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Builder's do not drive up the cost...others do that...banks, realtors and appraisers. Now they are eating the s*** they created in the past several years...
If a PEX water loop is used to heat a wooden floor, its a great material to insulate the floor joists cavities...
Oh didn't mean to alude that builders did. Modular mfg industry is structured to keep more money in their own house and less spread around to the trades, though.
Banks, realtors and appraisers- doubt they're going to eat anything. They got their upfront fees & front loaded ammortization kitty, along with the sellers who on some level knew outrageous fortune was cashing in on someone elses equity. Bank loans get sold on open market to investment portfolio managers when they feel cash poor, and I suspect they've been offloading them all along at a premium to investors.
Banks will be given immunity through whining for subsidy, PMI calls, lay offs, resale, pass on cost to everyone with higher fees, reduced interest rates or the combination of all of the above the way they always do. Their money just got really complicated. Realtors will sell the foreclosures and earn yet another commission on the carcas. Appraisers will earn re assessment fees with the same impunity.
The direct losers are PMI insurers, investment portfolios loaded in real estate funds and the bankrupt owners themselves. the secondary losers will be the depreciated neighborhoods and the reduced tax base for local gov't who commited the money they won't be making to projects. New construction will be hurt if foreclosures glut the market with a significantly lower cost per sq ft than new.
When have ARMS not made a mess every time the economy had indigestion? Maybe it's better we just outlaw them as fiscally unsound.
If this were the stock market, half the industry would be under indictment for fraud by the SEC.
PEX- only time I've heard anything detrimental about PEX is when someone used the wrong skim thickness under a tile floor, punctured the PEX, resulting in extreme heat under the tiles and a hole that wouldn't allow it to circulate to another on demand zone.
Lesson: can't beat PEX without incompetance. Bad idea to go on the cheap for the installation when it comes to slab floor systems.
Standard, run of the mill ARM's have a necessary place in lending, especially community bank lending. I'm talking about the 3 yr, 5yr variety which are priced sanely with no BS lanuage in the note.
It's one of the tools a small bank uses to offset increases and decreases in the interest rates.
The owners of America are now the Chinese, Japanese and the Saudi's...who do you think owns those secondary market mortgage companies? One thing giving me comfort is the fact that our dollar is worthless and is a floater.
The ARM's have always bitten the consumer in the butt...this is the 3rd cycle of this I've seen in my lifetime...a redeeming factor? It's only 1% of the market that has failed.
That's not bad...just hyped up by the media to look good for the Dems...FHA standards on all home loans would have prevented this from happening...seems contrived too...as the bankers make a double killing in the sale, then the re-sale...only loser is Jack and Judy Homeloser who have lost their equity and their credit.
Last edited by David Kennedy; 02-05-2008 at 06:47 AM..
Standard, run of the mill ARM's have a necessary place in lending, especially community bank lending. I'm talking about the 3 yr, 5yr variety which are priced sanely with no BS lanuage in the note.
It's one of the tools a small bank uses to offset increases and decreases in the interest rates.
NYS had usuary laws that prevented anyone from charging more than 20%, but I'm seeing credit card companies get over the law by doing business in ports of convenience like delware. apparently the law there is 25.99%. states compete for business in ways that hurt everyone IMO.
Someone making 38k a year doesn't belong living in a house that has a 700k sticker price. I can't afford to live in my hometown, I know it, I refused to make myself a slave to this stupidity, so I'm leaving. I have excellent credit and they practically begged to give me a loan I couldn't afford. No thanks.
I'm paying cash for what I can afford, save on the 200% interest I'd have to pay over a 30yr ammortization schedule, skirting the PMI insurance entirely. I'd rather be free in a hovel than a slave in a mansion.
Not everyone can qualify, for a variety of reasons, for a fixed rate loan. Additionally not everyone can afford to pay cash for their castle, no matter how meager it is. Portfolio ARM loans, with proper caps, make excellent choices. Community banks use them so they can provide people with good character an option. Jumping on an anti-loan or anti-ARM bandwagon because of the toxic ARM mess is akin to throwing the baby out with the bath water.
Since a mortgage is a useful hedge against future rises in housing costs, and the interest is deductable... well, I can go on and on about the overall merits of homeownership and the tools to achieve it but I don't want to appear as a banking lackey, lol.
There were a lot of complicit players in the current housing mess we are in. Realtors, brokers, appraisers, investors, customers and bankers all had a role. Ironically, 2005 was my worst year in commercial lending because of these factors. Prices were waaay overvalued based on current market rents (or true costs) and there were waaay too many 'flippers' and wanna be real estate moguls coming in for 100% financing (which we did ZERO loans to). We watched in shock as brokers were making 6 figure plus salaries selling seriously sub-grade loans to investment firms that we had never heard of.
