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Word of warning: Don't get scammed  XML
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Spacey

Wicked Sick!
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Joined: 01/07/2005 21:28:14
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320 wrote:
Mostly I agree, Spacey, except on buying property. Right now the market is too over-valued in many places. In the bay area, seriously, I can rent for literally HALF of PITI. Houses are so disconnected from fundamentals it's downright scary. It could potentially lead to a bank crash in the next few years.

You probably missed the creative financing revolution (it started around 2002 when interest rates bottomed out), but that's already starting to kill people. I read one statistic that foreclosures are already up 38% from the same month last year. About 75% of the houses purchased in the bay area in 2005 were bought with either ARMs or interest-only loans. Considering inflation, higher interest rates and flattening home prices, that means the purchasers are actually in negative equity.

If any of you bought a house with an interest-only loan or an ARM in the last couple years, best check that reset cycle and start crunching some numbers... you might be handing the keys back to the bank...

 


Bay Area and a few others, yea, I have to agree with you 1M%... stay clear of getting into real-estate. However, here in the midwest, we are not suffering from an over-valued market in most areas. And as for renting vs. PITI... around here, you pay somewhere between $150 and $250 more a month for a similiar sized place in a similar neighborhood if you rent.

And regarding loans... forget anything other than a fixed rate mortgage, IMO (note, I am a computer engineer, not a type that deals with money as a part of my job, other than what I get in my paycheck), anything other than a fixed rate mortgage is something to avoid without the advice of several professionals who you have come to trust over a decent period of time. If you got an ARM during the refi boom, your rate has skyrocketed, and an interest-only loan combines the worst of renting and owning (e.g. you fix it, but get no real gain in equity other than appreciation, and can loose it with depreciation if the market turns south).

But again, let me stress, I do computers for a living, not finances. You really should consult with folks who give financial advice for a living, preferably one with whom you or someone you trust has a long-term relationship with a history of good advice. And this person should also be someone who lives in your area. There is no way I would have someone out in the Bay give me advice about things here in Ohio. Or someone in Cleveland about things here in Columbus for that matter.

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320

Wicked Sick!

Joined: 10/11/2005 21:28:38
Messages: 605
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Spacey wrote:

320 wrote:
Mostly I agree, Spacey, except on buying property. Right now the market is too over-valued in many places. In the bay area, seriously, I can rent for literally HALF of PITI. Houses are so disconnected from fundamentals it's downright scary. It could potentially lead to a bank crash in the next few years.

You probably missed the creative financing revolution (it started around 2002 when interest rates bottomed out), but that's already starting to kill people. I read one statistic that foreclosures are already up 38% from the same month last year. About 75% of the houses purchased in the bay area in 2005 were bought with either ARMs or interest-only loans. Considering inflation, higher interest rates and flattening home prices, that means the purchasers are actually in negative equity.

If any of you bought a house with an interest-only loan or an ARM in the last couple years, best check that reset cycle and start crunching some numbers... you might be handing the keys back to the bank...

 


Bay Area and a few others, yea, I have to agree with you 1M%... stay clear of getting into real-estate. However, here in the midwest, we are not suffering from an over-valued market in most areas. And as for renting vs. PITI... around here, you pay somewhere between $150 and $250 more a month for a similiar sized place in a similar neighborhood if you rent.

And regarding loans... forget anything other than a fixed rate mortgage, IMO (note, I am a computer engineer, not a type that deals with money as a part of my job, other than what I get in my paycheck), anything other than a fixed rate mortgage is something to avoid without the advice of several professionals who you have come to trust over a decent period of time. If you got an ARM during the refi boom, your rate has skyrocketed, and an interest-only loan combines the worst of renting and owning (e.g. you fix it, but get no real gain in equity other than appreciation, and can loose it with depreciation if the market turns south).

But again, let me stress, I do computers for a living, not finances. You really should consult with folks who give financial advice for a living, preferably one with whom you or someone you trust has a long-term relationship with a history of good advice. And this person should also be someone who lives in your area. There is no way I would have someone out in the Bay give me advice about things here in Ohio. Or someone in Cleveland about things here in Columbus for that matter. 


I agree exactly. Good stuff.



(DC)DEMONSLAYER

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Amen on the mortgage situation. Here in the Denver metro area, prices are about 150% of the underlying value of the homes. At this time, there is a glut of over 30,000 unsold homes on the market due to the prices and the true value of the property------people are smart enough not to buy, and yet foreclosures are running 30%.............go figure.

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320

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USA wrote:
DEMONSLAYER]Amen on the mortgage situation. Here in the Denver metro area, prices are about 150% of the underlying value of the homes. At this time, there is a glut of over 30,000 unsold homes on the market due to the prices and the true value of the property------people are smart enough not to buy, and yet foreclosures are running 30%.............go figure. 


