What's the best economic decision for a typical upside-down screwed homedebtor?
Door #1: Stay in their depreciating debt-trap, paying their bloated $3000 a month mortgage, their $300 per month homeowners association fee, their $300 a month tax bill, and their $200 upkeep and repair charges
Door #2: Walk away and rent a similar (or exact same) house for $1000 per month. Total.
Door #3: Hope for a Housing Gambler Bailout so that they can keep doing what's behind Door #1
May 21, 2008
HousingPANIC Stupid Question of the Day
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43 comments:
Door #1. Although some would say it is immoral bc of ones signed contract.
The elephant in the room re: #2 is trying to rent with FUBAR'd credit after said actions.
Grab shotgun...
Denninger makes an interesting point on the food riots:
In other astounding news we had hearings in the Senate Tuesday in which it was claimed that "speculators are driving a commodity bubble."
"Benn Steil, director of international economics with the Council on Foreign Relations, testified that the value of commodity index investments has grown by about one-third since the beginning of the year to more than $250 billion.
"The sharp recent rises in global commodities prices, particularly in the energy and agricultural sectors, is undoubtedly causing hardship for many Americans, and is indeed threatening the health of many millions in developing countries," Steil said. "There is also no doubt that these price rises have been accompanied by a corresponding rise in interest from institutional investors in commodities as an asset class.""
That's a very curious number, $250 billion. It all seems to have shown up out of nowhere, like Dorothy in The Wizard Of Oz, starting right about last August.
How'd that happen, one must wonder?
Oh, don't look behind that curtain over there! Why if you do that you'll find one Doctor Ben Bernanke pulling levers to fiddle with the slosh in the banking system, intentionally tamping down interest rates and taking trash collateral in exchange for his pristine Treasuries and cold, hard cash so his buddies don't have to recognize their losses.....
Oddly enough, the amount of money that he's been tossing around, the excess liquidity that he has allocated to this nefarious purpose is.......
about $250 billion dollars.
Oh my.
I think we figured out where the problem came from.
Sssshhhhhh... don't tell anyone that The Wizard Bernanke (we retired the moniker "Maestro") is standing behind that curtain butt naked.
If you're upset about $4 gasoline go talk to Bernanke - you are paying $4 for gasoline because he is covering up the insolvency of his buddies on Wall Street.
All that excess "slosh" has to go somewhere, and the "somewhere" is oil, gold, and grains in a vile attempt to "earn" their way out from under the rockpile that collapsed on top of their heads.
The bill is not only going to come due for this nonsense in the future, you are paying it right now
That's right. You can blame Bernanke and his banker buddies for the starving hordes that can't afford food any more. That's the danger of socialism and their central banks. One small group of corrupt and incompetent people can f*ck everything up for the rest of humanity.
It's called INFLATION stupid!!
IF YOU CHOOSE ANYTHING OTHER THAN DOOR #1, YOU'RE A SPECULATOR.
AND DAMMIT, ME AND BEN WON'T STAND FOR IT!!!
WE'LL LOWER INTEREST RATES UNTIL YOU "DISGUSTING" HOMEOWNERS ARE WALKING TO WORK AND FIGHTING OVER BANANAS FOR YOU RUGRATS!
YOU THINK RICE PANIC WAS BAD?
LET ME CATCH YOU NOT PAYING YOUR HOUSE PAYMENT AND I'LL DEDUCT IT FROM NEXT YEAR'S STIMULUS CHECK!!!
DOPES!
Door #1 v.1
Arson with an alibi.
BURN BABY BURN
Buy BYE, FB.
Door #2.
Be part of the solution,
not part of the problem.
Think about it...
Let's hope they do what makes sense, but many (house debters) are driven by the "status" of housing as compared to renting - not realizing that many well-off people rent, especially now when prices make absolutely no sense.
Sluffing a bail-out onto the tax-payers's backs won't work, and if something so insane is ever put into real action, we'll see even worse (further reaching) problems within the economy.
The only way to get a start on fixing this mess is if people start taking responsibility for their financial mistakes.
Keith, I have enjoyed this site for some time now and I agree with you most of the time. But to encourage people to walk away from the mortgage might feel good in the short term, but it will have a huge negative effect on these people to obtain credit for years to come. I don't know what the answer is to this mess, but to just say the hell with it all is no answer to this problem.
According to you, is jumping into the rotten stock market. Hooooweeee, how's that "bull market" doing for you? How's the DOW today...hmmmm, only 200 points down, AGAIN, for the third day in a row? NAS is "only" -1.30% today?
