[Ulysses373]

Originally Posted by TheGreatCurve

It's called PERSONAL RESPONSIBILITY.

Why don't lenders have any responsibility for making proper loans? Until the subprime mess, they used to actually check if you had a job and what your income was, why were they suddenly free to ignore those things? There should be responsibility on both sides, but the lenders were the ones who could choose not to give the loans, the borrowers couldn't force them to make the loan.

The point of my Ferrari analogy is that I can't afford to buy a $200,000 car regardless of if any bank is willing to lend me $150,000 to buy it. I can't afford it and I can't pay the money back. So it doesn't matter how many banks offer to lend me the money to buy the Ferrari. I won't accept it because I can't afford it. Why couldn't people have done the same thing with houses? What's the difference? Oh, yeah, greed in the case of houses because thought they could sell the house for much more than they paid for it in only a couple of years. GREED. Plain and simple.

This is how finance works (leverage). You take a loan in order to buy something you hope will increase in value such that you can pay back the loan later. Before the crash, this worked with housing, it would not work with your Ferrari. Of course it's greed, but why are lenders free to be greedy and not consumers? Lenders don't make loans out of the goodness of their hearts, they do it to make money.

Oh, and you say houses don't devalue over time? There are houses in Vegas that are now selling for less than they did back in 1988. That's 24 years ago. If that's not devaluation over time, I don't know what is.

Obviously I was talking about the situation before the crash.

The bubble in Vegas went from the beginning of 2002 to the end of 2005. That's 4 years. In any case, yes, I do expect people to have kept renting over that period of time. That's what I did because I was smart enough to stay away from the bubble. Now I can buy the same houses dirt cheap. Much cheaper than even pre-bubble. Not just for 2001 prices, but for 1980's prices, as I mentioned above.

Las Vegas, Nevada Housing Bubble Graph: Charts of inflation-adjusted, historical home prices. It doesn't get crazy till 2003, but it definitely breaks from its old pattern starting around 2000 and peaks in early 2006 and holds on somewhat through mid-2007. It definitely depends on how you define the bubble, but there was a very long period of price growth greater than what everyone was used to.

Oh, and renting is not "throwing money away". Ask anyone who got foreclosed on. You know what's "throwing money away"? Buying a house you can't afford, making years of interest, tax, and HOA payments, getting foreclosed on, and losing all of your equity. That's what I would call "throwing money away" (along with your credit rating).

You're ignoring the context, I was talking about during the bubble. If you rented from 2000 until 2006, you threw away free money if you were able to sell before the crash. If you bought in 2000 for $130,000 and sold in early 2006, you could assume you would have made about $200,000. If you rented for $500 a month during that same period, you would have lost $36,000.

If someone bought a house they couldn't afford (knowing at the time they couldn't afford it), they probably assumed it would go up in value such that they could afford it later. It's not even necessarily a loss to be foreclosed on compared to renting. Depending on the rates, making the mortgage and other payments might have been cheaper than renting the same house over the same period. In any case they made a bet and lost. This is how most investments work. There's a reason investment funds say things like "past performance does not guarantee future performance." Housing was an anomaly for 50 years because it didn't go down. If you want to argue that houses aren't investments, you can, but I'm sure everyone who makes money on houses would like to argue with you.

Not everyone was fooled. Most rational, non-delirious people knew it was a bubble. I knew for certain it was a bubble. I just didn't know of a way to short the real estate market nor did I have access to a billion dollar hedge fund to take advantage of it even if I did. All Paulson did was figure out a way to short the real estate market by using CDS's (credit default swaps) so when people started defaulting on their CDO's (collateralized debt obligations), he made out like a bandit.

Lots of people other than Paulson did have access to the same things he did, why didn't they do what he did if it was so clear to every rational person?

[SportyandMisty]

It is too bad this thread about what is happening with rental rates today & will likely happen in the future has devolved into the typical rehash of what happened several years ago & who should we blame.

