Irresponsible
Call me irresponsible
Call me unreliable
Throw in undependable, too
Do my foolish alibis bore you?
Well, I'm not too clever, I
I just adore you
So, call me unpredictable
Tell me I'm impractical
Rainbows, I'm inclined to pursue
Call me irresponsible
Yes, I'm unreliable
But it's undeniably true
Call Me Irresponsible -- Michael Buble
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Being financially responsible can be difficult. I haven't always been, but I guess there are none so religious as the converted, right? There is a belief in our culture that one can be "responsible with debt." Personally, I think the whole idea is BS perpetuated by the credit purveyors (drug dealers) who want everyone to be hooked on their product. The most responsible way to manage debt is not to have any and use savings instead.
Most people don't budget well if they budget at all. Instead of running a surplus each month and putting money into savings, most people (who at least try to be responsible) will target a monthly breakeven where they at least do not fall behind. The problem with this approach is the unexpected always comes up and puts you behind. Budgeting for the unexpected is called saving, and most people do not bother or do not realize its importance.
The true spenders do not set out to run up a mountain of debt, but if they see something they want, they buy it, and they end up with a mountain of debt because of this behavior. Usually this behavior will go on as long as someone will extend them credit to enable their lifestyle. These people are only stressed when all their credit lines are tapped and they actually have to live within their incomes (minus debt service of course.) The longer this behavior goes on and the more it is enabled, the more debt this person will take on until finally they experience a personal Minsky Moment, and all of their debts come due. This is generally a very painful experience.
Today's seller is a profile of a spender who was enabled by the housing bubble. She bought a small place at the bottom of the last cycle in 1997. Over the 10 years that followed, she refinanced 5 times. Each time it was for a small amount and it was likely used to pay off credit card debt (I am speculating, I don't know for sure.) Rather than run into a credit limit barrier which might inhibit her lifestyle, she was enabled by the speculative equity building in her little condo to continue this pattern of overspending for a full 10 years. Only now that prices have stopped going up and credit is tightening is she going to be faced with a curtailment of her spending habits. If she drops her price much more, she may even become a short sale, and that would cut off credit altogether. This is where the analogy between credit and drugs breaks down -- when you go cold turkey from credit, you don't have any withdrawals.
Perhaps it is unfair to call this behavior irresponsible, particularly if the bills are paid on time and no creditor is facing a loss; however, this seller could have made $350,000 in equity profit which could have been used for more worthy purposes (retirement, move-up housing, etc.) This was perhaps a once-in-a-lifetime opportunity to gain wealth through fortunate timing in a speculative market, and she blew it. If living this way is not irresponsible, it is at least unwise.
Asking Price: $554,900
Income Requirement: $138,725
Downpayment Needed: $110,980
Purchase Price: $163,000
Purchase Date: 12/3/1997
Address: 46 Monroe #77, Irvine, CA 92620
| Beds: | 3 |
| Baths: | 2.5 |
| Sq. Ft.: | 1,456 |
| $/Sq. Ft.: | $381 |
| Lot Size: | - |
| Type: | Condominium |
| Style: | Contemporary |
| Year Built: | 1986 |
| Stories: | Two Levels |
| View(s): | Park or Green Belt |
| Area: | Northwood |
| County: | Orange |
| MLS#: | S518939 |
| Status: | Active |
| On Redfin: | 10 days |
Largest model, end unit & 'premium' large side yard. New paint in & out. New carpet in master & newer laminate flooring in living room, stairs, hallway & 2 BR. New Italian tile flooring-all bathrooms. Toilets have all been replaced, as water heater, motors in furnace, washer & dryer. 4 ceiling fans. Designer archway with colomns lead to 'gourmet kitchen', all stainless appliances, sink, potrack with light over a large added kitchen island. Granite look countertops, custom recessed lighting, all cabinets have been replaced, pull out drawers & built-in 'wine cooler'! Custom french sliders lead to lush topical paradise paved with flag stone, dramatic lighting, Koi pond and water fall, a place to sit under palm trees and enjoy the soothing sound of rushing water. Evenings entertain in this tropical setting around the built-in bar-b-que (which stays) and can be used with butane or with the newly added gasline. New rollup garage door has just been installed. All this & priced to Sell!!
