Interesting article by a financial advisor (short sale, real estate market, lease)

[MovingAloha]

This article is interesting and is probably indicative of the thinking of many during the housing bubble.

How a Financial Pro Lost His House - Yahoo! Finance (http://finance.yahoo.com/news/financial-pro-lost-house-191003606.html - broken link)

[shmoov_groovzsd]

Originally Posted by MovingAloha

This article is interesting and is probably indicative of the thinking of many during the housing bubble.

How a Financial Pro Lost His House - Yahoo! Finance (http://finance.yahoo.com/news/financial-pro-lost-house-191003606.html - broken link)

MovingAloha,

GREAT post! Thanks for sharing.

Oh wow, that was a brutally honest write up and I am sure both therapeutic and knife twisting for him. Its certainly a prime example of how people really felt at that point in time, even for someone that manages other peoples money.

Lets just say for those that got to the party at the right time and left before everyone got really drunk, made out like bandits. Otherwise it was like a massive New Years Eve party that kept going until the punch bowl was empty.

What I still find incredible to this day is the ability to finance large purchases. I dont have anything against it because there are many good borrowers and the formula does work.
But in the US vs other industrialized nations in the world, one can literally finance ANYTHING. When I lived abroad for several years, you really had to have some skin in the game to even buy a car. While financing did exist, it was so expensive that it literally forced buyers to 'save' for it or get something less expensive.
What kills me is how a new abnormal norm was set. Like what we are experiencing right now with the credit markets so called 'tightening'. I have heard around here talking with business owners referring to 'the good ole days' and when they will be coming back. Whining like they are getting punished for grabbing cookies from the cookie jar. Get a grip.

Managing a simple spreadsheet for those who earn a steady income and maybe some investments in a 401k or something similar should be mandatory for any household. I know I have many friends here that earn a nice chunk o change, but are mindless when it comes to looking at the ACTUAL cash flow in/out every month and I am certain this not uncommon.

[earlyretirement]

That was a pretty good article. I credit him for writing it. Yet, I don't feel any pity on a so called financial professional that bought a house he clearly could NOT afford. It doesn't take a rocket scientist to figure out that if you make $X per month and the house is $X you can't afford it.

I know things got crazy during the bubble. I knew it was time to get out of dodge and liquidate my USA real estate positions when I saw both my cleaning lady and my gardener (both of whom could barely speak English) buying big houses they clearly could not afford on no documentation, stated income loans. I knew then the system was going to collapse and the real estate market was going to tumble. No document, stated income loans... pick a pay mortgage payments? I thought it had to be a joke...and it was.

Often times people only try to blame the lenders and mortgage company which admittedly were horribly irresponsible. But honestly I think the homeowners that bought more house than they can afford are equally if not more responsible to blame. And not reading all the terms and conditions of a loan papers is not an excuse. Buying a house is very serious business.

Sure some people are taking responsibility for their horrible actions but I've seen plenty (some I personally know) trying to blame everyone else including Wall Street for their foolish actions.

Like you Shmoov, I've lived in other countries and have permanent residency status in other countries. It's always amazing that in some countries there is NO working credit and finance system. Or if there is...the interest is horribly expensive.

[MovingAloha]

Ya now in 2002 we purchased a home in Hawaii and kept it till 2006 when we sold it for almost double what we paid for it. We then moved briefly back to the Mainland, where we bought again, this time in Austin and we still have that home (its been rented out since 2008) because it is just now getting back to the point where we may be able to sell without it being a short sale.
When we were looking, we were repeatedly being "pressured" by lenders to go for homes way above what we knew we could reasonably afford in the real world. I'm glad we stayed realistic in our purchase, because even then, the homes around us went under thereby affecting our home.
The mess we in the U.S. are slowly working our way out of has many causes. I found the article so interesting because this guy really should have known better, yet he got caught up in the game like others. We aren't the smartest and brightest bulbs out there, but we just couldn't figure out how so many people could afford houses way more than our home and we felt we were at the top of our budget when we paid $300K. We saw people, especially in and around the DC area buying crazily priced townhomes - upwards of $800K for 3-4 bedroom. These places were beautiful, but just Crazy!!
Anyways, I'm not even sure I want to buy again, why should I, if we can find a long term lease in the neighborhood we want. I'm hoping to sell my Austin home next year and celebrating that I made it through this whole mess fairly well.

[jwblue]

Originally Posted by earlyretirement

That was a pretty good article. I credit him for writing it. Yet, I don't feel any pity on a so called financial professional that bought a house he clearly could NOT afford. It doesn't take a rocket scientist to figure out that if you make $X per month and the house is $X you can't afford it.

I know things got crazy during the bubble. I knew it was time to get out of dodge and liquidate my USA real estate positions when I saw both my cleaning lady and my gardener (both of whom could barely speak English) buying big houses they clearly could not afford on no documentation, stated income loans. I knew then the system was going to collapse and the real estate market was going to tumble. No document, stated income loans... pick a pay mortgage payments? I thought it had to be a joke...and it was.

Often times people only try to blame the lenders and mortgage company which admittedly were horribly irresponsible. But honestly I think the homeowners that bought more house than they can afford are equally if not more responsible to blame. And not reading all the terms and conditions of a loan papers is not an excuse. Buying a house is very serious business.

Sure some people are taking responsibility for their horrible actions but I've seen plenty (some I personally know) trying to blame everyone else including Wall Street for their foolish actions.

Like you Shmoov, I've lived in other countries and have permanent residency status in other countries. It's always amazing that in some countries there is NO working credit and finance system. Or if there is...the interest is horribly expensive.

Expecting consumers to be sensible and fiscally responsible is unreasonable and too much to ask.

100% on bankers and regulators.

[shmoov_groovzsd]

Originally Posted by jwblue

Expecting consumers to be sensible and fiscally responsible is unreasonable and too much to ask.

100% on bankers and regulators.

50% on the above and the other 50% on the signor of whatever contractual agreement was involved.

Takes two to tango.

Personal responsibility is a quality individuals should strive to have a conscience about. Not passing blame.

[MovingAloha]

Originally Posted by shmoov_groovzsd

50% on the above and the other 50% on the signor of whatever contractual agreement was involved.

Takes two to tango.

Personal responsibility is a quality individuals should strive to have a conscience about. Not passing blame.

^^^+1 Personal responsibility is the key! And that includes those "people" (Corporations).

[jwblue]

Originally Posted by shmoov_groovzsd

50% on the above and the other 50% on the signor of whatever contractual agreement was involved.

Takes two to tango.

Personal responsibility is a quality individuals should strive to have a conscience about. Not passing blame.

Originally Posted by MovingAloha

^^^+1 Personal responsibility is the key! And that includes those "people" (Corporations).

My point is that 99% of people are not capable of being fiscally responsible or sensible.

Not enough people strive to have personal responsibility and don't have a conscience about it.

That is why all of the blame goes to the bankers and regulators.

[tonyinsd]

It's mostly financial institutions other than banks that created the worst loans. They definitely deserve some of the blame for creating those products.

But putting all of the blame on them is like blaming A-B and GM if some idiot buys a 12 of Bud, slams it down, and then goes out in his Camaro, broadsides a school bus, and kills a bunch of kids.

If you don't understand something, don't sign it. And if they won't explain it to you, walk away.

I think that people got so caught up in the mania that they decided, I don't care what this means, I'll sign it so I get a house and I'll sell it later for more.

When you try to use the greater fool theory, often, you find out that you are the fool!

[MovingAloha]

It must be my weekend for reading about financial advice. Here is another good read. It's short.

Yahoo! Finance - Financially Fit