Seattle Times Q&A on Foreclosures

[rose-colored-coolaid]

[Civil Servant]

Of the people who did not use their houses as ATMs, I think many used them -- or, more precisely, the assumption that their value would appreciate rapidly -- for something else: an excuse to live larger than their circumstances and paychecks should have dictated. Lavish weddings and vacations, sushi every night, boats, the new car, remodels with restaurant kitchens, etc. Because why be frugal when you already have an ever-fattening cash cow that you don't even have to feed? In this sense the houses are used not so much as ATMs as savings accounts.

I think that at least locally, in terms of both depth and long-term repercussions the economic impact of the housing slide will exceed expectations. A lot of people who will never need credit counseling or the services of Melissa Huelsman are going to pull back hard on the last few years of consumption, wanting to make up for lost time. A few years ago on a "Daily Show" appearance Fareed Zakaria referred somewhat dismissively to the US as a "massage-based economy." I suspect that more than a few LMTs around here are already not living the good life they had grown used to.

[The Tim]

[perfectfire]

[ira s]

A home is a place to live. It's not a got-dang savings account. I think until we purge that nonsense mindset, we still run the risk of another housing bubble. The good news is that I think we're getting close to the breaking point where people finally stop thinking of houses as some sort of guaranteed investment.

I wish that were so. I still get emails from potential clients naming a few neighborhoods with the question to the effect of "Which is going to appreciate the most in value?"
I try to be honest but diplomatic. I might suggest that some neighborhoods are less likely to depreciate as much as some others, and although there are a few screaming deals out there, there are better venues for investment right now than houses. But if you like the house, like the neighborhood, can afford the payments and are comfortable buying a home in market where home prices are continuing to fall, and you envision yourself living there happily for a long time, then feel free to proceed.

[Civil Servant]

We would like to swing a 15-year mortgage -- or at least to buy something modest and commit to paying down the interest as fast as we can. When I tell this to people they look at me like I'm crazy. Even when I sketch out how much less one pays in interest over the life of a shorter mortgage, people act like it's nuts to pay more per month than you "have to." (Though I have noticed that it's no longer heretical to express intention to buy less than you "can" afford. Progress!) It's as if the middle part of "homeownership" has lost its meaning in the common usage and there's no such thing as a non-liquid investment -- so I think this goes back to the savings-account concept too. I will believe we're at the breaking point Tim mentions when those people start understanding that I am not, in fact, a fool.

[ira s]

When I tell this to people they look at me like I'm crazy

You are so NOT crazy! Not having debt is freedom. Having large long term debt is slavery. Paying off a mortgage has to have been one of the best feelings I've ever had, very liberating.
Being able to pay off a mortgage early or having a 15 yr mortgage gives one a lot more flexibility, and allows one to be able live a little more the way one wants to, not as a slave to "the man".

[tomtom]

[Angie]

[EconE]

[ira s]

Ira wrote:
there are better venues for investment right now than houses.
Angie wrote:
Care to be more specific? I guess those CDs paying 2% are technically in the black...

Large, boring, dividend paying stocks of companies that produce inexpensive, non luxury items that people are going to buy no matter how the economy is doing..
Proctor and Gamble? Johnson and Johnson?

[WestSideBilly]

[ira s]

P&G only lost 1/3 of its share price in the last year, so I guess it's a winner.

Almost all stocks went down last year, and many stocks saw declining earnings. P&G has earnings that are growing, albeit slowly, and appears to be a good value right now.

[tomtom]

[ira s]

You can always tell the Real Estate Professional in the crowd.

You just can't tell them much.

Still maintaining my buy recommendation on P&G. A bet on P&G is also a bet against the dollar. Major reason this past quarter wasn't so good was due to the strong dollar, since much of their revenue comes from outside the US.
I can't see the dollar remaining strong.