns into 14 over draws by magically resorting the numbers and RETROACTIVELY applying the $35 charges. so a $12.50 over draw with a $35 fee turns into 40 hours later a $12.50 overdraw that magically results in $490 in charges
I figured this must be some sort of mistake. When I showed it to the lady at the bank SHE figured it had to be some sort of mistake as well it seems NUTS to her as well. so she refunded all the fees including the one I deserved as a courtesy.
a few weeks later it happened AGAIN this time on a 15 cent over draw resulting in 8 fees for $280
I went back again. WELL I got a very different response from the lady. She clearly was "reeducated" during the last 2 weeks and told me she had to send me to someone else (I could see in her face she was sympathetic but also concerned as if she got yelled at)
I spent a lot of time fighting with them. Eventually it came down to this. The law lets us do this so its legal (she would not answer the MORAL question) and your stuck with it. I deposited ONLY what I owed and walked away.
Then you have credit cards. You start off with 9% interest do NOTHING wrong in fact pay very well on the card (you can afford to at 9%) and for no reason at all they jump it to 31.7%
The reason? Because they can. Thats literally what they told me. I stopped paying.
I did not agree to these terms so the debt was no longer mine. I would not budge on that. No way in hell was I going to pay down a $4600 balance at nearly 32% APR
and lets talk about how that works. Lets use %30 since its easier on the grey matter.
if you have a thousand dollar debt whats will you owe in 1 year ?
Your thinking 30% apr 1 year so $1300
you would be wrong because they calculate the debt MONTHLY sometimes DAILY and you get charged INTEREST on the INTEREST as well.
Cute ehh? and this is all legal. and you wonder why the CREDIT problem is such a big problem.
I got all these courts when I was young and dumb first year in college. I made my bed I can sleep in it.
but what happens when someone else comes along and CHANGES the bed.
WHO should be made to sleep in THAT bed.
Think about that.
- cubicledrone, on 12/16/2008, -2/+5Please list ten "job skills."
"Get more skills" is *****. It is an excuse to underpay Americans. - jerrycurley, 11 hr 40 min ago, -0/+1anotherDiggGuy is clearly an economics porofessor. I mean, everything he says is so spot on accurate!
Oh wait...today is NOT opposite day?
- MiddleAmerica, on 12/16/2008, -3/+5AnotherDiggGuy
- BullHunter, on 12/16/2008, -2/+15All this happened in the eighties - and the time before that - and the time before. But we learned that it's cyclical and will happen again, right? History does repeat, especially when bankers and politicians inflate the currency, shares and property prices beyond its capacity just to see it burst and ruin many people's life savings. So why do we, the people, put up with it. They will do it again. Next time it will be to your retirement fund and your children and their children (sorry about the chicken little rant)
- korvan504521, on 12/16/2008, -1/+10all of this has happened before, and will happen again.
- PeeEqualsNP, on 12/16/2008, -2/+3The difference is that last time the housing bubble kind of burst onto the .com bubble. There was a fallback bubble. Enough cash flow through the economy to stabilize it. During the stabilization and afterwards, the housing bubble reinflated... like you said its cyclical. Only this time, it was a big bubble!
The bad thing about housing bubbles is that it directly affects consumers and therefore pretty much every aspect of our economy. When the .com bubble burst, companies went under, not people. Since this is a big bubble, its a big pop. So the government is trying to create an artificial "fall back bubble" by inserting what they believe is enough cash flow to stabilize it.
It's not going to work because they realize that they can't actually insert cash, they have to insert credit. This is pointless and actually WORSE because for consumers to feel the benefits of "inserted credit", they have to go into debt. Inserting credit is just making it easier to get car, home or private loans. This is not an answer that will work because people are just using these new loans to pay off old loans. New debt to pay off old debt. They don't have the cash to pay back the new debt either.
It should be a cycle, one that ends in a recession/depression. The government trying to step in, especially with their current plan, will only make things worse.- Nerys, on 12/16/2008, -0/+1No it should not. recessions are NOT NORMAL. they are ARTIFICIAL in response to "fake money" ie money printed without backing.
this causes inflation and many other things.
Inflation is ALSO NOT NORMAL no matter WHAT they try to claim.
Think about this. who is the only one who BENEFITS from all aspects of currently no matter what its condition?
Why those who profit based on PERCENTAGE. you see 10% is 10% no matter what happens to the value of the currently or market.
WHO are the 2 primary beneficiaries of percentages?
Banks and Government.
Do you really think this is coincidence?
a fiat money system without backing PERMITS this system to work. If we were on BACKED currency many of the things we do today in banking would be IMPOSSIBLE (fractional lending, Credit Cards etc..) at least to the EXTREME that we have them today.
THIS is THERE fault. Ultimately its our fault for letting it happen but thats only collectively as a nation not as individuals. There is LITTLE the single individual can do about this.
- Nerys, on 12/16/2008, -0/+1No it should not. recessions are NOT NORMAL. they are ARTIFICIAL in response to "fake money" ie money printed without backing.
- Y0tsuya, on 12/16/2008, -0/+1I remember in 97-98 the home builders in California were quoted as saying they've learned from the 89 crash to not overbuild. Well, 5 years later they were overbuilding again. People have short memories and never learn.
- 1lastdigg, on 12/16/2008, -8/+5I need a bailout...
- ldmyers, on 12/16/2008, -10/+4HAHA TAKE THAT TOM VU.
- nirbir12, on 12/16/2008, -12/+3LOL
- alanr19, on 12/16/2008, -2/+7My home's valuation went up 2.6% in value in the last 8 months. I consider myself lucky. Negative equity is a nightmare.
- mike17032, on 12/16/2008, -2/+9My house is easily worth 3x what I bought it for 5 years ago.
Not hard to do when you get a place for 40k and put a little work into it.
Course I dont care, since I dont plan to move anytime soon.- Pstmann, on 12/16/2008, -0/+6Do tell, where did you get a place for 40k?
- Crucible1001, on 12/16/2008, -0/+2You can get places for 1-5k in lansing, mi. The normal fixer uppers are around 20-40k. Usually around 1000-2000 square feet.
- jabberwolff, on 12/16/2008, -1/+1You can put a down for 40K and get a decent place.
If its a fixer upper in a good location, you can get a good return.
Always the best bet to get the worst place on the lot in a good location, if you can fix it up. - mike17032, on 12/16/2008, -0/+3In Harrisburg PA. We never had a bubble here.
1600 square feet, 4 bed rooms (3 now that one became a huge bathroom with a Jacuzzi) and 1 bath (now a closet, that bathroom sucked).
I am a few blocks from downtown, and just 1 block back from the river front.
Crime can be a problem, and the local school sucks (no joke, last year the high school sent more kids to jail than they graduated). Its not the war zone that Philly or Baltimore is though, so as long as you are smart and careful you should be ok. Its not for the fait of heart or the weak, but if you have a pair of balls and know how to watch out for yourself its a great place to live if you dont have kids.
The city keeps improving, with more and more decent people moving in. Hence the property values going up. I love living within walking distance of downtown with all its bars and clubs, and the house itself requires very little upkeep. The only thing that I really hate is that I dont have a parking spot, so I have to park my car (that I love) on the street.
To be clear, the house was about 40k TOTAL, not a down payment. I put almost no money down, since I qualified as a first time home buyer I got a lower interest rate (fixed at 5.5) and could use a much smaller down payment than normal. Since my monthly payment is sub $300 (less than most car payments), its easy to pay ahead on it anyway.
Most of the people I know that spent 160k on a house (still not bad considering what some idiots pay) are all house poor. They can make their payments, but dont have a whole lot left over for fun things. I have a house full of fun toys, and plenty of money left over for boozing.
An added plus is that I live about a quarter mile from work, so its a 3 minute bike ride. Not pissing away time (or money) on a commute is damn nice.
So the moral of the long and pointless story is, find a cheap house that is close to your work and live it up. They are out there, and living in CA isnt worth going bankrupt for. - jerrycurley, 11 hr 38 min ago, -0/+1mike...you talk about how you are so close to downtown and to the riverfront as if those are things that drive the value UP...But generally they don't for the very reasons you mention in your next paragraph. Becuase those are generally high crime areas which brings prices way down.
Not everybody wants to live in a ghetto, let alone own a home in one.
- vizeroth, on 12/16/2008, -0/+5One of the big issues facing a lot of cities (at least in states that permit it, which is most of them) is that tax revenue is going down the drain with house values because the cities became accustomed to the rising values and started spending the money (instead of saving some of it for emergencies or the eventual downturn that has now come along). Of course, people were also losing their homes before the bubble burst, because the value of their house was increasing at a rate that exceeded their ability to pay the taxes, especially in the case of those with fixed incomes (ie people that retired in homes they had already paid for).
