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Thread: Friends in foreclosure? People you know... ?

  1. #1
    Vulture of The Western World Eric's Avatar
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    Friends in foreclosure? People you know... ?

    Reading about the recent huge uptick in foreclosures got me thinking about the situation a bit and it occurred to me that I personally know at least four people facing foreclosure - not random people, good friends and family, etc.

    That, to me is, pretty shocking. Three years ago I had never even met someone facing foreclosure. I'd only heard about it - and pretty much considered it an issue for poor/low-income people and so on.

    The people I know facing foreclosure are (or were not) poor/low-income people. They are all educated/professional people. There are different reasons for each of their situations, but again, what's striking is how this cancer is affecting the middle and upper middle classes.

    So I'm wondering whether my experience on this is similar to what you guys are experiencing. Do any of you know people facing foreclosure or very serious financial problems related to the housing market, etc?

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    Eric,

    It's one heck of a mess. And like the Carpenter's famous song I think "We have only just begun" to see the foreclosures. Unfortunately many more are on the horizon.

    I remember looking at houses back in 2000. Everything I was interested in was selling as soon as it hit the market (so fast you could not even get a contract on a house before at least three of four families already beat you to the punch). When I was looking the average 3-4 bedroom houses ranged in price at around $220,000 to $270,000 in neighborhoods I could afford. For me this was obtainable. However the prices for these houses suddenly went to $300,000+ then $400,000+ then $500,000+ then 600,000+. I decided to step back and let the lemmings buy these overpriced homes (I knew the bubble was going to burst the surprise was the bubble lasted longer than I expected). I realized that most people's salaries were not increasing but housing was skyrocketing and I saw lending institutions giving loans to many people that were well beyond what they qualified for not to mention some of them were plain and simply risky financial propositions. A sure sign of a coming bubble that was going to burst.

    So I sat back with no intention of buying a home these last few years. Currently I still can't afford a home in these once affordable areas yet I make what is considered a good salary. Prices have fallen but only back down to around 2006 levels where I live. Another two or three years they may be down to 2000 year prices. Even then, I still don't think I'll buy. It's much easier renting, you don't have to worry about property taxes and upkeep (homes suck more money out of your wallet than cars do). And if you have problems in a given neighborhood (neighborhood turns bad) you can just pickup and leave when the lease expires.

    I have empathy for these people who were duped into buying homes well beyond their means, but anyone a few years back with a clear vision knew this bubble was going to burst. Now that it has burst a lot of good people are getting clobbered financially - some may never recover.

    In the end only buy what you can afford or better yet what you can pay for up-front. If most people had done this, there would have been no skyrocketing prices and there would be no foreclosure crises right now.


    ...

  3. #3
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by Disco Man View Post
    Eric,

    It's one heck of a mess. And like the Carpenter's famous song I think "We have only just begun" to see the foreclosures. Unfortunately many more are on the horizon.

    I remember looking at houses back in 2000. Everything I was interested in was selling as soon as it hit the market (so fast you could not even get a contract on a house before at least three of four families already beat you to the punch). When I was looking the average 3-4 bedroom houses ranged in price at around $220,000 to $270,000 in neighborhoods I could afford. For me this was obtainable. However the prices for these houses suddenly went to $300,000+ then $400,000+ then $500,000+ then 600,000+. I decided to step back and let the lemmings buy these overpriced homes (I knew the bubble was going to burst the surprise was the bubble lasted longer than I expected). I realized that most people's salaries were not increasing but housing was skyrocketing and I saw lending institutions giving loans to many people that were well beyond what they qualified for not to mention some of them were plain and simply risky financial propositions. A sure sign of a coming bubble that was going to burst.

    So I sat back with no intention of buying a home these last few years. Currently I still can't afford a home in these once affordable areas yet I make what is considered a good salary. Prices have fallen but only back down to around 2006 levels where I live. Another two or three years they may be down to 2000 year prices. Even then, I still don't think I'll buy. It's much easier renting, you don't have to worry about property taxes and upkeep (homes suck more money out of your wallet than cars do). And if you have problems in a given neighborhood (neighborhood turns bad) you can just pickup and leave when the lease expires.

