Real Estate Crash thread

[cramer]

I'm from NY, only upstate where our summers are very nice. Just started thinking about investing into some real estate in Tahoe. I am trying to look ahead toward retirement and do not want to kick myself for not looking into something now. Timing is everything. I have skied all over the place except tahoe. I really would not know where to begin, other than gettting out to check it out.

Ya, i shouldnt have labeled NY like that. i was in manhatten end of august, beginning of sept. Probably the worst time to go there i'd imagine. at least weather wise. I have to admit amazing city, but i could only vist it. No way i could live there.

I wouldnt have a clue about the real estate up there. but id imagine now is probably a pretty good time to get in there. i can't think of a better place to retire. I've got a buddy who made his million from stock options off genetech. He retired up there and i get to enjoy him rubbing it in daily on facebook.

[liv2ski]

I am trying to look ahead toward retirement and do not want to kick myself for not looking into something now. Timing is everything. I have skied all over the place except tahoe. I really would not know where to begin, other than getting out to check it out.

I am fairly bearish going forward on Real Estate and if my wife would allow it, I would sell what I have, as it represents too much of my net worth to see it cut by another 30%-50% That said, I am likely full of shit and somehow the world will just keep moving along, even in the face of incredible deficits, under funded future entitlements and a dollar that should be worthless at some future point if we continue down the path we have been on for the last 10 years.
My opinion is to save your cash, try to be debt free and keep your eyes and ears open for the approaching financial tsunami. I am waiting to see what happens to Greece/Europe over the next few years. Our to big to fail banks have so much invested over there, that it will be interesting to watch the US government throw trillions more at bailing them out again, if the PIGS go down. Hell, the Treasurer just printed another $105 billion to send to Greece to protect US Banking interests.
If your crystal ball tells you all is well and you really want to buy and you have the cash, Incline Village would be my call.

[XXX-er]

My opinion is to save your cash, try to be debt free and keep your eyes and ears open for the approaching financial tsunami..

I have found this to be a good strategy anytime cuz its not what you claim something is worth or how much $$$ you made ... it's what you got left

up here I am expecting things to go further into the shitter at which point ... buy something

[Benny Profane]

It has come to this:

http://www.cbsnews.com/video/watch/?...in;contentBody

But, that's just the start, if you think about it.

[JooJooBinks]

The more shit ya own. The more shit owns you.

[AdironRider]

Im looking to buy and build a small cabin in the woods. Long term, hopefully debt free at this point. If I own that place outright, I think I would be alright. Plant a nice garden, live as sustainable a lifestyle as possible, maybe have a couple extra bucks to ski a bit, backcountry otherwise. Id be a happy man. Buying a bunch of useless shit is nice and all, but I can do without.

[Platinum Pete]

It has come to this:

http://www.cbsnews.com/video/watch/?...in;contentBody

But, that's just the start, if you think about it.

It's interesting to see the comments, too. I don't respect strategic defaulters, but I'm pretty sure mixing ethics and finance is probably going to make me a sucker somewhere down the line.

[Toadman]

Caught that 60 Minute piece on strategic defaulters. There was a smuggness to the younger couples decision to default. But I guess there are a lot of people doing it.

By Jody Shenn Jody Shenn – Tue May 11, 8:08 am ET
The first wave of U.S. mortgage defaults was spurred by lenders who made bad loans and borrowers who wound up with larger monthly payments than they could ever hope to manage. Lately, something altogether different has been making an increasing contribution to soured debt: Americans choosing to stop making mortgage payments they actually can afford.

"Strategic" defaults accounted for at least 12 percent of all defaults in February, up from about 4 percent in mid-2007, according to a recent Morgan Stanley (NYSE:MS - News) report. Analysts led by Vishwanath Tirupattur classified a default as strategic when a homeowner who hadn't previously been delinquent made an on-time mortgage payment one month; skipped payments for the next three months; and stayed current on other consumer debt of $10,000 or more.

