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Old 04-02-2012, 08:40 PM
 
119 posts, read 122,225 times
Reputation: 56

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Quote:
Originally Posted by aneftp View Post
What I am saying is most can still rent out their properties even if moving. They can hold onto property and eventually be even. It's just people want the quick fix. Will they lose money on rents? Possibly especially if they brought at peak. They can make up some of that money by eliminating unnecessary spending easily (smartphones, cable etc) But the main issue is people are what I call generation now. They want to be made whole NOW. Americans were taught that no one loses money on real estate. And that thinking has got to change.
You can rent out if your mortgage is low enough, but that's not the case for most people unless you bought the property as an investment and it has to be a good investment. Even if you live in an area where buying is more favorable compared to rent, if you didn't buy your property at a killer deal, you're only able to rent out the place for little more than your PITI. If that's the case, you're probably going to lose money if you include vacancy, managing, and maintenance. Also, for your second home, it's harder to get a loan unless you have 20% down as well as you'll pay higher interest rates.
I'm not sure how long it would take to get even.
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Old 04-02-2012, 08:52 PM
 
573 posts, read 1,173,092 times
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Quote:
Originally Posted by aneftp View Post
What I don't get is nationwide prices are about 34% off peak (2005/2006). So assuming it doesn't get much worse (it could still sink another 5-10%). We are at 2002 levels in most parts of the country and 1999-2000 levels in the hardest hit states (2000 is about time of the boom). Even if homeowner brought at 2005 prices and put zero down. By 2015, they should have eaten into the principal by at least 1/3 (33%)? right? We are already in 2012. So who's worst off? Someone renting for the 10 years (2005-2015) or someone sitting tight and owning the home for 10 years even with the 30-40% price decrease. Money is being thrown away in rents or a declining real estate market. It's just the psychology of Americans who think being underwater is the end all. It's not. Sit tight.

But you're assuming all those "homeowners" were actually paying down their mortgage debt. I admit I'm a bit jaded on the subject, but IMO the opposite was often the case.

At the beginning of 2001 U.S. home mortgage debt was $5 trillion.
By the end of 2006 U.S. home mortgage debt was $10 trillion.

Much of that huge jump was due just to rising prices of course.
btw, I'm open to a discussion on whether fundamentals ever supported said prices. Those who have read my other posts on the subject know exactly where I stand.

But there's even more to it. From 2001 - 2006 Americans withdrew $3.8 trillion in mortgage equity. That's twice the amount withdrawn throughout the entire 1990s. If we're being realistic the majority of GDP growth during those 6 years was traceable to mortgage equity withdrawal.

Many people saw all the equity accumulating in their house as “free money” and tapping into it was incredibly easy. They were consuming their net worth and making themselves poor, but they felt and acted like they were rich.

I used to be amazed when I saw a house that had doubled or tripled in value since it was purchased, sometimes 20+ years ago, yet it still ended up a foreclosure. But after seeing enough such cases (not a rarity in my area, believe me) not much surprises me anymore.

So now I ask you who is worse off?

A. A "homeowner" who drained equity as fast as it accumulated when prices were rising at unsustainable levels?

B. A "homeowner" who used an innovative affordability product (translation: toxic loan) to get into an overpriced house they could never legitimately afford?

C. A renter who has been "throwing away money" (your characterization - not mine) but who had to keep their housing budget at least somewhat reasonable (I'm not aware of any new government programs aimed at keeping struggling renters in their homes) during a time when RE prices have been either falling or flat pretty much universally.


