Less than 20% fall in home prices will destroy the banking system?
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Quote from dhpar:
I would never put such an inspiration as you <b>zdreg</b> on my ignore list...
This thread grabs my vote for the worst thread on ET.
Voting in imaginary polls and contributing to what you think is the worst thread on this whole website doesn't make you seem very intelligent. Not to mention the fact that you're not adding anything to attempt to make it better.
Good job, hypocrisy loves you!
I wonder if these people realize how serious a mortgage default is to their credit. Who is going to rent to them? I sure as hell won't. I do not rent to anyone with poor credit, even if they put down a couple of months rent (which they won't because people like that don't have savings).
Not to mention... some employers look at credit history. Utility companies won't open an account unless you put down a deposit. And so on. These people will be totally screwed for years.
Quote from moo:
That sure is the conventional wisdom!
Why would anybody with, say, 20% negative equity in his home and no or little other assets choose NOT to foreclose and just walk away from way-too-high monthly payments?
people that live in homes dont just walk away because of negative equity...they walk away cuz they cant make their mortagage payment...a house is still a house wether it is negative equity or positive...its only paper wealth...when it affects ur pocket as in u cant meet ur monthly nut..then perhaps there is no choice but to walk away...
I understand that and was exaggerating no doubt. Credit is important, I spent a lot of time even when I didn't have money making sure not to mess mine up.
But..and this is important...if you took out a mortgage on a house that costs you $5k/month at the teaser rate and your combined income with your spouse is $9k and then your ARM loans resets and now your payments are $6,200. You have to pay insurance, property tax, etc. Your home that you paid say $500k for is now worth about $450k on a good day and you're really cash strapped and slaving to pay down a house that's worth less than you paid for it.
Bailing on the mortgage and paying $1,500/month to rent without property tax and mortgage insurance would be a dream come true.
The problem that you're discounting is that there were TONS of people who bought houses that they couldn't afford. These people went into mortgages not understanding them or caring about them, and yet you think they'll really care about their credit enough to overleverage themselves for the next 30 years to pay off a house that's not going to be worth anything for the forseeable future?
I don't think so.
Exactly...if it was easy times and their mortgages were 20% of their income, sweet! I'm sure they'd stay...but you get a mix of ARM loans, declining value, and a SHITLOAD of people who leveraged into their properties using piggyback loans and low downpayments you're going to get a mass exodus from home ownership.
I know one of the best agents in the builders market and she only closed 2 out of 9 homes she had for the month....because 7 of them couldn't get qualified....they missed it by a couple of months i guess... so if and when there is a mass exodus from homes there will be less people qualified to buy them... :eek:
Quote from ElCubano:
I know one of the best agents in the builders market and she only closed 2 out of 9 homes she had for the month....because 7 of them couldn't get qualified....they missed it by a couple of months i guess...
Of course...the denial of what's going to happen, not to mention the ignorance, is astounding. The credit tightening is going to be DESTRUCTIVE!
The market dried up in 2005 at best and you could even make the case that it was 2004 in some areas I'm sure. Considering that about half of all loans in the last two years were hybrids, piggybacked, subprimes, etc. and on overvalued properties that aren't fetching as much today...especially with 16-year record inventory, I just can't believe people are so ho-hum about this.
The funniest are the ones that still call it the "subprime" issue because it's hardly just subprime as a problem...it's the other 40% or so of Alt-A loans that are the ones that will tear this market to shreds.
I see a chance to make a TON of money in the next 6 months...some people would rather go rah rah the indexes I guess.
And Wall Street will not lay down on this one and all the mortgages they bought in the forms of CDOs and MBSs, they'll turn against the lenders and banks like vicious dogs and get their money out leaving the lenders with a pile of bad loans they wrote(deservedly) and no cash to bail themselves out to try and fix the problem.
Down in Texas, rentals bring around 1% of their value monthly. I have a buddy out in San Diego and he pays $3500 rent on a house that is appraised at 350k. I don't have any friends renting in the east so maybe someone can chime in what rent is running out there. I think that the subprime issue is overblown. Most people put something down on their house, 3 to 5 % plus closing costs. People hate to sell anything for a loss, don't believe me ? Go ask all of the folks that held from the crash of 2000. If all these people walk, they still have to rent and from what I have seen for most renting is going to cost nearly as much as their mortgage. I am sure there are some cases where people did interest only or crazy arms but I think that is a minority when you look at the whole picture of outstanding mortgages. The corrections in RE will be in specific areas and not a nationwide epidemic.
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