Personally, I need the prices to correct themselves if I'm going to be able to buy a house in my area. I don't really see how people could justify the price of a house increasing 4x in 6 years with no one's income increasing in the same time period.- trispear, on 12/16/2008, -0/+4I like California's system better, 1% on original purchase price. A lot of the appraised "values" are nonsense, not to mention the school just raising taxes when they feel like it (my sister who is a teacher is earning way more with benefits than she could in private enterprise for her set of knowledge).
- trollick, on 12/16/2008, -6/+3My home went up 1000% in the last 3 month! Well, at least that's what I want to think...
- LanceUppercut, on 12/16/2008, -2/+12I put spinners on my van down by the river. Value doubled.
- gleongelpi, on 12/16/2008, -0/+4It all depends where you are. In the Carolinas there was never a bubble. In my county last count there were 11 houses in foreclosure out of more than 20k. I bought my house in 2004 for less than 100 per Sq. Ft.. Very nice house built in the '70s. The owner didn't know what he had and was in such a rush to move that he practically gave it away. My sister's house in South Florida, basically equivalent to mine, she could have sold a couple of years back for close to 1MM.
Did you know that over 60% of all the foreclosures are in four state? California, Arizona, Nevada and Florida.- fohf, on 12/16/2008, -0/+1you forgot Denver. Leading city for foreclosures in the nation.
- PhantomZmoove, on 12/16/2008, -0/+1What about Indiana? I thought it was way up there too.
- KUKBAHLAM, on 12/16/2008, -0/+5When I bought my house in Austin I knew I wanted to live in it until the day I die. I got a good deal on my loan and my my house payment was under $500mo. Then the bubble came. The state says my house is still worth 6X what I paid for it and they have seen fit to increase the % rate every year. Since my property taxes are rolled into my payment I'm now near $1,100 mo. I have almost paid the place off but once it's mine I will still owe the state $600mo until I retire. So, if I want to keep MY house, I will have to rent it from the state for the next 25 years at a rate greater than the original cost of the house..
I hope this crash makes my home worthless.- Nerys, on 12/17/2008, -0/+1HERE HERE Property taxes are complete ***** and a CON on the american people.
- mike17032, on 12/16/2008, -2/+9My house is easily worth 3x what I bought it for 5 years ago.
- MiddleAmerica, on 12/16/2008, -13/+5Unfortunately the Republican talking point that people that can't pay their mortgage are irresponsible & should be foreclosed on & made to be destitute. The fact is these people have been lied to about what their payments would be, & when & how much the loans would adjust. True, people got as much as they thought they could afford, but its up to the lending bank to make sure that the person can make their nut, which didn't happen. Instead it was a free for all, people that could only afford a modest payment were talked into larger payments, then the loans reset faster & at much higher rates than they were told would happen. So a person that could only afford $700 a month was talked into & approved for $1200 a month, then the loan resets turning it into $1800 a month. This is deregulation in a nutshell, which is the Republican mantra, because they let industry (aka lobbyists) literally tell them what their legislative policies are. There are tons of examples of this, but our media is so bought-off by industry that its rare that they'll really tell us what's going on.
Finally, rewriting the loans is a win-win-win-win-win low cost solution, not a bailout:
1) This would help the real estate market prices level out & even go up eventually.
2) This would not cost the taxpayer almost anything.
3) People would not lose their homes, ruin their credit, & become destitute.
4) This would help the companies that hold the mortgages, because they would start to see an income again because people would be making their mortgage payments.
5) All of the above would be good for the economy & for wall street.
6) This would not be for real estate speculators/investors, it would only be for owner occupied loans.- cyrusuncc, on 12/16/2008, -2/+6wow, you sure don't want anyone to take personal responsibility for their actions.
"Each is responsible for his own actions. "
- H. L. Hunt- Nerys, on 12/17/2008, -0/+2Its interesting you say that but want to absolve the BANKER who made the loan. HE had ACTIONS in the process too.
and hes the expert.
- Nerys, on 12/17/2008, -0/+2Its interesting you say that but want to absolve the BANKER who made the loan. HE had ACTIONS in the process too.
- FenianNProud, on 12/16/2008, -1/+7"people that could only afford a modest payment were talked into larger payments, then the loans reset faster & at much higher rates than they were told would happen."
So...I suppose all these people couldn't read, couldn't do basic math or were otherwise borderline retarded?
A person's failure to read the contract, hire an attorney to advise them or otherwise fail to grasp that $700/mo in payments doesn't cover a 30yr loan of $300k+ is an unfortunate learning expense but thats all.
The failure of this country (now days at least) to recognize personal responsibility for your choices is a key reason the fewer and fewer people are able to make smart decisions about their welfare and life.
You took out the loan. You signed the papers. You own the responsibility - no one else.- PhilliesBlunt, on 12/16/2008, -3/+2There's a part of this that I think you're missing, and it's this: Who gave these people these loans in the first place? Getting a home loan is an involved process, it's why we have things like credit ratings and various other background checks to determine whether or not the loan in question can actually be re-paid. Now, according to a functional business model, the bank profits from the interest on the loan over time, and therefore it's to their benefit to make good loans that will be repaid. Since most of the lenders do this professionally, it's a safe assumption that they have a pretty good idea of who can legitimately afford what type of loan, and who can't, and to accept or decline the application accordingly. It's all part of the basic business model:
1. Loan Money for real estate
2. Money is repaid over time with interest
3. PROFIT!!!
Problem is, too many people thought they could game the system by making bad loans, with idiotic terms that I'm convinced only exist to fool stupid people, and still turn a profit by flipping the mortgages into investment packages.
I won't argue your point about the stupidity of not doing your own math regarding your mortgage, but in the grand scheme of things, who's stupider, the person who walked ignorantly into a mortgage they couldn't afford, or the professional loan officer who knows that there's no way in hell that this loan can be repaid, but approves it anyway? - Nerys, on 12/17/2008, -0/+2But therin lies the problem.
When you screw up you should, to at least some extent, have to PAY for your screw up
there were TWO screwups here.
The loan officer
The Home Owner
The loan officer just got a $700billion dollar job well done
The Home owner got the finger
See the problem here :-)
- PhilliesBlunt, on 12/16/2008, -3/+2There's a part of this that I think you're missing, and it's this: Who gave these people these loans in the first place? Getting a home loan is an involved process, it's why we have things like credit ratings and various other background checks to determine whether or not the loan in question can actually be re-paid. Now, according to a functional business model, the bank profits from the interest on the loan over time, and therefore it's to their benefit to make good loans that will be repaid. Since most of the lenders do this professionally, it's a safe assumption that they have a pretty good idea of who can legitimately afford what type of loan, and who can't, and to accept or decline the application accordingly. It's all part of the basic business model:
- jfreeman, on 12/16/2008, -1/+4Unilaterally rewriting loans removes all the trust from the contractual relationship. If that happened, /no one/ would want to lend to anyone but /the most/ trustworthy of borrowers for fear of rewriting in the future.
- Nerys, on 12/17/2008, -0/+2that would be a good start. Send the message that either write good loans or we will write them for you.
They can't just STOP lending money they will DIE too since lending money is how they profit.
It will simply FORCE them to lend it properly and I HOPE "FAIRLY"
100+% interest is not fair on any planet or in any definition except maybe Ferenginar.
- Nerys, on 12/17/2008, -0/+2that would be a good start. Send the message that either write good loans or we will write them for you.
- cyrusuncc, on 12/16/2008, -2/+6wow, you sure don't want anyone to take personal responsibility for their actions.
- MiddleAmerica, on 12/16/2008, -5/+13Second Mortgage Disaster Looming On The Horizon - 60 Minutes
http://digg.com/business_finance/Second_Mortgage_D ...
An absolute must watch!
This is what we get when we deregulate the banking industry for the sake of "Free Market" ideology.- Pstmann, on 12/16/2008, -0/+9That's fine. maybe if there are enough home foreclosures people who actually work for a living can afford to buy one.
- baphomet, on 12/16/2008, -3/+14The "Free Market" has not existed in the U.S. for quite some time.
