United States Heading towards a Depression?

And I say this with the utmost sincerity... I don't give a shit... I have NO sympathy at all for these people for one reason and one reason only.

Everyone in trouble in the sub prime market bought more house than they could afford.. People who do not make a fifth of what I make, bought 10 times the house...

How on earth I could possibly care about the state of affairs of someone who bought something they could not afford is beyond all comprehension.. Now the government wants to bail these people out? HELL NO!!

One of the biggest complaints I have about Bush is this idea that the government should some how intervene and freeze rates, or help out those that bought interest only payment homes that they KNEW, they could NEVER afford.

It's pathetic... One of the properties I have was bought on a flexible sup prime note... I bit the bullet almost 3 years ago and brokered out a fixed rate and re-fi... The first few years or so were great.. I was paying more toward the principle by overpaying when rates were low... Knowing things were gonna change, getting a fixed rate ahead of the game locked me in, and insures that I do not find myself in the same situation as those that were only paying interest.

Outside of my investment properties, when I bought my home, I bought one I could afford. I did not let the bank dictate what they thought I could afford, I set a range that seemed reasonable to me, basically my mortgage was to be no larger than the money I paid on my condo each month.

From there, I decided I would pay more, which again, knocks down the principle over time.

There is no housing crisis.. There are only irresponsible buyers and lenders... I have no sympathy, none what so ever.

Don't live beyond your means....

 

that's all fine and good but that won't keep them from screwing other people up

in many areas the local economy is tied heavily to building houses, in the last year they have laid off 22,000 construction workers in just Florida

Also many purchases over the past 5 years were made using home equity loans, which are now drying up, that is why people who sell cars, boats, and other expensive toys are having a hard time now

I know if it isn't right in your face or in whatever hick town you live in, you think its not real but trust me in other parts of the country there is a lot of bad financial stuff going on

you don't have to be the guy who bought the over priced house to feel it

http://www.vvdailypress.com/news/furniture_4242___article.html/housing_stores.html

http://www.tradingmarkets.com/.site/news/Stock News/887138/

 

I certainly agree we you. I don't see anybody sharing the money when they sell their house for 3x what they paid.

The subprime market is no different that the other businesses that cater to the redit hungry like pay day loans, popular club, rent to own etc

I don't look at it that people bought more house than they can afford. It's more like people over paid for houses because they got greedy.

 

It will hurt the economy, but I don't think until after the election.

There was a lot of fraud involved and houses were appraised for hundreds of thousands more than they were worth.

 

Yea, and some people could only afford it by getting an interest only mortgage - how people are this retarded I will never understand.

 

Even worse, they can't afford the payments on an interest only loan.

 

Many of the sub prime loans were in bad neighborhoods and they got refi'ed with another mutation of a sub prime loan.

The last billion dollars of profit made in sub prime started with "Hey Mr. One-day-outta-bankruptcy-with-no-income-docs, can't make your 95% loan payment? We'll give you an 80-20 I/O." That's two loans, one 80% of the juiced appraisal, the other 20%, both interest only. It only took a little scrubbing to get the paper ready for investors and wa-la, the mortgage broker kept on his $500k per year in commissions pace.

BTW, if you are in cyclical industries like construction or anything real estate, assume that every upturn will be followed by a downturn which will be followed by an upturn. See a pattern?

 

No disrespect, but I think you have this wrong.

People will make mistakes. You can't stop people from making mistakes, without taking away opportunities, free will or both.

What has to happen though, and the post before yours totally misses the point, is that mistakes have to be dealt with in the market, not with intervention.

Because for everyone who says they don't care if people end up on the street, they have to realize that they are being taxed directly or indirectly to protect the banks and lending institutions from loss.

This is the real crime against the bulk of the population.

For example, they try to intervene and lower interest rates to save as many mortgages that will reset as possible. But anyone who is on a fixed income, pension or has savings, all loses value because credit is much more readily available than cash.

Unfortunately, people who are narcissistic about this situation don't realize they are in the blast radius, mortgage or no mortgage.

I don't think people will understand moral hazard until it's too late. Unfortunately.

 

In these cases, why should we have to bail these people out?

The banks are not going to lose money... They fucked up in the first place giving out the loans, they can eat it. Ultimately, they are getting their money, and the house when they foreclose.. In the end, the bank makes money on the deal, even if the house is sold at a loss.

As for the person foreclosed on.. Lesson learned.. Don't live beyond your means..

