High DTIs Equal High Default Rates

The most obvious sign of a housing bubble is a high aggregate debt-to-income ratio… that plus WTF asking prices on properties.

18682 PORTOFINO Dr Irvine, CA 92603 rear yard

Irvine Home Address … 18682 PORTOFINO Dr Irvine, CA 92603
Resale Home Price …… $2,295,000

I’m Broke — Black Joe Lewis & The Honeybear

The California housing market is volatile, but people only see the ups. Trying
to capture appreciation, they “stretch” to get into a property by
putting larger and larger percentages of their income toward housing
(until the entire system collapses). This stretching is (1) recorded in
the aggregate debt-to-income ratio for a particular market and (2)
observed in the struggles of individual homeowners.

For the post Doubling Time, I produced a chart showing the DTI Ratio in Irvine over time.

Irvine debt-to-income ratios 1975-2009

As you might surmise, the peaks in the DTI ratios correspond to peaks in our three California housing bubbles.

Today, I want to move from the macro down to the micro;
the charts above show aggregate numbers and big-picture relationships,
but what about the individual? What struggles does all of this mean for
you and me?

From Mark Hanson (Mr. Mortgage):

Time-Tested DTI Standards Thrown out the Window

A long
time ago in a mortgage market far, far away (circa-2000 and before!)
there was responsibility in lending. Age-old underwriting standards
only allowed fully-documented debt-to-income ratios of 28% for housing and 36% for total debt (referred to as front and back DTI). On Jumbo loans, the ratios were
33/38 because Jumbo borrowers typically have more disposable income. On
occasion, banks would make exceptions to this rule if the borrower had
a large equity position or liquid reserves. At 28/36, homeowners can
pay debt, shop, take their annual vacation, and even save money. At
28/36 DTI a house is a place to live first and an investment, second.

year’s loan guidelines not only pushed the boundaries of risk by exotic
loan structure but also income leverage. Circa-2002, time-tested DTI
standards went out the window. Allowable DTI ratios on Prime loans rose
to 50% and much higher when considering that so many loans were made
with limited or no income documentation. Alt-A and Subprime full-doc
loans would routinely go to 55% DTI…

This is the main reason we have an inescapable foreclosure crisis
coming, and it is also why the FED is keeping interest rates so low.
The only way to take a relatively small payment and apply some of it to
principal is to extend the term of the loan and lower the interst rate.
The Federal Government’s loan modification program will (1) lower
interest rates to 2% (2) increase amortization to 40 years, and (3)
defer principal like an Option ARM; this still doesn’t make the payment
affordable. There are simply too many people in houses they cannot afford under any circumstances.


How bad is a 50% DTI?

Mark Hanson goes on:

1) What a 50% DTI Really Means?

  • Borrower Earnings: $100k per year
  • 50% Total DTI: $50,000 per year to housing PITI & all other debt on credit report
  • 25% Fed & State Taxes: $25,000 per year
  • Disposable income: $25,000 per year, or $2,083 per month

How does
this well-above average household SAVE MONEY AND pay for utilities
(power, water, cable, garbage, insurance (car, life, health), gas,
food, car payment, fuel, clothes, household maintenance and more on
$2,083 per month? How do they save an emergency fund or take even a
drive-away trip for the weekend? How do they shop this holiday season
when over a trillion dollar in consumer credit was taken away in the
past year?

A 50%
housing DTI turns the house into the largest investment of your life
and ruins most household’s balance sheet at the same time unless the
gross income – and disposable income – is much larger.

For most in a serious negative equity position, it is better to walk away.
Earning your way out of a $200k hole is impossible with disposable
income of $2,083 per month less expenses. Why not walk – the borrower’s
credit will be trashed for a few years but as long as they maintain
their credit rating on all other credit, their overall rating will not
be damaged for as long as their house remains underwater.

2) Now, let’s look at this with 28/36 time-tested debt-to-income ratios.

Bottom Line – 60% MORE disposable income each month.

  • Borrower Earnings: $100k per year
  • 36% Total DTI: $36,000 per year per to housing PITI & all other debt on credit report
  • 25% Fed and State Taxes: $25,000 per year
  • Disposable income: $39,000 per year or $3,250 per month

$3,250 per month, a $100k household can likely save $20k per year.
Still, this is not enough to make a real dent in a $200k neg-equity
position. But, with this much disposable income the homeowner is not
missing out on much and they are saving money, meaning their house is a
place to live.

