Real Estate Market / Inflation / Recession / Depression (mortgage, credit rating, loans)

[tfox]

Originally Posted by jazzlover

One of the few things that is propping up the Colorado real estate market, especially outside of Denver (Grand Junction comes to mind), is the boom that high natural gas prices have brought to gas drilling and the related economic activity. A significant decrease in energy prices, while it certainly could benefit some segments of Colorado's economy, would likely "pop the bubble" in the part of the Colorado residential real estate market that has defied gravity and stayed at least comparatively robust.

Yes, ironically the early 80s crash on the western slope was caused by a sudden drop in the price of energy, the effects of which even led to a slowdown in Denver.

Be careful what you wish for. Colorado's economy needs energy prices to stay high. A sudden, precipitous drop would be very bad for us.

[LBear]

I wish I could have copied this page I seen today, it was SO GOOD! Basically it was quotes from newspapers starting from the 1970's. It basically mocked the doom & gloomers. The quotes were basically painting a doomsday scenario and quotes stating that real estate has tanked and it will never recover. The same nonsense and garbage that is quoted here.

For example, one quote stated: "Residential real estate will never recover." 1985 newspaper article

"This real estate market collapse will not see a recovery for at least 10-20 years."
1993 article

"Homeprices are completetly out of reach for the average person & one of the worst investments one can make."
1970's article - New Homeprices were around $25K

The point of all those quotes (there were many more, but I can't remember them all) is to show the DOOM AND GLOOMERS have always been around and if you listened to them, you would never get anywhere in life and live in a cave. When you study the psychology of the DOOM AND GLOOMERS, psychologist find that they actually become happy when things are bad and perpetuating bad things somehow makes them feel better.

[jazzlover]

Originally Posted by Bob from down south

Sales of foreclosures are not as robust as one might imagine. Banks and SIVs make lousy landowners, and they are very unwieldy when it comes to selling their REO properties...and foreclosure sales by the county trustee are resulting in unsold foreclosed properties going back to the bank as REO in over 95% of the trustee sales now. REO titleholders generally take weeks or months to respond to offers (even "full-price" offers at their asking prices)...and in many cases they don't even get their REO properties listed for sale for months or years after inheriting the property in the trustee sale. In some cases they don't even list properties on their books because they are trying to avoid selling at current market (fire sale) prices in a neighborhood where they hold other mortgages, to avoid triggering a further cascade of defaults that could arise from a REO sale massively dropping comps in the neighborhood. In most cases, the REO bagholders are just not able to cope with the volume of the time-intensive property management workload hitting them.

I watched this exact scenario play out in Colorado in the 1980's. REO's were often held by the bank for YEARS before they finally were sold. Many properties were so neglected by that time that they were unlivable or near to it. This in an environment when a lot of mortgages were actually still held by the originating lender. Today, a lot of that "toxic waste" was bundled up and sold (maybe many times) to outfits that don't even know where the property is located upon which they hold a mortgage. If anybody thinks the "workout" of foreclosed properties is going to expeditious in this environment, they would probably also think their chances of winning the lottery are 100%.

I am so pessimistic about what lies ahead in the real estate markets because I have seen first hand the abuses in the entire lending process that have inflated prices and led us to the edge of this abyss. Mortgage brokers only caring about their commission and doing anything to approve even the most shaky loan to questionable borrowers. Appraisers being regularly pressured to violate their independence and ethics--basically being told to "hit" a target value for a lender or be without work. Banks bundling up good loans with bad loans and selling the whole works down the line. Regulators asleep at the switch. Borrowers be told by realtors and lenders--and believing--that property values only go up, and being encouraged to buy the most expensive home for which they could qualify and being told to borrow the maximum amount that they could.

All of this has been getting worse and worse for more than decade--and has coincided, not coincidentally, with the unprecedented run-up of real estate values in what will soon be remembered as one of the most speculative and fraudulent investment bubbles ever. There are only two ways out of this: Either the "wretched excesses" are excised from the real estate markets with all of the attendant pain to irresponsible borrowers, speculators, and more than a few innocent bystanders; or the Fed expands its "bailout" of the "system" ("racket" would be a better description) which causes inflation that will effectively rob the savings of everyone--even those prudent enough to have stayed out of the mortgage mess. Sorry to say, but I think that latter outcome is pretty damned likely, and I'm not the only person who thinks that.
The Fed embraces inflation - MSN Money

This sentence from the above article pretty much sums it up:

The real problem in America today is largely a function of the maniacal real-estate bubble, created by the abdication of credit standards that allowed it to last as long as it did.

