OC buyers need $167,670/year for median-priced 810k home (sales, good credit)

[k374]

Originally Posted by Electrician4you

Its more beneficial for me to keep a tenant there even if I had to lower rent or lose money for a while.

That may be ok for your personal strategy but it isn't for the hedge funds who own these properties, they need positive cash flow on their investments because they are playing with other people's money. If the securities backed by these rents start under performing they will generate losses for their investors who will start pulling capital out. They could have clauses preventing withdrawals but that would be a huge loss of confidence in markets causing all sorts of other issues.

These hedge funds have no emotions involved in these properties unlike yourself, they will unload it en masse at the first sign of trouble and move that capital onto other things. If property values start falling even regular individuals may do exactly what they did last time - hand over the keys to the bank. A ton of foreclosures happened last time due to buyers who could afford but chose to walk away.

I think you are way too overconfident of real estate with a this time is different thought process, but that is actually very typical of bubbles and very reminiscent of 2008. Obviously we have opposing views on what is going to happen in the next couple of years as I think there will be a big crash again... we will see how it plays out.

[TacoSoup]

Originally Posted by k374

If property values start falling even regular individuals may do exactly what they did last time - hand over the keys to the bank. A ton of foreclosures happened last time due to buyers who could afford but chose to walk away.

What you’re missing is a lot more people who have bought recently have skin in the game versus last time. It’s a lot different when you get into a house with very little out of pocket, not to mention those who took out a second mortgage to buy toy, trips, and such on top of that, to walk away. Are you gonna walk away from $80-$200K+ of your hard earned cash, when if history has taught us anything, it’s prices will rebound? A know people who walked away that fit that bill and regretted it later, do you think they’ll make the same mistake twice?

Don’t forget foresclosure rates weren’t as high as the media would like you to believe. The numbers are out there to look up.

[k374]

Originally Posted by TacoSoup

What you’re missing is a lot more people who have bought recently have skin in the game versus last time.\

This is not true, I know tons of people who have bought with 3% down loans, they are pretty ubiquitous. A mortgage broker told me that subprime mortgages are actually back, they are just marketed a bit differently (code - same *****, different packaging).

In addition, those that have hefty downpayments are not immune to recessions and losing their jobs. If you can't make your mortgage payments and you can't tap into any equity because it's all gone or the bank will not lend you money (which they will not if you have lost your job and asset has gone down in value) you are screwed. Continue to paint great pictures with your rose colored glasses, we are due for a severe recession in a couple of years and this time I think it's going to be much worse than 2008.

[LuvSouthOC]

Originally Posted by k374

This is not true, I know tons of people who have bought with 3% down loans, they are pretty ubiquitous. A mortgage broker told me that subprime mortgages are actually back, they are just marketed a bit differently (code - same *****, different packaging).

In addition, those that have hefty downpayments are not immune to recessions and losing their jobs. If you can't make your mortgage payments and you can't tap into any equity because it's all gone or the bank will not lend you money (which they will not if you have lost your job and asset has gone down in value) you are screwed. Continue to paint great pictures with your rose colored glasses, we are due for a severe recession in a couple of years and this time I think it's going to be much worse than 2008.

Ok, well you are saying that now but those of us who have pretty high incomes, and incomes that are very solid, found it almost impossible to get a loan in 2012, for a loan that was not, relatively speaking, THAT much more than 500k. I own/ed other property and have gotten loans before, even after 2008! 2012 was nuts.

Are you telling me other folks who are similarly situated are going to collapse this thing?

My point is that there may be some looser FHA loans now, but not that many.

[Electrician4you]

Originally Posted by k374

That may be ok for your personal strategy but it isn't for the hedge funds who own these properties, they need positive cash flow on their investments because they are playing with other people's money. If the securities backed by these rents start under performing they will generate losses for their investors who will start pulling capital out. They could have clauses preventing withdrawals but that would be a huge loss of confidence in markets causing all sorts of other issues.

