Thread: 30 year fixed rate Mort: Is this the end?

This combined with the "SAFE" act which threatens to severely limit seller-financed sales isn't going to help the housing market any. I think it's going to force RE investors (especially flippers) to get much more creative. I also think RE investors as a whole need put forth a voice for their own interests.

I'm sure mortgage brokers and bankers have plenty of lobbyists and organizations putting forth their point of view while real estate investors may only have their local REI association. I submitted my thoughts during the SAFE act comment period and may have even posted the link on this forum...gotta make our collective voices heard or deal with the poorly thought-out legislation that will otherwise ensue.

As someone who wants to buy a house in a few years I think this is great. I might be able to buy a nice home with 150k cash by then.

I am sure if I was into real estate I might have a different view.

I'm not sure the govt is going to totally get out of mortgages.

Perhaps they will.

I do think that the view of "every American should be able to own a home" is gone, from a congressional POV (this view was promoted by many congressmen/women on both sides of the aisle a few years ago).

Used to be, you saved for years, got your 20% down, and found a house that fit your budget (and that the lenders thought you could handle). That worked pretty well, I think. We still had housing bubbles and blow outs, but they were regional, or generational (e.g., boomers moving as they aged).

With the escalation of home prices, and wacky mortgages, and over-extended credit (tying the loan more to the increasing value of the house, rather than the borrowers ability to repay), all of this went out the window.

So what we have now is almost a third of home loans don't even cover the value of the house-- they're for a lot more. Some banks have held on to their foreclosures to keep their balance sheets looking healthy, but this can't go on forever (these banks have been hoping that the market will clear out/come back, so they can then sell and get more for their money). Not all banks/lenders have done this-- many have dumped (or did dump) as soon as they foreclosed back in '09 and '10.

We are in uncharted waters here-- no one knows how long this will take to clear up, or how to do it. Banks are scared to loan money (with good reason!), and borrowers are scared to sell, for fear of being underwater.

I haven't seen the number of personal bankruptcies and "strategic defaults" in the past 3 years, but I suspect they are much greater than in prior years (anyone got any data on this?).

Lots of smart people have been trying to work out a solution to this. No one seems to have one that is workable, without having some serious downside, somewhere.
Sorry to sound so bleak. Not in my nature. I sure would appreciate a different POV on this!

-Russ H.

Well, not that uncharted... the rest of the world lives like that, without their governments having a secondary market for mortgages, the banks ask for 30%+ downpayment. Shorter repayment time.

Back where I am from, the typical mortgage required 30-35% down, 15 years amortization.

We may be headed in that same direction.

In the meantime, higher rents will probably be the norm, as banks that are not selling will probably hold the properties and get some cash coming in... and without buyers, prices will remain flat or trend lower. Add municipalities and counties needing money and raising taxes, that means that owning is more expensive. When owning is expensive, rents trend upwards. Right?

Originally Posted by andviv

Well, not that uncharted... the rest of the world lives like that, without their governments having a secondary market for mortgages, the banks ask for 30%+ downpayment. Shorter repayment time.

When owning is expensive, rents trend upwards. Right?

Well, that's something I hadn't considered.

I can always count on you, Andviv, to look at it from a different (and positive) perspective.

Besides driving value/sales prices WAY down (think, oh, 30% more), this could also have the effect of making the market a better place for RE investors, since they would be more likely to come up w/creative financing.

The offset remains, though: People in subdivisions w/identical houses have *radically* different loans on them. One guy who has lived there for 40 years might own it free an clear. Another who bought it 20 years ago for $50,000 might owe 10 grand.

And the family that bought it for $305,000 in 2007? When you can buy a house next door (identical) in foreclosure for, oh, $105,000?

I'm thinkin' the family is looking at moving. And the bank might be looking at a write-down.

Pity this is the solution, but as I've always said: Look for the rules to change.

Then figure out how to profit by them.

-Russ H.

Originally Posted by Russ H

I do think that the view of "every American should be able to own a home" is gone,

I think that is good because maybe some people don't want to own a home ... from my perspective, it forces you to pay perpetual rent to the state government in the form of property taxes. I can understand how some people want to stay "off the grid" - renting seems less obtrusive and less stressful, although via "flow-thru" the govts still get their share.

I guess the corporation-owned property, renting back to individuals, may have a better chance to profit in the long run...

McMansions Rental Company owns a few McMansions. This company takes care of major maintenance, taxes, etc. Russ McDuck wants to live in a McMansion but does not want to deal with the hassles of owning. Now he is the perfect client for a company like this.

This company probably has more tax breaks, better leverage with local government, and better ways to handle the potential raising local taxes, making it viable. This company could offer long term leases so its clients can be set for longer periods of time, or take a short-term approach, which may be ideal for those that want to spend parts of the year in different areas.

If I (along with millions of other Americans) had only known what was going to happen to the housing market the last few years, I would have GLADLY rented instead of owned the last 5 years...(LOL famous last words in the housing market right?). If I had, I wouldnt be upside down on the first 2 properties I ever purchased, although granted one is only barely.

My GF and I were just talking about this stuff the other day...regarding how much MONEY we could have saved the last 2 years if we had been renting instead of owning a home which continues to depreciate here in Northern NJ. I am fortunate to be in a position where I can ride this out and grin and bear it right now, but it really sucks to think about. (I know I personally could have put aside probably $50,000 just in savings had I done things differently the last few years).

Live and learn though right? I was proud to purchase my first home at 23 and still hold my head high about it today as it wasnt easy. It just turned out that it wasnt the "smartest" thing I could have done fresh out of college, lol. The real-estate market is definitely changing as Russ said. Its going to be interesting to see how this all plays out in the years ahead.