And I can guarantee you, the kind of "abdication of credit standards" described above has flourished in Colorado, and will have the same deleterious effects that are occurring elsewhere.

[CosmicWizard]

LBear wrote:

The point of all those quotes (there were many more, but I can't remember them all) is to show the DOOM AND GLOOMERS have always been around and if you listened to them, you would never get anywhere in life and live in a cave. When you study the psychology of the DOOM AND GLOOMERS, psychologist find that they actually become happy when things are bad and perpetuating bad things somehow makes them feel better.

I didn't exactly live in a cave in the 70's but I did live in a back-to-the-land community that was quite self sufficient. We grew much of our own fruit and produce, purchased grains, cheese, & nuts, etc in bulk. Lived off the grid with no dependence on electricity. We used kersone for lights, refrigerator, and hot water heater. We did have a generator, but the damn thing was so noisy, that the only time we used it was to run the blender for a few minutes now and then. It was a simple life and actually quite enjoyable, but I was in my 20s back then. It probably wouldn't be so enjoyable now, but I know I could do IF it comes down to something like that. It could happen. The doom and gloomers are always right. They have successfully perdicted 10 of the last 2 recessions!

[Bob from down south]

Originally Posted by LBear

I wish I could have copied this page I seen today, it was SO GOOD! Basically it was quotes from newspapers starting from the 1970's. It basically mocked the doom & gloomers. The quotes were basically painting a doomsday scenario and quotes stating that real estate has tanked and it will never recover. The same nonsense and garbage that is quoted here.

For example, one quote stated: "Residential real estate will never recover." 1985 newspaper article

Nobody here has said that RE will "never" recover.

Originally Posted by LBear

"This real estate market collapse will not see a recovery for at least 10-20 years."
1993 article

The early 1990s collapse of residential real estate in SOCAL actually did take 10 years to recover. I know, it's mighty inconvenient letting the facts get in the way of your incessant sunshine pumping. You can rub it, and you can scrub it, but you can't shine a turd. But...by all means, don't let me stop you from rubbing and scrubbing anyway.

Originally Posted by LBear

The point of all those quotes (there were many more, but I can't remember them all) is to show the DOOM AND GLOOMERS have always been around and if you listened to them, you would never get anywhere in life and live in a cave. When you study the psychology of the DOOM AND GLOOMERS, psychologist find that they actually become happy when things are bad and perpetuating bad things somehow makes them feel better.

I'm sure there were the same sorts of gloom and doomers in the mid 1920s who remembered the tulip mania and wondered if the 1925 midwest farmland bubble or the Florida land bubble, or the late 1920s stock bubble were as dangerous. And we all know now that there was no actual, you know, gloom and doom in the 1930s after all that imploded. Right?

Yes, doom and gloomers in 1938 warned of the dangers of the rise of Nazi Germany. I mean we taught those mean nasty Germans a lesson in 1918, and they hardly bothered us since then. Right?

And here we sit today, in the midst of a housing bubble collapse unrivalled since the last one in Florida in 1925. It's not gloomy, the idea of millions losing vast portions of their net worth in another asset bubble, the likes of which we've seen before in history. Right?

Sorry LBear, but when the weather is overcast with 100 ft ceilings and 200m visibility, it's dishonest and unproductive to report the weather as clear and a million. Some would call that sort of revisionism (a nice way of saying dishonesty) "nonsense and garbage."

[LBear]

Originally Posted by Bob from down south

Sorry LBear, but when the weather is overcast with 100 ft ceilings and 200m visibility, it's dishonest and unproductive to report the weather as clear and a million. Some would call that sort of revisionism (a nice way of saying dishonesty) "nonsense and garbage."

What is dishonest is that some here are gaining or can gain from all this bad news. Certain investments have been made and the more bad news that gets circulated, the higher the return on their investment. Bad news = $$$$ for some of the posters here. They know who they are. But that is another issue altogether.

Funny how you use the 1 out of 1,000 times you get something correct. You track record is far from good. You hope that we forget or not mention the 999 out of 1,000 times you were wrong. Even a broken clock shows the correct time twice a day.

By the way, the DOOM & GLOOMERS were not blowing the whistle on Germany. When I refer to DOOM & GLOOM people, I am referring to those who are doomsday false-prophets who are crying chicken little. Not those who are aware of the market conditions and the happenings in the world today. Big difference between the two.