Looks when it comes to the homes being foreclosed on, many of the properties I have looked at, and all the auctions I have been invited to, these are not small homes, owned by blue collar, hard working Americans.. These are 2nd, and 3rd homes, or homes that are JUST WAY TOO BIG, bought by people living beyond their means....

A good rule of thumb. Never buy a house worth more than 2-3 times your annual salary. If you are gonna buy a second home, make sure the first is paid for.

The foreclosures are actually great for the economy in many regards... For one, it is going to help stablize the over valued home market. You are going to see interest rates come down another 1/2 point or more this year, and in the spring time, watch those with shit loads of cash start buying up these foreclosed homes.

We really needed a correction to slow down the economic growth in this key sector. Without it, people would be asking 1 million bucks for a home they paid 100,000 dollars for a year ago... Things were really getting way over valued...

 

It's ridiculous that the government is bailing out homebuyers.

Normally a bank is going to get a 20% down payment to cover price fluctuations and foreclosure costs.

The banks were able to get higher interest rates from unqualified buyers with no money down. It's good business for the banks but bad business for US citizens.

Now here's the kicker. A lot of the banks are European and Japanesse. So what we have is US taxpayers bailing out foreign banks.

The smart thing is to rent.

The Goverment is trying to keep the bubble going for the following three reasons

1) Housing prices are not calulated in the inflation rate
2) Higher home prices mean more property taxes
3) Higher home prices mean more capital gains

This is very short sighted. Evenually rents will have to rise to cover the increased costs of property. Inflation will increase and government workers will demand higher salaries.

 

There are banks that already went under because of this , netbank for one, but there are others

if a bank loaned some x amount for someone to buy a house, then the house goes into foreclosure and the most they can get 70% of X, how are they not going to lose money? in addition to whatever carrying costs the bank gets to cover while it enjoys it's new house

 

I'm looking at it the same way.

Texas and the Mid West doesn't have a bubble.

Even in areas that have bubbles the sub prime neighborhoods are the biggest mess.

 

Look, if you subsidize an industy, prices will rise.

They made it easier to get loans, prices went up. It wasn't a natural appreciation, it was artificial, and like most things artificial, they don't stand up to nature, or nature of the market over time.

You see the same thing with student loans. There was a time when a person could work their way through college. It wasn't easy, but it was doable.

Now with the ease and availability of student loans, cost of education soars to the point where people HAVE to get loans for education if they are middle to lower class.

Again, same thing with the artificial appreciation in the housing market. The people making the money are the ones making the loans.

(Someone correct me if I am wrong on this part), the government overspends, then it issues Treasury Bills to finance the deficit. The FED conducts an open market operation to buy back treasury bills from the banks, and then the banks get created with 10 times the amount of the treasury bill in deposits.

So basically, the loans cost nothing to issue, relatively. And the interest is all profit...

 

Do keep in mind that Netbank was an online startup bank. It's problems can be attributed to the fact that other non-online (real banks) caught up to them in the end by also offering the niche online services that they based their business model on.

They are not going to lose money because they have been getting nothing but interest on an over valued property that they can sell at a lower price to regain liquidity quickly. Between the sale price, and the overage of interest payments they received, they are ahead in the end. Assuming the banks that have entered into this situation have enough capital to eat the loss, they come out ahead in the end.

There's an asset that the cash loaned is base on. While not immediately liquid, it is still never the less and asset which can be capitalized on.

 

One thing I can fully agree with you on

 

Well, let's hope whoever gets in can temper the banking industry as well as the federal government when it comes to spending without consequence...

 

Which I honestly think only one can and or will do it. Would love to see something that shows another candidate will, but in order to do something such as this you have to be a man/woman who does not pander, who does not back down and sticks to their guns.

To me I don't see anyone there willing to do this but one person. Definitely not Romney, definitely not Huck, definitely not Rudy, McCain at one time I could have thought would but not anymore. Definitely not anyone on the dems side, would love someone to prove me wrong on this but records sure show otherwise.

 

Romney is a bubbleboy. I just saw an interview on Fox that Romney is saying that we got to do everything to keep the subprime people in their homes.

If we had a balanced budget and somebody had to pay for this shit, it wouldn't be happening.

 

You realy can't have it both ways. The Government is trying to get the bubble going and at some point rents are rents are going to go through the roof. Then what is the government going to do for the millions of people that can't make thier rent payment.