    I have empathy for these people who were duped into buying homes well beyond their means, but anyone a few years back with a clear vision knew this bubble was going to burst. Now that it has burst a lot of good people are getting clobbered financially - some may never recover.

    In the end only buy what you can afford or better yet what you can pay for up-front. If most people had done this, there would have been no skyrocketing prices and there would be no foreclosure crises right now.


    ...
    Hey Pete,

    Yeah, I remember all that like it was yesterday (and it almost was). I think I told you once that I bought (when I was still single, before I met Jill) the house in Sterling circa '98 for $170k. It was a typical first-time/starter-type of place; older, smaller, not the best neighborhood, needed some work, etc. Within four years the same houses were almost all well over $300k, with an annual appreciation rate around 25-30 percent. Had I waited another two years, no way could I have afforded that house.

    On renting: You have some good points; and when you think about it, a homeowner never really "owns" their place anyhow. Even if the mortgage is paid off, you will always be forced to pay a mortgage to the county in the form of property taxes. So, in effect, you're renting albeit with all the hassles you mention about legal ownership.

    PS: Here's a story for you re foreclosures: My sister has this place in San Diego, near the beach (but not on it). It is very small - less than 900 sq. ft. - and old (1940s) with just one bath. Guess how much in hock she is for this POS?

    $625,000

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    I have a realtor friend that is facing a forclosure. He is one of the few honest realtors out there. He has been helping me hunt for a house for over two years. Two years ago, the brakes were just beginning to set on the overheated ashpot real estate market. I told him that I was patient and would wait for prices to drop. I almost got into 3 deals that I backed out of due to a little voice telling me that the drop wasn't over. I'm glad I did. It was because of his big blindspot regarding his own market that I almost faced financial ruin.

    Prices are returning to 2003-04 levels here. I'm not sure that in FL if they will drop much more if any.

    I feel bad for my friend as he is going to face foreclosure soon. The real estate market is nothing what it used to be (although bottom feeder homes are selling well). He has lost substantial income and has been forced to cash out his 401ks, etc.

    I hope for his sake that he can sell out before the bank takes everything he has.

  5. #5
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by swamprat View Post
    I have a realtor friend that is facing a forclosure. He is one of the few honest realtors out there. He has been helping me hunt for a house for over two years. Two years ago, the brakes were just beginning to set on the overheated ashpot real estate market. I told him that I was patient and would wait for prices to drop. I almost got into 3 deals that I backed out of due to a little voice telling me that the drop wasn't over. I'm glad I did. It was because of his big blindspot regarding his own market that I almost faced financial ruin.

    Prices are returning to 2003-04 levels here. I'm not sure that in FL if they will drop much more if any.

    I feel bad for my friend as he is going to face foreclosure soon. The real estate market is nothing what it used to be (although bottom feeder homes are selling well). He has lost substantial income and has been forced to cash out his 401ks, etc.

    I hope for his sake that he can sell out before the bank takes everything he has.
    That's a sad story.

    Even more so, because it's not uncommon these days.

    The other shoe that's likely to drop soon is defaults that happen not because the borrower was "sub prime" but because the borrower with formerly good credit and a good job has lost his job. Unemployment is pushing 20 percent.... and that is going to have huge repercussions on the housing market...

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    Quote Originally Posted by Eric View Post
    Yeah, I remember all that like it was yesterday (and it almost was). I think I told you once that I bought (when I was still single, before I met Jill) the house in Sterling circa '98 for $170k. It was a typical first-time/starter-type of place; older, smaller, not the best neighborhood, needed some work, etc. Within four years the same houses were almost all well over $300k, with an annual appreciation rate around 25-30 percent. Had I waited another two years, no way could I have afforded that house.