By the way, you forgot to comment on:

"Homeprices are completetly out of reach for the average person & one of the worst investments one can make."
1970's article - New Homeprices were around $25K

I believe that comment was made back in the 70's by you. Care to revisit that comment???

[Bob from down south]

Originally Posted by LBear

What is dishonest is that some here are gaining or can gain from all this bad news. Certain investments have been made and the more bad news that gets circulated, the higher the return on their investment. Bad news = $$$$ for some of the posters here. They know who they are. But that is another issue altogether.

There you go again. You're wrong with your constant bleating about some evil hidden agenda. I see bear markets as an equal opportunity for bulls and bears to have their butts handed to them. Bear markets whipsaw back and forth, and speculative trading is very dangerous for anyone in that environment. No, I'm on the sidelines as a spectator for this train wreck, and have been since long before this discussion began.

Originally Posted by LBear

Funny how you use the 1 out of 1,000 times you get something correct. You track record is far from good. You hope that we forget or not mention the 999 out of 1,000 times you were wrong. Even a broken clock shows the correct time twice a day.

You haven't the foggiest idea of what my track record is. WAY better than 1 out of 1000. In fact, it's quite good. By practicing what I preach...staying out of debt, avoiding popular manias, and systematically saving well over 50% of my earnings in conservative investments over the course of decades...I now get to move to Colorado and retire in my 40s. There was no inheritance, no lottery winnings, and no parents paying my way through college. Just many years of hard work, spending far less than I earned, and saving for a sunny day.

Originally Posted by LBear

"Homeprices are completetly out of reach for the average person & one of the worst investments one can make."
1970's article - New Homeprices were around $25K

I believe that comment was made back in the 70's by you. Care to revisit that comment???

So you think I made that comment in the 70s...when I was in my teens??? Dude, what are you smoking?

[katzenfreund]

Please... keep this civil!

[brightdoglover]

When people keep talking about "real estate recovery," I wonder, recover from *what*? It's the bubble that's not realistic. "Recovery" might look a lot like "stabilizing low." As many others have pointed out, the market cannot sustain prices so far out of whack with ability to pay or borrow to pay.

A friend whose only experience paying attention to real estate was in San Francisco in the early 2000s moved to a modest town in Virginia, bought a modest house for $204K, and announced that he expected to sell it for "$300k." When I asked "When do you plan to sell?" he said, I don't know, sometime, if I get a job in California." This is someone who has no idea that the S.F. runup he saw was abnormal.
Another co-worker was talking about maybe taking out a ridiculous mortgage, like an ARM to squeeze into the overpriced Boston market. I asked him what he'd do when the ARM expired, and he said airily, "I'd just refinance." I tried to explain that current rates were a historic low (in 40 years) and that when I first bought a tiny condo in 1989, the rate was 9.5 (never mind the Carter years). They looked at me like I'd gone mad.

[Bob from down south]

Originally Posted by brightdoglover

When people keep talking about "real estate recovery," I wonder, recover from *what*? It's the bubble that's not realistic. "Recovery" might look a lot like "stabilizing low." As many others have pointed out, the market cannot sustain prices so far out of whack with ability to pay or borrow to pay.

Absolutely. And that unsustainability is what drives news like this:

Foreclosures top 1 million--the most in history

The collapse of the housing bubble...a mania that overtook millions of Americans in the last ten years...isn't caused by people talking gloom. It's caused by basic lack of carrying capacity in the budgets of American families. The misguided souls that took out "pick-a-payment" Pay-Option ARMS in bubble markets and used them to leverage themselves far beyond what a traditional mortgage lender would or should allow are simply doomed. They can't make these loans work when they recast and require payments double the POA minimum payment they're now making (75% of POA borrowers only pay the neg-am minimum payment). The existence of those loans is a matter of fact...and their behavior is a matter of basic mathematics.

And those poor souls aren't part of the 1.1 million foreclosures in process right now. These Alt-A/POA "exploding ARMs" form the second wave, coming soon to a neighbor near you.

After the smoke clears (around 2012), those who haven't destroyed their credit ratings and reputations through carefree and irresponsible participation in this debacle will have their day. This bubble implosion is good news for young families, for savers, for the prudent who didn't fall for the "buy now or be priced out forever" mantra of banker-assisted financial suicide. The bubble collapse is, however, bad, bad juju for those that have overextended themselves, and whether they got overextended intentionally or not, the math is going to catch them short. Way short.