September 30, 2008

HousingPANIC Stupid Question of the Day

Do you think Americans are regretting not saving, or relying on their home's value to be their "savings", right about now?

Bonus question - are you in that boat, or did you see what was coming, live below your means, prepare for a rainy day, and save?


Anonymous said...

saw it coming back in 2005 and made preparations accordingly.

tried to warn my friends but was called a crazy conspiracy theorist. my favorite quote came from my friend who works for Morgan Stanley: "dude, you have to stop reading all those conspiracy blogs, America has the strongest economy in the world and if things get really bad we'll just print some more money"

Anonymous said...

This article from August 2005 was a real indication for me of where we were going.

Notice the asinine quote from David Lereah where he calls people who pay down their mortgage, "very unsophisticated".

And these are the people our government wants to bail out.

Equity Is Altering Spending Habits and View of Debt
By David Streitfeld
August 28, 2005 in print edition A-1

As they happily watch their houses swell in value, Americans are changing their attitudes toward mortgage debt. Increasingly, a home is no longer a nest egg whose equity should never be touched, but a seemingly magical ATM enabling the owner to live it up or just live.

Homeowners took $59 billion in cash out of their houses in the second quarter, double the amount in the 2004 quarter and 16 times the average rate of the mid-1990s, according to data released this month by mortgage giant Freddie Mac.

People are cashing out so quickly that the term “homeowner” may soon be inaccurate. Fifty years ago, Americans owned, on average, three-quarters of their house and the lender owned the rest. These days, it’s approaching an even split.

This spend-now-rather-than-save-for-later phenomenon has produced undeniable benefits. Experts attribute much of the nation’s economic growth to cash-out refinancings, home equity loans and other methods of tapping rising home values. And additional real estate investments financed by home equity have contributed to the rising home prices that bring owners such pleasure.

But the spending spree has a price. With the savings rate at zero, consumers’ eagerness to tap home equity is only worsening their retirement outlook, financial advisors say.

If mortgage rates rise sharply or home prices fall, many homeowners could be in financial turmoil. They may be unable to service their loans, or could even find that their homes are worth less than their mortgages.

Such a prospect seems unimaginably distant to Doug Levy, a university administrator in San Francisco.

When his two-bedroom condominium rose in value by 10% – which took nine months in the hot Bay Area real estate market – Levy refinanced. That increased the size of his mortgage but gave him $25,000 to pay bills and take a modest skiing vacation in British Columbia. He’s considering tapping his equity again if his condo continues to appreciate.

“It’s like I’m sleeping in my piggy bank,” said Levy, 44. “In this market, real estate is a liquid asset.”

Bill and Barbara Brockmann have a different view of their house. The retired Huntington Beach couple is sitting on half a million dollars of equity, but they’re ignoring it. They aren’t drawing on it to buy a new car or invest in a condo in Miami.

“I don’t like debt,” said Bill Brockmann, 79. “I don’t buy anything I can’t pay for.”

Such thriftiness has gone out of fashion. What was once considered undesirable – taking on large debt – is now seen as smart. And what used to be smart – becoming debt-free – is described as imprudent.

“If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah, chief economist of the National Association of Realtors and author of “Are You Missing the Real Estate Boom?” “It’s as if you had 500,000 dollar bills stuffed in your mattress.”

He called it “very unsophisticated.”

Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. “If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing.”

The financial services industry is doing all it can to avoid letting consumers be foolish. touts home loans as a way to pay off credit cards, and Morgan Stanley says they’re a good way to fund education expenses. Wells Fargo suggests taking a chunk out of your house to finance “a dream wedding.”

One obvious reason for the 69% rise in mortgage debt over the last five years is the exploding cost of homes, which has far outstripped wage growth. That’s led many buyers to interest-only loans and skimpy down payments, both of which minimize their equity.

The proportion of buyers whose down payment was less than 5% of the purchase price rose from 30.6% in 2000 to 38.1% this year, according to a new study by SMR Research Corp.

In California, housing prices have increased so much relative to incomes that buyers must stretch all they can.

Federal guidelines recommend homeowners devote less than $30 of every $100 in pretax income to housing. But 40% of Californians exceed that, according to a new report by the Public Policy Institute of California.

That’s higher than in 1990, when the previous real estate boom was cresting after several years in which housing-price rises outpaced salary gains. The figure then was 36%.