Freddy Mac and Fannie Mae are NOT free market. They are the government and they existed to help people own homes. Ditto for the Community Reinvestment Act, which was supposed to help people own homes. Ditto for the Federal Reserve. It sets the price of money via the interest rate. By cutting the rate to the absurd level of 1% in the 2000's Greenspan created a bubble economy to prevent the crash of the Dot Coms. The Fed wanted this, this is why Greenspan said that ARM loans were a good idea.
All of these things are manipulations of the economy, and it was BECAUSE OF GOVERNMENT, not the lack of it, which created the housing bubble. The government created the cheap credit that allowed everyone to get a mortgage, which increased the demand for housing, which increased the prices of houses. From there, the bubble really begins because people see a way to make even more money through the real estate market and then the system feeds on itself.
We can try all we want to regulate the EFFECTS of the government's meddling of the economy (which is what, in reality, what everyone seems to think is the answer), but the answer is only breached when we change the ROOT CAUSE, which is the government in the first place.
Greed and all other forms of human weakness has always existed, but when the government takes away the natural risks of the free market (via the Fed, the CRA, Freddy, Fannie, FDIC, fractional reserve lending, etc.) then things become unstable and chaotic.- regeya, on 12/16/2008, -0/+3http://www.insidearm.com/go/arm-news/cra-not-to-bl ...
'"CRA is becoming a convenient scapegoat for escalating losses in the housing and credit markets," noted Michael Rubinger, LISC president and CEO. "But in fact, these issues have absolutely nothing to do with CRA. They instead reflect the decisions some financial institutions have made in recent years to maximize gains at the expense of sensible risk management," he said.
'Contrary to what its critics assert, CRA does not compel banks to lend to poor borrowers who have little ability to pay back those loans. CRA actually requires that lending must be safe and sound. "It's simply not true to say that CRA drove high-risk loans to people without the ability to pay them back," said Rubinger.'
I mean...I don't get it. It's been shown, it's been PROVEN, that the timebomb is in UNREGULATED areas, and that the problems began when regulation was RELAXED. I'm sorry, but nothing that's come out lately is a very strong argument for letting banks do whatever the heck they want, without government intervention. They've more or less proved the opposite.
This sort of attitude is why China laughs at us, all the way to the bank, while they take our jobs. They're better educated, their system, while it has problems due to lack of transparency, seems to be keeping the wheels on. And yet, we have a loudmouth bunch of hooligans who want to claim that the problems are caused by banks being forced to give loans to 4% of the housing market, and that we'd be a lot better off without public education (at a time when our kids rank 18th out of a possible 24) and a federal government which keeps the union together. - baphomet, on 12/16/2008, -1/+1It has not be proven because like I said, the U.S. Economy is not "free." It is manipulated at every level by government. An economy with a Central Bank (Federal Reserve) is not a free market.
The CRA Scam and its Defenders: http://mises.org/story/2963
Either way, I don't think the CRA itself is the main issue. The Federal Reserve System is the main issue. The Fed essentially prices fixes the cost of money. This causes massive boom-bust cycles. Secondly, the "securitization" of home loans. This was pioneered by government agencies: Freddy Mac and Fanny Mae:
A quote from the link above:
"In order to try to diversify the risk of these loans, the Federal Home Loan Mortgage Company ("Freddie Mac") pioneered the "securitization" of bundles of these high-risk loans so that they could be sold on secondary markets. Such "securitization" exploded during the 1990s as a result of government regulation. As Fed Chairman Ben Bernanke himself stated in a March 30, 2007 speech entitled "The Community Reinvestment Act: Its Evolution and New Challenges" (published online by the Fed),
'Securitization of affordable housing loans expanded, as did the secondary market for these loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a large percentage of their activities to meeting affordable housing goals. (p. 3)'" - Nerys, on 12/17/2008, -0/+2I agree and disagree
THE PROBLEM is predatory loans
the SOLUTION is to eliminate predatory loans
the GOVERNMENT solution was to force them to let EVERYONE get predatory loans.
100+% interest is not a fair loan but thats how you buy a house by paying MORE MONEY in interest than the home will ever be worth.
this made loan payments insanely HIGH
so fewer people could afford them.
IF loan payments were fair (TOTAL interest 10% so 10 grand on a 100grand loan) and property taxes were fair (IE non existant)
I WITH MY $1200 a month income could EASILY afford a home.
but add in INSANE interest rates and property taxes and suddenly the monthy payment is MORE THAN I MAKE by a LOT
There is something WRONG with this picture folks.
SO the government did not create this problem the banks did
the government just helped to make it a lot worse and then REWARDED the banks for it with a bailout.
- regeya, on 12/16/2008, -0/+3http://www.insidearm.com/go/arm-news/cra-not-to-bl ...
- kaelyiesta, on 12/16/2008, -1/+3You're link says nothing of the cause of this problem, just that things are very bad. I on the other hand have a wealth of evidence that free market has nothing to do with the bank/housing loan industry failures exposed currently and that the banks are heavily regulated in a way that allows and sometimes encourages immoral banking practices.
Here is an overview: http://mises.org/story/2935
Here is a specific example(sufficient on its own, but by no means the only example I could cite): http://mises.org/story/2963
The big points to take away are these: First, initiation of force. The government is forcing individuals to do things which it has no right to demand of them. This alone is sufficient to reject their actions. A bank should be allowed to do whatever it wishes in so far as it's actions are not themselves immoral. As long as they aren't deceitful about it, they can operate however they wish and make risky decisions. As long as they aren't fraudulent, so be it. Second, moral hazard. The force imposed on banks(some of it, they want since they are in this little game too) allows them to make choices that are not productive to anyone but the politicians being lobbied and the bank making off with our money. Even if there were an honest bank out there, it wouldn't be possible for them to compete with those that played ball with the politicians.
The vast majority of banking regulation is not only ineffective, but harmful. The bailout is just another example of this. It's benefits are very short lived, and the harm it causes outweighs the benefits within a month or two. Paulson benefits, since he gets a ton of money to dish out to whoever he likes most. Bernanke benefits slightly as well in the same respect. The executives of the companies receiving the money benefit(as seen by AIGs post bailout parties). But that money had to come from somewhere, and someone had to be robbed. That's everyone not in debt. This then encourages people themselves to spend unwisely which adds another layer of moral hazard.
So clearly this isn't at all a free market. It's more of a managed or a forced market.
- Exhibitionist, on 12/16/2008, -7/+27I have to laugh at the term "predatory loans". It's kind of like saying "predatory cigarettes" or "predatory alcohol", like people that take out home loans are ***** forced into it.
- drlha, on 12/16/2008, -2/+13However, the personal responsibility of the people who got bad mortgages is only part of the equation, its not like the banks were blameless in giving out these mortgages. They should have known better when assessing people's mortgage applications, rather than just desperately getting signatures on paper and then selling off the risks to other investors.
- Autodidaddict, on 12/16/2008, -0/+9Some people getting loans were irresponsible. They were ignorant.
Some of the banks issuing these loans because they would just package and sell them to other banks and investors and hence not care of the loan applicant was a huge default risk were predatory and criminal.
I prefer neither, but would rather have ignorant irresponsibility than predatory irresponsibility. - FredFredrickson, on 12/16/2008, -0/+15The banks, lenders, and buyers are all to blame... but none of them deserve a bailout for this mess.
- Pstmann, on 12/16/2008, -2/+7Well not actually forced but sometimes lied to and tricked into it. The lenders were the ones who were really irresponsible and yet they get the bail-outs.
It wasn't too long ago that the measure of whether or not you could actually afford to buy a house was if a bank would actually lend you money. I remember jumping through hoops with documentation and references before I was even looked at for a loan. - ScottMitchell, on 12/16/2008, -3/+4There is a huge psychological difference between a home and a bottle of booze. People have an innate longing for owning their own home, for having a place to call their own, much like they do for food, family, respect of their peers, and so forth.
I'm not making excuses for the people that overpaid for homes using exotic mortgage products, but I can understand how one would feel compelled to take a gamble in this area for the sake of their family or dreams. - gleongelpi, on 12/16/2008, -0/+3Is not the home buyers that got shafted. The investors who bought the bonds backing the mortgages were the ones taken in. Many of them from overseas, they bought after rating agencies gave the security issues high ratings. They bought expecting a bond-like return and security for lending their money, but they were lied to.
- drlha, on 12/16/2008, -0/+2As the TV ads say, "Investments may go up as well as down". Tough ***** really, you dabble in the market, you can get burned.
- Autodidaddict, on 12/16/2008, -0/+2Except this "market" was totally fabricated and propped up on unrealistic projections and flawed mathematics.
Greed. Ignorance. Irresponsibility. - Nerys, on 12/17/2008, -0/+2100% spot on autod...
