i don''t see anything wrong with housing price going down...

[crown1]

Date: 2/27/2009 11:31:47 PM
Author: zhuzhu

Date: 2/27/2009 11:00:07 PM

Author: DivaDiamond007

Date: 2/27/2009 2:19:04 AM


Author: purrfectpear


I can hear it. Sorry but it is about me. I am not going to throw several hundred thousand dollars down the rabbit hole to maintain my popularity at the club house. I don't have that need. You're right, you have me pegged. I am all about taking care of myself.



I'm not trying to convince anyone my decision is correct for them. It's correct for me. I didn't expect accolades or encouragement. I'm not that silly. I'm just a very open person, entirely comfortable with myself, willing to share some thoughts on why some people are OK with returning a home held in collateral.

Purrfectpear - I'd like to thank you for sharing your story here on PS, even though it's obviously not a popular choice. I support your decision 100% because sometimes you just need to take care of yourself and not worry about what others might think of you. I am sorry that you are going through a rough financial patch.





For those criticizing Purrfecpear, I'd like to know what you'd do in her shoes. It's easy to pass judgment on someone when you're not in the same situation, and especially since it seems that many of the posters in this forum are comfortable in their finances. Please remember before passing judgment (on anyone) that not everyone here enjoys that luxury (i.e. ME).



She's obviously put a lot of thought into her decision and what's done is done. A foreclosure on her credit report is certainly not good, but it's also not the worst case scenario either. She'll take a hit on her score, but the effect will be short term at best.



In my area of the country (Northwest Ohio) I don't think we've seen rock bottom just yet. There will be another wave of foreclosures/bankruptcies when the rates adjust again on the ARMs and if/when the 'Big 3' fail. Automotive jobs are huge in this area so there will be many 'victims of circumstance' that end up in foreclosure or in my office seeking bankruptcy advice. Also, like I stated in my first post in this thread, the housing prices here are still outpacing income so I think that's something that will have to change before things start to level out over in my neck of the woods.



I've been thinking a lot about what has happened in our country relating to this lending crises and I really think that mortgage lending should become standardized across the board. If you make $X then you qualify for $X. If your credit score is X then your interest rate is X%. If you put X% down then you can qualify for a larger principal amount on the loan, also depending on your income and credit score. That way there's no confusion as to the terms of the loan on either end. Just an idea.

PP is not a 'victim of circumstance'. She CAN afford her mortgage. She chose NOT to because she does not feel like paying more for her home than what her home is currently appraised for. She is not the victim of the economic crisis, but her decision could very well contribute to the continued downward spiral of the economy.


I have plenty of sympathy for people who HAVE TO foreclose because of layoffs and illness, but for those who simply chose to back out from their mortgage commitment because 'the situation does not suit them financially', it is not really good enough of an excuse in my book. If she can live well with her decision, good for her; but to ask others who are going to be affected (which is all of us, you included) because of her action not to 'judge', is a little ironic.

i would tend to agree with you. when one is employed, has plenty of cash reserves to hold her for, i believe she stated two years, she is hardly the victim. she says she has business acumen and she has been very blunt in her judgments of others situations posted here. i have nothing against pp i think she is bailing because she has buyer's remorse. what she purchased did not hold its value and so she does not want to continue making the payments. it has been stated that california law allows this option and she is taking it. she did not have to tell us her story but she did and some of us just don't agree that her choice is the best.

eta: but i do know it is her choice and not mine. i am only commenting because i am concerned about the ramifications of so many foreclosures on the current struggling economy.

 

[purrfectpear]

I''m in full agreement. For the record, I never asked anyone not to judge - nor for any sympathy. Judging others actions is a perfectly normal reaction. We all do it. Some will say "OMG, I''d never do that!" and some will say "a loss of $200K, heck yes". I appreciate the rational and thought provoking discussions. Believe me, no offense taken by anyone''s comments

 

[DivaDiamond007]

Date: 2/27/2009 11:31:47 PM
Author: zhuzhu

Date: 2/27/2009 11:00:07 PM
Author: DivaDiamond007

Date: 2/27/2009 2:19:04 AM

Author: purrfectpear

I can hear it. Sorry but it is about me. I am not going to throw several hundred thousand dollars down the rabbit hole to maintain my popularity at the club house. I don''t have that need. You''re right, you have me pegged. I am all about taking care of myself.