Housing analysts say strategic defaults mainly occur when a home's value has dropped below the balance remaining on the mortgage. A homeowner in that position may decide that continuing to make payments is throwing money away, or may default to get the lender to modify the loan. An estimated one in five U.S. homes with a mortgage has "negative" home equity, according to Zillow.com.

So what happens when all these strategic defaulters get kicked out of their homes and have to pay rent?

Whatever you think of strategic defaults from an ethical point of view, they appear to be aiding the economy, temporarily, at least, by boosting consumer spending and allowing homeowners to stay current on their other bills. Consumer spending, which accounts for about 70 percent of economic activity in the U.S., rose at a 3.6 percent pace last quarter, more than economists forecast

[jayfrizzo]

So what happens when all these strategic defaulters get kicked out of their homes and have to pay rent?

They'll pay rent. Rents will probably go up and then people will buy when it's a beneifit to buy rather than rent.

Businesses do this all the time -- they're acting for the good of the business. The banks don't care about "morals" -- they're looking out for themselves.

The whole "morality" of people paying their debts no matter what is a story created by the banks and business, to better their own interests. Which is cool -- they're looking out for themselves and so will I.

[Toadman]

Jayfrizz,

I was thinking in terms of what happens to the economy when 1 million strategic defaulters have to pay for a roof over their head. Presumably they are just living rent free right now. Would imagine some of that income is going into savings but how much was spent bolstering the economy by buying stuff that won't be available as disposable income.

[Dantheman]

If they are true strategic defaulters and can make their mortgage payments but choose not to, they shouldn't have a problem paying rent once they get booted.

[liv2ski]

Jayfrizz,

I was thinking in terms of what happens to the economy when 1 million strategic defaulters have to pay for a roof over their head. Presumably they are just living rent free right now. Would imagine some of that income is going into savings but how much was spent bolstering the economy by buying stuff that won't be available as disposable income.

That topic has been discussed in previous pages, as many of us feel the economy has benefited by these defaulters buying shit, eating out. etc, rather than paying their mortgage payment. Once they all start paying rent, it will be interesting to see if the economy takes a hit. Also this should help support or even increase rents as the available pool of rentals tightens up????
Anyone who thinks these people are saving the money, I have news for you.

[GiBo]

They'll pay rent. Rents will probably go up and then people will buy when it's a beneifit to buy rather than rent.

Businesses do this all the time -- they're acting for the good of the business. The banks don't care about "morals" -- they're looking out for themselves.

The whole "morality" of people paying their debts no matter what is a story created by the banks and business, to better their own interests. Which is cool -- they're looking out for themselves and so will I.

Remind me never loan you anything.

People are not businesses. Because businesses fuck each other doesn't mean individuals should fuck businesses.

The couple in the 60 minutes piece COULD AFFORD to pay what they agreed to. They're just walking because they can rent the same place for cheaper than their mortgage payment. The guy figured he'd be able to save a bunch of cash and his credit would be fine in 3-5 years. That's flat out wrong. Call it a 'business decision' all you'd like- doesn't make it right.

Goldman’s was ‘just making business’ decisions too. And even though they probably didn’t technically break any laws, they were skirting the spirit of the law. What they were doing was shady as hell and not right.

I think saying “banks don’t care about me, why should I care about them” is a slippery slope. 7-11 doesn’t care about me either, but I’m not walking out with my next 12er without paying.

I honestly believe it's this 'new morality' that will be the end of us.

[khakis]

Anyone who thinks these people are saving the money, I have news for you.

wait...are you telling me the type of people who bail on a commitment that's no longer convenient for them are not putting that savings into IRAs and their kids' college funds?

[Platinum Pete]

If they are true strategic defaulters and can make their mortgage payments but choose not to, they shouldn't have a problem paying rent once they get booted.

If their default comes up in a background check I'm doing as a landlord, they better have a big pile of cash for a deposit and no competition for my vacancy. I'm not going to make it easy on these people, it's not in my best interest.

Anyone who thinks these people are saving the money, I have news for you.

I second that emotion. It sure seems like most Americans have an allergy to a healthy savings account and if these folks made dumb enough buying decisions that they believe defaulting is the smart move, they don't likely have the business sense to save the money they owe on their mortgage.