So now the chickens came home to roost, the brokers are out of jobs (and begging banks to hire them), the investors took a punch in the chin and prices are going back down to sustainable levels. Yay.
The good side to this ‘mess’ is that the smaller community banks can and do have the fiscal ability and well managed portfolios to not only weather the storm, but provide funding in this tightened market.
Just like every financial document you sign you must read what the terms are. There are good Arm's out there, they should have a cap and myself wouldn't get one with a 2 percent cap because that could mean a lot of money.
People got into this mess because they seen that they could afford a too expensive home at the teaser rate and didn't bother to think about if they could afford the payments when they went up.
We once had a 7/1 self insured arm loan that had a fixed rate for the first 7 years and then would only go up 1 percent depending on the market. We refinanced after 5 years but really the interest rate ended up going down so we wouldn't of needed to do that.
Not everyone can qualify, for a variety of reasons, for a fixed rate loan. Additionally not everyone can afford to pay cash for their castle, no matter how meager it is. Portfolio ARM loans, with proper caps, make excellent choices. Community banks use them so they can provide people with good character an option. Jumping on an anti-loan or anti-ARM bandwagon because of the toxic ARM mess is akin to throwing the baby out with the bath water.
Since a mortgage is a useful hedge against future rises in housing costs, and the interest is deductable... well, I can go on and on about the overall merits of homeownership and the tools to achieve it but I don't want to appear as a banking lackey, lol.
There were a lot of complicit players in the current housing mess we are in. Realtors, brokers, appraisers, investors, customers and bankers all had a role. Ironically, 2005 was my worst year in commercial lending because of these factors. Prices were waaay overvalued based on current market rents (or true costs) and there were waaay too many 'flippers' and wanna be real estate moguls coming in for 100% financing (which we did ZERO loans to). We watched in shock as brokers were making 6 figure plus salaries selling seriously sub-grade loans to investment firms that we had never heard of.
So now the chickens came home to roost, the brokers are out of jobs (and begging banks to hire them), the investors took a punch in the chin and prices are going back down to sustainable levels. Yay.
The good side to this ‘mess’ is that the smaller community banks can and do have the fiscal ability and well managed portfolios to not only weather the storm, but provide funding in this tightened market.
Wise to choose not to do biz with folks looking for free lunch, as it inevitably turns ugly.
Prices won't go down significantly. There are too many folks with a vested interest in keeping them inflated. I've already gone through this cycle 3x's in NY, and the housing situation never improves no matter what side of the curve we're riding. Defies the notion of 'free market' economics.
I was able to save money by living like a pauper for over a decade. Every nut I had to spare went into CD's with staggered maturity dates throughout the year when the rates were above 4%. When they dropped I took the nut to ING.
Gov't has punished me for saving for a house by putting me into another tax bracket based on interest earnings instead of total income earned. They favor bankers, and people being in perpetual debt. No matter how you look at it, it's always cheaper to pay taxes than loan interest, unless you own the bank and can find a way to play the system against itself.
If you were to buy a house for $150,000 today, and mortgage 100% of it (this is only for comparisons sake) the math would be something like this:
150,000 x 6% x 360 months = total repayment p/i $323,758.80
Now look at the average appreciation rate over the same period of time:
150,000 x 3.2% avg. annual appreciation rate x 30 years = $384,894.94
That's a difference of $61,136 to your benefit (based on the average appreciation).
That's not calculating the fact that whatever you are currently paying for housing costs (rent) goes into someone else's pocket. Factoring that is obvious.
I'm not saying that paying cash for a home is bad, but rather financing is generally a wise choice as well.
And it sounds as if you could use some tax exempt bond funds if INT income is eating at you.
I don't disagree with your point, but I do have to correct your math.
Your calculation applies the 6% interest rate to the entire balance. That's only true for the first month. The second month, your principal is slightly less than $150K, and so the portion of the monthly payment allocated to interest is slightly smaller, and the principal component slightly larger. This continues month by month until the loan is repaid.
Loan amortization is not a simple calculation. I took your same values (150K loan, 6% APR, 30 years), and plugged them into an Excel spreadsheet.
Monthly payments for 360 months would be $899.33. Total Interest paid would be $173,757, out of total payments of $323,757.28 .
A 1% increase under an ARM to 7% would increase the monthly payment by about $100. Where people have gotten in trouble in places like Florida is they're being hit by ARM adjustments on top of insurance rates doubling (Katrina) and aggressive property value reassessments. Since many had borrowed as much as they qualified for (under loose lending guidelines) instead of what they could actually afford, they're suddenly in deep do-do (or, as DK says, deep digested grass cuttings). And if they go to sell, they discover that prices have dropped 15-20%, either wiping out what little equity they had, or actually leaving them in the hole.
Last edited by snorpus; 02-05-2008 at 02:21 PM..
Reason: corrected typo
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