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So how did this seller manager her mortgage?
- The property was purchased in December 1997 for $163,000. There was a first mortgage for $156,000 and a $7,000 downpayment.
- 12/15/2000 the property was refinanced for $190,000.
- 12/5/2001 another refinance for $194,500. Christmas shopping money?
- 1/10/2003 a refinance for $232,000. Pay off Christmas shopping debts?
- 11/28/2005 a refinance for $381,000. Remodel?
- 1/3/2007 a refinance for $418,000 with an Option ARM.
Ten years and a steadily increasing loan balance on the property. Now if they sell for asking price (which seems high at $381/SF) they stand to walk away with less than $100,000 in cash from a property that went up almost $400,000 in price. Does this seem like good financial planning to you?
My advice, look at the rental properties that are listed by good realtors and then seek as much info as you can about the landlord. Does he/she live in the area? Does he/she own many properties? Does he/she live offshore? Through this vetting you can usually eliminate the flippers and ill-intentioned.
For Filet I use a cast iron pan and I sear them with a bit on butter on my Viking rangetop.
Thank God I have a big bad hood with dual motors because the pan looks like a chimney for ten minutes. ( I like the steaks about two inches thick and rare ).
Ummm… there are blogs, just like this, blogging about SF and Malibu. So… I think your communities are not immune. Google is your friend.
dear irvinerenter,
apparently there is a major block in communication here.
i originally replied to this “conversation” because of the negative comments and the assumptions of those making the comments regarding this owner.
i repeatedly attempted to inform all of you that there may be reasons for her mortgage situation OTHER than what you all were saying. but the responses were that she was ‘mishandling” her finances.
yes, the story was fabrication. i believe i mentioned it twice within the content.
the story was so radical that i thought people would understand that there ARE things that happen that are beyond our control. that maybe the owner HAS to do what she’s doing because she has no other choice OR, she’s playing the cards she was dealt.
it saddens me to learn of her situation, but it got you (your association) off your high horse and made you (your association)admit that there ARE situations that cannot (sometimes) be avoided.
for whatever reason, your (the association) self-serving attempts at “slander” have stopped. THAT was my point!
i do not NEED to apologise, but if you tell me who she is i will speak with her. and if you “know” her, why did you involve yourself in the name calling?
i think the apology should come from your direction…
right, so spend the HELOC on shoes
I’m enjoying myself as much as possible, because I’m going to be paying for this mess for years into the future. The RE boom skewed our economy in ways that may be impossible to recover from in any reasonable time horizon. If nothing else, I’m looking at losses in tax free bond funds, cities will not be able to borrow as easily for needed infrastructure. It’s a mess.
do you really prefer gas to charcoal for steaks? If you go buy dry aged filet or ribeye at Whole Foods, you better have more than 700 deg to sear them as the dry aged cooks in half the time of regular steaks. No sear marks possible at 5 mins a side at 700 deg. Ruths Chris and Mortons have ovens that get to excess of 1000 deg F. The only way to get this at home is with lots of charcoal or hardwood in a big Weber. I use half a big bag of Kingsford per grilling session. Hot fire indeed!
For regular USDA Choice meat from the market or some lame shop like El Toro Meat Market, gas is suitable for grilling. Not so for USDA Prime or dry aged.
From a concerned reader:
“Irvine Housing Blog,
The story you put up today is a fabrication. The owner is an acquaintence of my family.
The owner of that condominium is a single mother caring for a small child with cerebral palsy. Her husband also does not provide child support as required.
I believe you owe this woman a public apology. Will you offer one?“
No.
That’s why my BBQ ( natural gas ) has four knobs, one for each burner.
If I want to BBQ I set them low.
