Some homeowners struggle to keep up with adjustable rates (mortgages)

[RamboLiberal]

http://www.usatoday.com/money/perfi/housing/2006-04-03-...

For 45 years, Robert and Lorraine Brown have lived in their ranch-style home in Florissant, Mo. One of their four children was even born there. But for the past eight months, the couple have been locked in a sleep-wrecking race to keep up with their rising mortgage bills. They've switched to cheaper phone service, cut back on groceries and sometimes put off ordering medicine.

When they refinanced their home two years ago to pay off some bills, Robert, now 78, was working as a deliveryman. But his employer went out of business last April. Now he and Lorraine, 72, a retired nurse, are both seeking work. The rate on their mortgage has jumped from 7% to 10.5%.

<snip>

They feel alone, but they're not. America's five-year real estate boom was fueled partly by a tempting array of cut-rate mortgages that helped millions of Americans qualify for home or refinance loans. To afford soaring home prices, many turned to adjustable-rate and other, riskier loans with low initial payments. The homeownership rate hit a record 70%.

Now, the real estate market is cooling, interest rates are rising and tens of thousands more Americans are starting to have trouble paying their mortgages. Nearly 25% of mortgages — 10 million — carry adjustable interest rates. And most of them went to people with subpar credit ratings who accepted higher interest rates, according to the Mortgage Bankers Association.

"Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans," says Chris Krehmeyer, executive director of Beyond Housing, a non-profit group that offers homeownership support services in St. Louis. "That's significantly higher than in years past, because the ARMs are coming home to roost."

[mdmc]

1. it sure ain't easy

[MercutioATC]

2. Simple rule when buying a house:

If you can't afford the fixed-rate payment, you can't afford the house.

I can sympathize, but I have a hard time justifying the actions of people who bought more house than they could afford on low "teaser rate" ARMs. Unless they were planning to sell the house within a couple of years or rates were dropping, it was a foolish thing to do.

[BOSSHOG]

3. I'm at a loss on this story

ARMS SUCK, no doubt about it. But this couple has lived in the same house for 45 years and still has a mortgage? Even if you are planning on selling the house in a few years, I would advise avoiding ARMS; selling a house ain't a done deal. Push your cash on the principal, it is a great way to save money.

[JuniperLea]

5. A lot of people have taken equity out

I never understood this either. Get the damn thing paid off, then your cash flow goes up like madness and you have the cash to SAVE and do other things!

[converted_democrat]

27. I know MANY people that have taken their equity out..

I never understood it.. Especially when they turned around and used the money to buy vacations, cars, and boats.. I simply don't get it..

[sendero]

52. I do..

... it goes something like "a fool and his money are soon parted".

[barb162]

70. That's just it... some people have eyes bigger than their wallets

It's hard to feel sorry for them when all they do is spend, spend , spend. That sounds like my sister-in-law. Her idea of a financial cushion is 2 dollars. But I can't make the same analysis from the people in this story

[phylny]

82. We've had to take equity out to pay for our daughter's college education.

Of course, we have hundreds of thousands of dollars of equity, but we're still not happy about it.

I didn't want her to have loans when she graduated, and we're working as hard as we can as it is.

[barb162]

69. They had to... to pay off bills according to the story

[Dhalgren]

8. hey took the mortgage out on their house two years ago, for

the cash. It was one of those deals where the salesman really suckers the homeowners in with the idea of "cashing in on the housing boom". It sad when people get rooked...

[SoCalDem]

29. Modern loansd are MAGIC.. they turn houses into ATMs

When we re-fied last year they were totally surprised that we did not want a refi for what our house was "worth"..we only took what we needed for a roof, new AC, a yard bldg and some paint.. We left over $200K in equity...and we re-fied for a fixed rate..

People all over the place have taken out everything and then some to pay off credit card bills, buy cars and help their grown kids.. It's not surprising to see old people with mortgages. What they should have done was to file for bankruptcy when they still could, sell the house and get a cheaper place.

[MercutioATC]

36. Good for you!

I know plenty of people who have taken out more than they need on a refi. Hell, it's tempting.

Sincere congrats for not succumbing.

[barb162]

71. The surprise of the lenders in your case tells me that the

refis for the other many people are going to be hitting them in the face soon. There is SO much greed

[JuniperLea]

4. I totally agree

My first rule of thumb has always been, "Live Within Your Means" and it has served me well.

