"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
And, goldstate's right....a home is not a consumable. They do go nowhere but up over time. It's the over "how much" time that gets folks into trouble.
The lure of easy money.
1999: Wah! Wah! They tricked me into buying this worthless stock. The Gov’t should dooooo something.
2007: Wah! Wah! they tricked me into buying this worthless house. The Gov’t should doooo something.
Real estate goes thru boom and bust cycles, just like Glowbull Warming..................
Interesting article. My son and his wife are buying a house (new construction) out in that area right now and the builder is still tossing enticements their way.
Their base model now includes a third bedroom as std vice an option, which the kids paid for originally. The builder is ‘refunding’ their option fee to keep them on track to purchase.
My biggest concern is that they not get suckered into an ARM, and they’ve already said that they’re going nowhere near that kind of financing. Looks like they’ll be able to take advantage of her VA eligibility.
Oldest trick in the book. The moment a salesperson says "this price won't last" (even if its true) I'm out of there.
Anyone else notice the same regions have this problem once every ten years or so?
I did, before I bought my home in 2000.
Its appreciated approximately 35% since we closed in the spring of that year. And we refinanced once, and saved a bundle over the course of the 30 year mortgage. And locked in our rate forever to boot.
There are very few ‘guarantees’ in life. There is a huge number of times during your life, however, where you can make smart decisions, or poor decisions.
Anyone that went out and got an ARM was simply ill informed at best, dumber than dirt at worst.
Houses built on a cement foundation will fall down. They should have used concrete.
Greed is greed, period. It is not something less just because it is engaged in by a "homeowner" or a "labor union". People get caught up in their own greedy expectations and eventually the actions they take on those expectations produce situations that work against them. If you are going to be greedy, then at least be smart enough to know how soon you need to "cash in" on it.
"The lending industry encouraged that transformation, promoting not just subprime loans but mortgages requiring little or no documentation of income, no money down, and interest-only payments.
That statement is total misinformation; it conflates issues related primarily to the "sub-prime" mortgage market with all mortgages. Almost all mortgages made with "little or no documentation, no money down and interest only payments" ARE "sub-prime" loans - loans with interest rates a number of percentages higher than "prime" mortgage rates.
Next to zero mortgages can be obtained at a "prime" mortgage rate without income "documentation" and only a very small percentage can be made with "prime" mortgage rates and either no down payment or interest only payments.
"But rising interest rates and falling home prices put particular pressure on people who live in the homes they own."
No it does not "put particular pressure on people who live in the homes they own", for over 75% of American homeowners who bought their homes before the current boom (before current inflated market prices) and who are not looking to sell their home right now either. Additionally, for the vast majority of American homeowners, who bought their homes before the current "housing boom", their eventual "sale prices" will still reflect appreciation over the price they paid, 5, 10, 15 and 20 or more years ago.
"The American Dream is overdue for revision."
More alarmist media nonsense; but what can you expect from MSNBC. The majority of the "foreclosure" problem rests with "sub-prime" loans, which represent all of 20% of the entire mortgage market. The majority of "sub-prime" foreclosures are in the 80% of the "sub-prime" market made up by ARM "sub-prime" loans (adjustable rate mortgages), or 16% of the entire mortgage market. And actual foreclosure rates on those sub-prime ARMS are running between 20-30% of them - or 3.2% to 4.8% of the entire mortgage market. The American dream is far from dead and the current housing market is in a spectacular bust after a long-running and spectacular period of growth. In the end, more Americans than before the "boom" will still be homeowners after the current shakeout ends.
In 1981 I bought a home in a very young subdivision in a close-to-Houston suburb. The seller was in the midst of a divorce and due to its terms was not looking to make a profit; plus he had a low-interest assumable VA loan. So, the seller was able to offer a deal for his three-year old house that was better than the builders offered on brand-new homes.
That was only half the reason for our “deal”, the other half was that Houston was in the midst (little did we know it was near the end) of a huge boom at the time. When you got the local Sunday papers they each had a real estate section with a center fold-out in the middle. That foldout was a map of the Houston metropolitan area. It provided a number for each new housing subdivision under construction and a legend that supplied the name and location for each of those subdivisions. In the fall of 1981 there were over 300 #’d locations on that foldout. So, our seller also had plenty of “competition” that could delay his house being sold, and then settlement of his divorce.
It was not a bargain for long. Within a year the long boom in Houston was over and I had returned to New York, for work. We rented the house there at first, but within 18 months 1/3 of our neighborhood there was boarded up. We spent another eighteen months trying to rent it or sell it, with no success. We finally wrote the mortgage company and told them they needed to sell it themselves. They did. They got the principal on the balance of our mortgage. Being the people we were, we knew it was not the governments fault and certainly not the taxpayers. We bought a great house at 100% the wrong time for that location, period.
Too bad all these credit-risky sub-prime borrowers cannot just admit the same thing, and get on with their lives. At worst, they will go back to renting and trying to save more than they did last time.
“Did these people believe that prices would go up forever?”
A lot of them did. I live in one of the formerly hot housing markets in Florida. Neighbors of ours are trying to sell after buying at the height of the market a few years ago. The wife actually told me that they thought house prices would keep going up forever.
I didn’t say what I was thinking, which was that they were complete idiots. Nothing goes up in price on a straight line trajectory forever, nothing. Yet enough fools apparently believe that the laws of supply and demand are suspended just for them to make trouble for the rest of us.
The risks weren't obscured by "euphoria".
They were obscured by criminals.
Hoping the housing market stays down for at least two more years. Maybe I’ll pickup a nice home for tens of thousands less that it was worth a year ago.