- MiddleAmerica, on 12/16/2008, -9/+26I work in the mortgage industry & predatory lending practices are no joke.
Loan brokers are the worst, they lie their asses off about what the loans will do, payments, what a buyer can afford, etc.
I've been talking to other people in the real estate & finance industry for years about how this was going to be a serious problem.
Unfortunately many buyers are not contract savvy & are too trusting.
And the brokers & banks have no incentive to make sure that the loan will be repaid, because they sold them off to Wall Street.
Then Wall Street over extended themselves loaning out a thousand times the worth of their collateral.
There used to be regulations in place to prevent these things from happening, but they were taken away by Republican legislation over the years.
- korvan504521, on 12/16/2008, -1/+4I bet they're not as bad as time share salesman.
They're scary.- cyrusuncc, on 12/16/2008, -2/+3It's fun to go to these scam.... i mean sales pitches. I like having a new identity each time like a sex therapist.
- jhbarr, on 12/16/2008, -0/+5My mom used to get the free trips and run the numbers/calculate the interest rates they were charging and blurt them out to others in the sales pitch meetings. She would quickly be excused from the sales pitch and enjoy the rest of her free stay with no hassle.
- Nerys, on 12/17/2008, -0/+2Ahhh thats evil but in a good evil sort of way :-)
- omgwtflawl, on 12/16/2008, -2/+6"There used to be regulations in place to prevent these things from happening, but they were taken away by Republican legislation over the years."
Name this regulation, when it was taken away, and what it would have done to prevent this mess. - gleongelpi, on 12/16/2008, -0/+2I know a couple of people who got those kinds of loan. They insisted on taking them even after friends, including me, told them not to and explained why. They greedily went ahead and got the loans anyway. When they lost their houses, they went crying to the ones who would listen, and when confronted by the likes of me, either got angry or shrugged their shoulders. They lost nothing anyway. It would have been more expensive to have rented. I don't feel sorry for any of the SOBs who took the loans. They all knew what they were getting into. Eff them.
- jabberwolff, on 12/16/2008, -3/+3Really?
This wasnt a problem past 2006 when the democrats allowed banks to hold less equity.
Basically taking a huge risk with the economy, and we lost.- ultar6, on 12/17/2008, -0/+1So you're saying a collapse that began to manifest, at the latest in 2006, was the fault of Democrats who gained power in 2007?
I'm not sure what legislation, pushed through by Dems after January of 2007, resulted in such an immediate and complete financial collapse. Could you enlighten us?
- ultar6, on 12/17/2008, -0/+1So you're saying a collapse that began to manifest, at the latest in 2006, was the fault of Democrats who gained power in 2007?
- korvan504521, on 12/16/2008, -1/+4I bet they're not as bad as time share salesman.
- DangerCollie, on 12/16/2008, -4/+18If you pay $5 for something that should cost $2, it's not really fair to say the item "lost" value because the price corrected. When it comes to home prices, there's still quite a bit of correction left in the market. I'm guessing prices will over-correct on the way down, bob back up to something resembling normality, and then remain relatively flat for the next 10 years.
- Autodidaddict, on 12/16/2008, -2/+8It's not that simple. Houses are priced through supply and demand. Thus, a house isn't either price A or price B. It could be A one day, B the next, and C the day after.
The housing crisis is because irresponsible people were given loans by predatory banks. The banks didn't care, they would just package them as mortgage backed securities and sell them to others who would sell them to others. In fact, many people, though indirectly, may own stake in their own mortgages through credit default swaps and other derivative trading.
Then once these people realized they were upside down, or they just couldn't pay when the mortgage readjusted, they bailed. This, meant an upswing in supply, which drove prices down, which had a domino effect. Also, the builders building at a record pace also flooded the supply, and since foreclosed houses were selling cheaply, the newer ones stayed on the market, everything lost value, hence more domino effect.
Who's to blame? Sure, the sub prime mortgage owners....but I think the banks are more. They just didn't give a ***** whether an applicant was worthy. People are always going to try to get what they can't have, or what they can't afford. Unfortunately, it's the American way. But to place all the blame on the mortgage holders is insane. These banks and investors loved these mortgage backed securities, then when they realized they bought air, they cry to the government for a bailout. And they get it.
Insane. Deregulation doesn't always work and the free-market doesn't either. You can't give paperless mortgages, sign people up for confusing ARMs and deceive them by telling them don't worry when your payments double because your house value will carry you, sell them as securities on the open market to investors and other banks who continue to sell and package them to other banks and investors, act surprised when people default on the payments, and then cry for a bailout when it all blows up.
The real victims are people like me and my parents. People who bought within their means. People who are having their home value stagnant or fall even though they did nothing wrong. These are the real victims.
People need to go to jail. But people too poor to pay their mortgage or too naive to understand how it works aren't the criminals. They are part of the equation, but they aren't the criminals. The predatory lenders are. ***** their bailout money, ***** them all.- jfreeman, on 12/16/2008, -0/+2But how can these banks lend to so many people undeserving of credit? It all comes back to the easy credit in our monetary system, and the implicit (or explicit) backing of government. A sound money would tie these banks down under the chains of responsibility.
Let the market correct, let these people move into homes they can afford, let banks who made risky loans fail, let investors who bought risky assets lose their money, and then we can start rebuilding sooner. Anything is else is theft from those who saved and will only drag this scenario out further.
Also, the free market does work. Your quarrel is with fraud (which should be prosecuted), bailouts (which should be outlawed), easy credit (which should be impossible), and government regulations that in some cases forced banks to lend to unworthy borrowers. - Autodidaddict, on 12/16/2008, -1/+2@jfreeman:
"But how can these banks lend to so many people undeserving of credit?"
The regulations were loosened. Not completely by the Republicans. But mostly.
"It all comes back to the easy credit in our monetary system, and the implicit (or explicit) backing of government.A sound money would tie these banks down under the chains of responsibility."
What? Explain your exact point more clearly.
"Let the market correct, let these people move into homes they can afford, let banks who made risky loans fail, let investors who bought risky assets lose their money, and then we can start rebuilding sooner. Anything is else is theft from those who saved and will only drag this scenario out further."
I agree it's unfair. I am pissed, because I played by the rules. So are a lot of people. But to just sit back and let the "free-market correct itself" isn't realistic. It's easy to say, but it would involve a depression of many years for the systems to truly purge itself of all the toxic assets and write downs. You need to understand how prevalent these mortgage-backed securities have infiltrated themselves into the whole financial services sector. It's hard to trace these credit default swaps and other derivatives as they get passed around from bank to bank and investor to investor. Unemployment and foreclosures would be huge, money-supply would be messed up, it would be an economic meltdown. Maybe that's a good thing? Who knows. But a lot of people would have to get burned real badly. Not all the people getting burned would be the people who caused this though. If you live in a high foreclosure metro area, but you still pay your mortgage, you could be upsidedown because your homevalue fell, even though you are responsible enough to pay your mortgage. Collateral damage would be off the charts.
- jfreeman, on 12/16/2008, -0/+2But how can these banks lend to so many people undeserving of credit? It all comes back to the easy credit in our monetary system, and the implicit (or explicit) backing of government. A sound money would tie these banks down under the chains of responsibility.
- jfreeman, on 12/16/2008, -0/+4Right on the money. I can't believe there were so many other comments before the truth came out. Although, I believe that after prizes normalize, they will begin growing again (hopefully at a sustainable pace).
- Autodidaddict, on 12/16/2008, -2/+8It's not that simple. Houses are priced through supply and demand. Thus, a house isn't either price A or price B. It could be A one day, B the next, and C the day after.
- Zippo, on 12/16/2008, -1/+5Great time to looking to buy, I guess...
In the meantime, housing prices are as high as ever in my province... that's what happens when most of your contractors have left for Alberta.- fmasterdragon, on 12/16/2008, -0/+1Without even looking at your profile I knew that you were a fellow Newfoundlander. I must say that it's pretty good to be isolated (relatively) from this chaos.
- MiddleAmerica, on 12/16/2008, -15/+26Actually the deregulation was all GOP legislation & all but one was done between 2001-2006 under total Republican control. There was one that was a GOP bill, but they convinced Clinton to eventually pass it.
And the GOP talking point of the Community Reinvestment Act is 100% propagandistic lies & has been well proven so by many credible sources. That legislation has been working just fine for 34 years & had nothing to do with the bubble or the crisis.
Bush Administration Weakened Lending Rules Before Crash
The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
http://www.huffingtonpost.com/2008/12/01/bush-admi ...
