mls # 27097229

http://www.redfin.com/stingray/do/printable-listing?listing-id=798959

I only wish the crops could do so good with all those mineral salts. It’s like they’re in the water too.

But seriously, how about figuring out an average interest rate for mortgages from between 1975 and now, and comparing the interest repayment to the differnce in housing cost. Is that were inflation comes from, all that cashola paid back to the originator?

That means they don’t go down.

Because they’ve got electrolytes. It’s what houses crave. (okay, maybe that quote is a bit obscure).

LOL, Angie. Ok. I’ll stop speculating. As long as you don’t have your realtor’s license, it’s all good.

Biliruben, I’d always figured that your pseud referred to your jaundiced view of the real estate industry. (Or maybe was just a cutesy contraction of your name.)

Doesn’t take a doctor to make that association. You only need to be a good speller—and have gone a few rounds with a fussy newborn.

Nothing to see here, move along.

You suspect Angie is in the medical profession?

You can easily graduate from high school without taking trig. You can even graduate from high school these days without knowing the multiplication tables. Unfortunately, I know thru personal experience that this is very true.

I was focusing on what professions would use the word “sinusoidal” on a not infrequent basis. I’m just curious.

-So Angie. Are you going to divulge?

Geez. You may be in my profession. Hopefully not in the office next door!

But I will cop to being a number geek, and in that spirit, will share a link to my favorite amortization calculator. No bells and whistles, lots of flexibility. That note about moving the calculator has been there for maybe a year, so I suspect it’ll be there for a while.

Bilirubin, thanks, I’ll hang onto the rental. And be grateful to the good folks who pay my (15 year) mortgage! Five years down, ten more to go…

You aren’t taught about the sine wave in high school anymore?

You’ve got some of us curious:

Not in the RE business at all, bilirubin. (Except as a landlord, and a homeowner w/a couple of mortgages.)

I’m in a profession where one might not infrequently use words such as “sinusoidal”

Sine Wave

I would bet you’re a person of technical background, perhaps an electrical engineer or an electronics tech, possibly a teacher / professor of math / electronics.

I don’t think you’re in sales as I don’t believe most in sales are even aware of the sine wave.

Most loans in the 1985-1990 Bubble “should have been conventional fixed”. If you were stupid enough to go to an exotic or ARM you were the cause of the Bubble:

See the proof:

http://money.cnn.com/magazines/moneymag/moneymag_archive/1989/05/01/85125/index.htm

[Tim or Egat, you can cut a few words out of the URL with your HTML editor....a waste of time?]

So you are the purchaser of that NAR nugget about “paying someone else’s mortgage,” not the seller of it. I’m kinda glad to hear that, but I’m not sure you’ll find a buyer around here, if you are trying to lay it off! ;)

The danger of platitudes and catch-phrases is that people start assuming they are laws, not untested hypotheses.

While in a normal market your catch-phrase would probably be true, when the rent/own ratio is at 1.5 and properties no longer cash-flow, your theory no longer holds.

Given your posts exude confidence and not fear, I assume you bought your rental property pre-2004, when properties did, barely, cash-flow.

Here’s the calculator: Goof around. It’s fun!
http://www.archerpacific.com/30_or_40_year_loan_payment_calculator.htm

This house, ML#27139163, same model in the same community as house #1, on market for 40 days, is asking for $484,990

YoY price – negative, zip code 98075.

I hadn’t dug too deep into the topic and the idea just popped into my head. So the minimal payment relief from that extended term is good to know especially when that’s balanced with the huge increase in interest payment such terms create. But then again, as I look more around the internet, I find more stories advocating the 40yr loan, even though the payment saving is so small.

Another idea I’d wondered on was how a comparison of the total payments for a given mortgage would compare to the increase in the underlying asset (i.e. house price) price over that same time period. IE, over 30 years a 100k mortgage would result in total payments of about 154k. How much did the asset increase in cost in that same time period?

In particular he still hasn’t explained where his “20% homeowners in trouble” figure came from.

His dual assertion that 30% of the activity in that past five years was in “exotic mortgages” and that 20% of households are now in trouble automatically implies that something like 2 out of 3 homes in the Puget Sound area were sold/refinanced in the time frame considered.

Who other than a bubblehead desperatly wishing for a crash would believe something like that?

