Homeowner Rescue Plan
How do you think the homeowner rescue plan (if it passes) will affect the Seattle real estate bubble?
Here's a link to an article at Seattle Times that describes it:
http://seattletimes.nwsource.com/html/n ... ing25.html
Here's a link to an article at Seattle Times that describes it:
http://seattletimes.nwsource.com/html/n ... ing25.html
Comments
I'm worried because we are planning to buy in 2010 or later. Do you think that if this passes, Seattle home prices will remain the same/ continue to go down/ or is it even possible that prices will increase?
http://seekingalpha.com/article/82724-w ... 10-or-2012
http://seekingalpha.com/article/82648-t ... ce=d_email
Fact is, the risk/reward formula screams "don't buy now". There are four likely possibilities:
1. You buy now, and this IS the bottom. This means you will not lose nor gain, but successfully tread water.
2. You buy now, but this is not the bottom. This means you could be one of the senders of jingle mail in the fairly near future.
3. You wait, and this is the bottom. This means you will pay a little more than todays prices, but not much. The reason is that if this truly is the bottom it will become quite apparent in a month or two. By then you can buy and really have only missed the opportunity to gain the tiny gain in value of the last two months. And after a crash like this one it will be tiny.
4. You wait and this is NOT the bottom. Then you don't buy until it is clear that a bottom has been reached, which means prices have shown a sustained climb for a few months, and the general economy is clearly on a REAL rebound. This means you will not hit the absolute low, but it is possible that a home that was worth $600k NOW could be had at the bottom for $300K and a few months afterward for $320k. $320k on a house that was worth $640k and is currently worth $600k is not bad, but buying that same house now when it is potentially destined to drop to $300k-$320k IS bad.
IOW, buying now, the risk of failure is high and the potential reward is low. Waiting until an obvious bottom is reached would cause a low risk of significant loss and a potential for HUGE savings. For me it's pretty clear.
Note: my roughly 50% price drop scenario is based on the concept that this sort of pendulum tends to swing too far in BOTH directions.
What, my fairy tale reference wasn't adequate? Humpty Dumpty was a reference to the fact that "all the king's horses and all the king's men..."
The government is nearly powerless in the face of what is happening. This isn't Cuba or North Korea. People will do whatever they think is best. Most of these rescue plans are of severely limited scope and fail to address the true problems being exposed. Plus, it takes the government a long time to push through any rescue.
Ask yourself this. If Bill Gates announced he would "rescue" 1% of troubled owners 2 years from now, how would that affect your reasoning? The government rescue plans can be read with the same intent.
But this time, jr. went to Vegas and somehow found himself owing the mob $500,000.
Dad really can't do much.
Get yer popcorn, cuz this is gonna be interesting...
This is interesting and would probably help out a decent percentage of owners outside of Fl, Nv, Oh, MI and Cali...
In all I don't care what they do as long as taxes don't pay for it.
"I am not concern of the $5.00 gas price or the RE bubble, but rather I am concern of our government's reaction to $5.00 gas price and the RE bubble."
I would like nothing better right now than a "do nothing" congress.
In regards to the latest rescue plan, I like the provisions for national loan originator licensing and increased educational requirements along with a tougher competency exam.
I don't like the rest of the bill.
I do not believe this bill will have the intended effect. There's not enough money. Further, what will happen when these homeowners who have already proven themselves to be a bad credit risk, go into default a second time? Do we bail them out again?
I don't like the idea of equity sharing with the government. This chains a homeowner to a mortgage. It seems disrespectful.
Why not let these homeowners go into foreclosure and re-enter the real estate market as renters. They can begin rebuilding their credit NOW instead of postponing the inevitable.
I think that people were given enough rope to hang themselves quite easily by the nature of many of the loans. It seems as if they are just trying to "loosen" the noose just enough so that the homeowner can barely breathe and will continue to be a debt slave to an asset that may absolutely NEVER recover even half it's bubble price value in the next two decades. Just imagine how much would be required to bail out just Los Angeles alone? The "bad" areas (gangland) that bubbled like crazy and are now being fire-saled at less than 30% of the last purchase price won't ever help an upside down homeowner in those areas. I know that using these areas is an extreme example but there were TONS of loans in these areas add them up and that's a significant chunk of change.
WRT to equity sharing program, I think that's a suckers bet. When they sell their house they won't even have enough to buy a comparable house let alone "move-up" the ladder unless they have saved a considerable amount of money during the interim and then want to "blow it all" on a comparable house. I think that people that sign up for one of these programs don't realize the math behind it much like they didn't understand the "math" behind their loan and this will do little more than keep them "priced in forever"...maybe literally. They will also get to pay the overinflated taxes rather than getting the inevitable over with...get out of the over-priced and over-leveraged home, rent for however long they need to and then buy back in when the prices are more realistic. Especially in the communities that have been and will continue to be hit hard.
Only problem is...how much of the debt is forgivable using whatever means available and what are the chances of their paychecks being garnished for many years to come?
I believe the answer to this question is that the plan is not intended to help those that will go into foreclosure, either now (without the plan) or in the future (with the plan).
The plan is intended to help those that will *not* foreclose (the majority of homeowners) by spreading out the entire pile of inevitable foreclosures over a longer period of time. It's about keeping house prices up, bank losses lower (in relative terms), and the majority of homeowners happier.
When the general public or congress talks about preventing foreclosures and about the "poor families that will be homeless", they're really saying "we don't want too many foreclosures all at once because it will take the value of *my* house down". The best thing the government could do for those that will foreclose is to make the process easy, continue the IRS rules that don't "punish" people for defaulting on their loan and owing money to the IRS. But the bill isn't about that at all, it's about spreading the pain so that those not in a bad situation currently can remain that way.
Sorry to be so cynical, but I think when you analyze the bill from that perspective it starts to make much more sense.
Just my 2 cents...