BTW, many programs aimed at keeping struggling homeowners in their homes are aimed at groups A & B above... I wouldn't exactly characterize either group as responsible homeowners. JMHO

Granted I'm sure there are also plenty of folks in group D - the ones you described above who just need to sit tight. But they're being hurt by all this as well, especially if the original article posted by 399083453 turns out to be accurate. (see, this post is totally on topic)
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Old 04-02-2012, 09:23 PM
 
43,208 posts, read 47,082,143 times
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By 15 years many will be torndown and not building will further reduce numbers.Those with debt no matter what will be renters. Afterall;treasury and others want the homwownership level to get back to historic level. Different regions will recover i nhousig just as they are in recession recovery. It may atake 25 years for some to get back to near normal and never fully recover to past levels of both.
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Old 04-04-2012, 08:25 PM
 
2,767 posts, read 3,426,711 times
Reputation: 2967
Americans brace for next foreclosure wave

Source: Reuters

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010. Last year was an anomaly, and not in a good way,"

In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

"Now the banks have a settlement, foreclosure numbers for 2012 are going to be high,"
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Old 04-18-2012, 02:03 PM
 
Location: Albuquerque
5,553 posts, read 9,552,952 times
Reputation: 2462
Quote:
Originally Posted by aneftp View Post
What I am saying is most can still rent out their properties even if moving.
I think that's a form of denial.

It is denial that they have "lost" money.
The best loss is the first loss. Continuing to lose money via a new business
that you didn't want to get into ( the landlord business ) is dumb.

Take your loss and if you think real estate is going up, buy some stocks
that will reflect that --- like a homebuilder or home improvement store.

It's much cleaner than a property you really don't want.

You get the benefit of a price increase if you are right and it's much cleaner.
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Old 04-18-2012, 07:28 PM
 
3,428 posts, read 3,715,456 times
Reputation: 1344
Quote:
Originally Posted by mortimer View Post
I think that's a form of denial.

It is denial that they have "lost" money.
The best loss is the first loss. Continuing to lose money via a new business
that you didn't want to get into ( the landlord business ) is dumb.

Take your loss and if you think real estate is going up, buy some stocks
that will reflect that --- like a homebuilder or home improvement store.

It's much cleaner than a property you really don't want.

You get the benefit of a price increase if you are right and it's much cleaner.
Mortimer, in a fantasyworld, I agree with you 100% of your statements.

But we don't live in fantasyland.

Many people can't be made whole by just selling and taking a lost. They just can't get up an move for various reasons. Most likely, most people can't afford to write a $50-100K check at closing to get rid of the home.

I diversified with stocks also. But stocks are no guarantee either. Even divined paying stocks like Transocean (RIG) suddenly announced they are suspending their 6% plus dividen payment. It's crazy.

That's why these government stop-gap measures don't really work and real estate is the way it is.

I've said it time and time again. When did all this short sale madness start? You guessed it. Right about the time after the mortgage and forgiveness act started at end of 2007.

Take away that option. People have 1 of 2 option. Save the home, lose the home into foreclosure.

The short sale option does nothing to help the real estate market except create a gray area adding more distress properties and potentially saving the home owner to buy another home in a couple of year.

Let's see after the mortgage and forgiveness act expires at the end of this year. Let's see where the real estate market is going. You get rid of the short sale option, homeowners will quickly realize they either have the potentially declare BK or save their homes. You'll quickly realize how many short sell disappear for good. No one wants that IRS tax liability. It's not a kick me when I am down bill. It's government losing millions of dollars when we desperately need it. Each lost the banks take, they write off and get 33% back from the government. While the taxpayer pays nothing for their earned income. And yes bad debt is earned income no matter what anyone says.

I lend you 200K, I expect it back. Or else I file a 1099C and write it off and Uncle Sam wants that money back.

And the banks need to starting counting these loans are underperforming. Those assets more than 6 months behind in their payments. That will speed up the foreclosure process.

There will be no more middle ground. We are in year 5 of this real estate mess. It's time to end it. Stop the government interventions.

This real estate mess should have ended 2-3 years ago if not for government interventions. We crash, we crash hard. But we recover much faster than letting everything drip, drip, drip.
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Old 04-20-2012, 11:36 AM
 
Location: Albuquerque
5,553 posts, read 9,552,952 times
Reputation: 2462
Quote:
Originally Posted by aneftp View Post
Mortimer, in a fantasyworld, I agree with you 100% of your statements.
I was thinking of people who are actually going to move.

I moved from Chandler and as we were chasing the price down over $100k from what
our first realtor recommended, the recommendations to rent came rolling in and in and in ...

The person I replaced at my current job lives in San Diego and is renting out a house
here that has probably dropped 20-25% in value since they started renting it out.

In the real world, if one is going to stay, just keep paying rent and get on with one's life.

My impression of mover-renters is that they can afford to write a check and they are in denial.

People that have to move and can't write a check, just do a strategic default after they have gotten new digs.

Quote:
Originally Posted by aneftp View Post
I diversified with stocks also. But stocks are no guarantee either.
Even dividend paying stocks ... suspending their 6% plus dividend payment.
Actually, I wasn't recommending diversification.

I was saying that if you want to speculate on real estate ( which is what "renting until prices improve" actually is ),
then you can use stocks like homebuilders and home improvement stores a a proxy for owning actual property
that you DON'T actually want to own ( your old house - your former residence ).

If you believe the housing market has bottomed then you can put your money where your
mouth is by either buying houses or buying stocks that benefit from rising housing values.

I think there are still going to be short sales after the law changes. It is, in effect, principle
reduction without the benefit of continuing to live in the house. People will take the
instant gratification of getting out from under the payment and worry about the IRS later.

Last edited by mortimer; 04-20-2012 at 11:45 AM..
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Old 04-25-2012, 09:43 PM
 
2,767 posts, read 3,426,711 times
Reputation: 2967
- Boomers are retiring and the upcoming generation is not large enough to soak up this glut of single family homes

- Income of the upcoming generation, in terms of purchasing power, is much lower than the previous generation.

- Student loan obligations are enormous for the upcoming generation compared to the previous one. Some student loan debts are similar in size to a home mortgage. This further erodes their purchasing power.

- Energy prices continue to make single family homes in the suburbs less and less attractive to young families. These single family homes constitute a large portion of the available homes coming to market, as retirees seek smaller homes and/or condominiums.

- Combine higher downpayment requirements with young adults having to spend more of their income on student loan payments and other debt acquired during college (Credit Cards, cars), and add on top of that rising energy prices and general inflation for food and other necessary items, and the ability of young adults to save cash for these down payments is severely diminished.

- Builders continue to build single family homes at a rate that exceeds demand.

All of these things are conspiring to constrict demand for single family homes in the coming decades. Add to that the many families who will choose to live with mom and dad (possibly assuming their mortgage or buying their parents home from them while the parents remain living in the property, thus turning two potential home sales into one (kids move in but parents don't move out, or kids move in and parents don't leave, with parents retaining the home, thus making the net -zero- homes sold) and you have a very big, very real problem with demand for housing going forward.

This is a generational problem that will not "turn around" in 10 years time.
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Old 04-25-2012, 09:50 PM
 
2,767 posts, read 3,426,711 times
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Millions More U.S. Homeowners to Rent, Pimco’s Simon Says

Link

The U.S. homeownership rate may fall two percentage points to 64 percent, below historic norms, amid about six million additional foreclosures and tight lending standards, according to Pacific Investment Management Co.’s Scott Simon.

While owning is now “incredibly cheap” compared with renting for consumers who can qualify for loans, relatively few Americans can take advantage of the opportunity.
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Old 04-26-2012, 01:03 AM
 
Location: Los Angeles area
9,325 posts, read 7,278,055 times
Reputation: 16503
Quote:
Originally Posted by 399083453 View Post
- Boomers are retiring and the upcoming generation is not large enough to soak up this glut of single family homes
You had a list of good points as to why lack of demand for single family houses is largely generational. I quoted only one because it's the only one I disagree with. Yes, boomers are retiring, but when you consider the large number of years of birth over which the boomer generation is spread, their retirements will be occurring rather gradually. Also, people don't necessarily put their house up for sale just because they have retired. Lots and lots of people stay put - in the same city/town and in the same house.
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