So many people get in over their heads and then some even blame the lender because they can't afford what they agreed to pay.

[BOSSHOG]

6. And those you refer to

don't know how much they owe and they don't know how much (if any) they have in savings. Probably my number one hobby is money management. Thank God!

[Roland99]

12. Agreed. Caveat emptor.

[LostinVA]

24. 5.5%, 30-year fixed...

[Lenore]

30. 5.2% 30 year fixed...

We bought down a few portions of a point...

[Karenca]

31. 5.87 30 year fixed.

You did really good!

[VegasWolf]

48. 5.0% 30 yr Fixed! nt

[MercutioATC]

33. 5% 15-year fixed here...

Yeah, I could have gotten a 3.5% ARM or an interest-only loan and bought a different house. I could have just bought twice the house I've got with the same 5% loan. I was retiring in 15 years (10 years, now) so the term worked for me. I bought a house that I had no trouble affording and insisted on a fixed-rate loan.

I realize that not everybody has the same options, but if you're buying a house you intend to stay in and interest rates aren't falling, I can't see responsibly agreeing to an ARM.

[LostinVA]

45. Exactly -- I qualified for more house, but I got the house I needed

Not the one I wanted. I wanted to also be able to pay for utlities, mulch, food, etc.... not have all my $$$ go to the house payment...

[LeftHander]

91. 4.125% 15 year fixed.

in 2003 on a very SMALL two bedroom/1 bath home built in 1920...

Never been very rich...or do I make big salary (one year I did)

Cashed in a IRA to make downpayment (all 12k of it), was renting at the time and told wife if we are going to ever buy a house we have to right now. that was when the rates were below 5% We locked in and bought our little bungalo for the three of us. Being in our 40's we took the 15 year to get it paid down quick and build equity fast.

Smartest financial move I ever made....and probably ever will make. Looking the value we got out of that transaction outwieghs the money I paid in taxes on withdrawl.

[lovuian]

7. This is the trap Bush has set for Americans to get their homes

and for on the cheap... Americans wealth have been their homes...what will be tricky is how high will Interest rates go???

The Banks have made borrowing money easy ... refinance...

[MercutioATC]

35. This isn't Bush's fault, it's simple economics.

There's plenty to blame Bush for. We don't need to resort to blaming him for ARMs or a housing bubble...

[FloridaPat]

9. But the economy is in great shape. I'm sure these two 72&78 yr olds

will have no trouble finding jobs. Especially good paying jobs.

Another question is, how did two people with jobs and ss and no mortgage get enough bills to decide to refinance their home? And why didn't they just get an equity loan? And why didn't they remember the last time a repub took over the White House and the interest rates went to 20+%?

[barb162]

72. New cars? helping the kids? I wisah the story would have

mentioned why or what specifically it was they were doing that for at their ages.

[madaboutharry]

10. Paul Krugman wrote a NYT piece

a couple of years ago telling everyone to lock in, that they were going to get sucker punched with these ARMS. I can't understand why people feel for adjustable rate mortgages in the first place. It always struck me as a scam, or at the very least a big gamble.

[BlueManDude]

17. The problem is for these folks in trouble

that it's unlikely they'll be able to re-fi at a decent locked rate. Unless of course their income is healthy - but of course if their income was good they wouldn't be having this problem to begin with.

i've been telling everyone for 5 years to lock in a the best rate they can 9even if their credit is bad) and refi later if they can.

[CAcyclist]

21. I remember when I was looking at condos

back in '98 or '99 and I didn't end up buying - I'm still renting, by the way. My agent tried and tried to convince me to get an ARM but I absolutely refused, just as I absofuckinglutely refused to get involved in a bidding war. Well, that meant that the condos I could afford were crappy, so I didn't end up buying. And those same crappy condos are now 2 or 3 times as much and I still wouldn't buy one if I could afford to, which now I can't. We'll see when this market corrects if I made the right choice, but at least I don't have a millstone around my neck like these people do.

Some people are just so desperate to get in a house, they'll compromise especially when their agent makes it sound so reasonable. I do believe some of the blame has to go to the realtors and other people pushing these loans.

[MercutioATC]

37. I think it's an issue of buyer awareness.

If you go to a car dealership, it's not the salesman's responsibility to evaluate your finances and only sell you a car you can afford. It's his job to sell you the most expensive car you can get financing for. There's nothing wrong with that.