Some Californians devote much more than a third of their incomes to housing. The report estimates that about one in seven homeowners in the state are using at least half of their income to pay for their house.

Many of these are first-time home buyers, and many of them are relatively young. The report calculates that the greatest increase in homeownership rates between 2000 and 2003 came in the 30-to-34 age group. Second-highest was 25-to-29.

“I think what’s happening is that a lot of younger renters feel the ship is passing them by,” said Hans P. Johnson, one of the authors of the report, titled “California’s Newest Homeowners: Affording the Unaffordable.” “If they don’t buy a house now, they think, they never will.”

If their incomes expand as they age, these new homeowners may pay down their mortgage debt. On the other hand, they might devote their additional spending power to toys, trips and other fun things, carrying their indebtedness forever.

For Levy, the university administrator, cashing in so quickly made sense. He bought his condo in expensive Marin County, north of San Francisco, for $510,000 in April 2004. The bank offered to finance the whole thing, but he decided to be a little conservative and put 5% down.

By January, the condo was worth $555,000, and Levy refinanced. He took out $25,000 in cash, less than the bank offered to give him. The money paid off what he describes as “really ugly” credit card debt.

The interest rate on the credit card had been more than double the rate on his mortgage, so he saved about $600 a month. Furthermore, his mortgage interest is tax-deductible; his credit card interest was not.

“It used to be that all debt was created equal and all debt was evil,” Levy said. “But the tax breaks alone make a pretty compelling case to use home equity to finance just about everything.”

He still has law school debts. He’s tempted to dip in to his condo again – especially considering it is now worth about $600,000.

“There is no longer an incentive to paying off your mortgage,” said Levy. “The only way I’ll ever pay mine off is if I win the lottery.”

That’s probably the only way he’ll ever be able to stop working, too. “I’m never going to be able to retire, because I’ll never have enough money in the bank.”

The temptation to add debt can be overwhelming. Between 1997 and 2003, the percentage of people who owned their own homes outright, without any mortgage debt, declined from 38.9% to 34.6%, according to Census figures.

“Why can’t people stay on diets? Because once you get down to a certain level, you start feeling good, and then you splurge,” said Richard Targett, a research analyst with Ernst & Young. “So when your home goes up in value, you take that cruise. You figure, I got money in my house, I didn’t earn it, let me spend some.”

But he warned that if home prices stopped their rapid ascent – which might be happening this summer – Doug Levy won’t be the only one who has to have a job for the rest of his life.

“If you’re not working, where would you get the two grand you need every month for your mortgage?” Targett said. “We’re living longer, retiring younger, and don’t want to give up our lifestyles. Something’s got to give.”

The old way had much less built-in risk.

For the Brockmanns and many others who bought their homes in the two decades after World War II, a mortgage was something that started off big and slowly shrank. Just as retirement loomed, it dwindled to nothing. Making that last payment was a welcome milestone for those who knew they now had to live without a weekly paycheck.

This too is changing. In 1997, the median length of time remaining on an older homeowner’s mortgage was a decade, according to Census figures. By 2003, the median was 14 years. During that time, the number of older homeowners who owed more than $300,000 on their home went up tenfold.

New products give homeowners increasing leeway as to how much equity they can tap and how fast they can tap it. Credit cards that allow consumers to draw on their home equity loans are one such device.

CMG Financial Services, a mortgage company in San Ramon, Calif., introduced another tool this summer: a combination checking account and mortgage.

It works like this: Your paycheck is deposited into your account and immediately applied to your mortgage principal. Over the course of the month, as you spend money on food, gas and other necessities, the principal creeps back up. But the result is that your mortgage debt gets paid off more quickly.

That’s the theory, at least. Of course, if you’re indulgent, you can pay much less of your mortgage – like none. Any shortfall is added on to the principal.

“This loan gives you a lot of power,” said CMG’s vice president of marketing, Doug Nesbit. “You can use it, you can abuse it.”

In the old days, retirees who were house-rich and cash-poor generally downsized, perhaps moving in with their kids or retiring to the Sunbelt. To help consumers avoid those fates, reverse mortgages have been developed, which allow them to drain the equity from their houses while still living in them.

Irvine-based Financial Freedom Corp. says one of the major reasons people buy its reverse mortgages is “lifestyle enhancement” – extra money to have fun. Financial Freedom says it is on track this year to nearly double the 5,000 reverse mortgages it sold in 2004 in California.