If I want to grill steaks I can crank the sucker ‘till the temp is 700 deg. and those babies are cooked just like that.
dear irvinerenter,
this sort of situation makes me glad that i don’t live in communal irvine.
that i own houses in malibu canyon and san francisco where i am not involved with bickering “associations” and people who find it their business to bemoan others who sometimes have problems beyond their control (do you know if the reason your computer doesn’t work is because of the software, your cpu, a virus, your motherboard or a hacker?).
silly me, of course you do. you seem to know alot about everything; not like some with limited life experiences.
but the point is that the owner has kept up the payments until she no longer can and so she’s selling.
but it really isn’t any of your business.
Happy BUSH AND SUBPRIME Day!!!
President Bush unveiled his mortgage relief plan today. He’s decided to freeze the mortgage rates of perhaps hundreds of thousands of speculators and homeowners who might otherwise not be able to make their loan payments. Some have argued that the plan is fine because it uses no federal funds. Not so, says the Washington […]
dear zornudo,
i concur with you regarding planning and effort.
let’s take a hypothetical situation: dick and jane are a married couple in the mid-thirties. both are employed with comfortable salaries. jane is pregnant. they purchase a home to raise their family.
dick, without jane’s knowledge, becomes addicted to (remenber that this is hypothetical) re-hydrating liquids and inhales crushed ibuprofin. both sets of parents purchased tickets for the first manned flight to mars, but the spacecraft disappears into a black hole.
their baby is born, but the doctors don’t think it should exist.
dick’s addiction has hospitalized him three times, so he divorces jane and marries wealthy sally so that he is not bothered by lack of employment (he’s “too sick” to work) or support for jane and the baby.
jane then discovers that dick lied to her about part of his past and that he is also, supposedly, supporting four other children by different women (so how can he support jane and his baby?).
dick and jane’s baby has major physical, mental and emotional obstacles that will require jane to transport the baby to weekly physicians visits and multiple therapies. it will need “special education”, physical and mental support and prophylactics, it will need jane’s 24-hour supervision for the rest of it’s life.
jane develops two cancers, high blood pressure, a malfunctioning thyroid and a cyst behind her knee that requires removal but will necessitate the immobility of her leg for three weeks and therapy to follow.
translate that hypothetical situation into some form of reality and you have unforseen and unexpected events for which you will not be prepared.
and now play the cards you were dealt.
Ummm-m-m, thank you Kirk. And I take back all the bad stuff I have written to you.
The victim mentality displayed in your comments is something the people on this board find unseemly. It does not seem very likely that bad luck or unusual life circumstances prompted this owner to refinance 5 times. It is far more likely they were fueling consumer spending.
Let’s accept for a moment the possibility this serial refinancing was necessary due to life’s unforeseen circumstances. It still doesn’t excuse the serial refinancing. Generally, after the first of life’s mishaps, a rational person would learn to save to prepare for the next one. Certainly after the second time something happens and you are not prepared, the virtue of saving would become evident. By your conjecture, this person had the unexpected happen 5 times and did not learn from it. It doesn’t matter what unforeseen event occurred, if the person fails to learn from life’s lessons, they are a fool. And how exactly is “the ability to learn… removed.“ Did this owner suffer a stroke or get a lobotomy? This is the victim status bullshit people on this board find annoying. Perhaps if you stop seeing everyone as a victim and start believing in personal responsibility, you will understand the posters on this blog. Compassion without responsibility is enabling.
dear skek,
in answer to your first sentence; no ridicule was meant. it’s a fact.
in answer to your second sentence; 1) i live in the same world as you. i was referring to a group of people. 2) “discussing” the “crisis” is NOT inappropriate. i was referring to the moot “censure”.
in answer to your third, fourth and fifth sentence; i did NOT say that any of you had not experienced any negativity. fiscal responsibility and prudent planning ARE positive attributes, but when “control” is severed you learn to play the remaining hand (no pun intended).
in answer to your sixth sentence; i, too, am saddened by the loss of integrity. but “bad choice(s)“ may not be the current owner’s issue.
