Comments on: 5-29 – ‘The Day After’ the Interest Rate Spike

By: Deal or No deal Game

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By: coffeyesplease

coffeyesplease — Sun, 13 Dec 2009 19:32:13 +0000

Once the due date has passed and there

By: Year One Online

Year One Online — Sat, 20 Jun 2009 19:51:01 +0000

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By: Civil Disobedient

Civil Disobedient — Tue, 09 Jun 2009 23:49:11 +0000

Property prices are going to sink like a stone.

By: Mike

Mike — Tue, 09 Jun 2009 22:33:05 +0000

Noz, actually if banks were smart they would allow a person to buy, who defaulted and lost $200k, say they had bought at $400k sold for $250k.(plus misc. costs);
let them buy a home from them for example at $100k and if the value goes up to 200k someday they have something to collect. Obviously this would only work in markets where the current sales prices are well below what the home should sell for in a normal non-distressed market.
Instead they discount them to 50-70k and sell to investors that will never give the bank another cent. Without a home the former owner most-likely would never have income or assets to pay, even if they garnish wages or take other worthless personal property.

This could only happen at the bottom of the market since they may just walk if the home drops further

I see houses that sold for 400k, selling for $100k ,I’m talking about over 2500 st ft homes built in the last 5 years. Not just 1 or 2, that is what the maket is, in some areas of Vegas…

No doubt the current sales price is too low. (But, unfortunatly will go lower)

Someone that can buy for way under replacment cost most likely would have a very good increase in value 5-10 years from now. Unless the economy keeps getting worse.

Like it or not, homes (were) the biggest store of wealth for many decades of people. After a very large correction(now playing at a neighborhood near you) they will be again.

You know as well as I do after prices bottom some bank will start the whole game over. It’s in their best interest. Leaving out the people who default will only reduce any chance of a bank being repaid.

Another way to look at it would be: bought @ 400k walk away lose $200k, assume the home will never go to $400k again.

Buy 2 years later same home for $120k, if the home goes back up to $300k the buyer is better off than paying interest on 400k loan, and would have the ability to sell at a profit of 150k(120-300-costs) add the savings in interest, plus the $150k profit they could pay the loss incured by the original lender. Not to mention the original home couldi’t be sold until they paid the diff. and probally would have defaulted anyway. It would be a much better credit risk for the bank than keeping the $400k house. If the $400k house stays at $120k and never goes up the buyer saves on the interest payment over 30 years. Since we’re gambling, it’s almost stupid to say in the original home.

Of course the numbers change based on a million different factors. Really the people who bailed first(most irresposible) while prices were still near the peak are better off(if they didn’t buy too soon again). They might have only ended up losing 50k for the bank. Someone bailing now may lose 350k. In this declining market the longer people try to save their home the more they lose if they default. They are punished for making more payments. In a declining market the most responsible owners are punished.

Since housing is a gamble this would be the best way to look at it.

By: Noz

Noz — Tue, 09 Jun 2009 20:38:33 +0000

MIKE:

I don’t think we disagree.

Let’s be clear – for someone who:

LOST A JOB
HAS HEALTH ISSUES
HAS LIFE CHANGING ISSUES
IS THROWN INTO TRULY UNFORESEEN CIRCUMSTANCES

– if you have to walk away, then these reasons to do so.

However – for someone who:

BOUGHT A HOUSE TO FLIP

PURCHASE A PLACE THEY COULD NOT AFFORD KNOWINGLY

DID NOT READ THEIR CONTRACT AND NOW CRY WOLF

DID NOT TAKE THE TIME TO KNOW WHAT THEY ARE GETTING THEMSELVES INTO

DECIDES THAT BECAUSE THEIR HOME ISN’T WORTH WHAT THEY PAID FOR IT SO NOW THINK THEY ARE ENTITLED TO NOT PAY

– these people need to lose everything and not be allowed to buy another home again.

I am only speaking about the client side. I don’t want to get into the charlatanism and crookery of the banking and money industries.

By: Mike

Mike — Tue, 09 Jun 2009 20:07:33 +0000

NOZ Anyone who to stops paying(or can’t pay) due to increased interest rates, job loss, poor underwriting, bad loans etc. are the reason for prices declining. The banks that wrote the loans and the people who signed for them are reason the market is so messed up. The minority of failures are causing a drop in anyones property value with-in a 1 mile radius.
I comp houses for banks all day evey day.
Sometimes(very often) homes are sold for way less than they would sell for if they waited more than 1 day on the market for a buyer. But due to the banks being in distress, thier poor lending practices etc. they no longer care. They just need any money they can get as soon as they can, combine that with the fact they have insurance on other properties in the same area and know distress sales will cause more defaults(this is a fact). They have an incentive to cause defaults. Same goes for credit cards, they cut the lines and jack the rate, knowing it will cause more defaults, inturn paying them interest & fees on money they knew they should haven’t lent.

Your logic is reasonable, but the system and people involved area not.

Therefore individuals do what is in their best interest, just like the banks.

If the gerneral public could “save or create” like our gov. then , we could simply say we are saving money by not paying bills, or we can create income by not having a job and living for free until they kick you out.