I''m not trying to convince anyone my decision is correct for them. It''s correct for me. I didn''t expect accolades or encouragement. I''m not that silly. I''m just a very open person, entirely comfortable with myself, willing to share some thoughts on why some people are OK with returning a home held in collateral.

Purrfectpear - I''d like to thank you for sharing your story here on PS, even though it''s obviously not a popular choice. I support your decision 100% because sometimes you just need to take care of yourself and not worry about what others might think of you. I am sorry that you are going through a rough financial patch.



For those criticizing Purrfecpear, I''d like to know what you''d do in her shoes. It''s easy to pass judgment on someone when you''re not in the same situation, and especially since it seems that many of the posters in this forum are comfortable in their finances. Please remember before passing judgment (on anyone) that not everyone here enjoys that luxury (i.e. ME).


She''s obviously put a lot of thought into her decision and what''s done is done. A foreclosure on her credit report is certainly not good, but it''s also not the worst case scenario either. She''ll take a hit on her score, but the effect will be short term at best.


In my area of the country (Northwest Ohio) I don''t think we''ve seen rock bottom just yet. There will be another wave of foreclosures/bankruptcies when the rates adjust again on the ARMs and if/when the ''Big 3'' fail. Automotive jobs are huge in this area so there will be many ''victims of circumstance'' that end up in foreclosure or in my office seeking bankruptcy advice. Also, like I stated in my first post in this thread, the housing prices here are still outpacing income so I think that''s something that will have to change before things start to level out over in my neck of the woods.


I''ve been thinking a lot about what has happened in our country relating to this lending crises and I really think that mortgage lending should become standardized across the board. If you make $X then you qualify for $X. If your credit score is X then your interest rate is X%. If you put X% down then you can qualify for a larger principal amount on the loan, also depending on your income and credit score. That way there''s no confusion as to the terms of the loan on either end. Just an idea.

PP is not a ''victim of circumstance''. She CAN afford her mortgage. She chose NOT to because she does not feel like paying more for her home than what her home is currently appraised for. She is not the victim of the economic crisis, but her decision could very well contribute to the continued downward spiral of the economy.

I have plenty of sympathy for people who HAVE TO foreclose because of layoffs and illness, but for those who simply chose to back out from their mortgage commitment because ''the situation does not suit them financially'', it is not really good enough of an excuse in my book. If she can live well with her decision, good for her; but to ask others who are going to be affected (which is all of us, you included) because of her action not to ''judge'', is a little ironic.

Zhu - Please re-read my post. I did not say that PP is a victim of circumstance, nor did I imply that. She has stated herself that she can afford the mortgage and is choosing not to - and that''s her own decision to make and hopefully she''s fully prepared for the credit ramifications that she will experience. I was just trying to point out that it''s very easy to harshly judge her when you''re not in her position. I am glad that PP is not offended by any of the comments here and I should have stayed out of this entirely because it''s too personal for me.

You are right, I am affected by the current economic situation. I am benefiting from this economic crises because I work in bankruptcy and deal with foreclosures every day. Many times when a home goes into foreclosure the owners file for bankruptcy to relieve themselves of the debt. This means more business and more

for my office. Needless to say, business has been good the past few years.

Further, I do not own a home and will not for at least 2 more years because my DH and I cannot reasonably afford one. Partly due to the inflation of prices that our area has experienced and partly because we are not rich by any means. We will most definitely fall into the category of consumer that will have to put a large percentage down and pay a higher interest rate to qualify for a mortgage. We are waiting because we feel that we must be responsible about our purchase and buy/build within our means.

 

[Beacon]

ANother point of view, from the investment side:

If you were offered PPs mortage for sale, what would you pay for it? She is in default, it is going to foreclose, you are short of funds anyhow. You will pay next to nothing for this toxic asset. If you are the bank owning it, you have to write it down on your books to market value - you take a huge loss, there is no market for this.

But let''s say someone offered PP a different deal. She could stay in her home and the new loan amount is 140K, about what the place is worth. PP, would you stay? Some folks will stay.

