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No matter what the gov't does, housing WILL decline further

Discussion in 'Political Discussion' started by PatriotsReign, Oct 12, 2008.

  1. PatriotsReign

    PatriotsReign Rookie

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    Hopefully our gov't doesn't think we will believe them when they say they "...are taking action to stem the erosion of home values"

    I can sit here and guarantee with complete confidence that no matter what the gov't does, home values will continue to decline. The federal government can buy every single house currently for sale and home values will continue to decline. They can create incentives for home buyers and home builders but...home values will still continue to decline.

    I can state that as fact ...Why?... it's pretty simple. Home prices are still too high.

    Because there will never again be relaxed lending standards, the pool of potential buyers has been dramatically reduced. If unemployment continues to rise as expected, that will reduce the pool of home buyers even more. In addition, the lending industry is returning to they old requirements for mortgage approval. No more "liar" loans and no more no money down mortgages.

    So the only way that more home buyers will be created is by home prices continuing to decline. That is the only way, no matter what anyone says the gov't will do.
    Last edited: Oct 12, 2008
  2. MrBigglesWorth

    MrBigglesWorth Rookie

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    if housing prices go low, this will have an adverse affect on owners who are 5-10 years into the term of their mortgage. they'll be paying for a mortgage on a house that might have been 300,000 and is now half that value yet the mortgage stays high.

    so basically they become 150,000 in the hole... so what do you do? take on this reverse debt as your home equity evaporates.

    this could cause the second round of the foreclosure cycle where people voluntary wlak away from the value of the home yet are not offically foreclosed on right now as they can manage the payments
  3. PatriotsReign

    PatriotsReign Rookie

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    Sadly, I think you have something there biggles! I think the only thing that would prevent your theory from happening is that we don't have a severe recession or worse. Home values right now are probably close to the 2003 (5 yrs ago) average. If the economy goes into a lengthy recession, values could drop a lot more and if mortgage holders lose jobs, another wave of foreclosures might happen

    However, I think most buyers from 10 yrs ago were low risk and aren't having problems paying their mortgages no matter how much the value of their home declines. but if unemployment goes to 12%+, then you may be right.

    Also, keep in mind, if we have a long recession, the gov't probably won't allow foreclosures to happen because they'd further deepen a recession.
  4. MrBigglesWorth

    MrBigglesWorth Rookie

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    How would they prevent foreclosures? would they put a moratorium on them which would be a bad thing because who would pay their mortgage?

    It would be interesting to see the length of the mortgage term of these foreclosures. what is the average length of ownership for the propoerties that are getting foreclosed on?
  5. BelichickFan

    BelichickFan B.O. = Fugazi PatsFans.com Supporter

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    #24 Jersey

    That's a valid point for sure - those people need to understand, though, that if banks work correctly in the future that if the homeowners walk they won't be buying a house for a long time because they'll have a foreclosure on their record. They also shouldn't be able to buy a new, cheaper house first as they likely can't afford both.

    If they choose to do what you say, good for them I guess. But there should be consequences to their actions and that's to be renters for a lengthy time.
  6. MrBigglesWorth

    MrBigglesWorth Rookie

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    I'm not so sure about that as being renters for a long time.

    Let's say in the past three years I bought a house for $500,000. Because of this market reset let's say it hits bottom and is only worth $250-300,000. I saved for this house and invested $75,000 of my life savings. So my equity in the house $75000 and three years of payments which could be aroound $50,000 plus.

    Now granted it was like paying rent somewhat and I did get money back in my taxes.

    But the my equity just evaporated because I played by the rules and am getting shafted because of the mortgsge crisis and corporate greed.

    and McCain talks about : I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.

    so tell me why I should ahve faith in the future about doing the right thing?

    where is the incentive to save?

    corporations are always looking for ways to make money. if they see you were had perfect cedit history up until this decision of walking away from what became a bad investment, why wouldn't they relend to you unless there were govt regulations?
  7. BelichickFan

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    #24 Jersey

    Who knows what would happen under either candidate. I'm talking about what SHOULD happen in my opinion. If you walk, you have the foreclosure on your record for 7 years I believe. And a foreclosure, for whatever reason, should make you ineligible for a mortgage for those 7 years. Again, this is my opinion on what should happen not my opinion on what will happen.
  8. MrBigglesWorth

    MrBigglesWorth Rookie

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    Understandable.

    it's probably going to take a decade for this mess to fix itself out.
  9. BelichickFan

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    #24 Jersey

    My gut feeling is you're right that they'll find a way to "re-asses" risk and decide those who have walked before aren't likely to walk again :rolleyes:

    I don't really have a dog in this fight, I don't plan on moving so my mortgage is what it is. And we would all benefit if the economy and stock market (more the latter in my situation) recovered. There is something very wrong, though, with some people getting bailed out of their mortgages while others don't.
  10. MrBigglesWorth

    MrBigglesWorth Rookie

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    Agreed and it is not very easy to assess who should and who shouldn't get bailed out.