p.s.
i apologise. the point of the maybach apparently got lost.
dear irvinerenter,
the answer to your questions is: no.
maybe, just maybe, the current owner of said property was not able to learn from the mistake(s) because the ability to learn was removed.
and so the current owner must cope with the cards dealt.
i concur with your viewpoint that the utopia is “created” by the people on your board and not “given” (sort of like the biblical “garden of eden”, and we all know what happened there…), but since you can not be sure of the events involved in the life of another person i find it unseemly that you should condem that person’s actions.
dear purplehaze,
initially, i am not the owner of said property.
my point (i believe i made it previously) is that people (in general) are not perfect.
you can be educated, a “realist” and you can grab the bull by the horns but, an unexpected, unplanned event(s) can (your self-calculated life is not over yet) take place rendering one not equipped to meet the contingency.
educated decisions or the best laid plans (see: randal o’toole and robert burns) can be diverted by god or government.
come down from your cloud (for just a moment, you won’t have to stay) and “walk a mile” in a commoner’s shoes (i know it’s distasteful) and then try to accept/understand the above comment.
it must be wonderful to be prescient…
You know I have thought about doing it. My only issue is that with so many flippers putting their properties out for rent when they failed to flip, I don’t want to end in a situation where the bank forecloses on the property and I have to move.
Asian markets are opening dramatically lower. Looks like we will test the lows on the S&P500. If we break, which looks likely, batten down the hatches…. just like housing markets ‘fear vs. greed’. Behavioral finance at its best….
If we do have a significant recession all bets are off for how low we can go with housing. Any thoughts on a ‘percentage’ to the downside if we have a recession in the next couple of years?
No, IAC is a quazi-monopoly that grinds their renters like the cogs in the machine they are to them.
Even in a cruddy market, IAC will raise your rent if you don’t fight because they have 90% chance that you just end up moving to another IAC place anyway. Plus they get to churn you and keep a portion of your deposit per the contract you signed with them for ‘cleaning’ etc.
Find a nice long term landlord, pay your rent on time every month, and your landlord likely will not speak of a rent increase, let alone signing a new contract for the next four years.
Aww, c’mon, I only count 13 lones…
That is a great analogy. I may it.
Just little more complicated than that. There is also the thrill of beating the system. It is a real adrenaline rush. But then this is still consistent with her behavior.
“The reading’s off the chart—over twenty thousand. Even Master Ron Paul doesn’t have a midi-tinfoilhatian count that high!“
―Obi-Wan Kenobi to Qui-Gon Jinn
What’s so hard about living on less than you make?
It just takes a small bit of planning and then a little effort to work the plan. Do that a few months and then it’s a habit. Save enough and you can prepare for unforseen events, which while unexpected, you would be quite prepared for.
I dunno why the FDIC covers the rules on vendors offering discounts for cash (or imposing a higher price for those who use credit cards), but IANAL.
In short, that’s not allowed.
§ 167. Use of cash discounts
(a)(1) With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.
(2) No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.
(b) With respect to any sales transaction, any discount from the regular price offered by the seller for the purpose of inducing payment by cash, checks, or other means not involving the use of an open-end credit plan or a credit card shall not constitute a finance charge as determined under section 106, if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously.
BBQ is ‘slow and low’ so the aforementioned would be perfect. Please don’t confuse bbq with grilling. But since you are more than likely not from the south, you will be forgiven.
Enough said…
From http://www.ocregister.com/news/loans-camile-percent-1806121-subprime-loan
The only ones who seem content are longtime residents like Rafael Zambrano, who moved to 930 W. Camile St. in 1988. The chef and father of four said he has nearly paid off his $177,000 mortgage. He has a low opinion of the people who loaned money to his neighbors and the neighbors who borrowed beyond their means.
“I never sell. I never refinance,“ Zambrano said. “I don’t take money out of my house to buy a car or take a vacation. I’m not stupid.“
Actully, if you think of it as a two step recursive computer algorithm, works great ... until you run out of memory and it crashes!