McCain in March '08: Remove Regulations In Financial Markets
John McCain on the housing crisis just under six months ago: "Our financial market approach should include encouraging increased capital in financial institutions by removing regulatory, accounting and tax impediments to raising capital."
http://www.jedreport.com/2008/09/mccain-march-08-r ...
McCain defends deregulation, Obama blames deregulation (AP)
news.yahoo.com — Sen. John McCain defended deregulation on Wall Street even as he endorsed a $700 billion bailout of financial firms in an interview broadcast Sunday.
http://news.yahoo.com/s/ap/financial_meltdown_cand ...
Regulations Republicans Eliminated Causing Financial Crisis
Here are few: State Laws Against Predatory Lending, The Net Capital Rule, The Uptick Rule. And McCain has been touting the idea that more deregulation of industry would be part of his policy. That's worked out well so far, eh? Plus he has been stumping for deregulation of the healthcare system, because it worked out so well for the financial industry, seriously.
http://thinkprogress.org/wonkroom/2008/09/19/perin ...
GOP Was For Deregulation Before They Were Against It
Republicans deregulated markets causin the financial meltdown, then 6 months ago unveiled new plans for more deregulation of financial institutions, which McCain has supported on the campaign trail, but now GOPers have all flip-flopped.
http://thinkprogress.org/wonkroom/2008/09/19/dereg ...
McCain: Let's fix healthcare the way we did banking
Sept. 20 -- An article about health care published in an obscure journal led to a new skirmish Saturday between the campaigns of Democrat Barack Obama and Republican John McCain over who should be trusted with the ailing economy.
http://www.washingtonpost.com/wp-dyn/content/artic ...
The real reason behind the economic crises
http://www.rockhate.com/unofficial/mccain.htm
- mike17032, on 12/16/2008, -9/+13Other than the one Yahoo link, all your links are to ***** propaganda sites.
Huffpo, thinkprogress, Jedreport, ect, are all ***** sites that have no place passing as a credible source. - NJank, on 12/16/2008, -0/+8valid news stories will be reported multiple places. please repost with links from reuters/ap/bbc/etc. so that mike can be convinced.
- mike17032, on 12/16/2008, -1/+2I am still waiting....
Gonna take a wild guess and say most of these "stories" (that term seems to fit at least) arnt so valid. - Nerys, on 12/17/2008, -0/+2Go find it yourself.
- mike17032, on 12/16/2008, -1/+2I am still waiting....
- ScottMitchell, on 12/16/2008, -1/+5Prior to Clinton, you couldn't deduct your home mortgage interest. Adding that deduction raised the prices of houses nationwide.
When will politicians learn that giving preferential tax treatment to an item doesn't make it more affordable - rather, it raises the cost of said item! - jfreeman, on 12/16/2008, -2/+4Enough with the partisan bickering. There was enough political capital for both sides to support "putting every American in a home" even though it is economically infeasible. Both major parties are equally culpable when it comes to the housing bubble.
- inajeep, on 12/16/2008, -2/+4I believe both parties share the blame but not equally.
- omgwtflawl, on 12/16/2008, -2/+3The CRA didn't have any teeth till about 12 years ago or so. After they gave it some legal bite, it set everything in motion for this disaster to happen.
http://www.youtube.com/watch?v=pHIlr77NF8I&fea ... - jabberwolff, on 12/16/2008, -3/+4REALLY?
Aside from the "huffington report" "jedreport" and "thinkprogress" BS !
Why not look at the 2006 housing act which MCCAIN warned us would screw the economy.
And look and where Pelosi, democrats, AND BARACK OBAMA took a stance on the housing act they helped pass?!?! NO CHECKS NO BALNCES - we were screwed directly because of that.
- mike17032, on 12/16/2008, -9/+13Other than the one Yahoo link, all your links are to ***** propaganda sites.
- kalvinb, on 12/16/2008, -1/+31Well that's not surprising since home prices were artificially inflated trillions of dollars in the few years prior. Homes were selling for twice what they were worth.
Now they're going back down to what they are actually worth.- wifirewire2, on 12/16/2008, -0/+11I agree. People who bought a 350K 1400sq ft home in ***** are screwed b/c the home was never actually worth 350K...and now the same homes in the same community are selling brand-new for 120K
...but they did buy into the hype of ''real estate will always increase'' *****, my ex-roommate was a perfect example of the greedy / get-rich-quick mentality of the time.
So anyone in the negative equity mess has to foot some of the blame, but hopefully a hard lesson was learned. Bubbles are pretty easy to spot, especially ones on such a large scale. - Tbyrd073, on 12/16/2008, -0/+6People weren't wise enough to question the price tag on the houses and now they have to pay the price for their stupidity. Free Markets work like that. They made bad investments just like the banks when they lent to people who couldn't afford the houses. They all will fail, the bailouts will just artificially prop up the failed system until the government can't get any more money either or in this case borrow anymore since they are already spending imaginary money.
- wifirewire2, on 12/16/2008, -0/+11I agree. People who bought a 350K 1400sq ft home in ***** are screwed b/c the home was never actually worth 350K...and now the same homes in the same community are selling brand-new for 120K
- TheNWO, on 12/16/2008, -0/+28Excellent news for those of us who don't own homes, and not terrible news for those who don't plan on selling in the near future and who don't have subprime mortgages.
- ssn697, on 12/16/2008, -0/+11About two months ago, I said this was all good news for me, since I own my home outright, and want to buy another. I was buried so deep for just the suggestion...
The stock market tank, and housing tank are VERY good news, investment wise. Both my kids are getting stocks as gifts from me this year.- bluto36, on 12/16/2008, -0/+7just bought and closed on my new house. $58,000 below listed price in April 08 and the bank covered costs.
bank owned short sale... yea for me!
/i know it sucked for the owner of the house BUT yea for me! - ssn697, on 12/16/2008, -0/+4Congrats on the new house. I am willing to bet you don't have a loan with a built in "surprise" to twist your ARM in a few years ;-)
- bluto36, on 12/16/2008, -0/+3what? ARM? my loan agent told me not to worry i can just re-finance in a few years before my rates increase. she said 60yr interest only loans are the best deal going
- bluto36, on 12/16/2008, -0/+7just bought and closed on my new house. $58,000 below listed price in April 08 and the bank covered costs.
- ssn697, on 12/16/2008, -0/+11About two months ago, I said this was all good news for me, since I own my home outright, and want to buy another. I was buried so deep for just the suggestion...
- aron1185, on 12/16/2008, -1/+17Wait? You mean to tell me that, even though my credit sucks, and I can't pay my bills... you are willing to give me a loan to buy a house? SWEET!!!
- gleongelpi, on 12/16/2008, -0/+4And then you can live in it for free until it is foreclosed. Really Sweet!!!!
- AlterLite, on 12/16/2008, -0/+8I have said it in the past and will say it again. Once they figure out some kind of bailout for homeowners I WILL figure out a way to game the system so I get some free money too. There is not G#$damned reason I should be punished for reading my contract the day of closing and knowing exactly what I was getting myself into. I don't care if my credit goes to hell...
- ScottMitchell, on 12/16/2008, -2/+5If you bought in the last few years, here's how you can game the system:
(1) Buy a comparable house across that street that was foreclosed on and selling for, say, 20% less than what you paid.
(2) Move across said street.
(3) Rent out your house and stop making payments on your original house
It'll be a year or so before your old house gets foreclosed on, and you'll have a year of rent profits. Because your original house was foreclosed on, your credit will go to hell, but if you live in a non-recourse state they can't come after you for the difference. In short, you've reduced your total debt load by 20% (or however much less the house across the street is), plus you got a year's worth of rent in your pocket. For bonus points, you can get in touch with some recyclers with loose scruples and, for a fee, let them into your original house shortly before the foreclosure date so that they can rip out the copper pipes. You can then sell your fixtures (fridge, oven, etc.) and claim that they were stolen by the "thieves" who ripped out the copper.
Win-win-win. - gleongelpi, on 12/16/2008, -0/+2The only game would be to take the mortgage interest deduction from schedule A and turn it into a reimbursable Tax credit. In other words. not only can the home owner take a credit against taxes paid, but the government would send him a tax rebate check for the full remaining amount of the interest paid after all deductions agains taxes owed are figured. Sweet! I would be getting about 12 a year.
Mind you, I don't believe in any of this government shennanigans. But it is about time I get some "free" money for a change. I am always the sucker who has to pay.