These hedge funds have no emotions involved in these properties unlike yourself, they will unload it en masse at the first sign of trouble and move that capital onto other things. If property values start falling even regular individuals may do exactly what they did last time - hand over the keys to the bank. A ton of foreclosures happened last time due to buyers who could afford but chose to walk away.

I think you are way too overconfident of real estate with a this time is different thought process, but that is actually very typical of bubbles and very reminiscent of 2008. Obviously we have opposing views on what is going to happen in the next couple of years as I think there will be a big crash again... we will see how it plays out.

Other than high prices what are your signs that the market is in a bubble?

[TacoSoup]

Originally Posted by k374

This is not true, I know tons of people who have bought with 3% down loans, they are pretty ubiquitous. A mortgage broker told me that subprime mortgages are actually back, they are just marketed a bit differently (code - same *****, different packaging).

In addition, those that have hefty downpayments are not immune to recessions and losing their jobs. If you can't make your mortgage payments and you can't tap into any equity because it's all gone or the bank will not lend you money (which they will not if you have lost your job and asset has gone down in value) you are screwed. Continue to paint great pictures with your rose colored glasses, we are due for a severe recession in a couple of years and this time I think it's going to be much worse than 2008.

Tons of people, and a mortgage broker told me isn’t real data. Of course not everyone is immune to a recession, but none of this answers my response to your original statement.

Originally Posted by k374

If property values start falling even regular individuals may do exactly what they did last time - hand over the keys to the bank. A ton of foreclosures happened last time due to buyers who could afford but chose to walk away.

Could you please tell me why people who can make their mortgage payments will walk away if property values go down knowing full well they’ll rise again?

[iExtrapolate]

I saw this sign in Newport Beach yesterday: https://imgur.com/a/YAlzbCm

I took this from a distance and zoomed in which is why it's so grainy.

In case you can't read it, it says:

Home Loan
Purchase/Refinance
Stated Income
"I lend my own money"
***Best Rates***

[TacoSoup]

Originally Posted by iExtrapolate

I saw this sign in Newport Beach yesterday: https://imgur.com/a/YAlzbCm

I took this from a distance and zoomed in which is why it's so grainy.

In case you can't read it, it says:

Home Loan
Purchase/Refinance
Stated Income
"I lend my own money"
***Best Rates***

This is nothing new. Just because he’ll use his own money doesn’t mean any legitimate lender will for stated income. Hard money loans are a sweet gig as you get a great return secured by the property. Call him and see what his rates and terms are?

[Electrician4you]

Originally Posted by iExtrapolate

I saw this sign in Newport Beach yesterday: https://imgur.com/a/YAlzbCm

I took this from a distance and zoomed in which is why it's so grainy.

In case you can't read it, it says:

Home Loan
Purchase/Refinance
Stated Income
"I lend my own money"
***Best Rates***

Yup. Nothing illegal about a hard money loan. A lender CAN loan their own money at whatever conditions and guidelines they set. Usually higher than going rate and shorter terms. Most people do a hard money loan to buy then refi pay off the loan. It’s a great tool to purchase if you understand it.


They however cannot try and sell the loan to Freddy/Fannie because the primary lender did not follow the guidelines that Freddie/Fannie had for acceptance of the loan. So thecloan gets kicked back. That’s why most lenders follow the guidelines Freddy and Fannie set forth. Because they are really just a middle man.
Fannie/Freddie take the loans and sell them as securities.

If I was a bank can lend you money and make up whatever terms I want as long as I’m not discriminating and not charging rates beyond the legal limit. I just can’t sell the loan to anyone.

What this guy who advertises most likely lends to people with shaky credit. Those peoplecdefault and h3 gets the house keeps the money and now can resell it.

[CA4Now]

Originally Posted by TacoSoup

A know people who walked away that fit that bill and regretted it later, do you think they’ll make the same mistake twice?

Anyone who walked away from their home when the last housing bubble burst would not qualify for another mortgage that quickly. So there's no mistake to make twice.