Let us **** over Imran and Apocalypse in the housing market thread number two

[MRT144]

Originally posted by Oerdin
That's the thing. Expedicious action prevents a pop and instead allows a slow controlled deflation of the bubble. The sudden shock can really put a strain on lenders (remember the SNL crisis?) and possibly even start a downward spiral a la 1929 as housing prices crash and so force more people into upside down and banks are left with a bunch of houses worthless then the money owed. The bank sells those houses, the increase in supply drives house prices down further, this makes still more people underwater...

It's better to avoid such a spiral by controlling the deflation of this bubble then regulating the market to prevent another such bubble from occurring in the future.

so are you saying that the bubble hasn't popped yet? that thing are on a gentle descent down?

[DanS]

We've invented a time machine! Welcome to Japan circa 1990s!

[Patroklos]

I would say it is pretty gentle. The "crisis" has been in effect for over a year now. Before that most people knew it was coming for a year before that. And even with all the talk about American's getting thrown out of their homes, so far only 8 out of every1000 homeowners (less than one percent) are foreclosing.

The simple fact is most homeowners are like Oerdin, and are not going to sell there house anytime soon anyways so this only affects their ability to refinance or borrow against their equity. If you have already tapped out the equity of your house then you are stupid and living beyond your means and this bust is for you

Some life lessons are harsh.

[Dinner]

Originally posted by DanS
We've invented a time machine! Welcome to Japan circa 1990s!

My understanding was that Japan never developed away to move nonperforming loans off of the banks books. In 1987 the US solved the SNL crisis by having the government step in work with Wall St to insure most of the nonperforming loans (insuring investors a certain amount of assured return) which was enough to allow the bad loans to be bundled with good loans and resold as securities. This allowed banks to get the nonperforming loans off of their balance sheets so the banks could start lending again. Japan never got those bad loans off of the balance sheets so the banks couldn't lend more due to loan vs deposit ratios the Japanese government required them to maintain.

The idea of the repackage/bail out/what ever you call it is to get the bad loans off the books and so restart lending to get the economy moving.

[MRT144]

Originally posted by Patroklos
I would say it is pretty gentle. The "crisis" has been in effect for over a year now. Before that most people knew it was coming for a year before that. And even with all the talk about American's getting thrown out of their homes, so far only 8 out of every1000 homeowners (less than one percent) are foreclosing.

The simple fact is most homeowners are like Oerdin, and are not going to sell there house anytime soon anyways so this only affects their ability to refinance or borrow against their equity. If you have already tapped out the equity of your house then you are stupid and living beyond your means and this bust is for you

Some life lessons are harsh.

if HELOC dries up so does a portion of consumer spending. why would banks offer HELOC if houses are depreciating rapidly? we have a recession coming because of this and a recession coupled with a bubble bursting won't be good. if the fed drops the rate even more the dollar will dip which means we will have inflation from international goods. so now we have inflation, recession and bubble bursting.

i just don't get how things will be back to normal in 5 years or really even the same levels they are now.

[Patroklos]

i just don't get how things will be back to normal in 5 years or really even the same levels they are now.

I don't want them to be at the same levels they are now (house prices), as they are inflated. They will bouce back somewhat, but if people think their homes will ever be as valuable (or rather percieved as such) again they are on crack. The free ride is over, reality is back, and if we are smart we won't start deluding ourselves into thinking we can live like rockstars again.

I would love to examine the other finances of some of these foreclosure "victims," like how many plasma TVs per house. You know there is nothing wrong with buying a house more expensive than you need if you really want that, you just have to prioritize. But not us Americans, oh no. We have to have everything.

[DinoDoc]

Originally posted by MRT144


if HELOC dries up so does a portion of consumer spending. why would banks offer HELOC if houses are depreciating rapidly?

The real question is why morons take out HELOCs and ARMs in the first place.

[Kontiki]

Is the SNL crisis the years that Saturday Night Live sucked?