[khakis]

If their default comes up in a background check I'm doing as a landlord, they better have a big pile of cash for a deposit and no competition for my vacancy. I'm not going to make it easy on these people, it's not in my best interest.

So how long before we start seeing lawsuits where strategic defaulters think they're being discriminated against when trying to rent?

[skier666]

^^^^

I'm the rental business, we do credit checks on everyone on the lease. When I saw that guy saying he'd 'walk' and just 'rent,' I wish I could grab him through my monitor and give him a shake. We absolutely never rent to anyone with bankruptcies, defaults, and you need to show that your monthly income is 2.5 times the rent. Then again, with the $16 billion Fannie and Freddie need to stay afloat, I'm sure the gov't will start passing laws against doing credit checks. Nothing makes sense right now. On one end, walking away and allowing your credit to repair itself may actually work out in the long run. I'm being totally pessimistic, but there is no way in hell real estate as a whole will be increasing in value when factoring in unemployment, and all the programs artificially keeping prices stable.

[cramer]

If their default comes up in a background check I'm doing as a landlord, they better have a big pile of cash for a deposit and no competition for my vacancy. I'm not going to make it easy on these people, it's not in my best interest.



I second that emotion. It sure seems like most Americans have an allergy to a healthy savings account and if these folks made dumb enough buying decisions that they believe defaulting is the smart move, they don't likely have the business sense to save the money they owe on their mortgage.

Well you are one of the few. I'm not sure about where you live, but here in CA, half the fucking state defaulted on their loans. You arent going to find someone who makes good money to rent your place that doesnt have a foreclosure on their record. EVERYBODY bought houses here. Except me of course. I waited until after the meltdown, hehe. But seriously, everyone and their fucking mother made the stupid ass decision to buy a house. Everyone and their mother lost their house. My co-workers, my friends, my family all lost houses. Not one of them had a problem renting a house and paying normal deposit. so im going to have to say, with as large of pool of people this happened to, landlords arent going to give a fuck for the collective.

5 years ago, ya, fuck renting to someone who foreclosed. This day and age, it is the norm now. Any perspective renter who didnt fuck themselves isnt looking to rent here, they are all buying a house.

[char]

Remind me never loan you anything.

People are not businesses. Because businesses fuck each other doesn't mean individuals should fuck businesses.

The couple in the 60 minutes piece COULD AFFORD to pay what they agreed to. They're just walking because they can rent the same place for cheaper than their mortgage payment. The guy figured he'd be able to save a bunch of cash and his credit would be fine in 3-5 years. That's flat out wrong. Call it a 'business decision' all you'd like- doesn't make it right.

Goldman’s was ‘just making business’ decisions too. And even though they probably didn’t technically break any laws, they were skirting the spirit of the law. What they were doing was shady as hell and not right.

I think saying “banks don’t care about me, why should I care about them” is a slippery slope. 7-11 doesn’t care about me either, but I’m not walking out with my next 12er without paying.

I honestly believe it's this 'new morality' that will be the end of us.

What? They entered into a contract with a bank to loan then money so they can "own" the house. The collateral is the house. They and the bank both entered into an agreement which specifically states that if they stop paying, the bank gets the asset.

What is immoral about abiding by the terms of a contract that both parties agreed to prior to any money changing hands? "Lose your job, can't feed your kids, are 30k in debt and can't make payments, I get the house. Deal? Ok.

"I'm in a ok position with work, can find a place to rent, and would not like to keep paying on a worthless house. Bank, here are the keys per our agreement." Fucking soulless bastards.

If the bank doesn't want the asset when they decide to stop paying, well, the bank should have done their homework a little better.

Is it a wise business decision for the homeowner? Maybe, maybe not.

But in no way is it immoral.

[cramer]

What? They entered into a contract with a bank to loan then money so they can "own" the house. The collateral is the house. They and the bank both entered into an agreement which specifically states that if they stop paying, the bank gets the asset.