What do households spend money in every year? The U.S. Census bureau provides the answers:

  • $200 billion on furniture, appliances ($1,900 per household annually)
  • $400 billion on vehicle purchases ($3,800 per household annually)
  • $425 billion at restaurants ($4,000 per household annually)
  • $9 billion at Starbucks ($85 per household annually)
  • $250 billion on clothing ($2,400 per household annually)
  • $100 billion on electronics ($950 per household annually)
  • $60 billion on lottery tickets ($600 per household annually)
  • $100 billion at gambling casinos ($950 per household annually)
  • $60 billion on alcohol ($600 per household annually)
  • $40 billion on smoking ($400 per household annually)
  • $32 billion on spectator sports ($300 per household annually)
  • $150 billion on entertainment ($1,400 per household annually)
  • $100 billion on education ($950 per household annually)
  • $300 billion to charity ($2,900 per household annually)

average homeowner household spends $22,785 per year, or $1900 per month
on the above. When making an allowance for some of the items that are
typically financed, the outgo is still roughly $1500 per month.

At 50%
DTI, the $100k earner with a disposable income of $2083 per month will
have extra monthly income of $583 based upon typical spending. That
does not leave a lot for savings, or items not listed such as auto
insurance, vacations, gas etc. That definitely is not enough to ‘earn
their way out’ of their negative equity hole.

the 36% DTI borrower will have an extra $1750 month, which allows for
living life and saving money, significantly reducing the chance of loan
default due to negative-equity..

Line – This shows vividly why 50% DTI – even with borrowers making
$100k a year and with 20% equity in their property – is in fact
over-leveraged and a recipe for loan default for any number of reasons


When you see the hopelessness of the circumstances of the individual
borrowers who either bought or refinanced at the peak, and it is
difficult to see how they continue making payments and have a life without
HELOC supplementation
(it isn’t coming back soon). If many
individual borrowers do not make it, lenders end up taking back large
numbers of foreclosures — which is what we are seeing today — and what we will be seeing much more of over the next three to seven years.

In the post Debt-To-Income Ratios: The Forgotten Variable, I wrote the following:

Lenders have gone back to their historic data to relearn
underwriting all over again. They know they must underwrite loans at
DTIs in excess of 40% in order to support current pricing, so they
limit these loans to people with significant downpayments, large cash
reserves, and high FICO scores. In other words, it is the smallest
possible borrower pool. Because the potential borrower pool is so
small, and because there is a foreclosure tsunami coming, prices will continue to fall.

Over time lenders will continue to lower their allowable DTIs
because the default rates will continue to be very high. As long as
there are high default rates, there will be more foreclosures, prices
will continue to fall, and the lenders will continue to lose money.
This downward spiral will cause allowable DTIs to shrink until 28% to
31% DTIs are the maximum borrowers will be able to find in the
marketplace. Anyone who thinks this credit crunch in mortgage lending
is a temporary phenomenon is sadly mistaken.

So far, despite the Government meddling, ratios are falling to their
historic norms. The one that isn’t is the price-to-income ratio. It is
being artificially held at over 5-times income with 5% interest rates.

With the Government manipulation it is difficult to predict where
pricing will bottom, but we can be a bit more certain about payment
affordability and DTI ratios. It isn’t likely that pricing will fall so
low that people are putting less than 25% of their income toward
housing. Many will chose to buy a larger house rather than save money.
When DTI ratios fall into safe zones, properties enjoy payment
affordability, and with stable loan terms of 30-year fixed-rate
mortgages, markets enjoy price stability — at least they are supposed
to — we have never witnessed the kind of market manipulation we are
seeing today. I don’t feel our prices are stable, and neither should

18682 PORTOFINO Dr Irvine, CA 92603 rear yard

Irvine Home Address … 18682 PORTOFINO Dr Irvine, CA 92603

Resale Home Price … $2,295,000

Income Requirement ……. $475,743
Downpayment Needed … $459,000
20% Down Conventional

Home Purchase Price … $585,000
Home Purchase Date …. 5/4/1995

Net Gain (Loss) ………. $1,572,300
Percent Change ………. 292.3%
Annual Appreciation … 9.5%

