Is this a world wide monetary collapse? discussion

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Has the bubble really burst??

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message 1: by Jen (last edited Aug 25, 2016 12:09PM) (new)

Jen | 1 comments The media...they like to brainwash us with their constant "hot topics" and they like to include the entire nation as a whole. I have to admit, I sometimes get brainwashed with certain topics too...and it still doesn't stop me from reading the newpapers or watching the news. "The Bubble Has Burst," "Real Estate taking a Down Turn," and On and On. It has been building up during the past few years: "Is the real estate bubble going to burst?" and "Will the bubble burst right after you buy?" and "Protect yourself now while you can."

"Protect yourself now while you can"? This is making it sound like a natural distaster - take your family and run! It makes me feel like I need to take shelter in my basement, stock up on water, canned food, and flashlights. Yes, this sounds scary, but how many people are reading these news reports and honestly asking themselves - Is this really what is going on in my town, city, state?? There is some truth in what the media was saying, everything has it's ups and downs..but the market goes down, with interest rates at historic lows?

Being in the middle of the real estate market myself for many years, I have cloesly watched the ups and down in my own neighborhood as well as nationally. I am okay with a roller coaster effect and don't expect everything to be roses or on the "high" all the time. I am ready to weather the storm, to do what I enjoy to do. What goes up, must come down...but I would urge buyers to really do some numbers, instead of just listening to the media.

Some people may think that the interest rates are at 10%, because they are not doing the research. This is a good time to buy: there are HUGE, FABULOUS deals right now, with a HUGE inventory to choose from. Interest rates are still marvelous, and they aren't going to go down too much, if at all. Homes are priced a bit lower now, so even if you have to pay a half of percent higher on a mortgage, you are going to at least even out with a great deal. I see it as an all around WIN-WIN situation.

message 2: by Patrick (last edited Aug 25, 2016 12:09PM) (new)

Patrick Hi Jen,

First of all, great topic. This is the realest issue that we could be talking about, besides the Iraq war. I know that I read somewhere in the Group guidelines that the moderators don't want Good Reads to turn into a political forum, but I don't think that you're headed in that direction with this group. Hopefully Good Reads let you keep this group up for awhile.

As to your points...I think you have some good points, but let me provide a different perspective. FIrst of all, I currently have a real estate license out here in California, although i don't work directly in residential real estate. Secondly, I own a condo that is the lowest priced condo on the market in my immediate is in good condition and less than a mile from the beach, in a neighborhood of Dana Point, which is a good are of Orange COunty.

Been on the market for a year - can't sell it.

Now, as a real estate agent I'm sure you want a lot more specifics, and I'm sure you're thinking to yourself that there is something I'm leaving out. And I acknowledge that in real estate, as with small businesses, you really do have to get down to specifics for each property to fully understand what's going on. But please accept, for the start of this discussion, that my experience is very similar to that of other condo owners and homeowners in my complex and my neighborhood.

Here's what the conventional wisdom says for what's happening in this market. Yes, there are many greta deals out there because guys like me are trying to dump their properties. And no, interest rates are not too high right now, and it doesn't look like they'll increase too much in the near future - too much political pressure not to do that.

But, the average first time home buyer who would normally be interested in my home will need to put up a down payment of 20 to 33% to get the loan they're looking for. My current asking price is $339K, and I can't go lower than that without taking a short sale, which will hurt my credit. So right off the top the buyers need to come up with $66K to over $100K to get the loan - guess what, they don't have that kind of dough right now.

So, what I think is happening is that most of the banks are much more risk adverse than they were even a year ago, which makes it hard for the first time homebuyers.

Investors have inquired, but they won't make enough in rent to cover the mortgage. They will likely be out between $800 to $1200 a months when one includes HOA, takes, insurance along with the mortgage payment. Also, the mentality of the investor is to come in and offer us about $300K, because they have plenty of opportunities to choose from, what with all of the foreclosures that are happening out here.

Now, if you were a prudent investor who saved up during the boom years and are ready to strike because of the tough situation the sellers are in, then you will do well. But, I don't think you can turn around and do a quick flip right now unless you acquire it for next to nothing - which is still possible - I even helped rehab a house for some guys who did just that last year. But if you're buying from someone who bought their house in the last five years or had refi'd in the last five years, you better set enough aside to cover carrying costs for the next two to five years, because it may take that long to sell the investment and get your gain back.

So, some thoughts of mine. I'm not saying I think you're wrong. I just think that investors and homebuyers need to think through all of the implications of investing in property at this time. Looking forward to your response.

message 3: by Daniel (last edited Aug 25, 2016 12:12PM) (new)

Daniel | 50 comments Mod
From the NEW YORK TIMES August 24, 2007

WASHINGTON, Aug. 24 — . . .

Both the Bush administration and Democratic leaders in Congress agree that legions of homeowners could be overwhelmed in the next 18 months, as low teaser rates expire on more than two million adjustable-rate mortgages, causing monthly payments increase sharply.

More ominously, falling real estate prices and a pullback among mortgage lenders are expected to make it more difficult for overstretched homebuyers to either refinance their way out of trouble or simply sell their houses.

“This is really just the beginning,” said Karen Weaver, global director for securitization research at Deutsche Bank. “There’s a big wave of defaults coming over the next 12 to 18 months.”

message 4: by Daniel (last edited Aug 25, 2016 12:12PM) (new)

Daniel | 50 comments Mod
From the NEW YORK TIMES August 27, 2007

Home Depot was forced to drop the sale price of its commercial supply business by nearly $2 billion yesterday, according to people involved in the negotiations, one of the first big buyouts to be renegotiated as a result of the recent tightening of credit and problems in the housing market.