[MRT144]

Originally posted by Patroklos


I don't want them to be at the same levels they are now (house prices), as they are inflated. They will bouce back somewhat, but if people think their homes will ever be as valuable (or rather percieved as such) again they are on crack. The free ride is over, reality is back, and if we are smart we won't start deluding ourselves into thinking we can live like rockstars again.

I would love to examine the other finances of some of these foreclosure "victims," like how many plasma TVs per house. You know there is nothing wrong with buying a house more expensive than you need if you really want that, you just have to prioritize. But not us Americans, oh no. We have to have everything.

part of the problem is the estimates that there will be a 20% haircut that will be rectified by a 4% increase for 5 years. a 20% haircut still makes housing too expensive. people can talk about fundamentals all they want and how their area is special but that doesn't speak to the fact that trying to get loan that would result in a debt to income ratio of 4 or higher just isn't going to happen in huge numbers any time soon.

[MRT144]

Originally posted by DinoDoc
The real question is why morons take out HELOCs and ARMs in the first place.

speculation. trying to improve the value of their home. there are a lot of reasons but when the market works against you they all look stupid.

[Dinner]

Originally posted by Kontiki
Is the SNL crisis the years that Saturday Night Live sucked?

Savings aNd Loan crisis. In the late 80's all the news programs called it the SNL crisis.

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

Incidentally, deregulation was the primary reason for that financial melt down which should be kept in mind the next time some politician or business man claims deregulation is the best thing since sliced bread. Often times regulations are there because they're needed to prevent bad behavior. Ultimately the crisis brought about $150 Billion in bad loans of which the government ended up picking up $125 billion of it just to prevent yet more banks & thrifts from going bust.

[Dinner]

Originally posted by MRT144

speculation. trying to improve the value of their home. there are a lot of reasons but when the market works against you they all look stupid.

There are a lot of reasons people borrow money against their house. Some people are just enabling consumption while others get sick and have to pay medical bills, some get divorced and are buying their soon to be ex out, some borrow to start businesses, others to pay debts or college expenses. A 5% fixed HELOC is better then a 12% unsecured loan so if people really need it and don't have enough savings then that's where they go.

I'd never take out a HELOC because my goal is to pay off my house. ARMs are sometimes unavoidable or might even be a good idea if you think interest rates are going down. If you live in an expensive area or are a first time buyer (I was both) then mostly the banks only offer you an ARM. Most people with ARMS, especially the first time buyers, likely go into it thinking they'll refinance after the fixed period is over but then got surprised when the lending crunch hit.

[MRT144]

Originally posted by Oerdin


There are a lot of reasons people borrow money against their house. Some people are just enabling consumption while others get sick and have to pay medical bills, some get divorced and are buying their soon to be ex out, some borrow to start businesses, others to pay debts or college expenses. A 5% fixed HELOC is better then a 12% unsecured loan so if people really need it and don't have enough savings then that's where they go.

I'd never take out a HELOC because my goal is to pay off my house. ARMs are sometimes unavoidable or might even be a good idea if you think interest rates are going down. If you live in an expensive area or are a first time buyer (I was both) then mostly the banks only offer you an ARM. Most people with ARMS, especially the first time buyers, likely go into it thinking they'll refinance after the fixed period is over but then got surprised when the lending crunch hit.

if you had to choose between getting an ARM and not buying...then most people shouldn't have taken the ARM. Enabling poor decision making by offering poorly structure loans is awful.

if a place was expensive and the only way to get into it was through a ****ty loan and if there were more ****ty loans gulping up supply, perhaps it would have been better not to offer ****ty loans and avoid undue expense in the first place. but a realtor doesnt think that way I guess. they only want that 6%

[DinoDoc]

Originally posted by MRT144
speculation.

I read that as being stupid.

trying to improve the value of their home.

If you can't aford it without such stupid measures, you don't need to be doing it.

[Kontiki]

Originally posted by Oerdin



Savings aNd Loan crisis. In the late 80's all the news programs called it the SNL crisis.

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis