$5 submissions

There's still a huge amount of troubled homes that are not yet in the market. Trouble ahead?

Source: http://www.latimes.com/business/real...0,362339.story

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IllTestYourGirls

Prices should be dropping another 30% ~ 35%

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Supz

I dont think its as much as a housing slump as it is more homes in places where people aren't, ie the Florida real estate thread posted a few days ago.

Barry-xlovecam

That is one grim article ...

kane

I agree. We had about 5 years of housing boom because of the sub prime mortgages, but we are only about 3 years into the housing bust so I think we have a few more years with a lot of foreclosures and ugliness out there before things start to look better.

On the bright side. If you have decent credit and a decent downpayment, you can get a great deal right now. A friend of mine just bought a house that was a short sell. Two years ago it sold $249K and he just got it for $145.

jigg

there are hardly any buyers too
my partner's condo in Florida has a preliminary 2011 appraisal value by the county that's $10k lower than last year's. And in 2009 they dropped it by 100% from what it was in 2008!

My neighbors on one side bought theirs in 2009 for $500 above what previous owner paid in 2003, they're now ~120% under water. Neighbor on the other side would have to wait for the prices to go up 2x to come even close to what he paid for his minus any work and upgrades he put in

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Sausage

The same experts who were laughed at when they predicted the housing crisis years before it happened, have been saying for a while now that there will be a 2nd wave of problems.

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MetaMan

My question is how was it legal for banks to write so many sub prime loans? the housing market will not rebound. not in 3 years, not in 10 years.

jigg

the enablers made it legal

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sandman!

the shadow inventory has been here for a few years now nothin new.

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L-Pink

Plus these loans were bundled and sold as high yield investments!

GAMEFINEST

its only gonna get wrose

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Compound interest.

iamtam

100% drop would mean it is value zero. so you saying it is now worth -10k?

jigg

sorry 50% not 100%

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kane

There was a lot of deregulation in how things like mortgages could be bought and sold. It wasn't that long ago that you would get a mortgage from a bank, often your local bank, and they would hold it for the life of the loan. The only time it would change hands is if you sold the house or something terrible happened to the bank and they went under.

A friend of mine bought a house about 5 years ago. The mortgage has already been sold four different times. It's crazy.

This deregulation also allowed regular banks to become investment banks and vice versa. A regular bank would hold a mortgage and use that as an asset in reserve that they would loan money against. They made their money by giving out loads like car loans, other mortgages, home improvement, credit line etc. When this law changed it now allowed these normal banks to take those assets and invest them on the open market in stocks, bonds, derivatives, hedge fund ect. So many banks started buying more mortgages so they would have more "assets" in reserve which allowed them them further invest and make more money.

_Richard_

is it possible in our society to put a 'cap' on value? is that retarded or something that might be a good idea?

xNetworx

Download a film called "Inside Job" - One of the best movies of 2010

BareBacked

It was stimulating the economy and making a few people very very rich......

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MetaMan

I know how the slump happened. But the terms on some of these sub prime loans seems absolutely insane. It was nothing short of loan sharking.

IllTestYourGirls

Without a doubt. I keep telling myself I am going to buy "this summer" but each year the prices keep going down. I have bought one dump that I am renting out but want to upgrade the place I am living in. Had the plans to buy this summer but I dont think so now. If I wait another year or so Ill save another $100k+.

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BareBacked

That is your government at work

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IllTestYourGirls

It amazes me that someone buying a $100k+ house did not put up the $200 to have a lawyer explain the terms to them. Or if they did it amazes me how many dipshits took the loan anyway.

Not all subprime mortgages went under so they actually helped millions of people get loans for homes.

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L-Pink

Many borrowers knew they couldn't afford future increases in their payments but were assured by the "bankers" not to worry ..... Refinancing at a lower rate or selling and getting the appreciation was a sure thing.


Not.

MetaMan

Totally agreed. These people should have known what they were signing into. I am in no way trying to distance blame from the people who accepted the mortgages.

flashfire

so where are the best deals...I want to buy a vacation home somewhere warmer. I spend more on websites than some of you americans pay for houses. I'm thinking Vegas anywhere in the west. Wait another year?

kane

a while back I read that somewhere near 40% of the houses that are bing foreclosed on were second home and investments homes. This means the people bought the homes with no care what the contract said because they were intending to either renovate them and flip them for a profit or just sit on them for a year or two and resell them for a profit. The problem was these people didn't realize how difficult that can be.

kane

There was a story about a guy who was from Canada who came to the US to go to college. He goes to Washington Mutual bank to open up a bank account. He has $3500 total to deposit into the account. They give him a checking and savings account and then tell him he pre-qualifies for a $350K mortgage. He asks them how that can be. He has $3,500 to his name, no job and is a full time student. They tell him that having a job is not part of their criteria for getting the mortgage. They also tell him that they can arrange it so that he can get 6 months with no payments so they suggest he buy a cheaper house, fix it up during those 6 months with no payments then sell it before he ever has a payment and he could make some nice money off of it.