It's the buyer's responsibility to know what financing options (and price) they're comfortable with and stick to their guns, even in the face of temptation.

Realtors get paid based on the sale price of the property. Unless they're specifically buyers' agents, they also have the fiduciary duty to get the highest possible price for the seller, even if they're representing the buyer (state laws vary). Of COURSE they're going to suggest a loan that allows more people to qualify. Again, that's nothing wrong with that. It's the buyer's responsibility to know what they can afford and not to exceed that purchase price.

[CAcyclist]

62. She WAS ostensibly my buyer's agent

Basically what you are saying is that people can be con artists and the public has no recourse. And it's not about suggesting - it's more like hard-selling and basically lying. And she deliberately tried to induce me to get into a bidding war after I adamantly opposed doing so.

I think what also needs to be looked at is the lack of competition in the real estate field and the real possibility of collusion.

[MercutioATC]

65. It's not their responsibility to make financial decisions for you.

Were you paying her comission, or was the seller? If the latter, she may have been showing you condos, but her fiduciary duty was still to the seller. If the former, she still doesn't have the responsibility to make financial decisions for you, just to negotiate on YOUR behalf, not the seller's in terms of the real estate contract. She has absolutely NO responsibility when it comes to financing.

Bottom lime? Hard-selling only works when you let it. If somebody feels they're being coerced by a salesperson of ANY type, they always have the option of taking their business elsewhere.

[barb162]

74. Well said, but people don't seem to be taking responsibility

A lot of people mortgage themselves to the hilt to get the biggest house they can. It's just acting crazy.

[superconnected]

95. and a lot of people get hit

by predatory lenders.

Most people don't buy houses that often. They probably really do feel that what ever someone tells them is what they are going to be told by all lending firms.

[BlueIris]

85. For the record...I think you made the right choice.

Even as someone who doesn't have any interest in being a homeowner like, ever--GOOD LORD. The ARM concept sounds insane to me, especially for the condo market you describe. EGH. So, good call. Somehow, I don't think you'd want the problem many of the 10 million who bought under these circumstances will be killed by next year.

[barb162]

73. Yes, he gave good advice. People look for those low initial

payments and just think well the rates won't rise. Yeah right.

[CrispyQ]

11. My sister & her husband refinance every couple of years

& spend the money on life style -- vacations, furniture, cars. I gasped when she told me this & I told her I thought it was crazy. "But the interest is deductible," she said. "Yeah, but you have no equity," I told her. She doesn't care. She gets her interest deduction & a lifestyle kick to boot. Comparing her Christmas tree from 2005 to 2004, I would say that they are starting to feel the pinch. In '04 the gifts overflowed from under the tree out into the room. In '05, they were all tucked under the tree. I think many people are going to realize the thrill of new furniture, vacations & new cars does not hold when the creditors are after you.

[JuniperLea]

13. And when people are finally forced to live within their means...

They get all boo hoo poor me about it, feel all deprived and put upon, and don't get the connection between their actions and their current situation.

[superconnected]

18. May I suggest you read _nickel and dimed._

[JuniperLea]

26. I've lived it;)

Great book! I was impressed by the author. She had guts to do what she did. Bush's "have mores" are the ones who need to read it. I've done my time buying bags of beans and rice to make ends meet And I still have the coin tin... my b/f and I went to a concert recently and cashed in our change before the show... it bought our drinks that night! It felt like splurging for sure!

[Ignis]

53. Seconded!

I keep buying copies of Nickel and Dimed and What's the Matter with Kansas to put in my library, but I keep giving them away to interested readers within a week or two of buying them! These are both great books to raise the consciousness of fence-sitting moderates or disinterested/disillusioned non-voters.

[CAcyclist]

22. That reminds me of a good book I read

the Tightwad's handbook or something like it. She was saying that you should do these things to scrimp and save all the time and not just when you are tight on money or you will feel deprived and hate the scrimping, but if you do it all the time as a statement or belief system - I forget how exactly she worded it, you won't have that feeling of deprivation.

Actually, that book didn't go far enough - she never discussed the huge cost savings of going without a car and riding a bicycle instead.

[MissB]

23. The Tightwad Gazette by Amy Dacyczn

[CAcyclist]

61. Thanks!

:hand:

[Demobrat]

16. And when they end up owing more on the house

than it's worth, the pile will get even smaller.

