joey2002 said:agentpt5 said:Brian is a Bay Area mortgage broker. "Michael" is his client -- a 23-year-old auto mechanic. The payment on Michael’s new home is $4,200 a month, but he only earns about $4,000 a month -- leaving him $200 in the red. He was only able to get the loan because his broker used "stated income" to inflate his paycheck. Brian (the broker) said, "I put on the application that he made $13,000 a month, which was unverified … That's the definition of a stated income loan. You state the income. Most definitely it was a fraudulent loan. The income was literally made up from thin air."

....

One broker, "Dennis," works for a mortgage company where he says a whopping 85 percent of loans are stated income. He says out of that 85 percent, they all have inflated numbers.....

Liar Loans

Why would anyone in their right minds even apply for a mortgage that they know they can't afford? The stupidity just amazes me.....


Very simple actually, they bank on the continued 20% YOY appreciation so it doesn't matter to them how big the mortgage or whether or not they can afford it. IO or exotic loans permit minimum payment which allow them to keep the house long enough before flipping. There are so much frauds going on in RE that created this mess.

There will be alot dumping and forclosures once the appreciation stops and looks like it's already happening..

BillRHIT said:Shouldn't this new thread be entitled "Thoughts on the real estate bubble that is leaking and about to pop"?Yeah, ironically I almost posted last weekend that I wanted to change the title, because at thte very least the tense was wrong. Decided not to do it quite yet though, because I didn't think what we saw was a "pop" quite yet. In ohter words I was thinking we were really still along the lines of your proposal (leaking, not yet popping). Thought I'd wait a couple months more. Now alas I have no control of the title

MarkM said:BillRHIT said:Shouldn't this new thread be entitled "Thoughts on the real estate bubble that is leaking and about to pop"?Yeah, ironically I almost posted last weekend that I wanted to change the title, because at thte very least the tense was wrong. Decided not to do it quite yet though, because I didn't think what we saw was a "pop" quite yet. In ohter words I was thinking we were really still along the lines of your proposal (leaking, not yet popping). Thought I'd wait a couple months more. Now alas I have no control of the title

pity, you lost your child

codename47 said:

and after 30 years, you'd be up 12%/year on average...but hey I'm crazy. You could aways buy individual stocks to increase your returns.


that is only if you cherry pick the 30 years ending in 2000. 12% annual return will be a thing of the past in the coming decade.

ashprag said:Here is my 2cents:

Currently:
1) Negative points for housing market.

except 5% return is better than 0% return. And 1% real return is better than -4% real return. Even though no one made it big on 1% real return, continuing -4% return will guarantee you broke.

What's the point of this statement? Are you suggesting that the market is going to have continual negative returns of -4% over the next 20-30 years? If so, have you shorted Spiders?

that is only if you cherry pick the 30 years ending in 2000. 12% annual return will be a thing of the past in the coming decade.

You can go back decades through war, civil strife, natural disasters, bubbles, booms, and busts.

The market has on average kicked back 10-12%

I see another fortune teller emerges. You can predict prices in the future? If you think the market is going to be flat, wouldn't it be a good time to sell options and pick up the premium?

There are strategies for every market. It doesn't have to go straight up for people to make money.

I think the only thing that is going to put floor under declining house prices is rising rents. If prices keep falling and rents keep rising, at some point owning will become cheaper than renting and thats when renters will be out looking for houses.

Someone is starting to get it: The revolution is growing! Yes, rents and home prices move loosely in opposite directions. Home prices behaved like bond prices with interest rates, although there is less negative action when rates rise, more of a moderating effect. When rates bottomed out to 1% fed funds, rents and occupancies fell into the toilet. You couldn't raise rents and probably had to offer big incentives like builders are doing now to get someone in a place. I know, I was a landlord at the time.

Everyone was saying that home prices were getting out of whack relative to rents, but rents hadn't gone up in years because everyone was buying homes. There is a lag, this isn't a 1:1 real time correlation. Now that rates have risen, you have fewer home buyers, less vacancies, higher rents. Supply...demand...market equilibrium...

It is all really so simple.

but the last 6 years have been horrible except for 2003.

Well, kinda. If you pick individual stocks, you can do very well. You heard it here first, bank stocks are STUPID cheap. Single digit PE's, yields in the 3-5% range.

teplitsa said:orphanis said:teplitsa said:that's 30 stocks, hardly the stock market
S&P500 also does not look bad, aprox. 12% off it's peak in 2000

so if you put money into the SP500 6 years ago you would be down 12% after 6 years and down 25% at the trough. sign me up for this killer investment.

why not just buy some t-bills and sit on 5% or so?

Yeah, if you bought at the absolute possible worst day, at the very very top of an inflated bubble market, yes, you would have lost 12%. (If you had bought before the bubble or after the bubble, you'd be doing pretty well right now.)

Even then, even if you were that dumb/unlucky to pick THE WORST POSSIBLE DAY IN THE HISTORY OF THE WORLD* to start your stock investment, give it 5-10 more years and you will almost certainly have made money.

Yes, stocks are very volitile, even over 5-year periods. Start looking at 20, 30, or 40-year periods, though, and find me something that will beat it.


* Meaning that X dollars invested on that day would be worth less today than X dollars invested on any other day ever.

just where are the "HOT" rental markets?

im in the northeast and the rental market is quite cool.

With their low loan loss reserve requirements, I'd keep clear of them.

Every single one of them? You can't find one bank that looks attractive? If a single digit PE, 3-5% yield is bad for a regular stock, I'll have some more of it.

Yeah, if you bought at the absolute possible worst day, at the very very top of an inflated bubble market, yes, you would have lost 12%. (If you had bought before the bubble or after the bubble, you'd be doing pretty well right now.)

The revolution grows stronger!

Someone else "gets it"

Volatility is your friend. Buy low, sell high, everyone says, then when the opportunity comes, they lament the chance to average down.

I am suggesting that the market will not beat CD rate in the next 10 years at least. I am 90% in gold and silver stocks.

I don't share your view, but at least you put your money where your mouth is.

As far as hot rental markets, it isn't where you think. Everywhere that homes are NOT hot are likely good rental markets. The south/southwest are good spots. Albany, NY, probably Detroit, Mich.

I've been sitting on the sidlines for years rubbing my hands with a wolfish grin waiting for this. However, now I'm concerned about the economy at large. With our enormous trade deficit, negative saving rates, war costs, service-driven enconomy, I don't know how our economy can keep recovering from such disasters.

Being able to buy real estate cheap doesn't help you much if the whole economy has gone to pot...