Everybody using charge cards keeps prices high with the processing fees that store have to pay. You are paying for those points. The card company is just kicking back a slight amount of the processing fees it earns.
It’d be real nice if stores gave a 1-2% discount for using cash.
Thought it was
1. Buy
2. HELOC
3. Buy another
4. HELOC
5. BUy another
6. HELOC
... ad nauseum
result: PROFIT!
Definitely needs a hog barn! Nothing like some BBQ pork!
Gawd, again with the d*mn gold. Sure, buy at the top. nice.
Gold is one thing I’m going to really enjoy shorting. It’s a way’s off, but lots of people are going to lose big money on gold. I won’t be crying for them.
Besides, we don’t have to worry about a recession. Here’s the solution that will stave it off:
http://www.thestreet.com/s/just-put-it-on-my-401k-debit-card/funds/saving-money/10398317.html
See? Everything is going to be just fine.
Do people think that this softening of rents will show up in Irvine Apartment Communities as well?
I am having to move and would like to rent with the IAC as I prefer the convenience of dealing with them vs a private party. But for a 2 BD/2 BA w/ garage and Washer/Dryer in unit is running me around 2K which looks a bit expensive. I can delay the move if there is a chance that I will able to get a better deal in a few months.
Temporary humiliation only cures temporarily. That is why I propose that we put some kind of branding on these people’s forehead to permanently cure them.
I only feel sorry for some of these people that simply wanted a home to live in. But, I think they are the minority. I think most people saw riches. Screw them. They already screwed me.
Thanks for the link. I’ll stay in LA if prices come down, say, 50%. Looks like all of that and more is possible.
LOL!
Do you really think none of the people on this board had anything bad happen to them? Everyone here has lived a life without financial hardship? Maybe, just maybe, some of the people on this board have made some of these mistakes and learned from them. The utopia the people on this board live in has been created by them not given to them.
A little off subject, but a commenter named Scott at the Register pointed out something regarding the REDC auction and shill bidders. The REDC auction terms state:
* The Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller. The Auctioneer may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders. *
-and-
* Auctioneer, as used in these Terms and Conditions, shall include but not be limited to, any and all of its agents, employees, representatives, officers and directors. *
I went to the REDC purchase agreement and sure enough the auctioneer definition is the second line of the agreement and the fake bidding up to reserve price is under section 3.
http://www.ushomeauction.com/redc-purchase-agreement.pdf
REDC is telling you they have shill bidders. But, you can call them auctioneers… even though they may just be some people in the audience that only make bids.
How can a BBQ run both propane and natural gas? That makes no sense since propane has more “heat content” and thus propane burners have smaller holes.
If they imply that you can use natural gas with propane burners then they are clueless since the BBQ will run too COLD. Conversely the BBQ will run too hot and it may be dangerous.
But these people have “granite like” counters… and a new “blower” in the furnace.
Hey, I put new valves in my toilets but I didn’t know that was something to advertise.
No price is fair price when we are in recession. Shit has hit the fan and now we will see job loses and subsequent home loses. I dont even want to speculate anything at this point.
So, for this Condo, I am out.
Oh my dear, so are you saying that no one told you? Or that you did not know about it? Now where have I heard that before.
Yes, things do look simpler in restrospect, but most people here are realists. People whoi took the time to make educated decisions. Versus people like you who took the decision or as you say took the cards that were dealt to you. I think there is some virtue in grabbing the bull by the horns rather than becoming cannon fodder for the greedy people on wall street?
Dear myming,
Please tell me more about your planet—you know, the one where having “an above-average knowledge of finances, investments and the real estate market” is cause for ridicule. Tell me about the world you live in where discussing the causes and consequences of largest real estate crisis in our lifetimes is inappropriate and worthy of censure. And impart on us your psychic abilities which allow you to state, with virtual certainty, that no one on this blog has ever suffered a life changing event or otherwise endured the “foibles” of life.