Attention, attention! Calling all sheeple to jump into the rotten stock market so they can lose their shirts. Attention!
DOPES
"Immoral" - I wonder how long California will stay "moral" and pay salaries, health care costs, upkeep and such on their property when they run out of money later this year. Oh wait - they will tax porn...
Door #3 until our new favorite Pres. Bush vetos the gambler bill...then its on to Door #2.
Door #1 is not an option...Unless they start selling A$$ or drugs
Report: California Congresswoman walked away from $578K mortgage
LOL, No wonder the bailout bill is before us!
http://latimesblogs.latimes.com/laland/2008/05/report-californ.html
http://tinyurl.com/62bee9
Capitol Weekly reports that newly elected California Congresswoman Laura Richardson walked away from the mortgage on her $535,000 Sacramento home, letting the house slip into foreclosure and disrepair less than two years after she bought it with no money down.
Oh yeah, that's what I call a bull market:
DOW = -250 pts
NAS = -1.74%
S&P = -1.54%
DOPES
I don't know where you get your numbers from Keith, but I would die for $300 tax bill. Most tax bills around this part are $800-$1000 a month.
And a house for rent for $1000...maybe in the ghetto. Either that or I have to move off this infernal shitty Long Island. Can't get 2 bedrooms for under $1400 let alone a house.
#3 - It's coming!!! Don't be shocked - It will keep renters in their little cramped apartments and housing prices up for all of us home owners!
Report: California Congresswoman walked away from $578K mortgage
Capitol Weekly reports that newly elected California Congresswoman Laura Richardson walked away from the mortgage on her $535,000 Sacramento home, letting the house slip into foreclosure and disrepair less than two years after she bought it with no money down.
"While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees," the publication reports.
Richardson, a Democrat from Long Beach, declined to comment for the Capitol Weekly story, and her office did not immediately respond to a request for comment from LA Land.
Capitol Weekly, citing tax records at the Sacramento County assessor's office, reports "... in January 2007, Richardson took out a mortgage for the entire sale price of the house -- $535,000. The mortgage amount was equal to the sale price of the home, meaning she was able to buy the house without a down payment, even though the housing market was beginning to turn. A March 19, 2008 notice of trustee's sale indicates that the unpaid balance of Richardson's loan, which is held by Washington Mutual, is more than $578,000 –$40,000 more than the original mortgage."
In addition to 100% financing on the home itself, the report quotes the woman who sold the house to Richardson as saying she also gave Richardson $15,000 toward closing costs.
The weekly also reports Richardson's residence quickly became an eyesore, angering neighbors. The report says she recused herself on two key house votes on government efforts to address the foreclosure crisis.
http://latimesblogs.latimes.com/lala...-californ.html
Door #2: Walk away and rent a similar (or exact same) house for $1000 per month. Total.
_______
The "renting is so much better" concept might hold up if it weren't for the fact that so many "landlords" (FBs) are about to be foreclosed on.
You ARE relegating yourself to second-class citizenship if you rent, in a sense, because you have less control over where you get to live, and more important, where you get to STAY.
It isn't that easy to find a long-term home rental where you KNOW that the "owner" is in good enough financial shape to prevent you from ultimately being kicked out by a bank.
I think what bothers some of you HPers so much is that you never figured out how to make a good enough living to have put a 20% downpayment on a fixed-rate mortgage before houses got so expensive.
And now you're frozen out of home "ownership" (granted, the bank owns the home until you can pay off the mortgage...we understand that very obvious fact), and you're gonna whine about it ad nauseum, while you masturbate over the housing crash to make yourselves feel better.
Grow a pair, makes the sacrifices to upgrade your educations, start honest lucrative businesses, work your tiny butts off, and then you can overcome obscene inflation and get into a home with a fixed-rate loan, even at today's still-crazy house prices...and have money left over to send your kids to college and save for retirement.
It can be done.
Door 1 or 3 because their fragile ego requires home "ownership."
Most will choose door # 3, hoping that its the grand prize. They'll only find that burro wearing the straw hat with the daisies.
(Things will really get out of hand when we begin to see a run on grocery stores, especially in lovely, nice, civil places like Newport Coast.)
This is a trick question because it assumes these people have the intelligence to make an informed decision, which they don't.
You have couples with 1 or 2 children who are spending 50% of their income on a house that's large enough for the Brady Bunch. They're driving around town in a big ass SUV that they can't afford the payments or gas on, and of the 4 credit cards they own, 3 are maxed out, and the 4th one is 75% there. And you expect them to make a intelligent financial decision. LOL LOL LOL
Hows about everyone following the example of the foreclosure of Long Beach Democrat Laura Richardson's Sacramento home?
While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees.
Now this is an example for every home debtor in America!!! If congressmen and women can walk away
EVERYONE can walk away. Woo Hoo
http://tinyurl.com/6m2kcq
JaneZ
how about door #4
stay in the house, refuse to make payments. refuse to make tax payments. refuse to make insurance payments. just pay utilities. when they try to kick you out, make them produce the original documents and make them prove they are holder in due course for the loan....and who knows. the way things are, you can stay there for years at no cost to you. i wish i had snapped to this when this was all going on, but unfortunately i always thought that you had to have at least a 20 percent down payment for a home loan...silly me....
Here's the base that, according to the 20 points, should receive unconditional devotion. Coming near you:
http://tinyurl.com/4s9xa5
Enjoy the consequences of your votes.
Door #4 - Operate it as a crack house.
Economist Dean Baker has been talking about a way to solve the foreclosure problem that doesn't include the tax payer at all.
His plan:
Currently, if a homeowner is not able to make their mortgage payments, the holder of the mortgage can go to court to place the house in foreclosure. At that point, if the homeowner is not able to come up with back payments on the mortgage, or work out an acceptable arrangement with the mortgage holder, the bank or financial institution that holds the mortgage retakes ownership of the house and can have the homeowner evicted.
Under this security of housing proposal, the foreclosure process would be changed so that the current homeowner would have the option to remain in their house as a renter paying the fair market rent......
http://tinyurl.com/3lhdoa
An entire nation of bitter renters? It takes the entire process out of the taxpayer realm, and forces those who created this problem to deal with it.
JaneZ
Can Bush take out a HELOC on the White House? Can I?
Jane Z: Dean Baker's idea sounds like a good one. Perhaps I can add to it without detracting from it: The banks can hire all the out--of work realtors...they can become rent collectors.
Anon 9:10,
Stop projecting. I have enough cash and marketale liquid asset to put down a 100% "down payment" on a national median house; that's been the case for years. I just happen to earn better return on my money than I thought would be possible in real estate (even with rental income as a landlord in addition to appreciation). Okay, I under-estimated the mania in 2004-2005, but have been correct overall. I like my 30+% annual return on investment very much; only 2004-2005 RE market in very few select locations in the country could beat that kind of return.
Fear of landlord being forclosed? Why? The moving company cost only $2-3000; three months rent-free after the court notice is over $10,000! I save more than $3000 each month by renting instead of paying fully amortized mortgage on a comparable house.
Anon @ 9:10 has it right on.
Most, not all, posters here fall into the bitter renter category. Most of you could have bought a house or 3 10 years ago. But you thought you were smarter than everyone else and kept on renting. Had you bought you could have made literally a fortune in real estate. I made a small fortune myself and knew when to get out. But you were pussies and decided to take the easy and safe way. That was your choice, now live with it.
Doesn't matter if it's real estate, stocks or anything else that involves risk. When you play it safe you ultimately end up on the losing end.
re: own to rent plan
I have been suggesting something like that for some time, with one small but important difference: why involve the court in setting rent at all? Let the bank and the renter (former owner) negotiate the rent amount. It's a fantasy some court can name the "fair rent"; the "expert" is almost guaranteed to be biased one way or the other, just like most appraisers and rating agencies "experts" during the bubble. Market place itself is the ultimate price discovery mechanism. Without a bailout, the bank will have every incentive to get some rent cash flow out of the whole ordeal. If the former owner is willing to pay for the real fair rent, the bank has no incentive to have interruption. If the bank gets too greedy and the former owner can find something else to rent for less, the bank just won't get the rent it asks for.
From "Goodfellas":
...And then, finally, when there's nothing left, when you can't borrow another buck from the bank, you bust the joint out - you light a match.
I usually don't comment on idiotic statements like this one, but "Anonymous" is clueless about "HP Demographics" .... there are owners, renters and house debters who make up this blog, and the majority (across all living situations) cannot argue that housing is in a total mess, will continue to be in a mess, and will create an even bigger mess in the months/years ahead of us.
It's best we all remember ... "pride comes before the fall".
Anonymous said...
Door #2: Walk away and rent a similar (or exact same) house for $1000 per month. Total.