Mortgage Interest Rate ………. 5.01%
Monthly Mortgage Payment … $9,867
Monthly Cash Outlays ………… $12,150
Monthly Cost of Ownership … $8,630

Property Details for 18682 PORTOFINO Dr Irvine, CA 92603

Beds 4
Baths 3 baths
Size 3,663 sq ft
($627 / sq ft)
Lot Size 20,971 sq ft
Year Built 2005
Days on Market 5
Listing Updated 12/8/2009
MLS Number S598269
Property Type Single Family, Residential
Community Turtle Rock
Tract Custhttp://www.pwhitrow.com/blog/images/original/kirk-phaser.jpg


When I read custom Turtle Rock Estate, I am not offended; there really are custom estates in Turtle Rock.

I don’t know what to make of these property records. The owner bought back in the mid 90s, and only opened one other loan; a $1,600,000 HELOC! Realistically, when you look at this borrower’s behavior, I don’t think this money was borrowed and spent — unless this frugal owner suddenly decided to spend $1,000,000 renovating his property. It does have nice grounds….

If this owner can get this asking price, he stands to make a fortune.

48 thoughts on “High DTIs Equal High Default Rates

  1. winstongator

    This was the first clue that there was a bubble in SoFL. I saw people who made less money than my wife and I living in homes 4X or more expensive than ours in NC. There (FL), you also had home prices skyrocketing but no real improvement to their job situation. Now you have home values coming back down, and an even further deterioration of the job market (think a market based on home construction, real estate, and tourism). A lot of the 50% DTI families used helocs to create disposable income, but that only made their debt situation worse.

    Keeping everything else constant, a trend where buyers average 28% DTI move to 35% DTI roughly moves prices 25%. Now 28% DTI to 49% DTI gives a 75% price increase.

    Fannie & Freddie should only be underwriting conservative dti loans. Since they are now completely govt institutions, they should be able to cross check 1040’s to verify taxable income. There should be a govt website where a taxpayer should be able to verify values from their 1040 – have the IRS confirm them to a third party. A bank that doesn’t care about DTI, doesn’t care about an enhanced income verification system. House prices never go down, so they’ll just foreclose and make more money than from the payments.

    High DTI’s hurt everyone because they will cause a conservative buyer to be priced out of the home they really want. Maybe now that conservative buyer can pick that home up out of foreclosure, or distressed sale, and maybe that is how markets are really supposed to function. I’d rather see price stability from prudent lending/borrowing.

  2. AZDavidPhx

    Are realtors afraid of the word ‘barbecue‘?

    You see it in listing after listing, this BBQ business.

    Why not also say PVT rather than private?

    Or 4VR rather than forever?

    Can I pay 7% and get an upgraded listing that is slang-free and written with proper capitalization? Apparently, just being a 2M dollar house isn’t enough to cut it these days. Who would have thought that an estate could be turned into a double wide trailor with the mere flick of a pen(keystroke).

  3. IrvineRenter

    Foreclosures fall, but banks bracing for next big wave

    In November, for the fourth month in a row, the number of foreclosure filings in the United States declined — an 8 percent drop from October. But foreclosure experts aren’t celebrating. They’re bracing for the next wave of default notices, foreclosure auctions, and bank repossessions, which could hit early next year.

    “We don’t believe the underlying conditions have actually improved,” says Rick Sharga, senior vice president with RealtyTrac, which released its report of foreclosure trends Thursday. Instead, state and federal efforts to help homeowners work out their problem mortgages are delaying foreclosures, he adds.

    Even in a normal year, a third of these attempted workouts end up in default, he says. With high unemployment, tight credit, and depressed housing prices, this period will see much higher failures of workout plans, mortgage experts say.

    For the moment, the number of foreclosures continues to fall. In November, the total fell to less than 307,000, the fourth monthly decline in a row after peaking at 360,000 in July. That’s the lowest monthly level since February and, on the surface, represents particularly good news for Nevada.

    For the second month in a row, the number of Nevada properties receiving a foreclosure notice fell by a third. Las Vegas, which had topped the list of large cities with high foreclosure rates, fell to No. 5 in November.