[barb162]

75. Your sister sounds like my sister-in-law. Spend, Spend!

I think she's nuts...she isn't happy if she isn't at the stores

[Joanne98]

14. In 2005 50% of mortages were ARMS! What a diaster!

Real Estate Agents who do this are going to HELL!

[slackmaster]

19. A lot of people are too young to remember the last cycle

The big wave of ARMs combined with a housing price bubble in the early '80s.

Next phase = Foreclosures and bankruptcies.

[AnneD]

28. They were called balloon notes..

most folks figured they would be out before the balloon payment came due or their income would be up....yeh, that caught a lot of people with their pants down during the last RE bust here in Houston.

[Tight_rope]

55. You are so right...

I live in Houston and my parents got caught up in that. Didn't know better. Lost the house and it tore our family apart. Friends have been trying to pressure me into buying a house for the past 3 years. Told them there are 3 things I will not succumb to do with pressure.

1. Have a baby!

2. Get a credit card!

3. Buy a house (That I know I can't afford on my own). I tell them renting has it's advantages. When shit breaks I simply call the leasing office and they send over the maintenance man.

[AnneD]

57. You're so smart...

those of us that went through the housing bust here in Houston learned our lesson. Ask your parents if they remember Dec of 83 when the unemployment section of the Chronicle was one page front and back? I should have saved it, no one believes me unless they lived here then.

[CAcyclist]

63. I remember the Bakersfield Californian created a whole section

for employment and career directions back then. I believe they were letting people post employment ads for free, too.

[dbackjon]

15. ARMs are bad news for all

Let's people think they can afford a bigger house than they really can, drives up home prices, putting affordable housing out of reach for millions.

[superconnected]

20. In my area, for many people, they were the only way to afford any home.

Of course in my area(entire half of the state) the housing prices are massively steep and the wages have been going down the last 6 years.

I know people who were in the computer industry who never found jobs back in after the early 2000-2002 layoffs.

I myself am making $15 less an hour than I was in 2000. And I am working far harder.

I didn't take an ARM, but I can certianly see how many people would if the bank told them that's all they would give them.

Some of these people are people who went for the biggest house they could get, but most are likely people who went for the only house they could get. I blame the banks for these. Walking into a bank is no different than walking on to a carlot when dealing with getting loans. Banks have their own interest at hand. They knew the bottom would fall out. Everyone knew that who picked up any financial paper over the last 6 years - but how many average americans read the financial section. And btw, it happened with 0 down, variable interest car loans too, but I consider it different, for the people trying to afford a house. I bet most poeple went into them honesty intending to pay reasonable rates when the interest went up, and the banks went in, only with the intent of taking back the property after raising the persons payments and getting all they could out of them till they could pay no more.

[barb162]

76. People should be reading the business sections

"...but how many average americans read the financial section"

Because they aren't they are getting hurt. If people want to be willfully ignorant of things that affect them, what can we then say about their willingness to be sheep and getting hurt? I knows a fair number of people like this. And a lot of them, you can't tell them anything! They don't want to hear it any more than SUV owners want to hear how they are pissing away gasoline

[Theodolite]

32. In a very few cases

an ARM was a better loan. It made sense to get an ARM if you would pay well above your minimum payment each month. In the past the ARM interest rate was much lower. Nowadays the ARM interest rate is barely less than a fixed rate. In the current environment, it makes no sense to get an ARM , your payments will not be lower. For most people who took out ARM loans, they will only make the minimum payment, which is no payment at all toward your home, but only rent paid to the bank. People say that renting is stupid because you are throwing your money away. That is exactly what happens if you get an ARM and only make the minimum payment. You gamble that appreciation will occur, nowadays though your house might actually depreciate.

[MercutioATC]

34. If rates are falling or you plan to move in 2-3 years, they can make sense

It's not the ARM that's the problem, it's the people who use the lower rate to buy more house than they can afford.

[slackmaster]

38. All except big banks

Generally a bad deal for the consumer, to be sure.

[Retrograde]

56. Not so fast...

We bought our first house in 1980 with an ARM initially at 12% (down from 17% a few months previously. Remember rampant inflation in the 70s?) and also had an adjustable mortgage on our current home. For the first one, it was the only way we could buy.