The Brockmanns have resisted all such newfangled products, as well as the advice of their 55-year-old daughter. “Take out a line of credit and go travel,” Sandi Bandfield said she had suggested. “Interest rates are so low, your payments would be next to nothing. You’d be enjoying life.”

They already do. The couple’s four-bedroom house is about four miles from the ocean, in a section of Huntington Beach just off the Beach Boulevard commercial strip. They bought it in 1964, using their accumulated savings from three previous houses to make a down payment. The purchase price: $26,500.

After 30 years, when the loan was paid off, they got a home equity loan to help their four children buy their own properties. That’s it for debt.

“I don’t know of any bills we have,” said Bill Brockmann, who spent most of his career in the electrical industry. “My pension and Social Security aren’t huge, but between them we do nicely. We don’t require a whole lot.”

As neighbors have come and gone, the couple stayed put. Late last year, the house next door was listed for $595,000, a high-water mark for the neighborhood. Everyone said the sellers were never going to get it, and then they did.

But even this couple has felt the lure of being a landlord. “We had good luck with a rental in Bellflower for five years,” Bill Brockmann said. “After that couple moved out, the next was there only two or three months and kind of wrecked the place. I had to keep going back and forth. The upkeep!”

They sold the rental a decade ago. No regrets.

For their eldest daughter, the more houses the better. Bandfield was a medical transcriptionist until recently; her husband Bud, 49, is an independent electrical contractor. They bought their home in Boulder Creek, Calif., near Santa Cruz, for $157,000 in 1989. Substantially remodeled, it’s now worth at least four times that.

Last year, the couple began talking about retirement. “We don’t want to work forever, and someone’s got to pay for this house,” Bandfield said. “We have a nice life, but nothing in savings to speak of. I saw us relegated to a dinky gray condo in Las Vegas if we didn’t do something.”

Stocks? “I dabbled. I think I made $26 last year.” Social Security? “It’s piddly. Who wants to live like that?”

Real estate seemed the obvious, and only, answer. The couple attended seminars, began to educate themselves. They remortgaged their home to buy a three-bedroom in Visalia, then a two-bedroom cabin near Lake Arrowhead. More recently, they bought two houses in Colorado.

Buying houses to rent them out is a popular strategy. The National Association of Realtors estimates that as many as a quarter of all homes were purchased last year by investors, drawn by the lure of immediate rental income and long-term appreciation.

Bandfield’s goal is 10 properties, each yielding $1,000 a month above the mortgage and upkeep. That would nicely fund their retirement. “If we don’t do anything,” she said, “we’re going to have nothing.”

Anonymous said...

Man I feel good.

Sold the family home at the cusp of the bubble (May this year, in Australia) and now sitting happily in rented accommodation with a truckload of cash in high-yielding term deposits and some gold/silver. Wife's in a rock solid, high-earning job. I make a killing as a business contractor but can afford to depart from the workforce at any time.

Man I feel good. We positioned ourselves for what is now unfolding. Thanks Keith - you helped.

Also thanks to Nouriel Roubini, Stephen Roach, Steve Keen, Marc Faber, Kurt Richebacher, Bill Bonner, John Mauldin, Jim Puplava, Peter Schiff, Doug Noland, Nassim Taleb...

Man I feel good.

Anonymous said...

I'm not in as bad as shape as ALL these HELOC americans. Got cash in the bank and a house that I can afford. When I was buying the house, the bank kept trying to get me to borrow more money for a bigger house. I am glad I was modest in my purchase. Raised by depression age parents, so saving is in my blood, but this is going to get ugly for everyone. Cut cost and save money.

Bryan said...

I just so happened to have the good fortune of needing to maintain a rolling six-to-nine month window at which time cash would be necessary to put 20% down on a home. As the housing bubble grew, pushing 20% away from reach, being in cash/CDs despite their inflationary pressures has allowed better sleep at night here in the rented condo. Thanks for the warning.

Anonymous said...

Been saving money since 2005. Have a full years salary sitting in money market savings account.

Very glad I prepared.

Anonymous said...

The average folks are about as smart as squirrels, no savings, no plans to save.

Oh wait, squirrels think ahead and store nuts all summer. Nevermind.

Anonymous said...

>> Man I feel good.

It's temporary, you'll get over it (after you've been forced).

Anonymous said...