I find the latter discussion useless. We cannot change the past.

My favorite bumper sticker from shortly after the dot-com bubble burst: "God, Please Grant Me One More Bubble Before I Die. I Promise I'll Know When To Sell."

[dynimagelv]

Tinyyyy bubbles....in the wine.......

[modhatter]

Well, back to the discussion. Does anyone have recent first hand experience with the current rental market? Is it more difficult to rent now, than it was two years ago. Are homes renting better than condo's, or is there little difference. Do you feel renters stay in homes longer than in condo's.

In a house, you usually have a family with children I assume. With a condo you are more apt to have a single person or a young couple.

If B of A intends to offer some of their foreclosure homes as rentals, that will
contribute to the supply end for at least a couple of years. But of course, if their little test works, they will continue it I assume.

[Ulysses373]

Originally Posted by SportyandMisty

It is too bad this thread about what is happening with rental rates today & will likely happen in the future has devolved into the typical rehash of what happened several years ago & who should we blame.

I find the latter discussion useless. We cannot change the past.

I think it's important to understand how banks behave if they're going to be landlords. They say they're going to be market rate, but if they're renting enough homes, they may be able to set the rates.

[TheGreatCurve]

Originally Posted by Ulysses373

Why don't lenders have any responsibility for making proper loans? Until the subprime mess, they used to actually check if you had a job and what your income was, why were they suddenly free to ignore those things? There should be responsibility on both sides, but the lenders were the ones who could choose not to give the loans, the borrowers couldn't force them to make the loan.

And the banks couldn't force the borrowers to accept the loans. The lenders are in the business of lending. That's how they make their money. If they don't lend, they don't make any money.

If you choose to drive drunk and get into a serious accident, do you blame the liquor store for selling you the liquor? Or blame the car dealer for selling you the car? If you get fat from eating at McDonalds, do you blame McDonalds for selling you the french fries? Or should you blame yourself for buying their food?

Please need to take personal responsibility for their own actions instead of always putting the blame on someone else when something goes wrong. If your house tripled in price in 3 years and you sold it for a huge profit, would you still have blamed the banks for relaxing their lending criteria and giving you the loan? I highly doubt it.

I don't blame the banks at all. They are in the business of lending money and that's exactly what they did. I blame the borrowers for accepting money they couldn't pay back. Just because something is made available to you doesn't mean you should take it. Just because cigarettes are made available to you doesn't mean you should smoke and get lung cancer. Don't blame the tobacco companies, they are in the business of selling cigarettes. Blame yourself for buying them and smoking them.

Originally Posted by Ulysses373

This is how finance works (leverage). You take a loan in order to buy something you hope will increase in value such that you can pay back the loan later. Before the crash, this worked with housing, it would not work with your Ferrari. Of course it's greed, but why are lenders free to be greedy and not consumers? Lenders don't make loans out of the goodness of their hearts, they do it to make money.

Of course they do it to make money. Drug dealers sell drugs to make money, too. If you're an adult and this is news to you, then I don't know what to say.

And why would anyone assume houses would increase in value at accelerated rates forever? If that were the case, the average house would cost $5 million within 10 years. How is that realistic?

Originally Posted by Ulysses373

Obviously I was talking about the situation before the crash.

There have been lots of other housing crashes before this latest one. There was another big housing crash in the late-80's/early-90's. Housing prices don't always go up.

Originally Posted by Ulysses373

Las Vegas, Nevada Housing Bubble Graph: Charts of inflation-adjusted, historical home prices. It doesn't get crazy till 2003, but it definitely breaks from its old pattern starting around 2000 and peaks in early 2006 and holds on somewhat through mid-2007. It definitely depends on how you define the bubble, but there was a very long period of price growth greater than what everyone was used to.

And that's why it was without a doubt a bubble and people should have stayed far away. It's like playing a particular slot machine just because it has been "hot" in the past and then wonder why you just lost your whole paycheck.