We found a way to make it work to our advantage: we based our payments on the highest rate. E.g., if the rate was lowered from 10% to 8% we continued paying at 10% since that was what we had budgeted for. And if the rate went up to 9% during the next adjustment cycle, we didn't notice. If the rate went to 11% we set that as the new payment level. Got the loan paid off early that way.

It is tempting, when rates drop, to go for the lower payment. But you have to pay one way or another eventually.

Taking equity out of a house for anything other than a catastrophe is something I just don't comprehend.

[customerserviceguy]

59. ARMs make sense

Only when interest rates are coming down. You had no way of knowing that in 1980, so you got lucky. I don't seem to remember ARMs being used to fuel the real estate inflation of the mid to late 1970's but they sure have been used to turbocharge the last rise in prices.

Your frugal planning for higher interest payments was quite smart, you were fully prepared for the worst. Most folks are just too stupid to think before they sign the dotted line.

[phylny]

83. Not bad news for us.

We have a 3.5% ARM, which will rise no more than 1% per year in 3.5 years from now.

We'll be long out of this house by then. We bought it a year and a half ago, knowing we would not stay here more than 6 years. Under these circumstances, it would have been silly for us to get a fixed rate mortgage.

[lumberjack_jeff]

92. Not always

http://www.bizjournals.com/dallas/stories/2004/03/15/ne...

An ARM should not be used to buy more house than you can afford, but in the right circumstances, an ARM can save lots of money.

I wish I'd refinanced with an ARM on my previous house (I sold within three years - I'd have saved several thousand over the fixed).

A fixed mortgage, particularly if you pay points to get a decent interest rate, is a conscious decision to pay more now to avoid the risk that you might have to pay it later.

[NashVegas]

25. Refinancing After 45 Years?

Curious. I wonder what the original mortgage was. Previous equity loan?

[No Exit]

39. Yeah! That's what I asked!

Yes, I feel for these people. But... 45 years, and the house isn't paid off?? I have a small equity loan, 2/3 of which I'm going to pay off today, b/c I'm sick of seeing its interest rate go up.

But my original mortgage was fixed rate. I wouldn't have wanted an adjustable rate mortgage, no matter how low it was at the beginning.

And, for crying out loud, after 45 years, I think even *I* would have the house paid off!

[Bridget Burke]

50. Yup--they've never had much money....

Perhaps they don't have much education, either.

So they deserve to be screwed.

[Misunderestimator]

40. Wow

7 to 10.5%? That's awful.

[Bridget Burke]

41. The Browns refinanced to "pay off some bills"...

The article doesn't say they were financing a luxurious lifestyle. Yes, they should have been smarter.

But they were suckered. Now, at 78 & 72, they are looking for work.

[lastliberalintexas]

47. I wondered if they were medical bills myself

Unfortunately that's what puts so many of our elderly in these situations. I'm glad you pointed this out- the sanctimony on this thread was getting old. Yes, some people refinance to maintain a lifestyle, but not all or even most. Most people ( about 70%, IIRC) file bankruptcy due to medical bills, many people go into massive credit card debt paying for medical bills, many people refi when they shouldn't to pay medical bills. Gee, I think I'm noticing a pattern there!

[lutefisk]

58. Many retired people also have very high property taxes...

I know of situations where an elderly widow lives in her family home that has no mortgage, but is paying higher and higher property taxes each year- a side effect of increasing property assessments. Many of these retirees living in modest homes find themselves paying $5000- $6000/year and more in property taxes. That could easily be one third to one half of what they receive in retirement income. On top of that, many of these homes have old oil furnaces...

[phylny]

84. We paid more than $15K in property taxes last year.

Our mortgage payment is NOTHING compared to that!

[shrike]

87. I know a woman with eighty acres of farmland

that's been in her family for years. Her taxes have gone up to $30K a year. She's selling.

But she's a Bushbot, so I can't feel too sorry for her.

[trogdor]

42. A cautionary tale.

Re-fi'ing to an ARM when fixed rates are only 5% is NOT SMART.

[Mithras61]

43. I suspect that their credit sucks...

That's the only reason I can think of to go with a 7.5% ARM when FRMs are at 5%.

My spouse & i just started looking at homes (we currently rent), and the first thing everyone wants us to do is go get pre-qualified for a loan. I already have a good idea of what we can afford and what I'm willing to pay for a home, and both values are below what we can pre-qual. I'm not into the bigger, fancier house in the ritziest neighborhood.