He didn't take the offer, but I think it goes a long way to show how they would give a loan to anyone and were pretty persuasive with people. They just wanted someone to sign the loan and they would instantly sell it to someone else and get it out of their hands because they knew it was toxic.

$5 submissions

That's the key factor keeping prices down: people hold off buying because of the expectation of further price reduction. I don't see that changing in the near term.

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tiger

That isn't even the real crime. The real crime was writing all those loans, packaging them up and reselling them as AAA rated investments when they were beyond garbage in reality.

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Barry-xlovecam

Socks

Never understood the absurd desire to buy a house.

In a perfect scenario, you've busted your ass, lived at home, and saved the entire nut to buy a home with. Here, an average home is ~400k. So you've got your $400k in the bank, and you trade it for a home.

At 5% interest, your $400k makes $20k a year, which you no longer get because you don't have the money.

My rent (big 3 bedroom apt) is about $1400 a month, so $17k a year. In this scenario you could keep your money, use the interest to pay your rent and have $3k left over.

Of course very few people have this scenario. They're paying a mortgage, which I've read often end up costing 3x the value of the house over the course of the mortgage. Even if that number is inflated, clearly someone with a mortgage isn't going to make out nearly as well as someone who didn't pay a bank to buy their home.

If it doesn't make sense - even if you have the cash on hand - how could it make sense with a mortgage?

Also, the rent and home markets must be kept close at all times. If it was way better in either direction, you'd see investment banks, funds and other financiers buying up all the undervalued investments.

It just doesn't make sense. You need somewhere to live, and that costs money, so the whole "throwing away your money renting" doesn't add up. Clearly whether you rent or buy, you did so out of the need to have somewhere to live.

If something breaks in my apartment, they fix it. Electricity, water, gas, parking, all included. $0 home insurance. $0 property taxes. $0 repairs. $0 spent on aging appliances. I have no windows, doors, siding, roofing, driveway, lawn, etc etc.

People know you need more than the $300k pricetag to really afford a Ferrari. Why don't they understand it takes more than $40k to own a $400k home? If I showed up with $30k to buy a Ferrari and the guy told me I had enough... I mean...

It's also the hardest investment to get out of. You can't put a stop-loss order on your family's home.

kane

For most people real estate ends up being nothing more than a form of a savings account. They pay their payments then after upkeep etc by the time they sell their house the amount they profit is around the same as if they would have put money in a savings account during that time.

However, for some it is a nest egg. Case in point. My grandparents bought a house in Palm Springs in the 1960's for $30K. They lived in it for 25 years. When my grandpa died and my grandma sold the house she got 750K out of it. Of course this is not the norm. They just happened to buy in a place where the price of real estate exploded. The problem is most people assume the same will happen to them. They will buy the house, live in it for a while and it will go up in value and they will eventually sell for a huge profit, but rarely does it actually work out that way.

Sunny Day

The house problem isn't just sub-prime mortgages causing the fault. Although making $125,000 mortgages to Walmart clerks making $8.00 per hour, but that is a good portion of the problem.
House prices were too heated. As with anything that demand overheats, the bubble bursts, many times for no apparent reason. It's been happening for at least 400 years when tulip bulbs were the rage. With anybody being able to get a mortgage, demand (prices) went through the roof.
But mortgages were also being written to people who were bordering on being able to afford their mortgage or people with no problem paying the mortgage. Many people who were 2nd or 3rd time buyers traded up to a bigger house, figuring that they would continue to get pay raises and bigger bonuses. They also were believed that prices would continue to rise.
Mortgage rates were under 5% as was the unemployment rate. But as unemployment started to rise to 9% (17% counting people whose unemployment ran out), both people who should have never had a house & people who afford their houses fell into foreclosure.
The last reason is it's been government policy for over 60 years to encourage home ownership, especially with special programs for people to become 1st time buyers. Add in the mortgage deduction for home interest payments, everybody wanted a house.
At 1st the banks were quick to foreclose, then they got caught with improper mortgage papers, so houses that might have been foreclosed on, now sit empty in limbo, awaiting court decisions that make take years in the courts.
In a regular market, you lost your job, but your wife still has hers, you could sell your house and buy a smaller, less expensive house. But in this market, your $80,000 house with can be be worth as little as $20,000. Have a $60,000 mortgage on the house and there's nothing you can do but go into foreclosure or a short sale, move to a dirt cheap apartment or family.
With millions of jobs & total industries moving out of the U.S., unemployment is going to stay high for years, or possibly for ever. Also the Internet has wholesale destroyed industries. How many people did the newspaper industry employ? The movies aren't on the ropes yet, but hurting. Without jobs, people can't buy houses.
Oddly, a lot of foreclosures are selling. But they sell to guys looking for trashed houses, they can fix & flip or rent. I'm working with 2 groups doing this and competition for cheap, fixer uppers is rough. But it's damn easy to lose on a house, as there's so many empty houses, it's hard to get a good profit margin.

Amputate Your Head

try dealing with a multi-million dollar home.... nobody is buying that shit these days.

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