    The problem is that these drops are artificial, brought about because Nevada recently instituted a mandatory mediation program for problem loans, Mr. Sharga says. That’s a potential boon for some owners of distressed homes. It may help those on the margin restructure loans that might otherwise default. Such programs are also helping to keep the foreclosure problem from spiraling out of control and sending home prices plunging again.

    The challenge is that many of these attempt work-out loans won’t work out, so foreclosure isn’t averted, it’s simply delayed. Of an estimated 7 million troubled home loans in this down cycle, 3.9 million will go through foreclosure, predicts William Campbell, a real estate adviser and head of RPC Group in Little Rock, Ark.

    “We’re going to see a long drawn-out housing recovery that will gradually dispose of these distressed properties over the next three years,” says Sharga of RealtyTrac, an online marketplace for foreclosure properties based in Irvine, Calif. “Modifications will help, but they won’t solve the problem. It’s too big.”

  4. AZDavidPhx

    The pending foreclosure numbers are all lies. The was a guy on CNBC last night saying that we can all sit back and enjoy the smooth sailing from here to the recovery on the horizon.

    Clearly this man is an expert and knows what he is talking about – why else would he be allowed to go on television and tell us what to believe?

    I am perfectly content allowing this person to do my thinking for me. It’s much more comfortable than thinking for myself and reading all these depressed negative Nancy’s trying to Talk Down the economy.

    No sir – it can only get better. Activity is up. Lots of cars on the roads. Lot’s of people at the restaurant I went to the other night. Naturally, it follows that if Americans have access to cars, cheap gas, and 13.00$ chimichangas – easy credit and liar loans are right around the corner. Get ready! Bottom is in!

    I am going to go get ready by finding a nice pile of sand that I can shove my head into.

    1. IrvineRenter

      “No sir – it can only get better. Activity is up. Lots of cars on the roads. Lot’s of people at the restaurant I went to the other night. Naturally, it follows that if Americans have access to cars, cheap gas, and 13.00$ chimichangas – easy credit and liar loans are right around the corner. Get ready!”

      If people really believed that, politicians would be very happy because the sheeple would be very happy. The sheeple are easy to please.

    2. Lee in Irvine

      “we can all sit back and enjoy the smooth sailing from here to the recovery on the horizon.”

      These are the exact kind of comments that were being said after the stock market crashed in 1929. There was a bear market rally that went on for several months after the crash … losses in the market were curbed, only to rollover and decline the next 2 years, and ultimately losing 90% of its bubble value.

      Who’s to say the same thing is not happening right now? I for one don’t want to live in the same dire circumstances of the 1930’s, but at this point in the cycle, with an economy treading water in unprecedented waters, to ignore the potential of another threat of such magnitude is just stupid … and something that happens way to often on CNBC.

      Everyone wants to hear good news, but to repeatedly do so without acknowledging the obvious, and then broadcast it on CNBC, is irresponsible and dangerous.

  5. Sue in Irvine

    I wonder what the inside of this house looks like.
    Why aren’t they showing any inside pictures?

    1. Geotpf

      Very good question. I doubt it’s in poor condition, although who knows. Maybe the person who took the pictures didn’t have keys to the house? Sometimes it’s that simple.

    2. thrifty

      There seems to be a slow but steady decline in the general quality of listings. I think it reflects a slowly growing sense of futility on the part of many realtors new to the business since 2000. I think the there will be an ongoing thinning of the ranks until this mess reaches its nadir several years from now. Then, I suspect, overall quality will begin to improve.

      1. MalibuRenter

        That decline is a CA thing. Here in Texas, you generally get good photos and coherent listings. I think it is being enforced by the local MLS.

  6. SoOCOwner

    Removing that ivy from the stucco with be a total nightmare. It has probably destroyed the home’s structure and caused rot or mold.

  7. lowrydr310

    What, no song today? How about “Welcome to the Jungle” as that’s what comes to mind when I see that backyard.

  8. AZDavidPhx

    The new drumbeat and smokescreen going up is JOBS! JOBS! JOBS!

    Like crackheads who just burned up their last rock – the masses are fired up demanding that politicians create jobs for them so they can go buy more stuff that they don’t need.