- ScottMitchell, on 12/16/2008, -2/+5If you bought in the last few years, here's how you can game the system:
- ultra80, on 12/16/2008, -0/+18Not surprising. Any statistician could have predicted it based on nothing more than these:
1. The average annual increase in home value since world war two is slightly over 3%. (IIRC, but in any case it is around 6% annually since the early 1970's)
2. We were in a period where annual values were increasing in double digit annual increments.
3. Regression to the mean is a bitch.- vizeroth, on 12/16/2008, -0/+10http://graphics8.nytimes.com/images/2006/08/26/wee ...
That one said it all for me, and that was over 2 years ago. Houses are still over-valued 2-4x in my area, or inflation REALLY sucks right now.- Tbyrd073, on 12/16/2008, -0/+6Don't think there is any counter argument to that graph. Regression is a bitch and people are being raped for bad investments.
- gleongelpi, on 12/16/2008, -0/+4It also depends on the houase. From WWII to present the average sizes of a house has doubled
- jabberwolff, on 12/16/2008, -1/+4Actually the stats showed that this should have happened in 2006... we were delayed.
And these statistians and lenders warned us in 2006.
Democrats allowed the 2006 housing act to pass with Fannie Mae and Freddy Mac to have less cash on hand and to cover the awefully bad loans made. So when the market went down, there was no liquidity in Freddy mac or Fannie Mae, and there was a credit crisis... everyone got hit hard!
- vizeroth, on 12/16/2008, -0/+10http://graphics8.nytimes.com/images/2006/08/26/wee ...
- LukeTheGreat, on 12/16/2008, -3/+10It's just common sense. Why would a construction of wood, plaster and paper cost $400.000.00 ???
Most of american homes are built like that. Cheap, slight wind leave it without no roof or power.- trispear, on 12/16/2008, -0/+7Not that flimsy, but since the contractor doesn't have to pay the monthly bills, they're often under insulated like crazy.
- dae3dae3, on 12/16/2008, -0/+3They're insulated to at least building code. The better builders will build to better than code and use it as a selling point.
- regeya, on 12/16/2008, -1/+3ssssssh, dae3dae3, the Libertarian bury brigade is out in full force! They want you to be free--free to think their way!
I swear, those guys are getting downright Orwellian.
You are at liberty to think there are four lights. - Nerys, on 12/17/2008, -0/+2THERE ARE THREE LIGHTS!!! (but I think I did see 4)
hehehe
- trispear, on 12/16/2008, -0/+7Not that flimsy, but since the contractor doesn't have to pay the monthly bills, they're often under insulated like crazy.
- FenianNProud, on 12/16/2008, -0/+19Or at least 2 Trillion in inflated 'value'.
How can anyone in their right mind actually believe that the house they bought, which was flipped by 2-3 previous owners within 1-2 years, was actually work 25%-40% more now, lol.- kingmanic, on 12/16/2008, -0/+6Because obviously in the 3 months you held it the US population rose 30%?
Real Estate bubbles are very similar to giant legitimate ponzi schemes. Great if you get in early, incredibly bad if you get in later. The only wealth changing hands is that of the people involved in the scheme and no real economic value is generated.- NJank, on 12/16/2008, -0/+5and only really great in two cases: you got completely out during, or never got in in the first place.
- kingmanic, on 12/16/2008, -0/+6Because obviously in the 3 months you held it the US population rose 30%?
- LoveWidescreen, on 12/16/2008, -4/+12Forgive me for having no sympathy for idiots who signed on the dotted line knowing full well that they couldn't afford the house that they were buying. I want to know where my ***** bailout is for NEVER missing a payment and for actually buying a house that we could afford! (Imagine that!)
- cadmiumpaint, on 12/16/2008, -6/+5ever hear of something called getting laid off? its happening to everybody in every industry...even very responsible people. Savings can only float you for so long. Don't judge to quick. Karma's a bitch You might be next.
- LoveWidescreen, on 12/16/2008, -0/+5Oh, I've been there. But yours is a total straw man argument. You know damned well that the current economic smack down all comes not from unemployment but from people biting off way more than they could chew and from the banks who told people that they can do that. Unemployment is a result, not a cause.
- cadmiumpaint, on 12/16/2008, -1/+4the idiots who took out more than they could chew were the first to fall. I think by now all of them have been forclosed on. I think the banks share a HUGE part of that responsibility. If giving and selling junk mortgages wasn't a huge little racket for a few years we wouldn't be in this mess.
Now its the regular working people who were responsible and getting laid off or facing cutbacks are the ones who are suffering because of this crazy domino effect.
- mediaspree, on 12/16/2008, -4/+5Did ya get your $600 "stimulus check"?
- LoveWidescreen, on 12/16/2008, -2/+4Did ya get a clue about what you think you're saying? Your comment is totally irrelevant, and you know it. That "stimulus" was based on the family household, not the building they lived in. Friends of mine who live in apartments got them, too.
- Abscess, on 12/16/2008, -0/+2Hey Mediaspree! You need to put a /s at then end of comment like that. Most diggers are not smart enough to realize that you were joking. Funny as hell though!
- cadmiumpaint, on 12/16/2008, -6/+5ever hear of something called getting laid off? its happening to everybody in every industry...even very responsible people. Savings can only float you for so long. Don't judge to quick. Karma's a bitch You might be next.
- pathouston22, on 12/16/2008, -2/+6Home prices are inflated in many parts of the country anyways. A $100k house in Houston will cost you half a million in California. A cheaper house right now is actually better for most people as you will pay less in property taxes. Unless you're selling, then it sucks.
- dntn31, on 12/16/2008, -0/+3Now that's what I call a sticky situation!
- asskicker32, on 12/16/2008, -1/+10YES! Something tangible loses a perceived value which 99% of the homeowners wont even notice because they wont sell
Horray for sensationalist journalism and economics!- Nerys, on 12/17/2008, -0/+2but they will notice the tanking economy. SO in effect they WILL notice that that perceived value is the cause at least partially OF IT.
- Tynan, on 12/16/2008, -0/+28Nothing has lost value. They were never worth that much in the first place.
- FredFredrickson, on 12/16/2008, -0/+9Kinda like Apple's stock.
- vision777, on 12/16/2008, -0/+7The house prices were out of whack anyways. Houses could not keep growing in value at the rate they were. Unless you owe a lot on your house now it is not that bad especially if you are buying a house or already own your home.
- duderdude, on 12/16/2008, -0/+7Good, avg. home prices were ridiculous compared to avg. income a couple of years ago. This needed to happen in a bad way. I don't feel sorry for the people who gambled and lost, they are the same people who drove prices up to unaffordable levels in the first place.
- theutopian, on 12/16/2008, -0/+14More like home values now reflect their TRUE value.
No more 2 bedroom homes selling for $500,000.
The market has corrected itself. Since we all should be worshipping the market like a God, we cannot speak against God. Deal with it people.- spaceman84, on 12/16/2008, -0/+7I'd argue that they're still inflated. They haven't come down to 2001 levels yet, and considering the current economic situation, they should be lower than they were in 2001 because the demand is down considerably from 2001.
- sdwilly, on 12/16/2008, -0/+5I agree, I still think they are higher than they should be.
Next year or the year after they should be about the right area.
On the plus side if you are looking to buy it's a great time.
- sdwilly, on 12/16/2008, -0/+5I agree, I still think they are higher than they should be.
- spaceman84, on 12/16/2008, -0/+7I'd argue that they're still inflated. They haven't come down to 2001 levels yet, and considering the current economic situation, they should be lower than they were in 2001 because the demand is down considerably from 2001.
- shipwreck58, on 12/16/2008, -0/+9The reality is that the houses were overvalued from the git-go and they are now simply returning to their actual REAL value.
- FredFredrickson, on 12/16/2008, -0/+13Just a few more trillion to go before they are affordable again!
- eatsushi, on 12/16/2008, -7/+9I visited my parents this weekend. They are hardworking filipino immigrants that have worked their way up to own a very nice house. I remember when they bought it brand new and was constructed, it was purchased at around 325,000 in 1997. They never had late payments, recycled the equity to pay off city taxes, purchase a car for my mother so she didn't have to carpool anymore, and use it to put my brother and I through college. Around 2003, the house has been upgraded, both my brother and I graduated with honors from Northern Illinois University, him with an Business Degree, and me with a B.F.A. and worked fulltime at a small but wealthy creative agency, just the way I like it. I could wear whatever I want and worked hard. I took trips, and met a beautiful puerto rican girlfriend who I plan on marrying.