Because here on planet Earth, I’m fairly certain that fiscal responsibility is actually a positive attribute and something to be strived for. I’m also pretty sure that prudent planning and living within your means is something that you can actually control in life, as opposed to a lucky “hand of cards” that life deals you.
It saddens me that so many Americans have abandoned work ethic, personal responsibility and self-reliance for the mentality of paranoid and perpetual vicitim, one who thinks that all of his or her bad choices are actually the result of black helicopters and secret cabals of blood-thirsty capitalists.
p.s. at least everyone on your planet drives Maybachs, so that’s nice.
Yes, I’m surprised. That is a straight line up. You are not surprised?
most of the replies to this posting seem to come from people who have an above-average knowledge of finances, investments and the real estate market.
in general these moot comments: “should have…“, “didn’t…“, “used the money…“, “multiple re-fi’s…“, seem to be directed at an owner who did not have the money market insight that the brillliant respondents to this blog “obviously” have.
the respondents seemingly live conservatively charmed, financially secure, crystal ball blessed lives, where life-claiming instances, fraud, happenstance and the foibles of life in our society do not exist.
but for the rest of us, who are exempt from that utopia, we must play the cards dealt and cope the best way we can.
p.s.
so sorry about the broken windshield on your maybach, but you know how these add kids are…
If that happens kiss your 401K, pension, anything but pure gold goodbye.
Real Estate always goes up.
Step 1: Profit.
Step 2: repeat.
I can see husband as a plumber, tile layer, electrician or AC repairman and the wife as a secretary, teacher… so combined income say 60-80K. The house looks like it should have sold for 150K in a normal market, if they had 10% down they would only have needed a mortgage for $135K which is probably less than what they were paying on their fradulant bubble deal.
It took a lot of bad behavior for all this to come to pass.
Too complicated for underpants gnomes…
must simplify..
Step 1) Heloc
Step2) ????????
Step3) Profit
And you are supprised because????
Have you looked at the mean asking price in say Hermosa or Manhattan Beach, I think it’s like $1.5M
I’m shocked as many people can afford those prices as do buy.
Check out these SCARY inventory numbers from the South Bay. HOLY COW!!!!
http://recomments.blogspot.com/2008/02/dam-break.html
You guys found pictures of the seller couple??
When they refied, wouldn’t they have lost the non-recourse protection? If that’s the case, the bank could go after whatever asset they made the investment in once they handed back the keys…
If a refinance doesn’t make the non-recourse protection go away, I’m going to do a cash-out refi tomorrow and start with my buster plan!
You aren’t feeling sorry for the alcoholic in this case. You’re feeling sorry for the drunk driver who walked away from a fatal accident with some minor injuries.
...We’ll finally solve the trade balance problem…
A charge card is fine if you don’t carry a balance. If you carry a balance, cards with ‘reward points’ more than make up for the points with a higher interest rate.
If you use a charge card as your pool of cash and pay it off every month, you are essentially ‘paying cash” and just taking advantage of the grace period.
Nice!
Buster’s Underpants Gnomes Real Estate plan:
Step 1. HELOC, invest the proceeds and default!
Step 2: ???
Step 3: profit!
http://www.nytimes.com/2008/02/05/business/05spend.html?_r=1&oref=slogin
“... now the freewheeling days of credit and risk may have run their course — at least for a while and perhaps much longer — as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.“
The horror of it…
Being responsible didn’t work so well for this guy in 1932…
http://www.doctorhousingbubble.com/the-menace-of-mortgage-debts-lessons-from-the-great-depression-series-part-iv-where-do-we-go-after-the-housing-crash/
For example, two friends purchased adjoining identical houses in 1926 for $30,000. A certain bank placed a $15,000 mortgage on each. In 1929 the first owner paid off $10,000 on his mortgage. The second owner, when asked to do likewise, requested a reappraisal of his property. When a value of $40,000 was placed upon it he was able to induce the bank to lend him an additional $2,000, which he explained he needed in his business. In 1932 when both mortgages again fell due the bank needed liquid capital and, therefore, asked for full payments. Neither owner was able to meet this call. A reappraisal indicated that the value of the houses had fallen to $16,000 each. On one, the bank held a mortgage for $5,000, on the other for $17,000. What did the bank do? It commenced foreclosure proceedings on the strong mortgage fro $5,000 and allowed the weaker to stand. Why? It could readily transform the smaller mortgage into an asset on its books, whereas the larger mortgage would inevitably show a loss if the property were taken over.”
