So while those who stood idly by and didn't get into the market over the past 7 years can now lambast us all for being such greedy little pawns in the latest big real estate boom. They will spend their time wagging their finger yelling, "I told you so! You just didn' tlisten!" But last time I looked I still have some amazing equity in my properties, made substantial improvements to my retirement accounts, my personal residence, supported many a charitable organization in my community and can look my cleints dead in the eye.
We are now in the post-boom doldrums replete with hand-wringing, legislative committee hearings, pundits, economists, all explaining the downside, but out there in the ether I can see another boom coming down the pike. And I'm sure all the finger pointers can tell us exactly when that's going to be!
"mortgage brokers "giving money away" to anyone like free sex in the 60's. Speculators/flippers driving up prices funded by exotic loans, agents acting as pawns to fuel the horrendous bidding wars on the front lines"
Susan can you please give me an example of one Mortgage broker that actually lent their own money, or hey heres's a suggestion read my post earlier about who created these loans. Since your such a fan of Fortune magazine read the special edition about the credit market in October.
You would soon realize it goes farther up the ladder than some real estate agent or broker. I guess its the difference from algebra and applied calculus. It easier to quote a equation than understand the limits of a complex problem.
Who is suffering most from this nightmare? In my opinion, all the fiscally conservative hard working americans with good credit, who otherwise can afford a home AS A PLACE TO LIVE AND RAISE A FAMILY, but now are forced to pay exorbitant prices due to all the greedy participants of this frenzy, and they know who they are.
If you want to read a really excellent opinion on the real estate boom of the early 2000's go check out this site: http://www.patrick.net
Our issues became affordability and the buyer NOT being able to qualify for a standard, fixed rate, 30 year loan. New products and underwriting was created for this non-qualifying buyer. This is evident in how quickly the default rate was for the loans created for these buyers in late '04-06. We have much "re-setting" of 2/28's and 3/27 loans happening. 40 Billion in December and another 140Billion in March/April of '08 with the vast majority resetting in the third quarter of 2008.
However, when you look at sales of $700,000+ homes in our area you see a market equal to last years and actually robust in many ways. The crater lies just north of the conforming loan limit of $417,000 and wides out to around $675,000.
That mixed with The Financial Geniuses that developed the New Hyper loans, that when rates dropped people where actually tempted for the first time in a long time to refinance. Well most of us havnt seen a loan we didnt like and then someone gave us the bright idea hey since i am paying this amount for this price and with a 2 year loan i can pay the same price for this home which is alot nicer. Well the rest is history, and alot of people actually were wise enough to be cautious but yet still take advantage of the situtation and use this as a tool to move up. It was a great time to buy, and still is if you intend on making your purchase your home. Meaning a long term investment.
Believe me ,am i glad it happened? Of course, today more than any we have a huge amount of homeowners. For the majority they took this laxed time to get into a house when rates were amazing, refinanced when they were better without cashout and still have no regrets for buying. There is always a double edged sword, and you will live and die by it. I think there were actually some great loan products released, and i still think to this day there are some loans that maybe risky to some but a great loan to someone else. It is all about educating yourself, and not the hard education learned after the fact. There are some that took advantage of these loans, and they are paying the price.
What most people dont understand is that when someone creates a product, meaning new mortgage backed securities, and wall street is hammering you day and night for more of that product to sell. Foreign investors are buying like at auction frenzy, ratings systems of loans that when bundled together meant nothing, yet were sold as having great value. Most consumers say it started with Mortgage Brokers and Real estate agents pumping up the and abusing the system. Well i have never seen a Mortgage Broker or Realtor that could bundle billions of dollars worth of adjustable loans together, sell them for huge profits to foregin investors graded A, when they had no clue of what lied inside. Then go back make more dynamic easier to qualify loans, do this over and over again. It starts at the top, and trickles its way down.
The subprime market was and is a Headline, what better way to blame the most beat up people already. Those with bad credit history. Well someone made them a that bed, whos fault they lied in it? Thats debateable.
She refi'd it a couple of times. With the cash out of the refi, she bought more investment property. Three years after I sold her the house, she tried to sell it for double what she paid. Of course, it didn't sell. She could have easily made 50% on the original sales price. However, she couldn't afford to sell it for this because she had refi'd it to death.
Look at the hardest hit areas. Yes, they were subject to intense speculation. I do not blame the banks. They had a lot of partners in this process.
I think that we are returning to an understanding that real estate is a long term investment. That the numbers have to make sense. That there is no such thing as free lunch.
Check this thread out:
The investor thought they could make money without putting anything down. I feel sorry for them but: no such thing as a free lunch.
When you are raking down 10 million or more a year to package loans into billion dollar portfolios, you really have no grasp of how hard it is for the other 99% of Americans to make a living and pay their bills.
The people who have too much money are more ignorant about its value as those who make very little.
Since huge income increases come too easily to wall street CEO's, CFO's, analysts, and hedge fund operators, they started to think that the rest of us had the same kind of scalability in our incomes.
Reading the paper about CEO's receiving $200 million to LEAVE their jobs, after they screwed up, , made some of us little folk think that money does indeed grow on trees.
First let me address your comment about my assumptions, because there is nothing like a good debate. You said that the traditional idea of a 30 yr investment has been dead for a decade and then stated that this compression occurred in the last 4 years? You don't see a fallacy in that point? And inflation not being a factor how do you figure? What do you think caused the appreciation of home values? If you pay attention to currency markets you know that the value dollar is currently being reset ( I like that word, lol) to various currencies throughout the world because it was inflated...btw Nice blog. Linked the Schiller graph to show how inflation is very much an issue with the last boom....