    I'd bet your old place was as high as well over $500,000 when the market was at its peak. There were 4-bedroom 2 car garage places not too far from your old house in Ashburn and Potomac Falls that were $200,000 (new) in 1995-1996 that at the peak in 2006-2007 were as high as $800,000 to 900,000. That's a price quadruple in about 10 years.



    Quote Originally Posted by Eric View Post
    On renting: You have some good points; and when you think about it, a homeowner never really "owns" their place anyhow. Even if the mortgage is paid off, you will always be forced to pay a mortgage to the county in the form of property taxes. So, in effect, you're renting albeit with all the hassles you mention about legal ownership.

    Especially with the recent Supreme Court eminent domain ruling where a local government can grab anyone's property for public use or for what they claim is the "public good". Translation if some corporation has some local Government bureaucrats in their back pocket they can take away any person's property in that local juristiction and claim it's for the "public good" and pay that person peanuts for his/her own private property.



    Quote Originally Posted by Eric View Post
    PS: Here's a story for you re foreclosures: My sister has this place in San Diego, near the beach (but not on it). It is very small - less than 900 sq. ft. - and old (1940s) with just one bath. Guess how much in hock she is for this POS?

    $625,000
    Wow! That's the kind of debt is mind blowing for a place of that size, it's almost a form of slavery - being so far in debt. However I can believe it since being close to the beach in the San Diego or Los Angeles area is very pricey. And I am sure her real estate tax is mind blowing too. Has her place seen a big drop in net worth in the last two years?

    A friend bought a small 3 bedroom house in the San Diego area back in 1994 that was one block from the beach in La Jolla (house had view of the Pacific Ocean). Great area, it too was an older house with not much space (he, his wife, and son liked the beach so he felt the comprimise of less space was worth being close to the beach). He paid under $200,000 for the place back in 1994. Last time I spoke to him in 2002 his place was worth well over $1.2 million. I am sure at the peak two years back his place was probably worth over $2 million.

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    Quote Originally Posted by Eric View Post
    That's a sad story.

    Even more so, because it's not uncommon these days.

    The other shoe that's likely to drop soon is defaults that happen not because the borrower was "sub prime" but because the borrower with formerly good credit and a good job has lost his job. Unemployment is pushing 20 percent.... and that is going to have huge repercussions on the housing market...
    I know. That is frightening. To tell you the truth for the people who overpaid for their house, I don't really have that much sympathy (except for my friend..). There were a lot of people who did that and then decided to walk, whether or not they have "good credit." I say, what the hell were they thinking? Their parents paid $40,000 for a new house and now they are splitting with $300k. The dollar didn't devalue that much!

    The only people that deserve the bailout are the people who lose their jobs. Fuck the banks, fuck the idiots. Of course, the money will have run out by then. This is really making me an angry SOB.

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    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by swamprat View Post
    I know. That is frightening. To tell you the truth for the people who overpaid for their house, I don't really have that much sympathy (except for my friend..). There were a lot of people who did that and then decided to walk, whether or not they have "good credit." I say, what the hell were they thinking? Their parents paid $40,000 for a new house and now they are splitting with $300k. The dollar didn't devalue that much!

    The only people that deserve the bailout are the people who lose their jobs. Fuck the banks, fuck the idiots. Of course, the money will have run out by then. This is really making me an angry SOB.
    Middle class people are caught in a great pincer. One the left, static, or declining, wages. On the right, a system that devalues the currency (through the Fed) and which thus puts pressure on people to "invest" in things like real estate as a hedge against that inflation, as a way to protect what income/assets they do have.

    I don't have much sympathy for the "flippers" who were trying to make a buck off of houses and who counted on the ever-rising bubble to help them do it. It was a risk to take, just like any other business endeavor - and losses are the other side of profits.

    But I do have great sympathy for people who got sucked in to buying at too high a price (not everyone is a math whiz or comprehends the Fed or the boom-bust cycle of our economy), or who simply are losing (or have lost) their ability to make payments due to freeeeeeeeeeeeeeeee trade job killing and so on.

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