    Nobody wants to talk about fewer jobs and less debt like the good old days when one income supported a family. No, not these days – JOBS for everyone. Stupid? Incompetent? Willing to push papers around until you have expended every last ounce of energy from the prime years of your life? Well then, right this way into your new JOB where you will be treated like dirt and paid dick for all your hard efforts to cook the cheese burgers for your corporate masters.

    I vote for less jobs, less debt, less taxes, less shopping, more free time to do nothing.

    1. Geotpf

      One income can certainly support a family. But married couples these days want designer clothing, a big screen TV with 100 channels, dual SUVs, yearly trips to the Bahamas, a nanny and a gardener, private school for the kids, a house in a high priced area, etc. One income can’t pay for all that. But with one car, public school, K-Mart clothing, mowing your own lawn, etc., one can usually survive on one income easily.

      That is, single income families in “the good old days” got by with a lot less than dual income ones do today.

      1. matt138

        “But with one car, public school, K-Mart clothing, mowing your own lawn, etc., one can usually survive on one income easily.”

        I think many OC socialites would rather jump out of a one story window than live such a “substandard” existence. Future devaluation of the dollar will force families into this lifestyle, humbling to say the least.

      2. wheresthebeef

        When I owned, I did all my own yardwork. I also had a couple of neighborhood lawn mowing jobs when I was in high school.

        I have never ever seen “kids” mow lawns since I have lived in the OC (about 15 years). Is it against the law? Are the “professional” lawn services that much cheaper or better? Or will kids be ridiculed for doing manual labor?

        1. thrifty

          I mowed lawns and trimmed hedges (using a ladder to reach the top at times) when I was growing up to earn an allowance and extra spending money. I’ve wondered the same thing.
          I think a big problem for any youngster wanting to do that in Irvine and many other places is disposing of the cut grass, branches, leaves, etc. It has to be hauled away and disposed of -requiring a vehicle and paying dump fees. Where I grew up (south Florida in the 50’s and early 60’s) the trash truck came by weekly and picked up the rubbish which was left neatly piled next to the road solving the problem (the city was Coral Gables, very similar in most respects to Irvine). I delivered papers before and after school on a bicycle as well (not at the same time, fortunately). And sold Christmas cards and you-name-it door to door as well for personal as well as fund raising reasons.
          Makes me realize just how much the high density planned community concept involving zero lot lines, fences everywhere, newspapers delivered by car, etc., has limited the options for learning of basic entrepreneurship skills by kids. A shame!

          1. wheresthebeef

            I think another reason you won’t see kids doing yardwork in places like Irvine is that their parents probably see no benefit from it (even though jobs like that are invaluable). To the parents, mowing lawns or delivering papers won’t help you get into Stanford or Harvard. However, going to the SAT prep classes or having those extra hours to do homework might be just what is needed to get into the Ivy League.

            Modern society has morphed into something I really do not like. Bring back the good ole days.

          2. thrifty

            Thankfully, only if you believe an Ivy league school is the only answer. It’s always interesting to note where accomplished businessmen and women, academicians, attorneys, doctors, etc. have attended college, The vast majority managed to make it without the help of the ivy league. And most of them didn’t grow up in California. In my view, if there is one overriding necessity that differentiates So. Cal from the rest of the country, it is money. Everything is more expensive, particularly homes. This determines your child’s peers and school districts. Even if you like the neighborhood, many parents choose private schools – money, again. It is pervasive and long standing. Just look at the postage stamp lots where huge numbers of homes were built for WW2 veterans who wanted to come back to California after seeing it.

    2. Barren_Irvine

      Very nicely put. This also brings up another point where kids don’t have to grow up in day care while mommy and daddy are out making deals… I just don’t get this run like hell attitude. Also what I don’t get is DINK lifestyle. Is wearing Gucci and Versace so important that you have no time for kids. I work like hell myself but at the end of the day I don’t need to go to bar to take the stress out. Just playing with your kids make everything worthwhile.

      But I guess you can call me a old timer…

    3. less mortgage

      An obvious benefit of one earner in a household, if widespread in a community, is less afforibilty and hence less home price and less mortgage. There is no doubt that having two people in a household earning wages caused inflation way back then. However unlikely, to turn back the clock would be a very painful transition.

  9. newbie2008

    The DTI is really a debt service to income. With that the Feds can hide alot. Just make 70 year loans at 4.5% interest only $3919 per month on 1,000,000 loan/(million dollar house if nothing down). An income of only $130,000 needed for a DTI of 30%. May be I should get a Nobel Peace Prize or Nobel Prize for Ecomonics?

