4 threads in and ... now... popcorn

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An unwavering defender of those I see worth protecting.

"promote the general welfare, not provide the general welfare"

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

I didn't say (or didn't mean to say) that unless you are buying for profit, you should rent. Those were your words. I said that unless you want to have an equity position, which implies you can either make a profit or take a loss, accepting that both are real possibilities, you should rent.

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I know..I'm late! I've been reading everyone's response's on this thread..Intresting stuff. I don't know as much as you guys about this topic (besides the basics obviously) so I'll observe and learn what i can!

Ok, here's how I will explain how you could have researched the price two years ago and not been in the hole today..

You look at a city like Los Angeles. A decent starter home in a decent area was floating around, $1 Million dollars. So you do the math.

$6000/month mortgage. Not including taxes, that means $72,000/yr. Now add another 1.25% for taxes and your about $14000.
So cost to maintain home is $84,000 not including maintenance.

So then ask, how many people can afford $84,000 a year for a two bedroom starter home?

Well, that means, before taxes, I probably need to be pulling in no less than $250,000 in order to eat, pay electric bells, pay car bills, etc.

Then I ask, how many people do I know that are making north of 1/4 million. That includes all my doctor friends, lawyers, etc.

It becomes clear that the price of homes is way greater than what people can easily afford at this time. So, by doing this research, I understand that there is a housing market that can't be sustained by the income of successful professionals... I decide that a $1 Million dollar starter home is overpriced and will eventually come down.. I continue to rent and avoid disaster..

That is how I would have researched two years ago to avoid being in the hole today.

also, it's not the lenders and appraisers that create false prices. There is no such thing as a false price. Price is determined by supply and demand. Two years ago, there was very little supply and lots of demand because of low interest rates... But it's the buyers and sellers that created the pricing, not the lenders and appraisers. The lender and appraisers were on the same roller-coaster as everyone else. And at the time, they were appraising the houses for what those houses were worth, TWO YEARS AGO.

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"When two people agree on everything, one of them is not necessary" - Arliss

Did you read the article associated with this thread?

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An unwavering defender of those I see worth protecting.

"promote the general welfare, not provide the general welfare"

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Ok Wagner;
Please explain how the solutions you offered will stop the three things listed in this article?

#1 The most common type of fraud that MARI found pertained to employment history and income. Many applications exaggerated how much borrowers earned and misrepresented their job descriptions.

#2 The biggest increase came from a jump in the number of undisclosed or incorrectly reported debts, liens and judgments.

#3 Most fraud involves average home buyers whose lending officers feel compelled to tweak their applications. But some involves criminal enterprises.

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"What you hear in a great jazz band is the sound of democracy. “The jazz band works best when participation is shaped by intelligent communication.”
Harmony happens whenever different parts get to form a whole by means of congruity, concord, symetry, consistency, conformity, correspondence, agreement, accord, unity, consonance…….

Yes, I read it. And while I don't agree with the criminal activity of some lenders and brokers, I still don't see how that correlates to the risk of homeownership being transfered to the bank.

And, if the bank does assume any losses, than shouldn't they be able to dictate when and if you CAN sell at that time.

Real Estate always bounces back. If you sell now or did some stupid financing, you may get crushed. But if you hold on long term, you'll see a return on investment..

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"When two people agree on everything, one of them is not necessary" - Arliss

I have to agree with pretty much everything that B-Line and Quicksilver have said.

The appraisers and agents do not set prices. The historical sales in the neighborhood (the market) set prices. People can list a property for anything they want, but that doesn't mean it will sell for that price or that it is worth it. Also, the appraiser is not there to protect the buyer. They are hired by the bank to protect the banks investment in the property. They are basically sent to be sure that the bank is not lending more than the property is worth on that particular day. They are not there on the buyer or sellers behalf or to guarantee that the property will always be worth at least as much as it was on the day of inspection. Things change, for better and worse.

It is simply a buyer beware world we live in. A person who is buying a home and knows nothing about real estate or the market can contract an agent for FREE. That agent gets paid by the seller, so the potential buyer owes nothing. If you have no clue about the most important/expensive purchase of your life and you don't get the free help of a buyer's agent, then I really don't feel bad for you.

As far as the bank being responsible for any more of the loan then they already are is crazy. I appraised a property a few months back that was bought before this whole slump started. It was in a new construction subdivision. About a year after the homeowners purchased, the market turned to garbage and there were many homes in the development that the builder was sitting on. The builder eventually dropped prices significantly to move inventory and even offered $20k in builder incentive that could be used for price reductions. When I looked at what they paid for the house a year ago it was a legitimate price, now the home was worth about $30k less in one year because of all the recent comparables in the neighborhood. Would you say the bank should eat the loss on that too?

Home values are not guaranteed to increase. I think that is the main thing that people forgot because of how crazy homes were appreciating before this downturn. If you are buying a home for any reason, you have to be aware of the possibility that your homes value can decrease. If you are not comfortable with that possibility, then renting may be the way to go.