We bought our house in 1995. We went in with the following assumption, if our income doesn't increase at all ever again, can we still afford this house? The answer was yes. We invested relatively safely and have a ton of equity in our house and our income is quite a bit higher (for now) than it was in '95. We'll probably take a hit (like everyone else) but it isn't going to ruin us.

Anonymous said...

I'm good, thanks to you and other blogs.

Devestment said...
This comment has been removed by the author.
Anonymous said...

You have to post the Karl Rove Rap on you tube....
Please everyone need not forget who is running McCains campaign. I loved that a MSNBC reporter was on stage dancing with Karl...Nice connections its just not Fake News.
We need to be reminded what assholes have been running washington.
Please Keith post it because Americans were they are awake.

Anonymous said...

Well, I feel good that I have no debt and some savings. I have to admit, I have enjoyed the superior feeling I got when I watched others, who were so imprudent, squirm. But to be honest, that quickly faded as I realized I'm in the same ship of fools that's going down down down.

I hope I did all the right things, but I so mistrust the system now, that I just don't know. I don't know if inflation is gonna make my hard saved dollars worthless. I don't know if the government is gonna manipulate the gold markets and wash me out. I don't know if my diversified fund holdings are just a diversified system designed to suck my money from me into the hands of some oligarch. It's hard to feel good when I feel like the whole goddamned game is rigged.

I mean, I guess there is at least the satisfaction of personal responsibility. But that won't fund my retirement or buy my food.

Anonymous said...

You HP'ers are a bunch of DOPES! Do you really think having a lot of money saved up, driving around a 1985 Honda, living in a shit hole apartment means anything? I have news for you HP'ers, soon, the government will declare a Bank Holiday and the government will be more than happy to help themselves with your hard earned money via INFLATION.

I know you folks are hoping for deflation and it will and is happening in the housing and stock markets. But what good will that do you if interest rates are through the roof and every day commodities (food, gas, heating costs, etc....) are way out of control?

Either way, you DOPES/HP'ers are screwed! You should have partied and lived life up like me!

Also DOPES, I called Chase, my mortgage holder and asked them about my financial situation (remember, I have not made a mortgage payment in eleven months) and right now they could care less. Sooner or later there will be a bailout for Fucked Borrowers like me. Remember, we are the inmates and we are running the asylum! In these days, I would rather be a Fucked Borrower than a Fucked Saver! HA, HA, HA, HA, HA, LOL, LOL, LOL, LOL.

Anonymous said...


DOPES/HP'ers, I will get the last laugh. You guys are so fucked and not even know it! All your savings will go puff!

Anonymous said...

Not in that boat thanks to you Keith!
Copy and paste "Thank You" about 50 million times and add it on the end here. Thank you, thank you......

Anonymous said...

Not everyone borrowed beyond there means or tried to impress others with material things. Not everyone used money as instant gratification either. Some have had aggressive savings plans for decades.
We may be a minority but we do exist!

Mammoth said...

“Do you think Americans are regretting not saving, or relying on their home's value to be their "savings", right about now?"
Not as many Americans (TODAY) are.
However, in the FUTURE there will be many, many Americans who regret not saving.

Let me tell you, it ain’t going to be pretty!
“Bonus question - are you in that boat, or did you see what was coming, live below your means, prepare for a rainy day, and save?”
Ever since graduating 12 years ago, I have tried to maintain the same thrifty spending habits that I had as a ‘starving student.’

Thanks to HP I sold just past the peak and paid off my residence, then bought the adjacent acreage. Got ~$100K in two 401K’s plus some Gold; not enough to retire on but it does provide a feeling of some security.

But then again, not everybody is interested in spending all their hard-earned money on expensive vacations and buying ‘all the toys.’

Some of us are still able to derive satisfaction from life’s simpler pleasures – watching the sunrise, spending time with the family, reading a book, gardening…


Anonymous said...

Just paid of the remaining balance on my credit card and am free of those bastards. Only thing left now are the student loans.

Anonymous said...

The "Featured Article of the Day" on Wikipedia is "Tulip Mania"


Anonymous said...

"Noodles said,"

"Well, I feel good that I have no debt and some savings. I have to admit, I have enjoyed the superior feeling I got when I watched others, who were so imprudent, squirm. But to be honest, that quickly faded as I realized I'm in the same ship of fools that's going down down down.

I hope I did all the right things, but I so mistrust the system now, that I just don't know. I don't know if inflation is gonna make my hard saved dollars worthless. I don't know if the government is gonna manipulate the gold markets and wash me out. I don't know if my diversified fund holdings are just a diversified system designed to suck my money from me into the hands of some oligarch. It's hard to feel good when I feel like the whole goddamned game is rigged.