My in-laws used to sell real estate & I've seen too many folks that were house-poor and I won't allow myself to be one of 'em.

[lastliberalintexas]

44. Or they're old and the lenders wouldn't give them those rates

My grandmother bought a newer, smaller house after my grandfather died. She was lucky since she had the money to pay for the house outright, because the mortgage companies wanted to charge her 7% with perfect credit- and this was at the same time my husband and I refinanced to get 4.25%. They had a name for it and an excuse, but it was really just discrimination based on age.

[Mithras61]

49. That could also be the case, certainly...

but they refinanced in part to pay off other debts, which implies a level of difficulty in their financial lives. Bad credit because of inability to pay medical debts is not looked at any differently than bad credit for failure to pay credit card debts.

As to the situation with your grandmother, I can't really comment on it, because the mortgage companies have to take into account more than just the ability to pay today. They are looking in part at ability to pay over the life of the loan and the ability to recover the value of the loan in the event that life catches up with you (e.g. - disruption of income, loss of life, etc.). Further, they would have had to look at her credit, which may have been at least in part in her husband's name (this happened to my mother-in-law... it's not legal, but it does happen {at least in TX}).

[superconnected]

96. Wow, good thing to point out.

I had no idea there was an age discrimination.

[LostinVA]

46. You can get an FHA with bankruptcy on your credit

As long as it was discharged at least two years ago. My sister did that. You get market rates.

[barb162]

77. Exactly; the fixed rate mortgages were the cheapest in about 50

years about 2 years ago.

[Tight_rope]

51. Now who at DU didn't see this coming!...

[Gregorian]

66. And to think Alan Greenspan was crowing about ARMs.

I cringe just thinking about it. I had an ARM in the 90's, and it did me very well. There's no way in hell I would ever do that again. I know better.
The weird part is, I've got $61k of credit on one of my credit cards that is at 0% interest until next February. I only discovered it when I called about an unrelated balance, and the lady said I should take advantage of it, and that many people are using it to pay down their home loans.

Argh, I hate thinking about any of this. I went loan free from the first moment I had a chance. And with any luck, I'll never have to do it again.

Yes, I saw this coming. And I hate to think of how bad it's going to get. Americans should not have to fear the bank.

[davsand]

54. A LOT of people are gonna get hurt with this.

Predatory lending is how I view this entire ARM and interest only loan stuff. I'll grant you it is a matter of uninformed buyers, but what a lot of people maybe don't see in it is the impact the foreclosures are going to have on the real estate market as a whole. There are a LOT of those homes that were appraised at whatever value the lender needed to see in order to re-fi that loan. As a result a lot of this stuff will probably sell for less than what was loaned on it. A glut on the market of housing that is cheap is gonna bring down values on everything else.

Something else that comes into play here is the reality that if you are cash tight, you probably are not able to make the kind of repairs and do the regular maintenance that home ownership requires. That can also have negative impact on the resale value of your property. Essentially, you are gonna see a bunch of stuff on the market that is not only selling for less than was loaned on it, but it will be in rougher shape than other houses. It will sit on the market longer THEN sell for even less than what the bank/lender has invested in it...

This should scare everybody, however, this trend has been growing for a while now. I have not seen very many people out there talking about it in public, and that leads me to think that there are folks who KNOW how bad the real estate market actually is, and they know how much worse it will be getting--and they don't CARE.


Laura

[customerserviceguy]

60. I'm quite aware of the impact

that foreclosures are going to have on the market. I spent twenty-five years in the title insurance industry, and have seen every cycle come and go. There are reasons that things will even be worse this time:

1) The bust of the early 80's saw baby boomers still young and starting families, they provided a floor for prices of multi-bedroom houses. Now, they're pretty much done with raising their families, they can get by on a much smaller house than they could a quarter century ago.

2) The seventies' boom was supported by wage increases, the last one was not. It was propelled by declining interest rates, which got WAY lower than rates during the seventies. Climbing rates will have a monstrous effect on ARMs, that didn't happen in the early eighties, if you were locked in, and your family kept its jobs, you were OK.

3) Look around you, every house that has been built within the last twenty-five years was NOT part of the last bust. A goodly number of them will become foreclosures this time around.

When I got dumped from my last title insurance job in August, I predicted that the really savvy people would see the bust by Christmas, and just about everybody else would by Easter. So far, I'm right on track. I see massive hardship in real estate by Thanksgiving, and it will be painfully obvious. It will be good timing for November's elections.