2008 is here and it is like my life has flipped on it's backside. My company went under, and I am freelancing short term jobs, moving from place to place. I no longer have health insurance and no 401k, no investments for my future retirement, and I had to pick up a second job. I sold my house just before it went below market value and am now living in a one bedroom apartment. In 2006, I bought an engagement ring for my girlfriend, but I had to sell it to help make payments to my parents house, which in 2005 last time I checked was worth well up to 550,000, and today it is worth 325,000...the same price they purchased it for. They lost their retirement savings, literally hundreds of thousands of dollars. It doesn't end their. Bank of America offers the best rates in our area..but the only problem is that they only offer mortgages minimum of 15 years. My parents paid the house off in full 4 years ago, and once again, had to take out another mortgage and once again, a bank owns another piece of property. My brother has a degree in business and was working full time as a project manager. Today he works at jewel grocery store as a stock boy, and hates it.
My question is.....what did I do wrong? What did my parents do to deserve this? What did my brother do? This year I became political. It seems as if the only way I can feel better about what I am doing, about my life, is to play the game this so called government has instilled upon me, upon my family, upon us. I hate my government, so I will participate in it, and right the wrong. I honestly have no idea what I am doing, but I plan on running for alderman in my city of Chicago soon, and however long it takes to become at least noticed, I will keep fighting for fairness.
Thank you corrupt politicians, officials...you have opened my eyes and my parents eyes on what true America has to offer. Your greed has awakened many Americans finally finding a voice, and possibly their purpose in life here in the states. No longer will I accept the excuse "this is just the way it is." It is time to do something, and many others will stand up. I have nothing to lose because my government took everything from me, but the positive is I have a lot to gain, and thus, I no longer have fear.- trispear, on 12/16/2008, -1/+4Sorry to hear your misfortune, here:
http://campaignforliberty.com/ - PussInBoots, on 12/16/2008, -3/+5Sorry to break it for you:
1. NIU has been recognized by U.S. News & World Report as a "National University" in its fourth-tier rankings—i.e., within the lower 25 percent of schools in the National University category. Honors degree from a low ranking public school means *****.
2. You choose Bachelor of Fine Arts major. You ***** graduated from a low rank school with a major that has no direct application in this world. Let me tell you something, most of the time majors with the direct application in this world (engineering, math, economics, sciences, programming) make a lot of money http://www.payscale.com/best-colleges/degrees.asp
3. Stop blaming corrupt politicians. You are trying to find excuses. It is your fault that you life turned around. You did not think about long-run and opportunity costs.
4. When ***** hits the fan, "creative arts" employees get fired first. Deal with it.
Now if you would've picked a more direct major, and get a degree from top10 public school with higher/highest honors, your life would be different. You might've not enjoyed your work, but you would make $$$ and would not bitch on digg - KSUdesigner, on 12/16/2008, -0/+3"My question is.....what did I do wrong? What did my parents do to deserve this? What did my brother do?"
From what you've said, I don't think you personally did anything wrong. You were unfortunate to lose your job when your company went under, but that isn't your fault. Things like that happen, especially when the economy is bad. As far as your brother, I don't know, you didn't really say a whole lot about him. But if he has a degree in business, why is he not starting a business instead of (or in addition to) being a stock boy?
I don't particularly think your parents deserve it, nobody really does, but I think maybe your parents were living above their means. You said they purchased a $325,000 house in 1997 and paid it off in full four years ago in 2004. Why were they making such massive payments? Doing the math, that comes out to about $3,400 a month over 8 years. They would've been wiser to take the mortgage for a longer period of time and invested that money elsewhere (though obviously the stock market would've been a bad choice). And did they really need a $325,000 house? I guess it depends on where you live, but where I'm at you can get a decent home for half that price.
I don't think they particularly "deserved" anything, I just don't think they were particularly smart with their money either. To solely depend on the value of your home for retirement is foolish, you should fund your retirement from multiple sources.- regeya, on 12/16/2008, -0/+2"I don't particularly think your parents deserve it, nobody really does, but I think maybe your parents were living above their means."
I think he was addressing the question toward the people who are going around saying, "LOL, good, those people are getting what they deserved!" Correct me if I'm wrong. Having said that, I agree with you, KSUdesigner.
- regeya, on 12/16/2008, -0/+2"I don't particularly think your parents deserve it, nobody really does, but I think maybe your parents were living above their means."
- mobislink, on 12/16/2008, -0/+3Your parents used there home as an ATM machine to buy a car and put you and your brother through college. A lot of people did this. They could have spent the money on worse things I guess. So you expect your parents to buy a house for 325K and for it to appreciate to 550K. Where does the 225K come from in profit come from? Is the house that much better when it was initially purchase?
- trispear, on 12/16/2008, -1/+4Sorry to hear your misfortune, here:
- rrife, on 12/16/2008, -0/+10The home is only worth what somebody is willing to pay for it....this problem isn't caused by any political leaders, its caused by consumers.
- Nerys, on 12/17/2008, -0/+2Oh really so I get to choose the price?
that only works in a free but well restricted market.
We have neither.
- Nerys, on 12/17/2008, -0/+2Oh really so I get to choose the price?
- andyb747, on 12/16/2008, -0/+22Your house is to live in. Its not an ATM machine.
- jcaino, on 12/16/2008, -0/+5I'm glad I live in a location (and own a home there) where real estate values never really were over-inflated. Look on the bright side - maybe this will help you to argue for a lower assessment value, yielding lower property taxes. I bought my house nearly 2 years ago after it had been foreclosed on - then I fought the assessment to have it lowered to wait I paid. I've no doubt that when I finish rehabbing the house in a year or so that I will still come out on top.
- NJank, on 12/16/2008, -0/+3and I hope you will call the local government and have it reassessed to current resale so you pay your fair share of taxes ... :)
- Nerys, on 12/17/2008, -0/+3there is no CURRENT resale unless he sells it.
If he never plans to sell it it will NEVER have a resell value so NOTHING to reassess.
property taxes are fundamentally wrong and a violation of the core intent of our constitution. - jcaino, 7 hr 21 min ago, -0/+2And if I turn it into a rental? With any luck, I'll be keeping it for quite a while - its allows for a short commute to work. And I like where I work.
- Nerys, on 12/17/2008, -0/+3there is no CURRENT resale unless he sells it.
- NJank, on 12/16/2008, -0/+3and I hope you will call the local government and have it reassessed to current resale so you pay your fair share of taxes ... :)
- NoLibertarians, on 12/16/2008, -0/+7You don't lose anything on a home until you sell it..So yes, for some it lost it's value..But for most they will make a ton of money on homes they have purchased and stayed in for a decent period of time
- spaceman84, on 12/16/2008, -2/+3Of course, when you adjust for inflation, most people generally do not make much if anything on the sale of their home unless they're selling during an upward trend in house values which tend to cycle. However, from 2001 to 2007 house values went straight up to double the historic average so it will be a long time until house values return to their normal cycle.
- NoLibertarians, on 12/16/2008, -1/+5Your comment makes no sense..It depends when and where you invested in a home..If you chose wisely you made a bundle..If not so then you may very well have lost money..And that was as true 50 years ago as it is today..Your home also has tremendous value that can not be put in dollar and cents form !!
- spaceman84, on 12/16/2008, -2/+3Of course, when you adjust for inflation, most people generally do not make much if anything on the sale of their home unless they're selling during an upward trend in house values which tend to cycle. However, from 2001 to 2007 house values went straight up to double the historic average so it will be a long time until house values return to their normal cycle.
- ColonelJessup, on 12/16/2008, -2/+12Here we go again with the digg.com economic professors.................................
- boner79, on 12/16/2008, -2/+7yeah the demographics visiting the site today appear to be aderall-addicted college grads living in their parents' basements. Funny how everyone is an expert after the fact. If they had so much foresight they would've been flipping houses in southern CA and jumped out at the exact right time in 2006 before the bubble burst to laugh at us all.
- regeya, on 12/16/2008, -0/+2WOOHOO, ColonelJessup is finally getting rated UP!
- bormooski, on 12/16/2008, -0/+6Im sorry, but I don't know how everyone can say that they banks "lied" about the terms of their mortgages. The papers that you sign at closing have all the terms spelled out. If you were to lazy (or dumb) to read the CONTRACT that you are signing, then I don't feel bad for you.
Many people got ARM loans that changed the payment amount after 3 or 5 years. That is 3-5 years that they could have taken a glance at the contract that they have in their possession, and refinance to a fixed-rate loan if they felt that was more appropriate for their finances.
