Wondering out loud.

[EconE]

I wonder...what could the potential fall out be. I'm sure that lots of people are thinking the same thing...well...maybe just us bubbleheads.

We all seem to agree on one thing...the BH's that is.

People bought houses that they can't afford at every socioeconomic scale using funny money mortgages and some of them will be losing their homes in the next couple years...so...I wonder.

Who will they blame and what will they do when the "assured" 20% appreciation and "real estate will only go up" mantra does not pan out for them.

I'm thinking that there might be two camps on this one...but they'll both be pissed.

Lets first look at the upscale screwed client...how will they get their justice? Will they see it coming beforehand and obtain an attorney and sue claiming that they were duped by both the RE agent and the Loan Broker? They certainly won't blame themselves.

Now...at the other end of the spectrum...the potentially unstable bottom rung liars loan candidate...he's probably not very bright...and most likely won't consider...nor be able to afford an attorney. How will he get his justice? Will it be street justice?

And just one other thing...being that Loan Brokers seem to have been frantically calling their clients telling them to get in now and refinance due to the funny money machine breakdown...what are these clients thinking?

After all...they have just been sitting there peacefully enjoying American Idol, brushing up on the latest Britney/Anna Nicole whatever...who knows...they may have even been following the War in Iraq...but nevertheless...I wonder if they are thinking...."Why does the loan broker want me to refinance...I have a prepayment penalty after all...something doesn't sound right"

I dunno...just wondering...I wonder about other stuff too but don't want to be a hog.

What is everybody else "wondering"?

[Alan]

I'm thinking of investing in security firms. Companies like Pinkerton and Wackenhut. I think their services are going to be in high demand when more people start going through bankruptcy, become desparate to eat, and grow jealous of those living in gated communities.

[witzend]

this is sounding like a doomsday scenario now! I sure hope it doesn't go to those extreems. Personally, my biggest fear is the government bailing out the bag holders- both private and corporate-in the name of rescueing such an "important" segment of the economy.

It's not like we have a government surplus or anything, and I think it will just push the cost on to / be absorbed by everyone. Will we look forward to increased taxes as a result? Will social security, etc. be affected further?-it's allready considered to be a crisis, with so many baby-boomers retiring in the near future. If that does happen-and if the goverment sees fit to then continue to bail out the victims of following investment bubbles, then things just keep going down hill. I think we need to put the brakes on such bubbles before they happen and cause so much damage. Nothing against Wall street, but "everything in moderation" is a good rule.

[EconE]

I don't see any sort of government bailout of the coming at any time. There are too many $'s involved already and just the cost of trying to sort out who would get what would be absurdly high.

If the government were bail people out it could possible leave us with two potential scenerios.

Social revolt because now the renters actually ARE priced out....or were tey just going to print extra money for the renters also so they can afford a house?

It would also potentially alienate us from the global economy as our dollars will become worthless and all the countries that sell us "stuff" on credit won't want our monopoly money anymore.

The bailout will be for the major banks as they will be needed to keep the economy in general chugging along...hopefully...but to take care of the individual?...don't count on it...unless they ordered all those extra New Orleans FEMA trailers for a "different" reason.

[witzend]

Yep, I'm with you, and agree that is the most likely scenario. also, I think it's for the better to that individual investors and foolish homebuyers take it in the shorts, rather than such a bail out. Still leaves the issue of corporate bail-out though, including the effect on the likelihood of future bubbles.

[twistjusty]

I'm wondering about the financials of people buying into King County properties. If they're selling at a steady clip around Microsoft, and not so much around Mill Creek, maybe rich or equity-rich techies have dumped their SD or SF or Bawstawn houses to come over.

I do know of several retirees who've moved here, counterintuitively from warmer areas (**ahemCaliforniaahem**) to be near their adult children. That could be propelling the boom.

I used to wonder how my friends could manage their questionable 2006 purchases, but I've assumed their mommies and daddies are going to help them. Must be nice to have middle-income or better retired parents, or grannies who have assets and a will.

I've never denied there's a bubble here. Obviously there is one. I do think though it's being kept going here in KC because plenty of people with money are buying them. Foreclosures are happening and will happen of course, but the percentage will be lower than other cities.

I'm also wondering how I can increase my investment gains and decrease my spending to get to the comfort level I had in 1999, when our household income was 60% of what it is now and we had a car loan besides, but we could handle a house purchase at 3x our income and we had a double-digit percentage for a downpayment. Obviously diversifying into index funds and ETFs isn't quite doing it for us, although 12% of American workers in our age group have a higher amount of retirement assets.

And I'm wondering how I can get my income to "average": I saw the Seattle Times Personal Finance special from midFebruary, and it looked like a third of the cases profiled made more money, and I'm thinking "hey wait, I'm in IT, what do I need to do to earn that much money, and iif they earn more why aren't they as good at keeping what they have? Aren't they the same nationality as Suze Orman and Robert Kiyosaki?" (They're also the same nationality as Casey Serin, on the other hand...)

But I've always assumed 60% of Americans have more money than us and save more -- I had a late start and didn't earn disposable income until I immigrated here. Which is why the negative savings rate and the stats about paltry retirement savings, and the foreclosure sob stories from people (yeah you doctors and engineers, my heart weeps for you) who earn twice what I do are just really hard for me to wrap my head around. They did a great job convincing me they handled their money better...

Maybe I'm just not used to living in a country with this large a population... if 41 million income earners make more money than we do, then certainly they can afford Seattle real estate... but they could afford Phoenix, Miami, Honolulu, and Manhattan too, and why are some of those markets not doing so well?