Humiliation does not cure ignorance.
Every single kool-aid drinker will make the same mistake 10-20 years from when the bubble cycle repeats itself.
I just hope we don’t make a habit of bailing the financially irresponsible out with tax payer’s money by subsidizing their mortgages. I shouldn’t have to pay for the irresponsibility of others, and neither should you.
Temporarily?
Its been 5 years now since I haven’t been able to afford a 30-year fully amortized loan on a decent 3 bedroom house in South Orange County (where I grew up by the way). Oh, and I make six figures.
Good analogy. IMHO insatiable greed is the root cause of gambling addictions.
Aside from any arguments for genetic predispositions towards addictive personality disorders, if the user doesn’t have an insatiable appetite for greed, why gamble in the first place?
When you continually refinance and take out mounds of equity for discrentionary personal consumption, you’re gambling with your financial future.
You’re gambling that you can 1) make your increased payments within the term limits of your refinanced mortgage, 2) you won’t have negative equity if the market plunges and be in a position where, if you need to sell, you will be under water.
Attn IR: I think this topic would be a good future post.
Heck if there is a real working sliding machine in this place then it is a bargain at 10x the price.
This was a good show. Netflix has it.
http://www.tv.com/sliders/show/438/summary.html
+1 Ice weasel. -applause-
Alan, you bring up a good observation. One reason why prices have spiralled so out of control over the last few years is because if prices were too high, the lenders were quick in raising the appraised income of the next buyer in line such that an ever-increasing price system was being fed continuously: 1) By buyers and realtors and speculators bidding higher values 2) By lenders appraising higher income levels for those approaching them for loans.
It is very obvious that this reflects a highly fraudulent situation.
“I think there would have be to significant job loss and wage loss for this to happen.“
In effect, there will be wage loss. The OC economy has been premised for some time on equity extraction. You take that away and it amounts to a sizeable pay cut for a good segment of the population. Throw in the increased debt service from resets and tighter lending standards and it amounts to a loss in aggregate net income.
I thought the wife was rather attractive! Just her looks though. Everything else was repulsive. The dude looked like he works with his hands. No shame in that.
They both seemed intellegent enough to know the risks of their gamble.
The sad thing is these folks probably should have been able to afford the house they purchased had the market been normal.
“The king, the king’s to blame!“
Link to NYT article
Economy Fitful, Americans Start to Pay as They Go
http://www.nytimes.com/2008/02/05/business/05spend.html?pagewanted=1&ei=5087&em&en=88ddcd6543c43e40&ex=1202360400
I agree. That was one of the best lines yet…
“I feel sorry that they made the poor decisions that led them down that path. But I sure as hell don’t laugh at them…“
I do. I think the humiliation will help cure them. “Tough love” if you will. You see, I love them!
Totally agree if you have financial discipline. Bought a 52” Sony Bravia LCD TV three weeks ago. Best Buy wanted $200 for an extra one year warranty. AmEx gave it to me for free and gave me 1% back (Amex Costco card—good stuff).
Paying cash for everything is stupid. Why not use a charge card to get points, buyer protection, extended warranties, etc?
Running up debt is obviously a poor financial decision, but turning away free money and other benefits is too.
Yes, Real Estate Kool-aid drinkers made things more difficult for non Kool-aid drinkers, if you didn’t want to participate in this mass insanity, you were forced to make uncomfortable choices for the longest time, in a sane environment there was no a single reason why you needed to do that.