Then this worthless toxic loan is no longer worthless, in fact it is a great security as PP is a great owner. The bank hit is taken, the asset is now performing. Depending on how much of hit was already taken by the bank, this asset is worth more than the current book value of the toxic asset.

It could happen. And if it does, watch out above. Money to be made.

 

[Dancing Fire]

Date: 2/28/2009 1:07:46 PM
Author: DivaDiamond007


Further, I do not own a home and will not for at least 2 more years because my DH and I cannot reasonably afford one. Partly due to the inflation of prices that our area has experienced and partly because we are not rich by any means. We will most definitely fall into the category of consumer that will have to put a large percentage down and pay a higher interest rate to qualify for a mortgage. We are waiting because we feel that we must be responsible about our purchase and buy/build within our means.

DD
why ?

b/c you had already walked out on a mortgage?

 

[DivaDiamond007]

Date: 2/28/2009 7:29:44 PM
Author: Dancing Fire

Date: 2/28/2009 1:07:46 PM
Author: DivaDiamond007



Further, I do not own a home and will not for at least 2 more years because my DH and I cannot reasonably afford one. Partly due to the inflation of prices that our area has experienced and partly because we are not rich by any means. We will most definitely fall into the category of consumer that will have to put a large percentage down and pay a higher interest rate to qualify for a mortgage. We are waiting because we feel that we must be responsible about our purchase and buy/build within our means.

DD
why ?

b/c you had already walked out on a mortgage?

DF - No, that''s not why. DH and have never owned a home (or filed for BK for that matter). The housing prices in the area that we want to live in are high as compared to our income. We will probably need to put 50% down in order to buy and have it be affordable for us - i.e. be able to live off of one income if necessary. We are particularly interested in two neighborhoods that have some of the best schools in this area, which is important since we have a child.

Our other option would be to build a house on the acre of land that has been offered to us. Right now the land is owned by my IL''s and would be sold to us for $1.00. The value of the land today is around $30K and could be used as a downpayment towards the house. We''d still have to save a good chunk of cash as the land is totally wooded, a septic system would have to be put in, etc., etc. Financially that would probably be the best option (land + new house) but we don''t know for sure what we want to do yet.

Also, our credit scores are not 720+ (we''re both around 700), which means that we will not be getting the going rate of about 5.5% locally. We''re a couple of years away from doing anything with real estate so we''re working on saving, saving, saving and getting rid of the small amount of consumer debt that we do have. Hopefully that will bring our scores up past the requisite 720 marker and we''ll get a better rate.

 

[Rank Amateur]

Don''t they force you into backruptcy and force you to liquidate your assets? It seems only logical to do so. They at least are due the cash PP has been "banking" and anything else she''s banked.

 

[cara]

RA, PP is in California which has fairly populist laws. For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.

Other states have different laws, and the best example is to think of a car loan. For a no-down-payment new car loan, the borrower is underwater as soon as they drive the car off the lot, cause the value of the asset held as collateral drops sharply below the amount owed on the loan. But, people don't walk away from car loans because the amount they are liable for is whatever they borrowed, not whatever the car is worth. If the car is reposed, the borrower is still liable for the difference between the loan amount and the value of the car and the lender will go after them for that amount even though they have taken the car. Not so for house loans in CA.

 

[Harriet]

No, because mortgages (absent the exceptions noted by Beacon) are non-recourse.

 

[tradergirl]

That only applies to the first mortgage though, so HELOCs, etc. are fair game.

 

[crown1]

Date: 3/1/2009 10:18:58 PM
Author: cara
RA, PP is in California which has fairly populist laws. For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.


Other states have different laws, and the best example is to think of a car loan. For a no-down-payment new car loan, the borrower is underwater as soon as they drive the car off the lot, cause the value of the asset held as collateral drops sharply below the amount owed on the loan. But, people don't walk away from car loans because the amount they are liable for is whatever they borrowed, not whatever the car is worth. If the car is reposed, the borrower is still liable for the difference between the loan amount and the value of the car and the lender will go after them for that amount even though they have taken the car. Not so for house loans in CA.

i readily admit no knowledge of the ca laws beyond what has been posted here. i am thinking this stuff is nuts and has helped to create the real estate disaster out there. anybody care to correct me if my thinking is skewed on this?

if i was the age i believe pp is, and i think i probably am close to her in age, i think i would have paid for the home in cash or put enough down so that i could have completed payments by retirement. i now see why she was not worried about that. she had nothing to loose walking away with a mini down and 40 years kept her monthly payments low, not to mention the free 6 months she will enjoy waiting to be foreclosed.

i think ca has set it self up for this if the above is true. kind of makes you wonder what they were drinking or smoking when they designed this system. after the piece on 60 minutes last night, about the madeoff fiasco, it makes you wonder about all the people who care only about what they can get for themselves, and the rest of the country be darned. every day it seems it is something new along these lines. it is discouraging to say the least.

