Don't any of these fools realize they have to pay that money back one day? Oh dear god this is going to end so, so badly.
Many U.S. homeowners continue to take cash out of their homes even as mortgage rates climb and home sales slip, helping to brace the economy, economists said.
This year, Americans who refinance their mortgages are expected to draw $257 billion of wealth out of their homes, according to mortgage finance giant Freddie Mac.
That's $13 billion more than the refinancing cash-out seen in 2005 - the hottest year of the recent housing boom.
"I would have thought the home equity extractions would have been much weaker now," said Frank Nothaft, chief economist for the mortgage finance giant.
Consumers' spending of cash extracted from rapidly rising home values has helped fuel the U.S. economy's expansion over the past few years. But the housing sector is cooling, and most analysts expect that support to consumption to falter.
With existing home sales off 7 percent in the second quarter and mortgage rates climbing, some economists see the ongoing refinancing spree as the once-hot housing sector's last gift to the nation's economy.
August 19, 2006
Desperate and soon to be destitute Americans still sucking the phantom "equity" out of their crashing houses
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14 comments:
this "no savings" trend the past few years has just amazed me. Yes, Americans really did believe money grew on trees
I hope they come to enjoy the taste of catfood
it was all fake, and the HQ of fake is Scottsdale, Arizona
Scottsdale, the armpit of Arizona..fake houses, fake people, fake values.
Where does all this scum come from?
Ben has to turn into Big Bad Bear Ben right NOW!
Not in terms of interest rates----but getting medieval on underwriting standards on banks.
Use the magic buzzwords: lending to delinquents presents a major systemic risk to the banking system.
Hello, McBernanke?
The "Maui Cleaning Woman" mentioned above is a perfect example of what will NOT happen. . .
People like her will declare BK (yes even under the new law), and be back consuming again in a few years. . .you people just don't understand. . .the banking/credit card industy doesn't care!!! . . .as long as people pay minimum payment, they re-package their loan portfolio and sell it in the derivatives market to China, Japan, Nigeria. . .ANYONE, and turn it into an asset. . .I predicted on HP three months ago that the Federal Government will set up the "Housing Recovery Act of 2007" to re-package all the defaulted/foreclosed houses, and then make a government bailout. . .already starting to happen in Mass. with local banks, etc.
I think Mark above is right. People will NOT stop spending. Let'sface it, the last 5yrs of "free money" created a new lifestyle for them and its going to be near impossible to give it up and live frugally.
I used to work wholesale for a lender; I'd get tons of calls about people who bought 6mos earlier and now wanted to cashout ALL the equity. Either people don't care or they just don't get it. And as for the banks, minimum payments are fine. Late payments are fine too - they love penalties. Lenders are in the business of making loans; if the competition starts offering stupid loans, they have to somewhat follow or close their doors. They sell it off to other foreign investors anyway. And they are more than willing to work with people who are late right now. I keep asking my uncle who's been a realor for 30yrs "where are the foreclosures?" He confirmed that many banks are doing everthing they can to avoid foreclosing. Don't get me wrong, there will be foreclosures but not as many as you think.
Ann
To Bad, So Sad!
A guy i knew at work (excavating and grading) purchased a new Cat dozer. Easy terms, minimum payments. Filed bankruptcy, they took his new machine. Within a very short period of time he had another, newer,Bigger, better piece of equipment! He's is doing quite well. None of us can figure it out
Maybe we all should start doing it!
"America’s middle class is drowning in debt. A typical middle income family earning around $45,000 a year saw its debt burden grow"
Hate it say it but $45K/yr is only middle class for a single adult. That's a take home pay of $35K/yr will allows for $2700 per month of expenses which should cover rent, car payment (like a Corolla or Civic), food, some entertainment, and leave something in terms of savings for the average person.
For a family, $45K is the working poor.
"Many U.S. homeowners continue to take cash out of their homes even as mortgage rates climb and home sales slip, helping to brace the economy, economists said."
I've so wanted to tell this stoty..... A gal my wife used to work with and her husband stretched to buy a home in Citrus Heights (Sacramento suburb) in summer of 2004! They're both working want a backyard for the twins! He gets canned from Lowes....she hangs on at her job for another 18 months has a blowup at the owner of the company and gets canned! In the interim they take two HELOC's! The purchases include....a new rock for her wedding $3000, not one but TWO sets of new TITS (apparently the first set just wasn't big enough.....can tits be repossessed?) above ground pool for the back yard, trip to Disneyland...numerous other miscellaneous crap!
These are the valint souls bracing our economy as it slowly deflates! Nice people but dumb as stumps and doomed!
Can you get me the name of that cleaning lady? 12k boob job! Sweet!
Sounds like I might be able to get her to buy the beer too!
I read a serious commentator on banking once who, in reference to the ability of banks to "make money" through the issuance of credit while holding only of a fraction of the initial deposits as a "reserve", referred to our monetary system as not being a reality, but a "shared dream or illusion" of money. In otherwords, people believed that their money was sitting in a vault somewhere and that when they went to withdraw that money it would be there just because there was a positive number in their deposit or checking book. His point was that for all intents and purposes our monetary and banking system was not really physical bils/gold/coins, but a system of contracts or promises to pay. As long as people had faith in those contracts and the promises were beleived in the system worked and there was no panics or runs on the banks. This is what the FDIC was set up to ensure.
What happens to our system if that faith is shaken or the promises doubted or no longer believed in? What happens when the shared dream becomes the shared nightmare? Or more germaine to this blog, what happens when the belief that your house has a nominal value or that a consumer is a good credit risk is shattered? (No matter how many fees a lender rakes in on late payments, at a certain point losing too much of your initial principal to too many people makes you unwilling to lend or unable to sell the loan off for someone else to suffer the loss.)
--Andrew
Just to make things even more interesting, I keep hearing ads on the raido encouraging homeowners to get HELs before their house goes down in value> "Tap into the equity of your home while you still can."
"I keep hearing ads on the raido encouraging homeowners to get HELs before their house goes down in value"
Yep, and that's why we're entering desperate times because that's exactly what a middle class family has to do nowadays to stay afloat.
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