Bottom line: yeah, maybe the mortgage companies took advantage of _some_ home buyers, but no more than the home buyers tried to take advantage of the banks and the economy.- sdwilly, on 12/16/2008, -0/+2I was curious about the same thing, on my mortgage (15yr Fixed), it had it broken down for me, they even showed me what was going toward interest and what was going toward the principal with each payment.
Since I've only purchased one home I assumed that was a done across the board for all banks, was it not? - carlosos, on 12/17/2008, -0/+2I don't get why people don't read contracts before signing them but it seems very common in the USA. I just rented an apartment. I got a lot of paperwork to sign and while doing this, the person that gave me the contracts took care of some other stuff. After I was done she was surprised that I READ and signed the contracts. That made also her job easier because normally she goes over everything that got signed after it got signed since nobody read it. She said that I was the first person that read the contracts. This also wasn't the first time that people are surprised that I read what I sign.
- Nerys, on 12/17/2008, -0/+2Because they are intentionally made long complicated and hard to understand in simple to understand terms.
They intentionally make a SIMPLE process extremely complex.
You would be amazed how much "surprise" I get when handed a form and proceed to READ it fully before signing it.
They really do not expect and do not WANT you to read it and they ARE negotiable to some extent as you can always "walk away"
- Nerys, on 12/17/2008, -0/+2Because they are intentionally made long complicated and hard to understand in simple to understand terms.
- sdwilly, on 12/16/2008, -0/+2I was curious about the same thing, on my mortgage (15yr Fixed), it had it broken down for me, they even showed me what was going toward interest and what was going toward the principal with each payment.
- DirtyVicar, on 12/16/2008, -0/+7American's can't lose trillions in home value when they haven't even sold the home. You can tally this up for homes that did get sold, but for homes that aren't on the market it's pure speculation. Maybe some people don't even want to sell and the homes aren't even commodities to begin with. For them, the loss or gain in home value comes when it's TIME TO SELL.
- nutsackninja, on 12/16/2008, -0/+4The home prices here in Canada are still on a boom. Our housing needs to collapse by at least 40%. It just isn't affordable
- JonForTheWin, on 12/16/2008, -0/+8The prices were fixed. You can't "lose" something that isn't there to begin with.
- squelched, on 12/16/2008, -5/+6yaaaaaaaaaaaaaaa now you feel the effects of iraq war. finally some people are starting to find out how unnecessary war is. oh and the federal reserve is a joke.
- claxxical, on 12/16/2008, -0/+7I don't think U.S. homes were ever REALLY worth that much to begin with...maybe in people's minds they were. $2 trillion seems more like the overinflated value to me.
- Feenix566, on 12/16/2008, -0/+15The houses didn't lose value. Those houses are just as valuable today as they were when they were last purchased. What's going on is that we're all realizing that the people who bought them paid too much for them. The market is correcting that fact, and the prices are going down. We should all be celebrating in the streets that the American dream of home ownership is now more viable than ever, what with home prices coming down to more affordable levels.
I'm sick and tired of everyone in the media calling this a "crisis". It's not a crisis. It's a market correction.- BESTenemy, on 12/16/2008, -0/+5Damn right! Deflation has to be welcomed as it makes things more affordable for those that stayed away from the temptation of easy credit through the inflationary boom and saved. Deflation happens naturally in many aspects of the economy as manufacturing modernizes and goods become cheaper to produce. For houses there is this argument that the land is limited and therefore with growing population numbers prices have nowhere to go but up. Those that cheered the bubble said the demand prospects were infinite. Nobody bothered to figure out who was going to afford the houses at astronomical prices. Same with oil. Pundits were forecasting prices of upwards of $250 a barrel, as if there would be anyone but a speculator buying. Speculators alone are not able to drive the market. The pyramid rests upon the pool of greater fools. Regardless of the amount of speculation, some real buyer has to be entering the market continuously. When the first time buyers give up and stop coming, the credit freezes up and the market deflates.
Wasn't it the idea behind every government housing program to make houses more affordable? GSE's like Freddie and Fannie were built on the principle. Why, all of the sudden, when market begins to correct itself after the harmful intervention, everyone's kicking and screaming? Falling prices are good! If you haven't lived beyond your means, then this is the best time to go out and buy debt free, and tomorrow the deals will be even better. Recession only gets rid of the inflated part of the asset value. Like you said, the real value hasn't changed one bit. - regeya, on 12/16/2008, -0/+2'I'm sick and tired of everyone in the media calling this a "crisis". It's not a crisis. It's a market correction.'
The newly homeless will be happy to learn of this. - atomheartmother, on 12/17/2008, -0/+2"The newly homeless will be happy to learn of this."
If Washington hadn't mandated that people who couldn't afford a home should get one anyway, there'd be far fewer "newly homeless."- Nerys, on 12/17/2008, -0/+2It mortgages were actually FAIR those people could afford to stay in there homes.
I am not defending them. THEY signed the contracts afterall. but I sure as well will not defend the predatory loans that are in place in this country ALL of them not just these crazy arm things. - atomheartmother, 18 hr 22 min ago, -0/+2What sort of "fairness" would you propose? You can either afford to buy something, or you can't. If you don't understand a contract, hire a lawyer to look it over. If you can't afford 200 bucks for a lawyer, guess what, you can't afford a house.
- 140Suffolk, 10 hr 4 min ago, -0/+2"Predatory loans"? Oh puh-lease. Most of these people figured they'd buy today and the value would go up so much in the next two or three years that they'd be able to re-mortgage and take out the new equity.
In other words, they made their bets. Now that they lost, they want me to cover it. Hey, we're not ***** partners. If they'd WON the way they expected, would they have split the gains with me?
- Nerys, on 12/17/2008, -0/+2It mortgages were actually FAIR those people could afford to stay in there homes.
- BESTenemy, on 12/16/2008, -0/+5Damn right! Deflation has to be welcomed as it makes things more affordable for those that stayed away from the temptation of easy credit through the inflationary boom and saved. Deflation happens naturally in many aspects of the economy as manufacturing modernizes and goods become cheaper to produce. For houses there is this argument that the land is limited and therefore with growing population numbers prices have nowhere to go but up. Those that cheered the bubble said the demand prospects were infinite. Nobody bothered to figure out who was going to afford the houses at astronomical prices. Same with oil. Pundits were forecasting prices of upwards of $250 a barrel, as if there would be anyone but a speculator buying. Speculators alone are not able to drive the market. The pyramid rests upon the pool of greater fools. Regardless of the amount of speculation, some real buyer has to be entering the market continuously. When the first time buyers give up and stop coming, the credit freezes up and the market deflates.
- ElDiablo6870, on 12/16/2008, -0/+5I borrowed money to buy my house. I gave my word I would pay my payments and that is what I plan to do.
- scamper22, on 12/16/2008, -2/+2If your mortgage is worth more than your house... walk away if your state allows it (like California).
- scamper22, on 12/16/2008, -2/+2If your mortgage is worth more than your house... walk away if your state allows it (like California).
- reneu, on 12/16/2008, -1/+7Can you imagine what would have happened if social security got privatized a couple years ago? I'm sure that at least some of people's retirement monies would have ended up in riskier investment vehicles like mortgage-based asset-backed securities or hedge funds, etc. by now. With the stock markets down 35-40% over the past year, to say that would have exacerbated our financial problems sounds like an understatement.
- pagalchu, on 12/16/2008, -4/+4Your social security is in trouble regardless. By privatizing social security, you may have better control over your money then those crooks.
- evilbob333, on 12/16/2008, -0/+2Only if your money is being withdrawn now, or you think that the stock market will not recover. On the other, if you are retiring at a later date, while this looks scary, the money invested will buy more shares which will gain in value down the road, barring some stupid intervention by an overeager to help government with nothing but good intentions and no concept of restraint.....MY GOD SELL!!! SELL!!! SELL!!!
- garryw, on 12/16/2008, -1/+4Uneducated statement. Old people would not have been eligible for privitization, only those under 35 according to the Bush proposal. They (the young) would be getting in cheap, so I imagine things would be great.
- reneu, on 12/16/2008, -0/+1Yes, true. Old people's money would not have been involved with privatized social security at this point. My bad. Although we should assume that similar market corrections will happen again and again, bubble after bubble into the future. 401k and/or partially-privatized social security monies would certainly take a bad hit and negatively affect people's lives who need to withdraw during those times had they not managed their risk to a more conservative state when they were coming close to retirement age. We can probably assume that a lot of people won't manage their risk accordingly, in which case another bailout might be in order for better or worse.
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