 

[CrookedRock]

Date: 2/27/2009 11:00:07 PM
Author: DivaDiamond007

Date: 2/27/2009 2:19:04 AM
Author: purrfectpear
I can hear it. Sorry but it is about me. I am not going to throw several hundred thousand dollars down the rabbit hole to maintain my popularity at the club house. I don't have that need. You're right, you have me pegged. I am all about taking care of myself.

I'm not trying to convince anyone my decision is correct for them. It's correct for me. I didn't expect accolades or encouragement. I'm not that silly. I'm just a very open person, entirely comfortable with myself, willing to share some thoughts on why some people are OK with returning a home held in collateral.

Purrfectpear - I'd like to thank you for sharing your story here on PS, even though it's obviously not a popular choice. I support your decision 100% because sometimes you just need to take care of yourself and not worry about what others might think of you. I am sorry that you are going through a rough financial patch.

For those criticizing Purrfecpear, I'd like to know what you'd do in her shoes. It's easy to pass judgment on someone when you're not in the same situation, and especially since it seems that many of the posters in this forum are comfortable in their finances. Please remember before passing judgment (on anyone) that not everyone here enjoys that luxury (i.e. ME).
I would have bought my house as a home to live in and not been upset bc it lost value. When we choose to buy our home, it will be just that regardless of what happens. I pick what a home is worth to me, not everyone else.
Unlike PP we were very fortunate to know what was around the corner as far as the economy goes. Other were not as forunate, and some of those people are friends of ours, and it hurts to watch, espicially the ones we warned. But not so much the ones that made fun of us for wasting our money on rent!

PP acknowledged that had she been warned she would have listened. I'm just sorry someone didn't tell her.

She's obviously put a lot of thought into her decision and what's done is done. A foreclosure on her credit report is certainly not good, but it's also not the worst case scenario either. She'll take a hit on her score, but the effect will be short term at best.

(excuse me for bringing up posts a few pages back, I'm just back from an out of town wedding and I couldn't help but come back to this thread.)

Firstly, I want to also say that I appreciate PP sharing her story. It is interesting to hear.
There are a few things I feel the need to comment on:

I didn't decide what the condo was worth, their appraiser did. ~PP
PP, you are right they decided the value of the home to the market. You decided the value of the home for you. So at one point that money was worth it bc of the next point you made...

I didn't buy the condo with the idea to flip or reap massive appreciation. I bought it to live in. I planned to be here until I retired (I know the 40 yr. loan sounds crazy but I knew my pension, SS and savings would cover the payment even if I didn't refi). I didn't plan to sell, much less walk away. ~PP
I agree that people that went out and bought as much as they could to flip stuff, (and believe me that was huge here in FL) were the start of the problem. But it didn't end there.
Here's my issue... A home should be bought bc of the reasons you stated. Bc you want it to be your home! It not sould be look at as a way to make money. (Unless of course you are someone in a position to own your home that you reside in and have the extra to make wise investments)
So just bc the appraisers now say your home isn't worth what you paid, (and they are right, it isn't.) you walk...

DF, I'm not sure I know how to answer that. Firstly I don't agree that "others" are having to pay for my mistake ~PP
Oh yes we are! I'm pretty sure there is talk about raising federal taxes for people making over $250k to about 39%. You you can't tell me I'm not paying for the mistakes people made. (Not singling you out PP)

Basically the system is set up now that encourages people to do what I am doing. ~PP
Apparently it is in Cali, I'm not sure about Fl, but I wouldn't be surprised. And this is the next problem!

All that being said. I do see your point, I just don't love it!

