3 replies to this topic

[nimblebear]

from John Mauldin. How many homes have been purchased like this? "A 'customer' bought his house in '05 for $650,000. The house was new and he blatantly over-paid. He put no money down and the builder paid his closing costs. Just so we're clear, he didn't bring one red cent to the deal at any point. He got a no-doc loan. Just so we're clear about what no-doc is, he didn't even fill out the income or asset sections of the 1003. This man didn't lie about how much he made or had. He simply made no representations on the subject. He had 'perfect' credit. Just so we're clear, 'perfect' credit in this case consisted of +24 months of clean payments on two credit cards with high limits of $3K and $4K. "There is no consideration about how much credit he could or had been able to handle. He received 80/20 financing. The 80% first is a negative amortization loan. Today he wants to get a fixed-rate loan to pay down principal. The problems: He made the minimum payments on his negative amortization first. He now owes +$37K more than he originally did. On top of the fact that he overpaid, the house hasn't appreciated. He probably owes in the neighborhood of $100K more than the house is worth (and that's before estimating any negative impact on price if he goes to foreclosure), and 37 houses are for sale in his immediate neighborhood. The big punch line? He is a 26-year-old, single busboy for a catering firm. He makes $33K per year. "Heaven help us!!!! What more really can we say, other than 'What's your bid for this busboy's house?' Our bid is something south of $300K, and we are not all that certain that we'd make that bid stand for more than a day, fearful of being hit... fiscally and physically... by the busboy.... AND the lender." The lower end of the housing market is going to find a dearth of buyers, as they will not get financing and a lot of homes are coming back onto the market. It is going to be very hard to get a floating-rate mortgage turned into a fixed-rate mortgage, and consumers are going to see their payments soar. Foreclosures are at an all-time high and rising. Cue the congressional hearings, stage left.

[Rogerdodger]

I thought it a bit strange, but a local TV station had a poll question last week: "Are vacant houses a problem in your neighborhood?" 49% answered YES. I don't know how many responded. Then I got to thinking: I believe there are at least 3 vacant houses within a couple of blocks of my house. Two have been for sale since last fall, although the sellers foolishly did not list with a "real" multi-list broker but tried a "sell-by-owner" internet broker. I'm looking to buy a deal but don't think the bottom is in.

[OEXCHAOS]

Yeah. Same here. There's a house across the street. They want $205K for it. It's cute. Nice neighborhood. Two stories (plus converted attic), old, brick, shaded back yard, chopped up. We rejected it 4 years ago at 175 as "not big enough and a bit pricey" even though it had lots of rooms. Just none of them were ample enough. Also, no off street parking. It's been on the market for 6 months now. We've seen no activity. This is typical. Without a price enticement, who's going to even consider this? There's at least 3 more larger places with off street within 4 blocks only a bit more expensive. We'll need to see some folks actually come down in price, I think to shake lose the buyers. There will be a point however, when the pent-up demand will cause a snap back. How long THAT lasts is anyone's guess. M

[tommyt]

that is the subprime math...reorg the loan to a bigger amount and payment surprise during rising rates...spells trouble, and just a question of how much there is...I have no idea how much it will hurt the economy, but IF a recession were to come soon the impact would be large ( A paper would get hit also)