_______
The "renting is so much better" concept might hold up if it weren't for the fact that so many "landlords" (FBs) are about to be foreclosed on.
You ARE relegating yourself to second-class citizenship if you rent, in a sense, because you have less control over where you get to live, and more important, where you get to STAY.
It isn't that easy to find a long-term home rental where you KNOW that the "owner" is in good enough financial shape to prevent you from ultimately being kicked out by a bank.
I think what bothers some of you HPers so much is that you never figured out how to make a good enough living to have put a 20% downpayment on a fixed-rate mortgage before houses got so expensive.
And now you're frozen out of home "ownership" (granted, the bank owns the home until you can pay off the mortgage...we understand that very obvious fact), and you're gonna whine about it ad nauseum, while you masturbate over the housing crash to make yourselves feel better.
Grow a pair, makes the sacrifices to upgrade your educations, start honest lucrative businesses, work your tiny butts off, and then you can overcome obscene inflation and get into a home with a fixed-rate loan, even at today's still-crazy house prices...and have money left over to send your kids to college and save for retirement.
It can be done.
I love how people assume renters are poor and uneducated.
I have an advanced degree and own my own business. I do quite well for myself and support a family of 4 including me.
I rent because it costs me half as much as "owning" in this market.
I've also done quite well cash flowing the savings into gold and oil etf's.
I guess I'm just another bitter renter who is cashing in while "owners" now eating crow.
Don't get me wrong, there was money to be made from this, if you acted at the right time. However, most did not as we now see the rising foreclosures.
once again we have the HP renters making gajillions of dollars in gold and oil while saving more gajillions by renting in one thread and the bitching about $4 gas in another.
Liars, liars pants on fire.
None of the above: The trap door under their feet of foreclosure triggered by the terms of their toxic loan will make the decision for them.
Anonymous said...
once again we have the HP renters making gajillions of dollars in gold and oil while saving more gajillions by renting in one thread and the bitching about $4 gas in another.
Liars, liars pants on fire.
May 22, 2008 10:51 AM
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Quick, quick throw them into the house before the sheriff forecloses!!
Mail in the keys and walk.
buying the house back for 1000 per month total when they were previously paying 3800? seems a little exaggerated but I get your point.
Anonymous said...
how about door #4
stay in the house, refuse to make payments. refuse to make tax payments. refuse to make insurance payments. just pay utilities. when they try to kick you out, make them produce the original documents and make them prove they are holder in due course for the loan....and who knows. the way things are, you can stay there for years at no cost to you. i wish i had snapped to this when this was all going on, but unfortunately i always thought that you had to have at least a 20 percent down payment for a home loan...silly me....
May 21, 2008 10:15 PM
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Actually, at one time banks were so concerned about taking a loss over the term of a mortgage that they required 40% down & loan terms usually did not exceed 20 years. Post depression era w/ gov't intervention into the mortgage markets made home loans more affordable by going w/ 20% down over thirty years (viewed as the sub-prime at that time).
Anonymous said...
Keith, I have enjoyed this site for some time now and I agree with you most of the time. But to encourage people to walk away from the mortgage might feel good in the short term, but it will have a huge negative effect on these people to obtain credit for years to come. I don't know what the answer is to this mess, but to just say the hell with it all is no answer to this problem.
May 21, 2008 8:05 PM
Why do we have to hugely borrow for having a house ? how about working our asses couple of years, save like crazy and BUY WITH CASH ?
But that will mean the end of FRACTIONAL RESERVE SYSTEM, and we dont want that. We just love interest, hidden fees, inflation, being slave to satan (a.k.a. "banks"). I see ... "negative efect on credit". KEEP LIVING YOUR LIFE ON CREDIT !
I have an advanced degree and own my own business. I do quite well for myself and support a family of 4 including me.
Same here, including Dean's List, honors, Summa, Greeks, etc). Many homedebtors, who are leveraged up the wazoo, assume that we haven't sold at peak and now rent. Or they assume that we haven't bought any property overseas, to hedge the falling dollar, with profits from selling at peak.
Oh, did I mention that I studied Real Estate Analysis in college?
DOPES
once again we have the HP renters making gajillions of dollars in gold and oil while saving more gajillions by renting in one thread and the bitching about $4 gas in another.
Liars, liars pants on fire.
Skyrocketing gas prices means high inflation. There's not one financially savvy person in the world who enjoys inflation. The reason screwed homedebtors like you are in trouble is because you don't pay attention to little details like that. I bet you don't pick up quarters from the sidewalk either, right? You're too good for that.
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