 

[Rank Amateur]

Date: 3/1/2009 10:18:58 PM
Author: cara
For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.

That''s just stupid.

 

[purrfectpear]

Date: 3/2/2009 12:49:47 PM
Author: Rank Amateur

Date: 3/1/2009 10:18:58 PM
Author: cara
For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.

That''s just stupid.

Indeed. It''s the law in about half of the 50 states

People who purchased between 2005-2007 and now underwater by almost 50% with 10 years or more before their homes will be worth what they owe, are bailing in droves.

A mandatory 20% down would have decreased the number of people walking away, but then it would also have prevented the ridiculous pricing bubble that put some of us in that position

At least in California (and other markets) the prices were unrealistically driven beyond anything rational by the fact that they were handing out loans to anyone who could fog a mirror. If you wanted to buy during that time period you were stuck with those prices. In hindsight I just should have said no. I was an idiot. I got scared and thought if I didn''t buy something small while I could afford to, I might get priced out of owning entirely. Doh. With a single income I knew I couldn''t handle the $4000-$5000/mo mortgage that the "average" single family home in Los Angeles was commanding.

 

[cara]

Date: 3/2/2009 12:49:47 PM
Author: Rank Amateur

Date: 3/1/2009 10:18:58 PM

Author: cara
For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.

That's just stupid.

But the law itself is not the underlying source of the madness. It would be stupid to require car loans to work this way, cause cars are depreciating assets, while houses are typically stable assets that hold their value. But I guarantee, if they passed a law requiring car loans to work this way, car lending practices would change dramatically overnight. In many cases banks would stop issuing loans, and for any loan they did write, the downpayments required would be significant and interest rates would be higher. If getting a car loan became too difficult, the public might lobby to change the rules back just so they would have easier access to credit on less onerous terms. Such is how the feedback on a regulation is supposed to work.

The vast bulk of the stupidity award goes to the lenders. If CA passes laws that favor the buyers, the lenders should be more conservative in their lending practices since they may be left holding only the house and the buyer walks. They could have required a larger down payment, required mortgage insurance, required a more conservative assessment, made a determination that their was a possible bubble happening so they would need even tighter lending standards, etc. They could have stopped lending if they thought it was too risky! If no one could have gotten loans, CA would then have been forced to change their laws to make it more bank-friendly and less-joe-homeowner friendly.

But the CA lenders drank the kool-aid with everyone else, and they did so in a legal environment that exposes them to downside risk when they make a primary home loan. Lenders didn't consider the risk of depreciation in housing. Instead, they only saw profit in writing loans, any kind of loans to anyone that would sign. Liar loans, selling exotic loans to unsophisticated buyers, even plain vanilla loans all made with the understanding that either the buyer pays the interest and the lender wins or the buyer walks and the lender sells the home for a nice profit (cause housing is just going up!) and the lender wins. No consideration of what happens if housing goes down. They were gambling without considering the downside risks just as many homeowners didn't consider the risks. Where in another state PP would be more exposed for her bad risk assessment, in this state the lenders are more exposed for *their* bad risk assessment.

 

[Phoenix]

Date: 3/2/2009 3:39:27 PM
Author: cara

Date: 3/2/2009 12:49:47 PM
Author: Rank Amateur

Date: 3/1/2009 10:18:58 PM

Author: cara
For a primary mortgage, the lender is only allowed to go after the borrower for the collateral, ie. the house. If the borrower hands in the keys/is foreclosed on and the lender takes possession of the house, the lender is not allowed to pursue the borrower for any additional losses or costs. Hence bankruptcy is not necessary to get out of the mortgage.

That's just stupid.

But the law itself is not the underlying source of the madness. It would be stupid to require car loans to work this way, cause cars are depreciating assets, while houses are typically stable assets that hold their value. But I guarantee, if they passed a law requiring car loans to work this way, car lending practices would change dramatically overnight. In many cases banks would stop issuing loans, and for any loan they did write, the downpayments required would be significant and interest rates would be higher. If getting a car loan became too difficult, the public might lobby to change the rules back just so they would have easier access to credit on less onerous terms. Such is how the feedback on a regulation is supposed to work.

