Foreclosures

[Kulindahr]

Oh my gosh. Homes are selling again in Lee County, Florida. Homes have dropped as much as 80%, according to the news. Many people are paying cash. Brand new homes can be purchased for $55k, $80k, etc.

My down payment on my home had to be more than that.

I wish they were dropping here. But people are still paying $800+/mo. rent for a small 2-bedroom place with no yard or garage. That much should be making house payments!

 

[metta]

^
that sounds cheap to me. You can only rent a room for that much in LA. A nice apartment is normally at least $2k. And if you compare that to NYC, LA is dirt cheap.

 

[sixthson]

I wish they were dropping here. But people are still paying $800+/mo. rent for a small 2-bedroom place with no yard or garage. That much should be making house payments!

You have to remember that rented apartments, condos, etc are as much a home to those who rent them as are houses. They just don't own them. Many tenants recognize that they are likely never to be able to afford to own their own homes. Is this a terrible thing? Not really, unless they desperately want to have a house of their own.
Let's just say, for the sake of argument, that a person could find a mortgage for the same price as a rental unit. The person renting knows that is the total amount they must pay each month. Anyone who owns a home knows the monthly mortgage is just the beginning of expenses. As a rule, a home buyer needs to know that he will require (roughly) an additional 40% each month to pay for things like property taxes, homeowners insurances, maintenance and upkeep, heating and air conditioning. The list goes on and on and this does not include unexpected expenses like a furnace, water heater or some appliance needing to be replaced. If you are not handy, you will also have to hire plumbers and electricians to do even simple repairs around the home.
Home ownership is not for everyone. In the 70s, the push began to get everyone into a home. It didn't matter if they could afford the mortgage, not to mention the upkeep of the home.
Making a house a home is a great pleasure and very rewarding. It is also a tremendous responsibility, lots of hard work and sometimes even a burden.

Selling homes or renting apartments is part of the economy of our country. One is not superior to the other, imo.
Also, I would guess that the vast majority of small business owners rent office/warehouse space and whatever they need for their businesses rather than owning outright...mostly because it fits their budgets and their responsibilities are lessened. Even huge corporations are tenants. Should we now start offering sub-prime rate mortgages with no downpayments to business onwers so they can own rather than rent? Ownership is not the be-all and end-all.

 

[Kulindahr]

You have to remember that rented apartments, condos, etc are as much a home to those who rent them as are houses. They just don't own them. Many tenants recognize that they are likely never to be able to afford to own their own homes. Is this a terrible thing? Not really, unless they desperately want to have a house of their own.
Let's just say, for the sake of argument, that a person could find a mortgage for the same price as a rental unit. The person renting knows that is the total amount they must pay each month. Anyone who owns a home knows the monthly mortgage is just the beginning of expenses. As a rule, a home buyer needs to know that he will require (roughly) an additional 40% each month to pay for things like property taxes, homeowners insurances, maintenance and upkeep, heating and air conditioning. The list goes on and on and this does not include unexpected expenses like a furnace, water heater or some appliance needing to be replaced. If you are not handy, you will also have to hire plumbers and electricians to do even simple repairs around the home.
Home ownership is not for everyone. In the 70s, the push began to get everyone into a home. It didn't matter if they could afford the mortgage, not to mention the upkeep of the home.
Making a house a home is a great pleasure and very rewarding. It is also a tremendous responsibility, lots of hard work and sometimes even a burden.

Selling homes or renting apartments is part of the economy of our country. One is not superior to the other, imo.
Also, I would guess that the vast majority of small business owners rent office/warehouse space and whatever they need for their businesses rather than owning outright...mostly because it fits their budgets and their responsibilities are lessened. Even huge corporations are tenants. Should we now start offering sub-prime rate mortgages with no downpayments to business onwers so they can own rather than rent? Ownership is not the be-all and end-all.

Renting a house, everything I put in bold is generally part of the expenses anyway. Landlords are required to provide water; they are not obligated to provide it hot.

Of course the real travesty here is the liberal penchant for jacking up housing prices with all sorts of rules, to the point that the Oregonian calculated that a house selling for $250,000 would be $175,000 to $210,000 without all the permits, fees, inspections, and a multitude of regulations -- such as zoning, which is foolish in the first place because it causes crime, and "latest technology" building codes.

