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(English) What About the Cost of Delaying Your Dreams?

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16 comentarios
  1. Marvin
    Marvin Dice:

    This is an easy question to answer with a calculator.

    Home prices have fallen 33% from 2005. A home that cost $500k in 2005 cost $335 today. Price reduction $165K

    Home prices have fallen 8% in the last year.

    A house that cost $300k last year costs $275 today. Savings $24,000.

    Home prices are still fallng and the rate of the price fall is increasing,

    Real estate is in a depression by any measure. All real estate workers know this. Appraisers, brokers, associates, home, inspectors, surveyors, builders, advertisers etc are suffering the deepest job losses that I can remember. My heart goes out to them. In 2005 I finished appraisal school when the bottom fell out of the market. All the people who were able to get a job appraising from that class are unemployed.

    9 days ago the real estate double dip was called in the Case Shiller Index report. This week the forward looking pending sales contracts (contracts to purchase that usually close in about 2 months) were down 11%. Mortgage applications are way down.

    Foreclosure sales now make up 25% of the sales.

    13 million mortgages are under water.

    No credible source is calling a bottom for housing prices. Sources that lack credibility have been writing “affordability articles” and “now is the time to buy” for 200 years regardless of the market conditions and they will continue regardless of the market conditions. Articles about 500K anual sales are an admission of depression level sales.

    When I look at where we are and how we got here I strongly support tighter mortgage requirement including 20% down payments to avoid another crisis like this one. Lets show people who cant afford a home the door now and not evict them later.

    Sales figures indicate people are sour on real estate at the current price point. Confidence has been lost. The agility and certainty of renting is the current preference to the uncertainty and anchor of owning.

    The public has lost confidence in real estate and is not buying. When the real estate bubble popped in 1929 home prices were flat for 20 years. After the stock market crash and recession of 1987 home prices were flat till 1997 when sub prime bubble and maturing baby boomers pushed up prices – that bubble cycle is over. We are in for a long bumpy ride.

  2. Marvin
    Marvin Dice:

    I certainly do not trust the “experts” who got us into this mess. Do you? As of today Household Real Estate assets losst $6.6 trillion from peak thanks to the experts.

    The marketing pitch of curtains blowing in the breeze, and the smell of apple pie in the kitchen has lost out to risk avoidance and price deflation. There is the potential of serious money losses.

    In January you advised sellers to sell and not to wait because prices are falling. http://www.youtube.com/watch?v=KYM1yP-FFCI

    On the opposite side of that transaction is a buyer who loses money when they buy that same property because of the same falling prices! This is pretty obvious.

    The articles from the “experts” argue prices are lower now than last year – BUT they omitted the part about prices are still falling and will be cheaper in the future. That is reckless advice in my opinion. They are recommending significant risk.

    Are you calling today as the bottom of the market?

    My advice to the sellers agrees with yours – sell before you lose more money if you can’t wait it out (at least 10 years).

    My advice to the buyers is – wait for the bottom and do not buy now because you can get a home cheaper or a better home with your current funds later. If you get a motivated seller who wants to unload a property at a 1996 price – that should be a safe buy.

    Why risk losing tens of thousands of dollars or even hundreds of thousands of dollars? There is no rush. The bidding wars are over.

    Robert Shiller is indicating prices can fall another 20% from here. At this point today – I see no risk to waiting and plenty of risk buying.



  3. Marvin
    Marvin Dice:

    Thanks for encouraging respectful dialog on a sensitive subjects.

    Nothing would please me more than a good outcome for real estate. The entire economy is dependant on it. I do plan to pounce on a property when I feel the time is right. I am a cash buyer. Believe me you don’t want any part of my negotiations.

    I am in favor of QRM, It forces a return to 20% down payment
    It removes the unqualified borrower from the system up front rather than evicting them later. 20% down payments stopped in 1996 because banks found a way to remove risk to themselves by dumping mortgages to Wall street via Credit Default Swaps and “Securitized Investments” which put the risk on other investors (often unwitting).

    In just 10 years reckless lending ruined the economies of many countries and its not over.