    I view the $1,000,000 divided by 130,000 = debt to income of 7.6 which is too far traditional formula of 3 to 4 times income is the upper limit of house purchase price.

    We can really stimulate the ecomony if the govt issues money –cash or tax rebate for home purchase, but that’s already being done.

    1. adeptic

      That is a fantastic idea! how about we create a special state where instead of “negative amortization”, we institute “negative property taxes”.

      So… in our new state, let’s raise taxes to -5%. The state would then pay this homeowner $4166/mo and he would then be able to spend the $247/mo difference and revive the state economy!

      ok… I got dibs on my share of the Nobel with you!

      1. matt138

        Didn’t the prez already get a prize for similar genius?

        Newbie2008 – the cash and tax rebates do not stimulate the economy. It postpones problems, postpones recovery, and spends our money in an inefficient manner.

          1. AZDavidPhx

            They were starting to do 50 year mortgages right when the bubble popped.

            Makes just as much sense as 500 year payment plans to me. Why stop at 50? Just let the borrower pick his loan term; call it ‘Pik-A-Term’.

          2. adeptic

            well… as the saying goes…

            you can pick your friends, and you can pick your nose…

            but you can’t pick your friend’s mortgate terms!


  10. Joann

    Yes, 20% down and 50% DTI now is a standard mortgage product, but when I was working with loan officer at a model home office this weekend, even though I clearly stated that I will go 15 years with 30% down, the loan agent remaindered me a couple of times for a chance to qualify 10% or even 3% down payment program.

    While government keeps pressuring banks for easy landing and with super low interest rates, is this the beginning of another subprime scheme? What if rate goes down to 3%.

    Anyone know what is “DemoRuplictian”?

    Ans:A person has Democrats appearance with the Publicans’ policies but actually is a extreme politician.

    1. Geotpf

      The low money down loans are more profitable than the high money down ones, assuming they don’t fail. The interest rate tends to be higher, the fees are higher, and the amount loaned is higher. The banks don’t need the government to want to push them (although FHA does absorb their risk, which makes them even more profitable).

    2. thrifty

      Irvine Renter:
      Regarding the observation by Joann that

      “even though I clearly stated that I will go 15 years with 30% down, the loan agent remaindered me a couple of times for a chance to qualify 10% or even 3% down payment program.”

      Is there a good possibility that most, if not all, of these loan officer suggestions are because there is more money to be made by the officer (or his/her firm) at loan closing time by selling these more leniently-termed loans?

      1. zubs

        When the restaurant Islands asks “want some guacamole or salsa with your chips” they are upselling you…and all servers must ask this question or face the wrath of management.

        The same goes with loan officers…though they get the direct benefit of commission.

      2. IrvineRenter

        Subprime was notorious for back-end payments to mortgage brokers, so these brokers would often steer people into the loan that made the loan officer the most money.

    1. IrvineRenter

      Yes, I don’t think this house will sell for that price. It is difficult labeling houses WTF lately because someone goes out and pays the WTF price and makes it look OK.

      1. grabasnorkel

        “The lot is nearly 1/2 an acre.”

        LOL – well blow me down!

        Not directed at Chris, personally, but this part of the country (SoCal, specifically OC, more specifically Irvine) has its head so far up its ass it ain’t funny. It’s genuinely fun to see OC properly burn.

        “…and there shall be wailing and gnashing of teeth…”


    2. travis

      I agree. I see nothing about this property that makes it worth even $200 a sq foot. Turtle Rock is a nice area, but come on. Its not like you are looking at the ocean 1000 feet away from you. They have a view of a hill. Wow! This shows me once again Irvine has a long way down to go.

      IR. Your graph makes it seem like 2009 prices are similar to 2001. I dont see it. I was there in 2001 and new homes were selling in the high 300’s for 1800 to 2000 sf. Existing condos in the low 200’s. When I left at the beginning of 04, new home prices were in the 600’s. Seems like thats where prices at right now.

