Click the link - this is an excellent, excellent report. Too bad the media didn't report this stuff when it was happening - or when Greenspan was recommending folks get an ARM and Bush was recommending everyone buy a house.
It's too late now. People are in too deep. Foreclosures will soar (and are soaring). Lives are being ruined.
Yes, nobody made these folks buy a house. Noboday made them sign a no-down, interest only teaser rate loan. Nobody made them buy a wildly overpriced bubble home. They made their beds, now they don't get to sleep in 'em.
hat-tip to bpl for the link. Oh, Sam D. doesn't do the report - I just liked the picture.
March 23, 2006
ABC News video: Homeowners who can no longer afford their homes (thank you ARMs)
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34 comments:
...what does Star Trek have to do with this???
The constant drip drip drip of these stories is surely having an effect on the hoemowner's psychology, so when do folks get real and lower prices on their houses? When do we really start seeing meaningful declines. I don't think I can wait 5 to 7 years.
Simmssays...
http://www.americaninventorspot.com
bake,
Can you not observe the consequences of loose lending practices in this bubble without being so cranky and mean? You don't have to look down on people just because you made better financial decisions in life. Don't you get tired of going around calling every person who screws up a looser?
I would tend to agree with Bake, who in their right mind would take out an adjustable rate mortgage when interest rates are at historic lows? It makes absolutely no sense, and it is really hard to feel sorry for someone who bought way more house than they could realistically afford. What are these people thinking?
You're right! What a looser! I hope they learn their lesson!
bake,
I'm so fascinated by you. Also, you annoy me with your tough-talking capitalist BS. Were your parents mean to you and make you feel like a failure? Are you overcompensating for something by beating up on people who aren't "as good as you?"
Why do YOU have to blame anybody? By your own logic, the cold, harsh realities of simple economics will dictate the outcome. I just don't believe it's necessary to point out other people's weaknesses or problems to prop myself up.
These people who think that they can buy an expensive new house, live in it for two years, and sell at a huge profit crack me up. Yeah, I want to spend my time cleaning your toilets, shower, and carpet stains so you can go defile another new house. One of these days those types are going to get caught like that woman on tv. Did you see how she trashed that house? I am not buying anything until they beg me for the low-ball from hell offer. Then, I will say: "Get out of my house you losers!"
I think the reason many of us our cranky is that we anticipate having to bail these assholes out with our tax dollars.
Yes, Americans are fat and lazy. They will get what they deserve some day. I see the housing market like a tidal wave. Right now the rumbling under the sea that all is not well. Later, on the shore (California) the tide goes out. The speculators see the fish flopping (first wave of foreclosures) and rush out to pick up the deals. Then later still, the tidal wave comes in (job losses and more foreclosures) and drowns them also. Then, a second wave of bank failures hits, further depressing the market due to lack of lending and more job losses. By the time it is over it will be a massive catastrophe.
Okay everybody, bake, in his brilliant fanancial savvy is giving the world a wake-up call. Don't buy stuff you can't afford! It's as simple as that. If you do, not only will you owe more than you can afford, but you'll also be a loser in his book. And that makes bake feel like a winner.
onlygoesup,
I totally agree with everything you just said. I hate it when people like bake simplify the situation with cliches of capitalism. Perhaps that would be a better word to use than BS. I don't know why I'm stuck on him, but he sounds like a cranky old guy that tailgates people in a big suv...
Tax time around the corner. The flippers who made profits on houses they didn't live in for two years will have to pay gains taxes. God, I think I'm in love with the IRS. :-)
It definitely IS NOT THAT SIMPLE. Take an economics class sometime...
whatever happened to 'common sense'?
has the country been hit by the stupid virus?
bake
Sorry, you annoy me so much. You're repeating yourself and not saying much of anything:
--you've got your finances in order, and you like to keep things simple (nice job)
--you are critical of people who have made bad financial decisions (aren't we all)
--you seem to feel this gives you the right to look down on them (that's not my style)
It's a combination of complex factors that's causing these problems in America (obesity, savings, debt, poverty, racism, etc.). You probably can't fix it by a by going to the highest mountain top and yelling, "Use more common sense, dummy!"
http://tinyurl.com/fzdvn
From Craigslist. Supposedly, he is the last man holding this Phoenix area flip. But he exaggerates the 1243 square footage. More importantly, the purchase price may have been $230, but his two purchase loans total $207K in November '05.
And as far as I can tell, no 1200 to 1300 square feet house has EVER sold in his Tolleson zip code for more than the low $230s.
Stop lying, Bill. You're stuck.
anon said "whatever happened to 'common sense'? has the country been hit by the stupid virus?"
Yes, the virus is called Absurdiali Gullibili
bake mcbride is CORRECT.
Don't feel sorry for people who don't understand two concepts: (ahhh---new one here)
1. DELAYED GRATIFICATION
2. SIMPLE ECONOMICS
Heidi wouldn't be in the mess she's in if she had understood both of them.
Both those concepts are learned in childhood. If you have 50 cents you can either get a candy bar or a soda, but not both. If you choose the candy bar instead of the soda you have practiced delayed gratification for a soda.
Around here it's a must to use elementary concepts because the average IQ seems to be fairly low or we're just surrounded by 'bleeding hearts' feeling sorry for the poor person who couldn't live within his/her means.