I mean, I guess there is at least the satisfaction of personal responsibility. But that won't fund my retirement or buy my food."


Well said. My feelings exactly Noodles.

We are the minority and the ones that will most likely be sacrificed to save the masses.

What to do when inflation really kicks in is the big question for me.

Anonymous said...

I'm still renting and saving. No savings stresses me out. I'm glad I stopped renting a place in June with my debt ridden ex-friend who got behind on rent and took 9 months to pay be back a measly $700.

Anonymous said...

I do think a lot of people in the *world* regret some of their financial decisions.

I am not in that boat. I did not need to see what was coming. I grew up in the inner city and am not going back. It took until my mid-20s to learn, but I have been a saver for 20 years now, at a rate almost 25% of gross.

In 2001 I wrote a web page that said we were in a housing bubble. So I made my own way without blogs, without advisers, without well-meaning friends. IMO if you sell your home because someone on a blog says we are in a bubble, you are a puppet.

Frank R said...

I never really understood the concept of relying on an illiquid asset to replace liquid savings.


I'm prepared to live several years without income while these dopes have all their cash tied up in their houses.

Anonymous said...

Not as much as they will a year from now; people will be thinking how much food could be bought with the money they spent on inedible frills. We have lived by money/credit and we're going to perish via the lack of it..

King Midas legend still holds.No one will buy our trinkets at any garage sale, and we will not be able to plant or eat them.

Grandma PKK

Anonymous said...

Absolutely, I sense that conservatism and thriftiness are in where I live, mainly because many of these people have choice with no more money or credit to spend. Long term will see if it sticks.

Anonymous said...

I rented, saved the housing payment difference and put the money in my 401K. Unfortunately by default, the 401K is Wall Street money. What a pot to play with!

Anonymous said...

A loss on the house, if purchased for the right reasons (not flip) and hold to live or rent at cash flow or above. No concern. Paper loss. Don't care much about what happens, as the home is the home. I have plenty of cash in the bank, stock (oil) and gold coins in safety deposit box. Not making money like gangbusters, but also NO ONE will force my hand. That is a good place to be. As things improve, I will put some of that cash to work, but right now just nibbling here and there. Deeper the panic, the bigger the nibble. More optimism, less nibble if at all. Lately, sell on optimism, but on big drop (yesterday) and damn it paid off today. Will sell at end of day for nice gain. High tax but so what nice gain.

Anonymous said...

Ummm. I regret taking a 2nd. We should have done things differently. We are working hard to get out from under it, but quite frankly I don't see it anytime soon. Once we are out of this, we will never put ourselves in this situation again.

Anonymous said...

What to do when inflation really kicks in is the big question for me.

If inflation kicks in, stocks are going to tank before they go higher. Why? Because the economy will be that mcuh more in the hole and also, it always takes a while for EPS to reflect expected inflation. After they tank, you scoop them up and sit on your portfolio for years.

Anonymous said...

it was these people who borrowed the 10, 20, 30 or 100 debt dollars printed up and indistinguishable from the dollar i put in the bank that allowed the printing and used them to compete at the house buying bidding process against my dollar......a huge loss of purchace power over 15 plus years that may detail the value that was put to the time and mopney of the borrowers, ......sadly fools who dealt with the way of the world????

Anonymous said...

The first house I bought was $943,000 (including lending fees) in San Francisco during late 2005. Supposedly, that was a the very peak of the housing bubble. It was 2250 sq ft with an ocean view. I was able to get an interest rate of 4.75% for 30 years by paying points. I plugged in 30% down, to avoid having to take two separate loans.

Bad mistake? Nope. Because I'm locked into a low interest rate. The house at the current market rate is still in the $1,100,000 to $1,150,000 in my area.

Did I make any money? Nope. If I take into consideration the following:

1. 5% fee to sell the house
2. $100,000 in interest and bank fees paid
3. Property taxes paid: $33,000
4. Maintenance: $15,000

My real basis or net gain is close to ZERO. I'm sitting on something that has not made me any money. It's not worth the time to sell it, especially with the threat of harder financing, and possible hyper-inflation around the corner. Selling and converting to cash would have made me poorer.

