Housing Threatened by Defaults in Sub-Prime Mortgage Market

Quote from dandxg:

Other than our home, if I can't pay cash I am not interested. It makes life real simple....
Debt free means stress free.
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Very good advice, and something that I feel similarily about.

I'm nearly done with being a university student, so I owe a bit more than I would otherwise prefer (still quite small relative to most other students), but I personally believe very much in the "if you can't pay for it cash don't buy it" philosophy. Only two exceptions - housing and vehicle.

The vehicle side of things is another interesting point. I personally chose to locate myself in an area where I can easily access public transportation, so I do not currently own a vehicle. That plus a few cab rides a month sure beats buying and insuring a car, plus paying for expensive parking where I work.

The above said, I do realize that at some point a vehicle may become a necessity, but there is still a spectrum of options there. I think that financing is a necessity for most people when they purchase a vehicle, but one should still be smart about choosing the vehicle. Unfortunately most people seem to want the nicest car possible, and end up paying a very nice monthly payment as a result. :)

In my opinion credit should not be used to finance frivolous purchases, such as widescreen TVs, home theatre systems, expensive furniture sets, etc. I could personally have a much larger number of material posessions right now if I were willing to increase my debt, but I personally do not wish to do so.

I am now at the threshold of being able to pursue trading more seriously, but it will still be delayed somewhat by my intention to be debt free within 2-3 years. Less debt does indeed mean less stress.
 
I worked at one of the biggest if not the biggest subprime lenders in the country for 3 years and let me say this: if it wasn't for the paper being bought hand over fist from investors this loans would have never been written. I was shocked at first with some of the situations we could lend on. After awhile I realized that my company was charging 5 points in fees on the front end, selling the paper, and then getting there money right back into the door to lend again. A cash machine for a long time but now the truth is coming out. This is just the start of the mess.
 
indytrader, I read a report which stated that the balance on sub-prime loans with "flexible" interest rates was around 1 trillion dollars.

Do you (or anybody else) happen to know what the mortgage balance is for prime paper ?

Thanks.
 
DOOM AND GLOOM……It is so funny to read “Speculation” on Real Estate from Elite Traders. It is all most as funny as reading about their “Trading”. I left the trading as a living about three years ago to enter into the world of Land Speculation/Real Estate Development. Although I do trade my personal account, well more like position trading for weeks if not months, I am finding the world of “Real Estate” to be far more interesting and rewarding.

The biggest problem many do not understand is that when they read the “Talking” heads about “defaults” they are talking about the 9 to 5ers, Lets call them “SHEEP” as we will use “Market” terminology. We are talking about Johnny Joe and Mary Idiot Real Estate Sales person who helps Johnny “ I have hardly any income” but I want to purchase a house 4x my net worth so I can be like Mr. Day Trader across the street. Mary Idiot goes and finds a mortgage broker to help “push” the paper work through. Wolla, big PiP’n Johnny “ I have no money” is now in his new home.

The median home price, or should you say nation average is some where between $230g to $260g. Of course there are plenty of other areas that run higher, but we are taking the median home price for 2006. These are what the numbers are based on.

So, you have Johnny “ I have no money” driving his BMW, his wife shopping at Prada because she just watched “DESPERATE HOUSEWIVES” and like the way the women dressed. They come home to that home that they can’t afford. Even at $260g they are doomed.

Then take the Joey “I can become a Land Investor” with no money down, getting into Investment Property between $200g and say even $400g, thinking the can flip. Surprise,
He is holding two mortgages and has taxes to pay, “Value” of the property has been pushed up by a hoard of speculators and out of the price range of the general population.


I do not deal with such crap. I deal with homes from $500g to $4.7 million. Commercial projects that run into the triple digits of the 9 zero range. And I picked the proper region as in the Texas south region, where, property, land and commercial investments are pushing for 14%-25% growth for the next few years.

So, while the doom and gloom is broadcast, the “Pundits” cry “Crash” and the Mary Idiot Real Estate agents, who are a dime a dozen, much like the trading world during a bull market, hustle for nickels and dimes, the money is flowing fine in the proper areas and High Net Worth Clients are coming by the carloads.

Oh yea, I did make a trade, bought Oil futures Jans/febs and march months …legged in to average 51.90 and was out about 57.20 on the average. So, I still find time to play the game will I’m creating my own monopoly board…..but what……the Housing Bust is upon us.
 
why yes you picked a fine spot to speculate, but for the majority of the country r.e. is contracting. you forgot about people using their credit cards and 2nd mortgages. isn't texas tied to the oil economy? so it should be fine for a while.

bgp
 
Every market is different...some start to explode upward, while many others foreclose like no tomorrow, and begin to shift downward...

I do agree on the fact though that subprimes are screwing a lot of people and a chunk of the system up...and causing a lot of this mess. When you're lending to someone because they can walk, talk, and breathe, there's a problem here...

But then again, it'll make some house buying on the cheap! :D I love a good deal...
 
Texas does have big oil....but not South Texas. Oil is up in Houston and Dallas. There are a few companies like Valero, Headquartered in SA. But no actual Oil fields like the rest of texas.

My main clients are coming from Cali, NJ, Chicago, DC, Houston.
Most of the people I deal with are looking to leave their area, have already become successful and are in the age range of 40 to 60 years old. These are the individuals buying up our houses at say $480g to 1.2 mil.

Commerical Clients I deal with are privite and not corporate. Microsoft, Pharmac. co's a lot of Banking Headquarters, have moved into this region. My clients are individual developers from out east and other parts.

Bacially, its a value game. The amount of space you can purchase with serious buying power, trumps any where else, and the South West Region is becoming more Cosmopolitan than ever before. It will take a while to reach "Cool"ness statis....but by then I will be long gone into other markets.

Very little young money in South Texas. Most of the money is being pumped in from outside sources.

Of course keep in mind, its much like the Cow-boy-Indian game now. The cow-boys came in and took out the Mexican Indians. Then the stuck around for a while and created the Tex-mex culutre. However, sad to say, its a dump foking culture. Very little brains but a lot of Pride run in this Culture. Machismo is the proper titled. A lot of half educated (from very weak state schools) and a lot of unskilled labor have dominated the San Antonio Region for decades.

The New Indians are the "Locals" and the East coast/West Coast money are the New Cow-boys. South Texas is also being hit from the Rich side of Mexico, the Educated Elite of Mexico look down upon the Tex-Mex culture, so they are pumping money in but not dealing with the TEX-MEX.

What you have is a perfect situation of a Robberbarron setup. Prime Real Estate, Location in the center of the US, flights are 3 hours both to East and West. You have a local population that are mainly idiots and could never really take advantage of the surrounding positives to achieve economic advancement. Now, Money swoops in and control is being set by outside sources. It's just like the board game of monopoly only we are not playing for parkave, like the old game. We are jocking to buy Skyscappers, Oil land, Water Aquifers, and paying hardly any taxes and passing GO.

Dallas has stalled....over priced, Houston Money is running away fast, thanks to the 250, 000 Katrina Victoms looting and killing. East and West Coast slowdown , its like one big implosion of money and the vortex is smack in the middle of the South West Region of Texas...sucking it all in.




I
 
Quote from WinSum:

Why doom & gloom about housing ?

Look at DJ Real Estate ishare (IYR) chart which tracks the real estate market.

Nothing on that chart says the real estate sector is falling apart. The trend is still up.

Homeowners who are worried about falling housing prices can hedge their risk in the financial market.
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I believe that is commercial real estate your looking at, commercial real estate hasnt seen any sort of selloff yet.
 
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