Originally Posted by Ulysses373

You're ignoring the context, I was talking about during the bubble. If you rented from 2000 until 2006, you threw away free money if you were able to sell before the crash. If you bought in 2000 for $130,000 and sold in early 2006, you could assume you would have made about $200,000. If you rented for $500 a month during that same period, you would have lost $36,000.

You could have also bought Apple stock for $3 a share in 1997 and sold it for $620 a share last week. But how many people did that?

And how is renting "losing money"? You got to live in the house and provided you with shelter to survive without having to pay interest, taxes, and HOA. Do you also consider buying $300 worth of food per month "losing money" because you ate it and now it's gone?

Originally Posted by Ulysses373

If someone bought a house they couldn't afford (knowing at the time they couldn't afford it), they probably assumed it would go up in value such that they could afford it later. It's not even necessarily a loss to be foreclosed on compared to renting. Depending on the rates, making the mortgage and other payments might have been cheaper than renting the same house over the same period. In any case they made a bet and lost. This is how most investments work. There's a reason investment funds say things like "past performance does not guarantee future performance." Housing was an anomaly for 50 years because it didn't go down. If you want to argue that houses aren't investments, you can, but I'm sure everyone who makes money on houses would like to argue with you.

It did go down during certain periods was has been up on average. Stocks have also gone up on average over the past 50 years, but does that mean you should pour your life savings into random stocks?

Originally Posted by Ulysses373

Lots of people other than Paulson did have access to the same things he did, why didn't they do what he did if it was so clear to every rational person?

Paulson invented new financial instruments which allowed him to profit when the real estate market crashed. Some of these instruments he created in conjunction with investment banks, such as Goldman Sachs. There were other people doing it but just not on as large of a scale as Paulson. Even Goldman Sachs was shorting the real estate market before it actually crashed.

[LostVector]

TheGreatCurve ... Fundamentally, I agree with you, mostly. There is a concept of "unsophisticated investors" which basically says you have a moral obligation not to push junk on people who aren't smart enough to know what's going on ... Aka little old ladies. The banks should have known better.

At the same time, surely there would have been no grousing if the market had kept rising so the investors who overleveraged need to bear some of the blame as well.

[jerseyru]

Originally Posted by modhatter

Well, back to the discussion. Does anyone have recent first hand experience with the current rental market? Is it more difficult to rent now, than it was two years ago. Are homes renting better than condo's, or is there little difference. Do you feel renters stay in homes longer than in condo's.

In a house, you usually have a family with children I assume. With a condo you are more apt to have a single person or a young couple.

If B of A intends to offer some of their foreclosure homes as rentals, that will
contribute to the supply end for at least a couple of years. But of course, if their little test works, they will continue it I assume.

I just rented my house in 89131 in less than a week. Makes me optimistic about buying another next year.

[modhatter]

What size? A house or a condo? How old and how much did you get? Also how many bedrooms? (If you don't mind my asking) It is so hard to know truth from fiction sometimes. Though I guess it has a lot to do with location, house appeal and the corresponding rent. That's the zip code with all the foreclosures that was on TV. Hard to resist buying at those prices, though I'm not sure when that aired on TV and if prices have jumped much. Looked like some really nice houses.

Also wondering. What stipulations do you make with tenants about performing any landscaping. Even if you have desert landscaping, there is some work to be done. Do you make it their responsibility? Most homeowner's associations that I have been familiar with include the front yard landscaping and homeowner is responsible for rear. Of course you pay $100 to $200 in those HOA.

[airics]

Strange thing happened to me and one of my rentals. Tenant called 9 days ago said they lost job and had to move out. They had been in 1 month... So they moved out, no damage to house... I had the carpets cleaned, raised the rent $180 and posted on Craigslist 3 days ago, home rented out on 1st showing.... No problems here in 89081