What is immoral about abiding by the terms of a contract that both parties agreed to prior to any money changing hands? "Lose your job, can't feed your kids, are 30k in debt and can't make payments, I get the house. Deal? Ok.

"I'm in a ok position with work, can find a place to rent, and would not like to keep paying on a worthless house. Bank, here are the keys per our agreement." Fucking soulless bastards.

If the bank doesn't want the asset when they decide to stop paying, well, the bank should have done their homework a little better.

Is it a wise business decision for the homeowner? Maybe, maybe not.

But in no way is it immoral.

I'm with you on this one. Bank sold me a house for 600K. House now worth 280K. Why would i continue to pay for it when i know that FHA will give me a loan in 3 years for a new house and my payments will be half. Pretty much a no brainer to me. Who gives a fuck about morals here. Its all about the almighty dollar.

Is the system broken, yes it is. You shouldnt be able to walk away from debt like that. The reality is, you can, so fuck ya i'd do it if i made that mistake.

[GiBo]

If it's not wrong, why does the system penalize you for defaulting? Why? Because we can't have a system where people just decide to not live up to their obligations and walk from debt whenever the feel like it with little or no repercussions. Just because the contract states that the bank gets the asset if the loan holder stops paying doesn't make it OK to do so just because the value went down. How else is the contract supposed to be written? For most people the house is the largest asset they have and thus is the only thing the bank can hope to go after to recoup what they loaned.

Ya'll can keep justifying why your word, signature or handshake is only good until you can make money by reneging on it. For me, I want to look my son and father in the eye and know that I didn't walk from and obligation that I can still uphold just to turn a buck.

Cramer sums up the new American ethos perfectly with this quote:

Who gives a fuck about morals here. Its all about the almighty dollar.

Apparently, I'm one of the very few left that puts my personal morals above the 'almighty dollar'. I'll probably be poorer for it, but only monetarily.

[jayfrizzo]

For me, I want to look my son and father in the eye and know that I didn't walk from and obligation that I can still uphold just to turn a buck.

I can dig where you're coming from. And agree people should be held to their word, their obligation.

In the case of strategic defaults, they *are* being true their word, or their obligation. The homeowner said, I promise to pay you the money I'm borrowing, and if I don't you can have the house I'm buying with this money.

The homeowners aren't defaulting *and* keeping the house. They're giving it back, as per their obligation to do so.


J-

[khakis]

So how do you feel about a strategic defaulter who doesn't move out the day they stop paying, but instead squats until the bank gets around to evicting them?

Seems in light of all this mess someone would put together a new standard mortgage agreement, that states the moment you go into default (16 or 31 days late on a payment maybe?) your mortgage agreement converts to a rental agreement, so for each month you live there without paying you are now indebted to the bank for back rent, which would make it much easier for the bank to kick somebody out, and to get a judgment against them without having to go through the short sale and whatnot.

[XXX-er]

IMO this is all just business , THEY played with all the rules to make more money ,if you played along maybe you got screwed ... how it always works out is some one will have to pay in the end someone will lose

the story is not over

[GiBo]

I can dig where you're coming from. And agree people should be held to their word, their obligation.

In the case of strategic defaults, they *are* being true their word, or their obligation. The homeowner said, I promise to pay you the money I'm borrowing, and if I don't you can have the house I'm buying with this money.

The homeowners aren't defaulting *and* keeping the house. They're giving it back, as per their obligation to do so.


J-

Seems to me borrowing $200,000 and then giving them back a house worth $100,000 isn't really giving the same thing back. If both parties took the risk and I can still afford the payments, it sure seems pretty shady to stick the bank with a $100,000 loss. Expecially when 'bank' in this case eventually means you, me, my kids and probably their kids.

What if it worked the other way around? If we're in the risk game together with the bank, what if we were in the reward game with then too? What if my house went up $100,000 in value and bank called and said they wanted out? They want to sell and cash out on the increased value. Why would that be any different? Of course, we'd never let evil banks do that to poor little home owners, but when it goes the other way, hey, it's 'just bussiness'.

I'm not convinced. There are contracts and fancy bussiness intruments and convient new ways to view this- and then there's right and wrong.