  11. Ochomehunter

    IR, I have not been posting here in a while but follow general economy. To say the least, I dont see any recovery. THere is some $4-$7 trillion in commercial RE debt due in 2010-2011 with no means to pay for it. Low foreclosures are the result of banks not letting the homeowner walkout by offering deals like fixed payment for 5-years to prevent writedowns, etc. One of the friends of mine got a $900/month 5-year plan on a $450K home in Palmdale when he tried to handover the keys to the bank.

    Proof is in the pudding, unemployment is very high and going to get worse. we got seasonal hiring by Retailers and some Govt. workers (US Cencus Burew) that skewed the data last month.

    Most AAA CDO’s and MBS are going to go sour.

    market will bottom when bottom chasers/flippers are wiped out. At the end of the day, one has to have a job to pay for mortgage, I see very nasty 2010 and 2011 waiting for all of us.

    1. IrvineRenter

      And after the waiting, they find a way to prop up prices to take away the benefit of our insight.

    2. AZDavidPhx

      Proof is in the pudding, unemployment is very high and going to get worse.

      Don’t worry – Obama is coming in with some roadwork jobs; pop the Champagne.

      At the end of the day, one has to have a job to pay for mortgage

      If you are unemployed, get out your shovel – we may need some ditch diggers too. We are going to save the working man.

      Stay tuned.

  12. AZDavidPhx

    Geotpf –

    When you get done wanking yourself, there is a good lecture here that refutes your designer jeans theory.

    I know I know – not as entertaining as Rush, but it is our responsibility to actually seek out opinion from people with educations every now and again.


    Please educate yourself so you can stop looking like a fool on here every day.

    1. whatever

      She says that taxes are up 25% in the period in question, but this only assumes one person makes more than the other. If both are about the same, the tax bite is higher (marriage penalty).

      Everything else is optional – you can buy a smaller house, or rent, or not buy certain things. Taxes are paid no matter what.

      1. AZDavidPhx

        Everything else is optional – you can buy a smaller house, or rent, or not buy certain things. Taxes are paid no matter what.

        It was just as optional in 1970 as it was in 2001.

        Are you arguing that the inflated bubble house prices are some function of a free market?

        One thing she did miss was the zero-down mortgages, but she did hit the low interest rates right on the head.

        Also have to bear in mind that this lecture was given right as the economy was beginning to unravel and that the premise of the lecture was how dual income households have made it economically riskier for the middle class as a whole.

  13. tnye

    I live fairly close to this house and I’ve been to several houses in The Highlands.

    Let me tell you something. This house is downhill from the two tile roofed monstrosities just a house up the hill. Also, I don’t think this house has a view.

    The lot is big, bug a big chunk of it is hillside.

    Take a look at the map. This house is at the wrong end of the cul de sac, no view, against the mountain with a big, useless lot and almost zip of a chance to add square footage since The Highlands are currently very opposed to 2nd story additions on account of the two Tiled Monstrosities.

    I figure that a house on that street, with a view, will run at most $1.5MIL in this market. Those homes have beautiful views, real nice lots and very good layouts.

    But, this home, with all that ivy and those dark views makes me think that a bunch of Norway Rats must have eaten the common sense of the owner.

    $2.3MIL? No way. These people are nuts.

  14. patientone

    As mentioned by IR above…

    These truly WTF!!!!!!! prices are becoming less and less ridiculous because so many of these places are actually being purchased at or near the list.

    WTF people!!!!!!!! Get a clue!

    Sorry just had to get that off my chest.

    1. some buyers

      Some buyers assume that if a house is listed for an “x” amount, then it must be worth that much! The only check would be a bank appraisal but with the market being erratic and in transition as it is now, it’s not hard to find a comp whether on the high side or the low side ($$ wise) in a neighborhood.

  15. AZDavidPhx

    I understand that it’s a commonly understood acronym but it seems out of place.

    I know it is knit-picking, but the commissions that these agents are collecting is a lot of money for what I perceive to be some pretty lousy half-ass work. If they hired high school students at 7.00$ an hour then I would “get it” but 6% on a 2M piece of overpriced property is a nice amount of change.

    I also know about the character limit in the MLS, but look at the crap filler that they put in like:


    I would say throw out the fluff, like the above useless statement and don’t use acronyms and slang.

    As we know, it’s all about image.

  16. thrifty

    Who is responsible for paying the property taxes on REO. And are they usually paid on time by whoever is responsible?

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