 

[metta]

So my loan guy called today to tell me that my papers are ready for my refinance. I went in and signed them and it will all hopefully be done by next week. It is a 30 year fixed loan at 5.75% with no prepayment penalties.

While I was there, the person helping me with the papers told me that she was surprised to see a refinance because she has not seen one in a long time. The only business coming in for them right now is people buying homes, not refinances. She also said that most of the property sales going on right now are cash deals, many from people that come from overseas.

 

[metta]

Officials: Financial crisis can lead to violence

http://news.yahoo.com/s/ap/20081014...is_violence;_ylt=AniwlLaLcfU4oRThzmckQQcDW7oF

In Massachusetts, a housewife who had hidden her family's mounting financial crisis from her husband sends a note to the mortgage company warning: "By the time you foreclose on my house, I'll be dead."
Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.

In Los Angeles last week, a former money manager fatally shot his wife, three sons and his mother-in-law before killing himself.
Karthik Rajaram, 45, left a suicide note saying he was in financial trouble and contemplated killing just himself. But he said he decided to kill his entire family because that was more honorable, police said.

In Tennessee, a woman fatally shot herself last week as sheriff's deputies went to evict her from her foreclosed home.

In Akron, Ohio, the 90-year-old widow who shot herself on Oct. 1 is recovering.

In Ocala, Fla., Roland Gore shot his wife and dog in March and then set fire to the couple's home, which had been in foreclosure, before killing himself. His case was one of several in which people killed spouses or pets, destroyed property or attacked police before taking their own lives.

 

[metta]

Report: Almost Half of Nevada Homeowners Underwater

The housing problems are everywhere.

http://calculatedrisk.blogspot.com/2008/10/report-almost-half-of-nevada-homeowners.html

Here is a graph by state:

http://1.bp.blogspot.com/_pMscxxELH.../RXwTWLMt4Q8/s1600-h/UnderwaterHomeowners.jpg

 

[Kulindahr]

Report: Almost Half of Nevada Homeowners Underwater


http://calculatedrisk.blogspot.com/2008/10/report-almost-half-of-nevada-homeowners.html

Here is a graph by state:

http://1.bp.blogspot.com/_pMscxxELH.../RXwTWLMt4Q8/s1600-h/UnderwaterHomeowners.jpg

That's pretty incredible!

 

[NineOfClubs]

I was reading a blog link (sorry, can't remember the author) recently.

The "so called expert", an economist, thought that this crisis could last another two or three years. When the dust settles, average housing prices will be around three times median income. Their historic value.

So in Oregon that would mean home prices could decline to roughly half what they are today.

This will create a great opportunity for the younger demographics, groups that were beginning to think they were permanently excluded from home ownership.

If this scenario plays out, those most hurt would be speculators, of course, and the older people who had hoped that real estate would ensure them an easy retirement.

 

[Kulindahr]

Ouch.
My mom's house will soon be on the market. Of course it has a boost by being on the coast, right near stores, in an area known for scenic beauty.

(We hope.)

 

[drhladnjak]

I was reading a blog link (sorry, can't remember the author) recently.

The "so called expert", an economist, thought that this crisis could last another two or three years. When the dust settles, average housing prices will be around three times median income. Their historic value.

So in Oregon that would mean home prices could decline to roughly half what they are today.

This will create a great opportunity for the younger demographics, groups that were beginning to think they were permanently excluded from home ownership.

If this scenario plays out, those most hurt would be speculators, of course, and the older people who had hoped that real estate would ensure them an easy retirement.

Dan, this is a really important point that's far too often left out of this debate.

I distinctly remember listening to my parents and others in a similar stand (baby boomers in hot southern California real estate market back during the latest boom) talk about how much money they'd made off their appreciating house over the years. These same people would also complain about how their adult children still lived with them at home or how they had to live in much farther out suburbs (or other metropolitan areas entirely) to afford anything. These two things are really just two sides of the same coin, but that didn't seem to occur to a lot of them.

Moreover, the money they had "made" was all on paper and theoretical. Any gains could only be realized by selling the house, at which you'd presumably buy another house at similar valuations. Hence, the only real effect they were seeing of skyrocketing housing prices on their own lives was that their kids couldn't afford to buy their own homes.