SD's hairpiece is a thing of beauty;)
Moman,
I never said I felt sorry for her or that she was a victim, but I didn't strut around shooting my mouth off about how stupid she was.
I share the opinion of many if not all on this site that this woman's story is disgraceful and shocking.
On a certain level you could say that personal finance is like managing your pocket change at the candy store, but the "how much house can I afford" (along with taxes, appreciation, risk, liquidity, etc.) scenario is a bit more complex. People take on more risk than they should all the time and get burned. Some don't.
No, it's not good to revel in the misfortune of others.
That said, my sympathy level is very low, because I took a deep breath, accepted defeat, and let the ARM buyer have the house. I've been in a position to bid for a year, and I'd really like to own a house. But last year, I refused to use an ARM to win a bidding war.
If it turns out I made the wrong decision - ie., housing keeps booming (or even goes into the "soft landing" we keep hearing about), well then I lose - and I have to accept those consequences. Just like the people who used ARMS to outbid me need to accept possibility of losing their house if the arms adjust in a declining market.
Roll the dice, pay your price.
...or maybe not.
marvin,
"How much house can I afford?" is a question that needs to be answered SOLELY by the person who is paying the bill. Asking a banker how much house you can afford is akin to going to the Chevrolet dealer and asking them which car you can afford.....of course they are going to try and get you the most expensive car on the lot or the most expensive house. Planning to buy a Aveo? Nah...might as well get the Tahoe that costs 6x as much since YOU can afford it.....never mind that the planned payment is now $650 instead of $150 a month.
I personally think Heidi's an idiot and as such have NO sympathy for people in that situation. I have some credit card debt from a couple years of stupid decisions in the past. I guess I should expect everyone else to feel sorry for me and give me money to pay it back while I continue to spend like it's going out of style.
Anyone that is gambling should study the odds and determine if the potential reward is worth the cost. Buying a house in today's market is a gamble. Some will win but many will lose.
moman said,
"How much house can I afford?" is a question that needs to be answered SOLELY by the person who is paying the bill."
It IS answered solely by the person who is paying the bill by virtue of the fact that she must pay the bill, and now she's going backrupt.
But as you say, salesmen are good at selling. It's currently VERY easy to buy a McMansion for way more than you can afford. That should not be possible. Sometimes we need to put regulations in place to protect people from themselves and to prevent unethical business practices. That's not some bleeding-heart idea. That's how we keep the economy from going nuts like this.
bake,
some people with ARMs are getting equity just fine right now. I remember when we bought our first house. I couldn't believe the numbers. Never used an ARM. I'm very conservative and and always always went with a 30-year fixed (which looking back was kind of financially naive because I'd have significantly more in our nest egg today if I had).
She took a calculated risk that was clouded by many factors ranging from "keeping up with the Jones's" to vulnerability to buy into a salesman's pitch.
Getting back to the original post, what strikes me the most is the fact that it made it into the soundbite world at all. Pretty soon it will be common to hear people talk about how they "lost their house in the bubble" as if some force of nature swept through and washed it away. There will be some creative solution for these pathetic folks--not unlike gastric bypass surgery for obese people.
no.
compare what you're saying with obesity in American...
She ate too many twinkies. She ate too much popcorn. It's endless.
Stop. Step back. X% of Americans are obese. It's no longer a story about a fat person. It's a story about fat people, which goes way beyond twinkies and popcorn.
There's a difference between attacking one person for their bad financial planning and trying to figure out how the overstretched ARMs crowd will affect the overall economy. Just like there's a difference between a connection between bad nutrition and one fat person and figuring out how a large population of obese people will affect overall health.
Once and for all, I don't view her as a victim. Economics doesn't really have anything to do with victims or a battle between good and evil.
onlygoesup,
I work in marketing/advertising.
Why didn't these idiots refi when rates were at historic lows?
Why did two people and two dogs need a 3500-sqft house? They could have easily bought a new 1600-sqft house in the same area for $130K and had payments under $1000/mo on a 30-yr note. My sister, her husband and son live in a similar house in the Dallas surburbs.
People are stupid and greedy pigs.
I agree with Bake and he or she probably worked for a family member who was a depression era baby.
Additionally, I subscribe to those capitalist BS ideas of saving for rainy days and that you've got to have money to save money. It can be that simple and I never taken an economics class. Cash is always King.
For those of you who chose exotic mortgages and are now losing your house, take a good long look in a mirror. You'll get to the root of your problems.
We renters now have a new title. Instead of being called Bitter Renters, we are now Arbitragers. Makes us sound important for just paying attention to what's going on.
"take a good long look in the mirror."
that's another good cliché like "caveat emptor" and "A fool and his money are soon parted." If you can't think for yourself, you'll never get anywhere--and especially don't think like your depression-era parents.
Today you have the balls to criticize people going bankrupt. A year ago many of the same people you refer to made a lot of money. Not everyboby is going bankrupt.
Here's a tip. Cash isn't king. Compound interest is king. Avoiding taxes and staying ahead of inflation is good too.
It's sometimes hard for me to view people such as Heidi as victims. I have a tendency, being honest here, to view them as perpetrators.
They blew this bubble up. If people had stayed within their means, I might have my own house right now.
So yeah, I hate them a little.
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