The reason the foreclosures are up is because a lot of people bought the line that prices would keep going up. Many bought as "investment" properties, thinking they were going to sell again in a year and pocket a bunch of money. Their adjustable rate mortgage they got at 4% just adjusted to 7%. That's a 75% increase in interest they now have to pay. They can't make their payments.

Just like the scams I described, their greed got the better of them.

Even many that (wisely) bought with fixed interest loans are having a tough time because the homes were so pricey. They have put 70% of their monthly income in to make the payment. All it takes is for one person in a two-earner household to lose a job or for an emergency to come up and, same deal, can't make their payment. Keys go back to the bank.

So the people that bought as "investments" are frantically trying to sell at the same or a higher price than they bought. They have to because closing costs on a house can easily run 20 - 30k. They need to make at least that much more than they paid just to break even. But nobody is willing to buy anymore - they simply can't afford to. But who wants to be in a situation where they owe 50k to the bank with nothing to show for it? That's why they won't lower their prices. That's why there's so many properties on the market now.

Another factor is that all the "funny" loans are being clamped down on by the government. Loan standards were continually lowered as a way to keep the train on the tracks (i.e. keep people buying). For example, it used to be you had to show proof of income going back two or three years. So they lowered the requirement in some cases to three months! Think about it, someone applying for a 30-year loan only having to show proof of income three months back. So that means there are fewer "qualified" buyers now. In truth, many that bought were not qualified for their loans.

I don't like to be all gloom and doom, but it's a perfect storm brewing as I see it. Over-leveraged buyers will have to cut back on consumer spending to make their payments, which if you've followed the economy the last year or so, the bulk of growth was in consumer spending. So consumer spending drops and companies have to lay off employees, which means those people can't buy houses either. And a lot of those layed-off are home owners, forced, as a result, to sell or foreclose.

Here's one last scary factoid. The profit-bearing assets of banks is at an all time high, vested in, guess what? Loans. So as those loans fail, so do do bank profits. And now you got more people out of work.

Don't know about all of you, but given what I've seen with the market in the last month and knowing what I do with regards to the housing market, I sold out of all my funds a month ago and put it all in 3-month CDs. Fidelity, my primary broker, buys CDs in Lots. I went to purchase a couple and the lots were already bought up. I've never, ever seen that happen. I had to purchase CDs with a slightly lower yield. That tells me many investors are putting their money in similar assets...

It won't happen overnight because housing is one of the least liquid assets. You can't sell a house like you sell a stock that just started tanking. It will take at a minimum, a year, to see the pronounced affects.

Disastrous consequences, indeed.

Again, NOT investment advice.



LoneTiger

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Joined: 05/27/2005 14:15:36
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Wait a second, if this is true about scams, does that means the secretary of the president of the unknown african country of sabolotan who promised me a piece of the land and 10,000,000 gold nuggets in exchange for my small investment of modest 10000 dollars is not true?

*GASP!* I'm shocked... NOT
(DC)DEMONSLAYER

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Joined: 03/18/2006 12:10:27
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God, that old scam is coming back again. I've gotten several e-mails............

Let us not fool ourselves into thinking we went to the Moon because we are pioneers, or discoverers, or adventurers. We went to the Moon because it was the militaristically expedient thing to do. Neil deGrasse Tyson

Every job is a self-portrait of the person who did it....Autograph your work with excellence. Author Unknown

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Shadow-Yoda

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Joined: 04/03/2006 23:16:44
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v0rTeX wrote:
Here, here.

If anyone would like free money, they should invest it into something with a reasonable return interest rate.  


EBAY!

I have probably made 2k or so off of Ebay. Without even trying very hard.

Buy low, sell high.

Or

Sell the useless junk around your house for $5-$10 starting bid.

I sold my sega genesis for $500 dollars (had like 5 games and 2 controllers).

Yoda Wiki: http://en.wikipedia.org/wiki/Yoda

Quotes of the ancient Yoda

"Size matters not. Look at me. Judge me by my size, do you? Hmm? Hmm. And well you should not. For my ally is the Force, and a powerful ally it is. Life creates it, makes it grow. Its energy surrounds us and binds us. Luminous beings are we, not this crude matter. You must feel the Force around you; here, between you, me, the tree, the rock, everywhere, yes. Even between the land and the ship."

"Ready are you? What know you of ready? For eight hundred years have I trained Jedi. My own counsel will I keep on who is to be trained. A Jedi must have the deepest commitment, the most serious mind. This one a long time have I watched. All his life has he looked away... to the future, to the horizon. Never his mind on where he was. Hmm? What he was doing. Hmph. Adventure. Heh. Excitement. Heh. A Jedi craves not these things. You are reckless."

"Lost a planet Master Obi-Wan has. How embarrassing..."


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