The refashioned deal cut the sale price roughly 18 percent, to $8.5 billion. Because the deal relies heavily on debt, investors and bankers have been watching it closely for signs of how new limits on credit could affect other large buyouts that are still pending and are worth nearly $400 billion collectively.

. . .That could put a damper on the buyout boom that has been a major factor in the runup in stock prices over the last few years.

message 5: by Daniel (last edited Aug 25, 2016 12:17PM) (new)

Daniel | 50 comments Mod
from the NEW YORK TIMES September 2, 1007

Over the last 18 months, the Egglestons have watched one house after another on their street, Gardenview Drive, end up foreclosed and vacant. Although lawns are still tidy and empty homes are not boarded up and stripped as they are in inner-city Cleveland, the Egglestons say Maple Heights no longer feels safe after dark. Nor do they have the confidence they had when they moved in a decade ago that this is the ideal place to raise their 6-year-old twin girls, Sydney and Shelby. So, in May 2006, they put their home on the market in order to move closer to Mrs. Eggleston’s parents in another middle-class Cleveland suburb, Richmond Heights.

They have had no takers. Although they lowered the asking price to $99,000 from $109,000, no one has even come to look at it in more than six weeks. . .

It is a scene being repeated in cities and towns across America as loans that were made to borrowers with little or no credit history, many of whom could not even afford a down payment, fail in ever-growing numbers.

message 6: by Daniel (last edited Aug 25, 2016 12:18PM) (new)

Daniel | 50 comments Mod
NEW YORK TIMES (printed) September 3, 2007

WASHINGTON, Sept. 2 — . . .

Even as the chairman of the Federal Reserve vowed on Friday to act “as needed” to keep the economy from sliding into recession, some analysts and even some policy makers caution that the central bank’s main tool may be ill-suited to the problem it faces.

Money for subprime mortgages, for people with weak credit, has already evaporated. And the paralysis has spread to more traditional home loans, business loans and corporate borrowing for billion-dollar leveraged buyouts.

“The reason there isn’t a market for these credits is that people don’t know what price they should be trading at,” said Edward E. Leamer, professor of management at the University of California . . .

Over the next six weeks, more than $1 trillion worth of commercial debt is set to come due and will need to be refinanced, more than five times as much as came due since the disruption began one month ago.

message 7: by Daniel (last edited Aug 25, 2016 12:18PM) (new)

Daniel | 50 comments Mod
from THE NEW YORK TIMES September 4, 2007

. . .
In the coming months, more than $330 billion in leveraged buyouts are to be financed, including the acquisitions of the Texas energy giant TXU and the student loan provider Sallie Mae. Over the last two years, banks eagerly lent private equity firms money, collecting lucrative fees.

But beginning in late June, investors in the high-yield loans and bonds that are at the heart of buyouts began balking. The buyers, mostly institutional investors and hedge funds, demanded discounts and stricter repayment terms, leading many banks to withdraw debt offerings, including that of Chrysler.

message 8: by Daniel (last edited Aug 25, 2016 12:30PM) (new)

Daniel | 50 comments Mod
from NEW YORK TIMES Sept. 14, 2007

. . . what was so ominous about the government’s report last week that businesses reduced total employment by 4,000 jobs in August and that payroll gains for previous months were being lowered. Another important labor market indicator — the share of the working-age population that reports holding a job — has fallen to its lowest level in nearly two years. And consumer spending, while it continues to grow, has slowed in recent months.

“Large numbers of people are leaving the job market,” said Jan Hatzius, chief United States economist at Goldman Sachs. “That is not just a sudden bout of laziness, but it’s a response to reduced labor market activity.”

Mr. Hatzius and his peers on Wall Street now put the risk of a recession at about one in three, which is significantly higher than earlier this year but far from a sure thing.

message 9: by Daniel (last edited Aug 25, 2016 12:51PM) (new)

Daniel | 50 comments Mod
Countrywide is the largest mortgage lender in the U.S.

Countrywide is virtually teetering on the edge of bankruptcy.

This following paragraph in the New York Times Sept. 30, 2007 gives you the pertinant facts of the Home mortgage problem :

". . . But according to Countrywide’s own data, it currently services almost nine million mortgages, with a value of $1.45 trillion. Of those, roughly 450,000 are delinquent. So providing home preservation assistance on the 39,582 loans amounts to just 8.8 percent of Countrywide borrowers who have fallen behind."

Read it all:

message 10: by Daniel (last edited Aug 25, 2016 12:53PM) (new)

Daniel | 50 comments Mod
from: Yahoo October 2, 2007

Pending home sales index hits record low

"WASHINGTON - An index that forecasts near-term home sales fell in August to a record low as would-be homebuyers had difficulty getting mortgages. Economists said the housing market's woes show no sign of improving soon."

(Anyone buying a house today needs to put between a quarter or a third of the price down to get a mortgage in this tight money market.) DPF

message 11: by Daniel (last edited Aug 25, 2016 01:01PM) (new)

Daniel | 50 comments Mod
From the New york times Oct. 9, 2007

"A Bank bet on Condos"

"Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors."

"The three seemingly unrelated predicaments have a common thread that leads to Chicago, and Corus Bankshares, which financed the construction of each condominium development involved."

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