But I didn't buy with the expectation of making money. I needed a place to live, and I plan to keep the place as long as I can with no expectation to sell. It's an investment for me. In the short run, it'll just be a money leak for me, but not that much. But as more time goes by, and rent increases, it'll be an asset which will eventually pay for itself over time. I just have to be able to hold on long enough to see that day.

I didn't want to leave money in cash, because I saw what inflation did to my cash stockpile earlier. It killed it. If I just bought an house earlier by three years, I could have gotten two houses for the same money vs one.

It was a bad mistake because since 2005, the price of most things that we need close to doubled. That means anyone with cash in the bank for the last 5 years just got poorer instantly. Everything cost almost twice as much, but their account savings did not double.

I bought the house as an effort to hedge against the possiblity of oncoming hyper-inflation.

Sad that this society and economy has forced us to hold huge amounts of debt to maintain our lifestyle.
Those who don't know how to leverage debt correctly are going to be left behind, while those who leverage it too much without much thought to how much they can really handle will also get left behind.

The only reason, I wasn't totally affected was because I got a good deal for the house, and didn't do a $100,000 - $140,000 overbid like everyone else was doing at the time. I only overbid $30,000 above asking, and the real estate agent helped me convience the seller to sell to me before anyone else had a chance to make an offer. The market was so hot with bidders at that time, it was crazy.

Anonymous said...

I moved away from a high-cost area in 1994 so that I could BOTH buy a small house, AND put 15% into my 401(k) - which I am leaving in place and adding to, as I won't need the money for 13.5 more years (I HOPE!!!)

Anonymous said...

Keith, the United States is not a country where saving is much esteemed. Look at the Federal Tax Code, where those who buy a house on credit are allowed to itemize the interest paid, but the person saving money receives no break whatsoever. Long term the percentage yield on cash such as savings accounts, CD's, risk free Treasury bills and notes is rarely more than and very often less than the inflation rate, which results in a slow but steady erosion of the savers' financial position. In this latest financial fiasco there are real dangers that money market funds will be unable to pay 100 cents on the dollar (as was the case with one fund that could only pay out 97 cents per dollar withdrawn). Overall, any society gets what it wants, and the United States is apparently content to have foreigner (mostly the Chinese and Japanese) do our saving for us. At least until the day when they call it quits.

Anonymous said...

I never looked at my house as an investment - never planned to continually "move up the housing ladder" anyways - that's something left for the sheeple.

Housing prices have no choice but to continue the plummet, regardless of what our government employees try to do.

Anonymous said...

"Anonymous said...
The first house I bought was $943,000 (including lending fees) in San Francisco during late 2005. Supposedly, that was a the very peak of the housing bubble."

Blah Blah Blah. Have you sold the movie rights to your fascinating story? Why not just get to the point?

Anonymous said...

Experts attribute much of the nation’s economic growth to cash-out refinancings, home equity loans and other methods of tapping rising home values.

Given the above argument, figuring out the major cause for the recession is a no brainer. Fake growth cannot be sustained.

Anonymous said...

No debt here whatsoever- save for the debt that our government is racking up on my families behalf. We paid our house off on January 1st of this year.

Our savings accounts are fat with cash and soon much of it will be on it's way out of this country.

Words cannot express how angry I am at our federal government, the Federal Reserve and the Banker barons.

More than that I'm terrified at the profound ignorance, blind partisanship and brain washed people that appear to make up a majority of this country. When things really fall apart, the bleating masses will be amenable to the most despotic and fascist of solutions.

Anonymous said...

"Blah Blah Blah. Have you sold the movie rights to your fascinating story? Why not just get to the point?"

Okay, Okay, I'll get to the point...

The housing crisis might be bad, but I'll be able to survive it because I did my calculations. The place has 2 units, so I basically can rent one floor for $2400, and the basement for $1400. That comes down to $3,800. My 30 year mortgage is $3,300 + 1,000 per month property tax. So that means, basis for keeping the house is really: $4300. This means, I'm only $500 per month short in a rental to pricipal + interest scenerio. Not too bad. Assuming inflation kicks in bad, and rents go up, in about 8 years, I have a possibility that someone is paying my entire mortgage for me for the remaining 20 years, and a little extra per month for me to pocket.

So regardless of what happens with the houses, the loss of value is not going to be very important if you're not planning to ever sell. If houses fall more, that will be a very good thing, because now my lil brother can afford to buy his own house.

So I'm hoping for a crash... eventhough, *gulp*, I have 2 house without subprime loans.