Housing is not like other investments. You don't just own it, you live in it, which means there are social implications to housing prices. Unlike with stocks or other investments, rapidly appreciating prices are not a good thing in the grand scheme of things. The best housing market is one where prices stably track inflation and where adequate supply exists for demand. That predictability provides housing security to both buyers and sellers, which is better for society than a certain segment of the population making a bunch of money off flipping houses.

Americans need to understand that by and large, any gain in the value of their home comes at the cost to their children when they want to buy.

 

[Kulindahr]

^
Very nice exposition! It pulls together aspects people see as separate problems.
It also points up something needed in a president: the ability to synthesize, to see how things fit together, so solutions can be aimed at actual problems, not at symptoms.

 

[metta]

There is a new foreclosure near me. I'm starting to think that it is better to have people leave quickly rather than giving them a lot of time. This foreclosure, the bank gave them around 6 months. They took everything, including the granite counters, stainless steel appliances, etc. I hope that they get caught. I think that is so wrong.

 

[Kulindahr]

There is a new foreclosure near me. I'm starting to think that it is better to have people leave quickly rather than giving them a lot of time. This foreclosure, the bank gave them around 6 months. They took everything, including the granite counters, stainless steel appliances, etc. I hope that they get caught. I think that is so wrong.

None of the neighbors called the cops?

 

[metta]

None of the neighbors called the cops?

My neighbors did not notice it until they were gone. I was told that it is up to the bank to proscecute. I have told my neighbor that is a realtor that can find out what bank owns the home and have asked him to contact them so that they know. I'm not sure what else to do besides that.

 

[drhladnjak]

The bank is probably unlikely to do very much about it. By the time a house goes into foreclosure, it's already pretty hopeless for both the bank and the borrower. The bank has already taken losses at that point and will take many more by the time the property has been sold. The borrower is also probably already in financial dire straights if it's gotten to the point of foreclosure.

I'm not sure if removing such things from a house in foreclosure is a criminal or civil offense. I suspect it's the latter which means the bank can only sue the former owner for damages. Even if such a lawsuit were successful, the judgment might never be paid if the previous owners are having financial troubles.

The whole situation is very sad, because such behavior only results in a net destruction of value. It's sort of like a criminal breaking out the window in your car to steal some change--the cost to replace the window far outweighs the value of what was taken.

 

[NineOfClubs]

As I posted earlier, it's possible that home values will return to their historic ratio of three times median income. Probably by falling to those levels....

But the other option is that income over the next few years, by means of high inflation and government injection of "cash" into the economy, grows by 200%. Same result.

I think that the current rescue package might make that scenario a likely one, too.

Either Presidential Candidate seems capable of getting us to that point.....

 

[Kulindahr]

I'm not sure if removing such things from a house in foreclosure is a criminal or civil offense. I suspect it's the latter which means the bank can only sue the former owner for damages. Even if such a lawsuit were successful, the judgment might never be paid if the previous owners are having financial troubles.

It's going to depend on the jurisdiction, both due to differences in law and in definitions. If something is portable, taking it is probably theft if it belongs with the house, e.g. water heater or air conditioner. Marble counter tops could be a matter of multiple charges, since damage to the property is involved, not just taking something.

 

[Kulindahr]

As I posted earlier, it's possible that home values will return to their historic ratio of three times median income. Probably by falling to those levels....

But the other option is that income over the next few years, by means of high inflation and government injection of "cash" into the economy, grows by 200%. Same result.

I think that the current rescue package might make that scenario a likely one, too.

Either Presidential Candidate seems capable of getting us to that point.....

At that point I wouldn't even be able to afford a place to live.

 

[metta]

From the WSJ: Delinquent Mortgages Set to Nearly Double in 2009

TransUnion LLC ... predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009.

That would be the highest level reached since the Chicago credit bureau ... first started tracking these statistics in 1992. It compares with an expected delinquency rate of 4.67% at the end of 2008.
...
"There are a lot more loans that will be resetting throughout 2009 through 2011," says Ezra Becker, principal consultant in TransUnion's financial-services group, who notes that rising unemployment and depreciating home values are other contributing factors. "There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now."

So with all of these experts predicting that the economy will bottom out mid 2009....the same experts that predicted that we would get out of it mid 2008....this makes me thing that these experts will keep pushing that date farther and farther back to after 2011. It is just a guess, but I don't see how the economy will get better until the foreclosures start to decline. They are still increasing.

And then with the tightening of the credit card markets next year, that is going to make things even worse.