The vast bulk of the stupidity award goes to the lenders. If CA passes laws that favor the buyers, the lenders should be more conservative in their lending practices since they may be left holding only the house and the buyer walks. They could have required a larger down payment, required mortgage insurance, required a more conservative assessment, made a determination that their was a possible bubble happening so they would need even tighter lending standards, etc. They could have stopped lending if they thought it was too risky! If no one could have gotten loans, CA would then have been forced to change their laws to make it more bank-friendly and less-joe-homeowner friendly.

But the CA lenders drank the kool-aid with everyone else, and they did so in a legal environment that exposes them to downside risk when they make a primary home loan. Lenders didn't consider the risk of depreciation in housing. Instead, they only saw profit in writing loans, any kind of loans to anyone that would sign. Liar loans, selling exotic loans to unsophisticated buyers, even plain vanilla loans all made with the understanding that either the buyer pays the interest and the lender wins or the buyer walks and the lender sells the home for a nice profit (cause housing is just going up!) and the lender wins. No consideration of what happens if housing goes down. They were gambling without considering the downside risks just as many homeowners didn't consider the risks. Where in another state PP would be more exposed for her bad risk assessment, in this state the lenders are more exposed for *their* bad risk assessment.

I agree with everything you've said, Cara.

In Singapore, lenders have been very strict (the three biggest banks here are local and the foreign banks basically follow that the local banks do). I remember when we borrowed in 2006, their usual requirement was 20% down. I know of some instances whereby the borrower "got away" with putting down 10%. As far as I know, there was and is no such thing as a 100% mortgage. I know that in the UK, like the US, 100% mortgage is not unusual either and the standard requirement is 5-10% down. As a result of their stricter lending requirements, I think that the SG property market is not as affected by the economic crisis as say in the US or the UK. Sure, prices have dropped some 20-30% but you don't really see that many desperate home-owners trying to offload their houses/ apartments or even resort to bankruptcy/ foreclosure.

But having said that, SG is not totally unaffected either. Its government allowed in the last few years up to last year what's called "deferred payment", meaning that a buyer or (in most cases) an investor can put down a 20% deposit and not pay anything at all until "TOP" (meaning until their property is ready for occupation). This has driven up a lot of speculation. People thought that they could just put down 20% (and not have to worry about their ability to borrow/ repay), sell their property back at a big fat profit and walk away happy. Well, some investors did do that and managed to sell quickly and now are very happy. The rest (I'd say the majority) has now been lumbered with apartments (mostly, since "landed properties" or houses are mainly restricted to Singaporeans/ PR's) which are significantly less that what they paid for, but still their prices are not 50% or so below that they paid for, again unlike other countries. It will be interesting to see what happens this year and next year, which is when the majority of new condos are going to be TOP'ed (buyers having to take up mortgages to pay property developers the remaining 80% of the purchase prices). I'm actually a bit scared that this mass dumping of condos are going to drive down this market and consequently the rest of the housing market with it too, not to mention the overall effect on the SG economy (which is already affected by the worldwide economic downturn).

 

[Dancing Fire]

Date: 3/3/2009 7:45:03 AM
Author: Phoenix

I agree with everything you''ve said, Cara.

In Singapore, lenders have been very strict (the three biggest banks here are local and the foreign banks basically follow that the local banks do). I remember when we borrowed in 2006, their usual requirement was 20% down. I know of some instances whereby the borrower ''got away'' with putting down 10%. As far as I know, there was and is no such thing as a 100% mortgage. I know that in the UK, like the US, 100% mortgage is not unusual either and the standard requirement is 5-10% down. As a result of their stricter lending requirements, I think that the SG property market is not as affected by the economic crisis as say in the US or the UK. Sure, prices have dropped some 20-30% but you don''t really see that many desperate home-owners trying to offload their houses/ apartments or even resort to bankruptcy/ foreclosure.

as it should be!!...then we wouldn''t have this mess on our hands today.

 

[Beacon]

.

 

[Mara]

"People who purchased between 2005-2007 and now underwater by almost 50% with 10 years or more before their homes will be worth what they owe, are bailing in droves. "
_______

The thing is that no one really knows what will happen in 2 years. 5 years. 10 years... that is WAY too far down to think about anyone actually knowing what is going to happen. Nevermind what is going to happen to the area you are in. Someone mentioned seeing a revival of the area the condo was in and it not happening yet. Well 10 years down the road, it might be a different case.