    Some of the victims of reckless lending are
    Bear Sterns
    Fannie May
    Freddie Mac
    AIG Mortgages
    Iceland – bankrupt
    Ireland – bankrupt
    Spain TBD
    and more.

    The un-named victims are private investors like the retirement funds who were getting high yield on their “securitized investments” that turned out to be loans on Harley Davidson motorcycles – which went sour!

    A co-worker of mine in his late 50s sees no way to ever retire because he lost his retirement on AIG stock. American International Group Inc insured mortgages and went bankrupt on defaulting borrowers.

    I purchased real estate and I had to have a 20% down payment, a job, a tax return and a decent credit rating. QRM requires nothing more.

    QRM forces banks to keep some of the risk – thus encouraging them to show at least some of the risk on a loan.

    I believe QRM will fix that situation. I also know greed will tempt banks to try and find a way around sane banking again. But lets at least plug the holes we know about.

    We have seen what happens when there is no risk to the banks and they give loans to people they know can not pay them back.
    I want QRM but I would not mind if some of those lenders went to jail!

    I support QRM because I think it is good for all of us. I think its good for America.

  4. Marvin
    Marvin Dice:

    The impact will be less defaults and less loss on defaults, less bank bailouts by taxpayers and lower taxes.

    Borrowers will need to save up a larger down payment. on expensive properties.

    I don’t want banks to put any more people into homes they can not afford and I don’t want to pay for reckless lending with my taxes..

    The down payments required today are inadequate for this market conditions and risk based on what happened.

    Under QRM a purchaser who is purchasing a million dollar home could be required to have a $300k down payment to protect lender in case of default. That’s what it costs to protect a loan on a million dollar home in this soft market. If it has to be dumped fast in a default its more likely to sell fast at $700k.

    Right now we are all paying for the inadequate down payments on loans that went bad with our taxes. The Govt purchased toxic loans to prevent the banking system from going bankrupt!

    We can not continue the practices that got us here.

  5. Marvin
    Marvin Dice:

    I do not support the fear mongering campaign the real estate industry interests are waging in Washington and the media

    The total cost of a home will be lower. Prices are already down 33% from the peak and 8% for the last year. That more than offsets any of the cost due to the increased risks .

    It was a few yeas ago people were happy to pay double what a home is worth and 6% for the mortgage.


    Bad real estate lending practices and reducing bank risk is at the center of the financial crisis and this reform puts the cost where it belongs – on the buyer. It also puts the risk on the lender. Not on the tax payer.

    Are you supporting tax payer bail outs, no money down loans, No principal mortgages and the other shenanigans the industry dreamed up when they had no skin in the game?

    You did not answer my primary question. Are you calling a bottom to this market today?

  6. Steve Harney
    Steve Harney Dice:

    @ Marvin,

    We have on many occasions given our opinion that prices will continue to soften and have offered the reasons we believe that. For example: http://kcmblog.com/2011/05/10/5-reasons-you-should-consider-selling-now/. This post was read by over 20,000 people.

    We can at some future date argue the societal impact of QRM. Right now we are discussing whether now is the time to buy. My only question is how do you think QRM and the new Conforming Loan Limits will impact a buyer’s mortgage payment?

  7. Marvin
    Marvin Dice:

    Risk cost belongs to the borrower as it is now and will be paid by the borrower.

    Steve – what is your estimate for the the cost of not implementing QRM?
    We have historical data here – Increased taxes, bank bail outs, foreclosures, short sales. bankrupt institutions and on and on.

    QRM is a measure to force banks that are out of control to not sell loans to people who can not pay them back and for banks to retain a loss potential on bad loans they write.

    The measure is to protect all of us from bank bailouts and the current situation that forced US Govt to buy bad mortgages.

    There is more liability than the cost of a mortgage to the borrower.

    I am on the record that the tax payer should not be stuck with the bill for a bad banking practices i previously outlined.

    QRm is an effort to clean up the mess going forward and I support it if it means additional cost to the borrower or not.

    As a tax payer I want out of the mortgage bail outs.


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