the joke is on us...
With all the concern being raised for the poor, struggling, home owners, I am beginning to wonder if the people who got themselves into untennable mortgages, and homes they couldn't afford, weren't actually the smart ones. In the worst case these struggling buyers will be able to just walk away and give the keys back to the bank. Sure they will get a black mark on their credit, but that's a small price to pay for the opportunity to live in a place beyond their means and possibly get rich if prices keep rising.
Even better, a struggling home-owner just might qualify for one of these bail-outs, and get the loan amount reduced anyway.
This makes the house-sitters (like myself), who have been biding their time renting because they didn't feel they could afford a home look like idiots. Maybe we should just bite the bullet and realize that the system will always favour home-owners with big debt-loads.
Or maybe I am just feeling particularly cranky on a long week-end...
Even better, a struggling home-owner just might qualify for one of these bail-outs, and get the loan amount reduced anyway.
This makes the house-sitters (like myself), who have been biding their time renting because they didn't feel they could afford a home look like idiots. Maybe we should just bite the bullet and realize that the system will always favour home-owners with big debt-loads.
Or maybe I am just feeling particularly cranky on a long week-end...
Comments
I don't think the joke is on those that did not buy a home.
Of course, it's nearly impossible to know all the consequences, both intentional and unintentional that result from decisions we make at the time.
Aim to be a virtuous person. Aristotle would have you consider the virtue of patience.
I would guess that a very small percentage of foreclosing homeowners were downright sociopaths, devoid of all emotion. I think we'd find more sociopathic personalities (or perhaps a better description would be people who are sorely limited in their moral development) in the corporate insitutions that sold pay option, interest only, ARM loans to wage earners who didn't understand the loan terms.
The joke is on them, if they believed they would be able to operate their business in this way forever. They will now be either out of a job or, if they're the business owner, forced to make drastic changes to survive, if they're business even can survive.
Housing prices will continue to drop. If homeownership is in your plans, continue to watch the prices go down. When the foreclosures come back on the market, there will be opportunites to buy wherever you want to live.
Your words are comforting, and I sincerely hope you are right. I definitely want to buy a house at some point, but I just can't bring myself to do so if it requires taking on horrendous debt loads.
My problem is that I can easily bring myself to believe different outcomes from the unwinding of the credit bubble. I can imagine that prices are going to drop significantly across the US (including the magical Seattle area), even in the 50% or better range. On the other hand, I can bring myself to imagine an outcome where prices only fall moderately, and where many struggling home-owners get sweet-heart deals in working out lower mortgages with lenders.
I definitely favour the 1st scenario (i.e. where there is a major clearing of dead assets, and debt, with massive price deflation). But I also fear that policy makers could decide to just inflate us out of this mess, bailing out the debtors at the expense of the savers (like me). I guess that only time will tell...
Remember what I said to Kayleigh over on RCG a couple of days ago about how when people buy a home, they will naturally go out and buy things for it. Then they become a slave to their mortgage (and credit card bills) which requires them to be good, productive, corporate employees so they work like dogs until they die of a stress-induced heart attack. (okay, that's a bit fatalistic with some Green Day themes thrown in there, but you get the picture.)
So figure out the picture you want for your life and then, with patience, go for it. Maybe you buy farther out and weather a commute each day. Maybe you start with a condo closer to work. Since your debt load is really important to you, make the payment work for you.
You are already smart enough to know that many LOs and Realtors will say anything to make a sale. You're 10 steps ahead of the average Joe.
Here's some additional consolation. Some of the most overbuilt/bubbly areas are already seeing price declines near double digits (approx 8% is what I've seen for parts of Florida, Vegas, and Sou Cal). Most people don't understand fractions very well, so they miss that an 8% decline shaves as much money off as a 9% increase. These price declines are still increasing (look at Tim's YOY price change charts). Anyplace that reaches 10% YOY declines will likely have declines in excess of 30% overall. A 30% decline offsets a 43% increase in price.
Second, I like the idea of attempting to highlight any 'possible' fallout scenario we can envision. I think I'll start a thread dedicated to that. It'd be nice to see a whole range of things from the expected to the extreme. Like a crash brainstorm.
I still give the severe deflation scenario the highest propability (i.e. where housing prices drop well over 50%). I think that this is what would naturally occur if the credit bubble is allowed to unwind naturally. Without the demand all the easy credit created our current house prices will fall like a house of cards.
On the other hand, I readily admit it is possible that our politicians could implement some degree of extraordinary intervention that bails out struggling home-owners and pumps inflation to new levels. However, I give this a much lower propability level since I believe the policy making decisions are much more limited than many would like to think (i.e. many important constituencies would hate hyper-inflation and would create a lot of grief for politicians trying to go that route).
In the end, I figure that the best policy for the moment is just to sit on the side-lines and let this play out for a couple years. I just can't imagine prices appreciating much in the next year, so there is no reason to jump in the market yet.
Still, I will have to continue gritting my teeth when I hear of over-extended home-owners getting sweet-heart work out agreements when lowly renters just have to sit back and watch.
Good God man....get a grip on yourself!!!
1) House prices WILL drop anywhere from 20 to 60 percent depending on degree of Oz factor
2) Bailouts will be discussed endlessly as we get closer to the election but in the end...will amount to jack squat.
3) There will be a recession
4) Seattle will trail CA by about 8 to 15 months....we are one of the last dominos to fall
5) You WILL be rewarded for waiting
I know this can be like watching your grass grow but RE crashes are not like stock crashes....they are more like glaciers.
Patience is most assuredly...a virtue :!: