Hmmm.. Its not a big loss to walk away from that home.

Sometimes you walk away and move on. They hardly put any mney down and the payments can be viewed as rent/luxury.


A bigger loss is for people that buy a property for 600k and put 300k down. Then when they decide to leave and sellit for 500, they are taking a 100k hit+all the payments.

And some people take 1mil+ hits. At least he is still empliyed.

Edit: 275k is only a lot depending on where you live.. We have a house for instance that weve been renting out for 6 years... It has never gone over a month without a tenant. We charge $4500/month to rent with 1 yr terms. Its all relative.

You're right. I missed the word forecaster in the post I responded to.

For foreclosures, things are a bit trickier.

If the banks renegotiate, then, they have to revalue an asset of theirs downwards. No big deal for an individual house, but, if they have to reduce thousands and thousands of houses down to the current market value, then, their balance sheet looks awful and, as they have to keep a certain reserve, they won't be able to trade as high a volume of made up, non-productive financial instruments back and forth.

Someday, of course, those assets will have to be re-valued, but, the folks making the decisions, as with the folks who pushed out the mortgages in the first place, will be long gone, so, who cares?

 

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Overall the banks lost tons of money on these bad mortgages. Anything they made up front is vastly overshadowed by what they lost in the end. Plenty of executives walked away with lots of money, but not the stockholders.

 

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I won't disagree with that. My point is what an incredibly stupid system it is where bankers can get incredibly wealthy very quickly by doing incredibly short-sighted stupid things. Yes, the institution suffers, but, that's just a construct no one cares about, anyway.

 

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So you don't really care that the economy crashed. You're just mad that someone got rich?

 

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275,000 for a house in idaho?

You could get a pretty nice place where I live in Cali for that.

 

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I could get a pretty nice closet in DC for $275k

 

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It's all relative. But a lot of it is really about how much a house costs in relation to your annual salary.

If your income household income is around $70,000, and you are well rooted in your community so that you shouldn't have to move, a $275,000 house isn't so ridiculous. IF you have saved and put 20% down up front.

If your household income is $50,000, and you only put 3-18% down, then a $275,000 home is > 5x your annual salary. That's in the "unaffordable" range.

Comps are important, here. If the house costs more because it is located in a place close to everything (saves on gas/mileage), is safe, and has good public schools (so you don't have to pay for private schools)... others will be worth more as well and $275k isn't a stretch in most parts of the country.

There's just a lot to know as to whether this makes sense.

However, the net is: $275k is high but it isn't nosebleed, if you saved up and put money in up front. When you get into $400,000 and more territory for 1,800-ish sq ft homes, THAT is getting nosebleed, because the median income for the US is around $52,000. When you start exceeding 6x and 7x median annual income on non-premium properties, IMO, that is simply unsustainable on a national competitive level.

Not everyone is intended to... or should... have a home. You shouldn't expect prices to get so low that people earning less than median income can afford one.

We STILL have some markets in the US where the pricing on homes is 8x and 10x median income FOR THAT AREA... and the median income is in the $60k range. As I've pointed out, that's unsustainable in a global market. And, the market is in the process of correcting that bubble now. Big time.

 

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my house i bought in may has gone up 12% in value.


mwahaha

I think this is the main problem.


The owners of the mortgage note get killed on foreclosures. The servicers of the mortgage make a killing.


When you contact the lender and look for a refi or a writedown, you deal with the servicer. Their interests are not aligned with the homeowners or the mortgage holder.


Even when the owner of the mortgage and the servicer are the same big entity (bank of america for example) you see misaligned incentives between divisions causing this market to get all fouled up. The magic free market genie leaves much to be desired sometimes.


ed- mortgage owners also have bad incentives since there is no reason for them to accurately value their receivables (future mortgage payments) when doing so might blow up their financial statements. If you can avoid doing this for as long as possible, we can pretend our financial statements are healthier in the short term...and who knows maybe things will work out in the future. Big writedowns right now can mean bankruptcy, firings, or simply the loss of a bonus or stock options. But if we wait 3 or 4 or 5 years, maybe things will work out, or more likely the eventual losses will be significantly bigger but this will be someone elses problem as decision makers have moved on to companies that are actually healthy.