    I think we all agree that those who did the right thing and made their payments, lived within their means, saved money should not be the ones who suffer the most.
  11. BelichickFan

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    #24 Jersey

    I actually don't want anyone to get bailed out. The only idea I've heard that I like is stretching out mortgages. I don't like dropping interest rates for those who can't make payments because that leads to the same problem; why them and not me ? Why them and not you ? They're getting something for nothing and the rest of us are paying.

    What interests me, though, is allowing people to re-finance at their current interest rate to a 40, 50 or 60 year loan. That would lower the payment and keep a lot of people able to afford the loan. It's less unfair as they pay a price - that they'll be paying off the principle even slower. It would at least fix part of the problem as it would keep some people in their homes - whether it would keep enough, who knows. Combine that with some regulation that if you walk you don't get another mortgage for 7-10 years and you'd keep even more in their homes.
  12. PatriotsReign

    PatriotsReign Rookie

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    I agree with you here but disagree with your previous post. If the gov't is going to bail out some mortgage holders in the near future, then it wouldn't be fair to those who have been foreclosed upon this year to have their records ruined.

    Actually, it isn't fair for ANYONE to get special treatment and have their mortgages re-written, but it is going to happen. It's just one big mess.

    Getting back to the main point of the thread, no matter what happens, home values will continue to decline until they are affordable to enough people that sales begin to increase.
    Last edited: Oct 12, 2008
  13. BelichickFan

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    #24 Jersey

    I don't buy the double negative on this one. It's unfair for anyone to be bailed out, we agree. But for those who weren't bailed out to claim it's unfair they weren't bailed out - I don't buy that one :)
  14. PatriotsReign

    PatriotsReign Rookie

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    If others get bailed out 6 months to a year later for the same conditions, why isn't it valid for them to claim it's unfair they weren't bailed out? Of course it's unfair.
    Last edited: Oct 12, 2008
  15. BelichickFan

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    #24 Jersey

    Well I disagree. The bailing out of anyone is unfair. But the reverse isn't true for me. That's like me claiming it's unfair my wife didn't forgive me for cheating on here just because your wife did forgive you. All those who got loans they couldn't afford deserve to be foreclosed on with no bailout. The fact that some get lucky and bailed out doesn't mean the others should get bailed out.
  16. PatriotsReign

    PatriotsReign Rookie

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    Well, it won't matter since the other will have already have been foreclosed upon. I think your analogy is weak BF since your cheating would be irrelevant to my wife. We would be like 2 different countries. A more accurate analogy would be 2 parents forgiving one child for the same thing they punished the other for.
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    Last edited: Oct 12, 2008
  17. BelichickFan

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    #24 Jersey

    The fact of the matter is no-one deserves a bail out, they took out the loans. And my stocks don't deserve a bail out, I knew the risk. I think we agree on that :)
  18. PatriotsReign

    PatriotsReign Rookie

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    absolutely we agree on that bf!

    Since we're off-topic anyway...regarding fairness, I hate that some Americans get "stimulus" checks while others don't. Specifically how the federal gov't draws the line at $75K per individual and $150K per couple. Don't get me wrong, I don't think another one should go out, but to draw the line at income levels that low is unexplainable.

    It's like the law that restricted my 401K contributions the day I went 1 dollar over a certain income level. In one day, I went from being able to contribute $15,500 annually to $5,900 annually. There are laws that prevent people who make "decent" wages from contributing to Roth IRA's as well. Our government treats people as if they are wealthy based upon arbitrary income levels that are far too low.

    People at my income level pay more taxes & social security but get to contribute far less to retirement funds than any group in America. Those that are truly wealthy can afford the vehicles that allow for accelerated retirement investing, while the in-between group is left hanging.
    Last edited: Oct 12, 2008

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