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To: Moonman62

Could anyone really afford their first house and furniture at the same time? I couldn’t. Now my mortgage payment is equal to my car payment. I don’t know what my house is worth and neither will anyone else until my wife and I are gone and it gets sold.

The problem is with speculators. The housing bubble was basically a ponzi scheme. Those that flipped early and often made tons of money. The ones that got in late took it in the shorts. Mortgage companies jumped in with both feet using the inflated values of the homes as the assessed value. My brother made money and lost money. One of his lawyer buddies put 10% down on 10 $1,000,000 condos in Florida (new construction). He just walked away and let the bank take them back. That’s the problem. This was NEW construction based, not on the demand for housing, but pure speculation. It will take 10 buyers to purchase the units that this bozo ordered. He lost a ton. The bank lost a ton, but the builder made a fortune. Money doesn’t disappear. It just moves around.


26 posted on 12/28/2007 12:40:21 PM PST by Soliton
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To: Soliton
The problem is with speculators.

No it wasn't. A rising market creates speculators, not the other way around.

28 posted on 12/28/2007 12:48:46 PM PST by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
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To: Soliton

“Money doesn’t disappear.”

It’s most certainly disappearing and lots of it.

Some putz pays $500k for a McMansion in the DC suburbs. His 500k goes to the builder/seller, but he has a $500k asset, and things being what they were the past few years, he probably also has a full $500k note.

Score:

Seller: $500k
Putz’s House: $500k
Putz’s Mortgage: -$500k

Total: $500k

Fast foward a few years. Putz’s subdivision had lots of speculators, and he had a few subprime neighbors.

Speculators couldn’t sell,and didn’t want to pay so they walked. Several houses in foreclosure this way.

Putz’s neighbor A got a new job on the west coast. He puts his house up for sale, but nobody bites. After a few months of eating it, he rents it out to an illegal immigrant clan. They park 10 cars on the street and have loud parties, but Neighbor A gets the cashflow to stay solvent.

Putz’s neighbor B also got a job transfer.....they tried to work the two household deal while the house was on the market, but it looked like a long haul and couldn’t do it.
Nobody wants to live next to the 10-car pileup, anyway.

Neighbor B walks, the bank gets the house back but not before the tenants in Neighbor A’s house strip it of all copper pipes and wiring.

Ok so now Putz’s wife says I’m moving to Florida with or without you.

Putz can sell his house for $500k, or anywhere close. He calls his bank and negotiates a short-sale - at a 30% discount.

Here’s the score now:

Original Seller: $500k
Putz’ House: $350k
Putz’ Mortgage: -$500k

Total: $350k

The $150k delta just up-and-disappeared. Yeah, Putz will have to pay the IRS some fraction of the $150k because of his “gain”, but that’s a pitance.

This scenario is repeating itself all over the place. Money IS disappearing.

Who knows whether we’ll face inflation, deflation, or periods of both....but something has to give.

You tell me....where’d the money go?


67 posted on 12/28/2007 2:27:51 PM PST by RFEngineer
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