I’m in a profession where one might not infrequently use words such as “sinusoidal” ;)

1. Lowering the interest rates will trigger a decline in the dollar with unknown but potentially fatal results which can only be fixed with much higher interest rates in the future.

2. The U.S. household is staggering under an unprecedented burden of debt, which it has created by borrowing and spending more than its income can possibly support.

3. Lowering the Fed funds rate will not rebuild the shattered structure of global risk appetite and trust; that is irrevocably broken.

4. Lowering the Fed funds rate will not rebuild the American consumers’ balance sheets which have been irrevocably broken by the decline in housing values.

5. Lowering the Fed funds rate will not enable households to extract more equity to spend–that tool is broken.

6. Lowering the Fed funds rate will not create new jobs or stop the erosion of jobs which has–despite painfully obvious official suppression of reality–finally become visible to all.

So exactly what will a Fed funds rate cut do? I am reminded of the schoolyard joke about the short-term benefits of peeing in your pants: it will give the stock market a warm feeling for a very brief moment.

That’s not enough to help much.

If you aren’t a lawyer/broker/escrow agent, what are you, Angie?

No, mortgages in the US aren’t callable.

That’s not enough to help much.

If you aren’t a lawyer/broker/escrow agent, what are you, Angie?

No, mortages in the US aren’t callable.

I believe this is incorrect. I recall when be bought our first house in ‘98 (30 year fixed with WAMU, nothing exotic) the broker told us that was a standard part of the contract, but that it was very uncommon for banks to employ that option. Borrowers rarely can pay remaining principal on demand, so essentially it means forcing foreclosure, which is costly for the lender.

I am not a lawyer/broker/escrow agent, and my attempts to wade through the legalese of my last set of closing documents nearly induced a coma. I’d appreciate if any professionals could clarify—thanks in advance.

Macro and micro-economics are pretty complex, and the economy is rarely as straightforward as those who publish blogs on a single topic would have you believe (this blog is no exception). I’d wager dollars to donuts that the “percent likelihoods” people believe here are no better than random chance at being correct.

Here are some direct examples of the complex economy: When the dot-com bust happened, I was directly impacted (lost my job, took me almost 2 years to get back to work), but most of my non-tech-employed friends were only hit in their 401ks (which hardly mattered to them in the short run). When the oil bust hit Texas in the late 70s, my father-in-law was nearly bankrupt and it took him 10 years to recover, but my father was barely impacted. On the other hand, the change in reimbursement by HMOs/PPOs has made my father’s income decline annually for like 10 years, while my father-in-law is earning more than ever (oil/gas law). The US and global economies are complex beasts that shift in ways you can’t begin to predict – if you even have a chance of knowing what you’re talking about, unlike most commentors (self-included) here.

Even looking at the depression for what “might” happen can be a red herring now. One of the things that caused so many mortgage defaults during the depression is illegal now. Banks were able to demand that borrowers repay their entire loan at any time, and did so because they had a cash crunch. This caused many more people to default than otherwise would have. In the wake of that the government made it illegal for banks to demand you pay back your mortgage any faster than the amortization schedule states. So sure, people unable to meet the basic payments may default, but unless all of us

Anyone who tells you it’s black or white (“no problems in the economy, prices going nowhere but up” or “mass defaults around the corner, prices falling to mid 90s levels everywhere) is someone to safely be ignored.

My personal take is that no has a clue what’s going to happen to the economy in the next 10 years. We don’t know what might happen, good or bad, to massively influence things beyond our imaginging – mass earthquakes, terrorist attack, end of war in the middle east, new discoveries, rising/slowing birth rates, etc.

So the likelihood of someone named “The Tim” knowing that much is slim. About as slim as jcricket being a conscience you can trust.

But even if rates are lowered, it won’t matter. Nobody is buying mortgages anymore.

I keep seeing this, but although probably more than 1/2 of the loans were conventional, ARMS were still pretty common. We bought a home in 1984 with a neg amortization ARM, and about 5% down, and I don’t think it was uncommon, especially with first time buyers. BUT, interest rates were very high (ours was over 12%, fixed was about 14%, I think. I remember one point where they were over 17%) and coming down, so I think that most people were able to refinance after a few years at a lower rate conventional. Plus we had to document to the hilt and my mom had to cosign for us to get the loan.

I thought you disagreed with the 20% foreclosures, then I thought you agreed. Read my initial question. I addressed Sniglet, not you.

