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No - Freefall not slowing down

April 23rd, 2008 at 08:13 am

BA asked me if it was slowing down - the foreclosures here.

Then I saw this article.

The answer is clearly - no. Still crazy here.


Looks like a pretty bad year or 2 left for subprime resets.

& then I recently blogged that an "original" neighbor who bought his house in the $250k range in 2001, just lost his home. Which is the beginning of an ugly trend. All the homes that sold for $600k in our immediate neighborhood have foreclosed. But now the people that got in the ground level here? That's the next wave? The prime borrowers who used their homes as ATMs. I have hardly talked to anyone in our age range who is not in this boat.

As for us, we are still fine. My older co-workers and relatives skirt around the issue. I can tell they all assume we are in WAY over our heads. My spouse doesn't work, we have a nice house, and we're young. We obviously are in way over our heads. Wink It's probably a pretty safe conclusion for the area. They will just never understand how dirt cheap our house was to us. The alternative was a $500k mortgage for a complete piece of crap, back home. Not sweating the $200k mortgage. Though I wouldn't be surprised if the value of our home dips below what we paid at some point. We paid almost $300k, but have paid $90 off our mortgage. A little over 20% down, and then just steadily paying down our 30-year mortgage since. Plus paid cash for some improvements when we first moved in. We've never borrowed a dime against our house, so this is the difference apparently between us and everyone else. Putting money down in the first place also makes all the difference.

I know you oldies already know all this, but had to throw in for newer readers. Who may wonder where we fit in, in all this.

I keep reading how the growing trend is to walk away from homes here. Well duh! Put 0% down and the your mortgage payment goes up astronomically. What do you really have to lose? I can't honestly hold these people morally responsible for their mortgages. The banks completely screwed them over, what do they owe them?

I have cringed whenever I have seen advice to put little down on a home, and I guess this is really the true side affect. People just walk away. In the end that doesn't really help anyone. But I don't see the morality in making someone who makes $50k a year pay a $4k/month house payment for a house worth half what they paid. It's just craziness. Of course they are walking away. I would have to say they would be insane to stick it out. Wouldn't make any sense.

Of course, you could argue why they bought these homes in the first place then. Like you couldn't see this coming.

Well, you got me there.

So yeah, it's ugly here.

9 Responses to “No - Freefall not slowing down”

  1. Joan.of.the.Arch Says:

    I'm just shaking my head, but I have nothin' smart to say about it. What a situation! What is going to happen to all those people? Where are they going? Moving in with parents, brothers 'n' sisters? Leaving town? What the heck is happening to your rental market now?

  2. Broken Arrow Says:

    Thanks again, MonkeyMama! I asked because I was wondering if I should buy Wachovia stock. Big Grin They are at a bargain basement price right now, but a substantial portion of their investment is tied to the California real estate so....

    But it's really neat to have free access to a CPA who lives there and is actively examining the situation. You're my hero! Big Grin

  3. PauletteGoddard Says:

    Credit Suisse has an infamous chart of resets. Interest rates are super low right now to mitigate the # of foreclosures from ARMs due to reset this spring. August 2008 and September 2008 are predicted to have the largest number of mortgages resetting.

  4. Ami S Says:

    The bank didn't screw them over without the homeowners help.

    The ONLY reason one needs an ARM mortgage is because they bought a house they can't afford and/or they have lousy credit. That has very little to do with the bank. Yes, the bank made it easy for the homeowner but in the end, the homeowner is ultimately the one to blame....period!

    Buy what you can afford, not what you WANT!!!

  5. monkeymama Says:

    LOL - BA. Honored to be your hero. OMG - I would so not invest in any mortgage banks right now. No way. Not for a LONG while... Like years... That's my advice... I mean it really feels like just the beginning here. There is a long ways to go to sort out this mess. Sacramento may get pretty knocked on its a** soon, but the rest of the state has a lot of shaky loans. People in the Bay Area have been paying $500k+ for homes for a good decade. I honestly have no idea how most our friends/relatives make their payments. That is why we moved.

    I agree with you Ami, to an extent - but the banks have done some REALLY shady dealings. Lots of stories about people who did not speak english who did not understand their loans, etc. Being ignorant does not give corporations the right to completely screw you over. IT's criminal what many of these banks did. I don't see why the corporations would get let off the hook. OF course, both sides are paying for their mistakes big time. Both sides to blame; both sides paying for their greed. But this is way more than just people making some bad choices. WAY more than that.

    Joan - Funny you ask. The rental market here is WEIRD. Rents have been really low for a while because there has been so many speculative homes purchased for rentals. So rents have been pretty low. Likewise, rents have been rising with foreclosures. I have read many articles about rents rising. Because so many bank owned homes, and so many people reverting back to renting. (I don't know what people are doing, but many of them are going back to cheap rents over expensive home ownership - starting over I guess - though not sure how with the knocks to their credit). Sacramento is unique in that is has pretty cheap rents (I don't think you can say this about any other area of the state).

    Also, I have read that renters are credit checking their landlords - very SERIOUSLY. Because who wants to rent a home that is foreclosed tomorrow. ODds are that a home for rent is facing foreclosure...


    I actually read an article the other day that rents were falling as more renters are out buying foreclosures. So I don't know - I am confused. Maybe it will be a wash. The homeowners will become renters and the renters will become homeowners. ??? There is a feeding frenzy at the bottom - people who felt priced out and waited, and are jumping in and buying now.

    I think overall less rentals will be on the market (as the homes foreclose they are bought up by families instead of speculators). BUT there are a lot of homes here too, so who knows.

    I don't really have a strong pulse on the rental market so I just don't know. I hear conflicting things. Many forces at work I guess.

  6. monkeymama Says:

  7. PauletteGoddard Says:

    The homeowners will become renters

    This is what I want to be. "Like you couldn't see this coming." No, I didn't see this coming when I bought my little house in 1999. I wasn't aware there was going to be a bubble. I don't groove on having my house value plummet 40-70% because I didn't have clairvoyance last century. I didn't move here so I could go broke with everybody else, when I had a lawyer read through our documents, we didn't use our house as an ATM, we didn't buy in the burbs where we'd be dependent on personal, gas-powered transportation for all our errands, we went with a fixed rate, put as much toward a mortgage as we could, applied for a HELOC low enough that I could replenish with cash if I had to. I was supposed to be immune from this mess: otherwise, what's the point of being cautious?

  8. monkeymama Says:

    No - I meant - like you couldn't see that having a mortgage that was 75% of your income, and set to reset, wasn't going to be trouble. That's what I meant.

    Likewise, I am not sure why you would face trouble in your situation. Sounds like a good spot to be in.

    I didn't see this bubble coming at all when we bought in 1999 either. Who could see this? I remember being required to put 20% down for our first home. None of this ARM stuff in 1999.

  9. Joan.of.the.Arch Says:

    Thanks, MM for your further comments and the link. I posted a question about rents and lower end housing in the general discussion forum, too.

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