[DavidMS]

64. Some of us will benifit

Finaly the real estate prices are comming back out of the stratosphere. Its bad for everyone who overextended and perfect for me as I will be able to afford my own place (finaly). I still feel sory for everyone who will loose out because they over-extended themselves, but at the same time they should either have worked with a financial professional with their best of intrests at heart or learned what an adjustable rate morgage meant in terms of risk exposure. I feel that much of the problem was a regulatory failure (politicians, the fed, etc should have and could have nipped this in the bud, but because they were paid off, in the minority, or cool aid drinkers).

[barb162]

81. How long do you think it will go on this time

[customerserviceguy]

93. I can see

it taking a few years to right itself, after the slide has come to an end. I can project a slide lasting about a year, to a year and a half, that pretty much takes us out to the end of 2007. The recovery of prices will start VERY slowly, and be unnoticeable until the summer of 2008. There will be heavy political pressure from the White House for the Fed to drop interest rates, so Bushco can have "things are getting better" numbers for November.

You're not going to have full recovery of prices to their 2005 level until incomes catch up to levels necessary to sustain those prices, and I don't see that happening within five years. The speculative boom that we are now seeing the end of only comes around every quarter century or so, as new home buyers who do not remember the last bust start bidding up the prices.

All this assumes that we do not tumble into full blown recession, like we did during the first Reagan administration. Then, it will take a LOT longer for the slide to stop, and the recovery to be noticeable. I hate to be in the position of advocating this, but it would go better for the Democratic Party if there is noticable hurting taking place within the middle class in November 2008. I suppose some with longer attention spans than those needed to watch a DiTech commercial might remember who got us into the mess, even if we're on our way out of it by the election.

All I can say is, I'm glad I have a job outside of the real estate industry right now. A recession could impact the company I work for (they make computer chips), but by the time this is evident, I might be able to get a title insurance job again during that industry's recovery.

[barb162]

78. I've been seeing the subject discussed in both the real estate

and business sections of the papers for the last few years.

[womanofthehills]

67. Building alternative homes

Where I live in rural NM, most of my neighbors have built their own homes and most of them are woman. Lots of earthships and straw bale. My house is passive solar frame but my boyfriend and I build a good portion of it ourselves. None of us have mortgages and the houses are very artsy and creative. A lot of us are also off the grid - no mortgage and no electric bills.

[SLCPUNK]

68. My wife and base our choices

As if only one of us had a job. We both have decent income coming in. But we plan our buying/spending habits as if we had half our income. It is a good safety net in case one of us were to be unable to work. But, more than anything it keeps us in line with reality. I refuse to over extend myself, and I have a very stress free life because of it. I know people who make more then us, spend twice as much working and have LESS.

[barb162]

80. That's very smart. It's a lot easier on the psyche to have money

stashed for when it's needed rather than always be spending like crazy.

[BlueIris]

86. Good call. Have you read "The Two Income Trap"?

Came out in 2004 and is a nice validation of your perspective on saving and planning.

[barb162]

79. May I ask about zoning laws? Wouldn't straw bale be a super fire

hazard? Ummmm and what's an earthship

[SoCalDem]

88. Adobe or stucco OVER the straw..practically fire PROOF

[faithnotgreed]

94. i love earthship and straw bale technology

and of course solar

thank you so much for posting about them
i first learned of the earthship and straw bale approx 10 years ago and would adore living in one. living in chapel hill at the time i was able to check out original earthship books from the library
of course they require a certain environment and great commitment to true green-building principles

how lucky you are

glad youre here womanofthehills

[ramapo]

89. Surprise?

Taking out an adjustable loan when rates were at historic lows has to rate as about the dumbest thing one could've done, financially speaking. I have no sympathy for those who chose this route. These people should've shopped for a less expensive home or postponed buying.

[LeftHander]

90. I hope they feel dumb....and taken advantage of.

Why in hell would you re-finance your home in your 70's and do a adjustable rate mortgage?

If you can't afford the house you are in SELL IT and live in something cheaper. Don't refinance in your sunset years and take on the risk of an adjustable rate mortgage with Bush in the WHite House....OHMIGOD!

That is simple pure STUPIDITY!

and...GROSS predetory lending...that mortgage broker should be tarred, feathered and run out on a rail.

Despicable, Snidly Whiplash behavior.