But for all who continue to suppose that the Seattle area is somehow unconnected to the global realities of available investment funds, look out!

Sometime within the next four weeks (and likely on September 21st when the unmarked value of some trillions of derivatives will reset), the world financial markets will begin to understand who is holding the bag, and how big a bag it is being held…

Real estate values will no longer be seen as a local interest story, but rather as a sad side-show compared with the real carnage caused by the US$ implosion.

I’d be pleased to be wrong about it, but after watching markets for thirty years, I don’t believe I’ve ever seen a scarier combination of money risks in play.

Disclaimer: I sold all real estate investments in 2006 (including main residence) and have been renting since. We have a significant portion of our liquid assets in non-US$-denominated currency.

I am with you however when it comes to the impact on the dollar. We are a debtor nation after all and need the Chinese, Japanese and Germans to keep buying our debt so that we can continue to live beyond our means. But, that is another whole discussion!

“… What happens if the FED lowers rates? The dollar looses value compare to other currencies and we start loosing foreign investment in our debt. If the FED raises rates, well, then a bunch of over-zealous speculators and others whom simply were irresponsible loose a lot of money. Which one would you prefer?”

“..A couple of years of extraordinarily low interest rates (which are now in the past) doesn’t amount to a new paradigm.”

I have kind of lost track of where I was at the start of this thread. My original point was that everyone has a view but no single view is any more valid than any other view. There are just to many unknowns.

I am not suggesting housing will not fall, I am saying the chances of prices dropping 50% or more is incredibly small. A number of people on this blog believe or wish for a 50% drop.

As to the new paradigm, why do you think inflation has been so low over the past 5 years in the face of historically low interest rates? Could it have anything to do with the deflationary effect of China even in the face of China’s growth increasing energy and commodity demand? I am not suggesting China has infinite labor capacity but I am arguing the globalization has has a significant effect in keeping wages and consumer products low in the USA, effectively dampening inflation. Also, the latest employment figures suggest that the fed will drop interest rates at the next meeting and most likely will drop interest rates several times after that. What effect will a drop of 0.75% in interest rates have on affordability or demand for housing? Even if you remove the morons that had no right buying in the first place and will no longer be able to get financing after the rate cut.

The historical relationships will apply but the absolute values will shift. The interest rate environment we are in today is very different from the historical norm. Will it last forever? Probably not, at some point wages and production costs will equalize globally. But, we are a long way from this point. I won’t call it a new paradigm but I will call it a new interest rate environment and it does change the housing affordability equation for the forseable future.

A 20% drop in housing prices is a possibility. A 50% cut? Don’t hold your breath and if it does happen,you better make sure your bunker is stocked with automatic weapons, ammo, food and water. A 10% drop in the short term…probable but hey, my opinion is as valid as those claiming a 50% reduction is inevitable.

I think the historical high default rate is something like 2 or 3%. If we get to 20% foreclosure rate, I don’t think it will be because of the current exotic loans. The numbers just don’t support it. It will be because we are in a severe depression with 20% unemployment and deflation, frogs raining from the sky, etc. It could happen- but I’m not preparing for that any more than I prepare to be struck by lightning every day when I walk out the door. It’s just no fun keeping all that ammo and canned food in the basement ;^)

I see this all the time and I don’t get it. Everybody acts like it’s just fine to have "chocolatey" credit. Mine and my wifes are both over 800. Why? because we pay our freaking bills. Over the years we have run up debt several times and still we paid our freaking bills. If your credit is UNDER 800 you don’t need to be buying anything, much less a house, until you have your finaces figured out.

It just pisses me off when real estate “professionals” spread such misinformation. It’s the same type of people who tell their clients to get any type of financing they can because they can continue to expect double digit price increases forever …

I’d just like your take, as we were both writing about the impending market crash while these people were too busy spreading lies and cashing huge commission checks.

Thank you for your time.

Deejayoh,
Your analysis looks more reasonable to me.

deejayoh, your post seems to ignore all of the refinancing activity in which people used their existing homes as atm machines to fund vacations, cars and material consumption

jcsc –
I wasn’t ignoring them. I included them in the “etc” category. to get to a 20% number, the exotic/toxic refi activity would have to be 3x the purchase activity. is that what you are suggesting? I guess it could be the case, but I haven’t ever seen anything to suggest that is true. perhaps you something to back up your statement?