Quite frankly, given what I have seen about the CA RE market... we''ll see inflated prices again sooner than people might expect. That''s just the way it is here. It''s very cyclical. Things go down. Things come up. I know some may not agree, but I was raised here.

Like Crooked Rock mentioned, I don''t quite understand how someone who says they planned to be there til they retired (on a 40 year mortgage) would bail on the first year that things looked ''iffy''. The calcs were in 10 years at 3% growth that PP would still be underwater. But when has CA growth been at a 3% yearly average? Not for a very very long time. Maybe things would be low for a few years, but again, eventually, we''ll see another round of RE inflation IMO.

I can see both sides of the coin for sure. But given the general uncertainty around any type of future ''knowing''...how can anyone CALL it?

 

[TravelingGal]

Date: 3/3/2009 3:50:32 PM
Author: Mara
''People who purchased between 2005-2007 and now underwater by almost 50% with 10 years or more before their homes will be worth what they owe, are bailing in droves. ''
_______

The thing is that no one really knows what will happen in 2 years. 5 years. 10 years... that is WAY too far down to think about anyone actually knowing what is going to happen. Nevermind what is going to happen to the area you are in. Someone mentioned seeing a revival of the area the condo was in and it not happening yet. Well 10 years down the road, it might be a different case.

Quite frankly, given what I have seen about the CA RE market... we''ll see inflated prices again sooner than people might expect. That''s just the way it is here. It''s very cyclical. Things go down. Things come up. I know some may not agree, but I was raised here.

Like Crooked Rock mentioned, I don''t quite understand how someone who says they planned to be there til they retired (on a 40 year mortgage) would bail on the first year that things looked ''iffy''. The calcs were in 10 years at 3% growth that PP would still be underwater. But when has CA growth been at a 3% yearly average? Not for a very very long time. Maybe things would be low for a few years, but again, eventually, we''ll see another round of RE inflation IMO.

I can see both sides of the coin for sure. But given the general uncertainty around any type of future ''knowing''...how can anyone CALL it?

I''ll call it Mara!

In key California cities, continued depreciation through 2011 (2014 if I''m being pessimistic) stagnation to about 2015 and small gains from there. Expect another kooky housing bubble in 2024.

 

[purrfectpear]

I''ll call it worse. Bottom mid 2010 (agree that it could go on longer) then stagnation for a long period.

House prices over the last 25 years have appreciated at a rate greater than wage growth because interest rates have been falling and debt-to-income ratios have been rising. Interest rates cannot continue to fall. As they rise in the future to rates nearer their historic norms, house price appreciation will be held in check. It is likely that house prices will appreciate at rates of less than 3% while interest rates rise, and it will only match the 3% rate of wage growth thereafter. It is also possible that Los Angeles and Orange County may not see 3% wage growth in the future due to factor price equalization and outsourcing. Sustained appreciation rates of 7% will not be seen in the next 25 years.

In other words, I would be screwed.

In the mean time, 9-10 months rent free = save $18,000
10 years paying half the cost of mortgage via rent = save $172,000 (including HOA and property tax avoidance)

Total savings in cash (yes, I''m a disciplined saver) = $200,000 down on next home in 2019 or less if I move sooner.

 

[TravelingGal]

Date: 3/3/2009 5:37:54 PM
Author: purrfectpear
I''ll call it worse. Bottom mid 2010 (agree that it could go on longer) then stagnation for a long period.

House prices over the last 25 years have appreciated at a rate greater than wage growth because interest rates have been falling and debt-to-income ratios have been rising. Interest rates cannot continue to fall. As they rise in the future to rates nearer their historic norms, house price appreciation will be held in check. It is likely that house prices will appreciate at rates of less than 3% while interest rates rise, and it will only match the 3% rate of wage growth thereafter. It is also possible that Los Angeles and Orange County may not see 3% wage growth in the future due to factor price equalization and outsourcing. Sustained appreciation rates of 7% will not be seen in the next 25 years.

In other words, I would be screwed.

In the mean time, 9-10 months rent free = save $18,000
10 years paying half the cost of mortgage via rent = save $172,000 (including HOA and property tax avoidance)

Total savings in cash (yes, I''m a disciplined saver) = $200,000 down on next home in 2019 or less if I move sooner.

I was thinking rates of growth at about 3% from 2015ish to 2024. Then more in about 15 years...

 

[Beacon]

I''ll call it Mara!

In key California cities, continued depreciation through 2011 (2014 if I''m being pessimistic) stagnation to about 2015 and small gains from there. Expect another kooky housing bubble in 2024.

Heh, probably right! Next high in 2024-2027.

But I agree w/ Mara in that real estate is particularly local. An "average" depreciation/appreciation figure is not useful in real estate. Even in a one mile radius, different properties can have different results. I also agree that no one can call it.

Mara''s orginal post thought that we would go back up to highs in 2-3 years. That will not happen. Certain markets will be much slower and others will do better. Bakersfield, for example, isn''t going near it''s highs maybe for decades.

 

[Dancing Fire]

i think the avg appreciation for Ca RE (in normal yrs) is something like 6.75% and the rest of the country is somewere like 5 %

 

[Dancing Fire]

Date: 3/3/2009 5:11:22 PM
Author: TravelingGal

I''ll call it Mara!

In key California cities, continued depreciation through 2011 (2014 if I''m being pessimistic) stagnation to about 2015 and small gains from there. Expect another kooky housing bubble in 2024.

agree,TG !!

dreamers like Mara better stop dreaming.

 

[Beacon]

I live in the SF bay area - have owned for 20 years. I calculated my purchase price to current market value, taking 100K off the top pricing, which is probably about right for this property. The result on a compounded basis is 5.25% per year. I live in an average area, neither the top nor the bottom.

People think real estate is great b/c the huge leverage juices the apparent returns. In fact the nominal returns are average and inflation adjusted and add back property taxes and other costs and returns are barely adequate.

 

[Mara]

I agree, Beacon, that it's particularly local. Sacramento and other infield areas were showing depleted values and stagnation years ago, no jobs, lots of land and tract housing?

But I am in an area where things have always moved fast...the heart of the Silicon Valley in the South Bay area. There are extreme ups and downs. Plus some towns just hold their value better than others, like Cupertino for example where the school districts are extremely coveted. They have only dropped about 10%. The area where we bought has dropped about 10%. But some other less desirable areas have dropped a far more significant amount than that.

To underscore how local it is, while some areas languish with properties on the market for 120+ days...we have seen numerous properties that are on the market for 12 days with multiple offers on them. These are turnkey properties under a million dollars in desirable South Bay areas.

California dreamin'. Honestly, because of THAT very thing...I think that this area in, particular, will recover sooner than many other areas. People are always coming into the tech-heavy areas looking for work and therefore housing. Maybe I am an optimist, but only time will tell. Speculation IS fun though.

 

[Dancing Fire]

Date: 3/3/2009 6:54:57 PM
Author: Beacon
I live in the SF bay area - have owned for 20 years. I calculated my purchase price to current market value, taking 100K off the top pricing, which is probably about right for this property. The result on a compounded basis is 5.25% per year. I live in an average area, neither the top nor the bottom.

People think real estate is great b/c the huge leverage juices the apparent returns. In fact the nominal returns are average and inflation adjusted and add back property taxes and other costs and returns are barely adequate.

yup, that''s whole truth.

 

[zhuzhu]

That is why we should buy a house that we love, not a house that will make us (hopefully) rich.

 

[icekid]

Date: 3/3/2009 7:35:55 PM
Author: Mara

California dreamin''. Honestly, because of THAT very thing...I think that this area in, particular, will recover sooner than many other areas. People are always coming into the tech-heavy areas looking for work and therefore housing. Maybe I am an optimist, but only time will tell. Speculation IS fun though.

All of this makes me happy that I don''t live in California and have no desire to do so! I cannot understand that crazy place for the life of me. Sure, salaries are higher, but not so much higher as to make up for the obscene home prices. I have friends who are doctors out there and I always wonder (but don''t ask ha) how they make it work. After 8 years of school, plus 5 years more training I don''t want to feel like I am struggling to get by.

It will certainly be interesting to see how everything plays out there, though. I''m beyond thrilled that prices are heading back toward planet earth on the East Coast.