There were young families in constant movement, small kids that couldn’t have their own backyard because the insanity of the SoCal market decided that a house with a backyard must be priced above $750K, but that house in regular market should be $350K, and how you explain that to yourself if your household income is more than $100K a year?
You cant argue with the market, you will always lose.
Typical cash out option arm broker points: 2 on the front 2-3 on the back (YSP). For a loan amount of $418,000, brokers were making about $16,000-$20,000. Section 32 (Ca hi-cost limits) are 6%, so the max that the borrower could pay in total fees would be $25,080. This borrower gave a lot of equity away in broker fees throughout the years.
Interesting comments today on CNBC - said yes the bank and credit losses in this bubble have been about $200B but, there has also been a 8% reduction in values across the country. On a $10Trillion dollar RE market this means that americans saw $800B in equity and purchasing power leave ALREADY! This does have a spillover effect…
BD
You know, maybe this person is the smart one. I know the chances are between slim and none that the refi money went into an investment (but hey, even an education is an investment) but a really savvy person would have refi’d the crap out of the place, put the money into a real investment, reap a decent return from that investment and with that return could rent the same place back without taxes, HOA, repairs and depreciation. Dump it back on the lender and rent back for less than your investment is yielding and have not only the same home but positive cash flow. What are the chances this person was that smart and/or savvy?
Half a million bucks & you get “Granite-look” counters!
Me, I don’t have a lot of sympathy for those who made irresponsible choices and are now having the deal with the consequences. As others have stated their decisions had a direct impact on those of us who were (temporarily?) priced out of the housing market due to the bubble they helped create.
I do have sympathy for the the children and in many cases the pets of these folks.
More random thoughts…
I was watching that you-tube post from 60 minutes again on this blog yesterday… the one where wife talks about giving the keys back to the bank becuase they couldn’t afford the mortgage…
Is it me or..
The couple looks like well… lower class white couple (without being too racisit), probably not college educated, looks to me like their income couldn’t be more than 60K tops. The house looks small, nodiscript, box can’t be more than 1200 sq ft, couldn’t cost more than $100K to build, the land can’t be that much, maybe $50-60k for the lot (small lot, doesn’t look like a particularily nice area). My estimate is maybe $150k for the house true value..
Some lender then gave these numbnuts a $350K mortgage (max they should have qualified for is maybe 200K) for a property that shouldn’t have been apraised for more than $150K. I think I’m more angry at the lender for giving them a $350K loan when they should have known better and the apraiser for yanking up the apraised value then the couple for walking.
neighboring units sold for mid-$200s in 2001. Here’s one at $286K in Nov-2001.
If you can afford your payment, you’ll be okay. If your payment is a strain, you’ll feel pain.
But a lot of people, won’t feel pain. Look through that neighborhood and you’ll see a lot of the 3/2s have been owned since the mid-90s. If they sell at $250K, they still made $70K. They beat inflation and they lived less expensively than rent for the last decade.
It’s those owners that will drive the market going forward. The reason is simple, they are the only ones that can actually price to market and get out. The market is about to become sellers that have owned their places from before 2000 and bank REOs. Frankly, the owners that bought prior to 2000 actually have a better cost point than the banks.
Most people here are not rejoicing in others suffering, but rather enjoying justice.
I have been labled a “bitter renter” because I understood that I could not afford to own a house at these inflated levels. Of course that did not stop people from bragging about their “equity” etc. It seems every gathering I went to I was surronded by dumb asses in Tommy Bahama shirts talking about how smart they all were and how wrong I was….Real estate never goes down, if it drops there are investors lined up to scoop up…etc., etc.
Keep in mind, that there are those of us here who did not participate in the scam, have been labled a “bitter renter” had to pay more for everything because of inflation and now will have to pay increased taxes to pay off the “real estate hangover”.
I cant wait to buy that REO that has the granite counters, travertive flooring and new “Gormet Kitchen” at half price without having to do any of the work.
You could put in a chicken coop too, then when you want to use your Bar-b-que you could just pull one out, and get some fresh eggs for your Bristo!