patrick.net

Neighbours who where underwater in 1990 decided to hold on to their SFH because they bought to live and raise a family.

Most people buy a home to live in it. If the potential selling price rises they still will need a place to live. If the potential selling price declines they will still need a place to live. Either way, most will just continue doing what they expected to do... which is to live in the house, and go on with their lives.

Until you actually sell the exact price is not important. And becuase almost all sellers are also buyers (trading up) price movements affect their intended purchase as much or more than their sale.

I have been in the situation of declining prices during several market cycle declines. And I expect declines in the near future. What was on my mind during those declines, and now? The same thing as during the rises... I was (and am) thinking about making home improvements that we would enjoy.

Until you actually sell the exact price is not important. And becuase almost all sellers are also buyers (trading up) price movements affect their intended purchase as much or more than their sale.

Not exactly. Many rely on serial refinancing to stay in their homes. The "mark-to-market" price is very important important indeed.

Also, if the mortgage is upside down, the homedebtor will not be able to trade-up. If he foreclosures, he will not be able to get another loan any time soon (assuming normal credit standard).

Considering the number of late vintage high CLTV (combined loan to value) loans, this must be taken into account.

"...what is going through your mind right now?"

Hmm...I'd be envious of the Venus de Milo...she has no ARM.

Most people buy a home to live in it.

Ok, you lost me right there. I don't recall exactly where you live, but in my neck of the woods (SCAL), you "buy" a home to flip it. Or, at the very least, you might hold it a year then refinance to "liberate" all of that guaranteed equity. Which you will then spend on something important --like a new H2, a Caribbean cruise or some cool bling.

C'mon, Zephyr --you're enough of a Patrick.net "old-timer" to know better. Are you just pulling our leg here?

Side anecdote: a new contractor started in a cube nearby. We've had lunch a few times and one day the conversation turned to housing. Well, turns out he bought in '02 at a not too-bad price, but just recently refi'd into a neg-am/option-ARM with a hefty cash-out ($100K) of "liberated" equity. And what was all that liberated equity spent on? New plasma TVs, digital cameras, plus an $80K cinematography degree for his wife (now working PT in a non-film capacity).

"Most people buy a home to live in it."

Oh, if only....

just recently refi’d into a neg-am/option-ARM with a hefty cash-out ($100K) of “liberated” equity

Newly liberated equity can readily disappear.

As said on the links section, if the 50 year mortagage comes out it will be popular and there may be lot of refinances and price might keep going up as the affordability goes up.

As said on the links section, if the 50 year mortagage comes out it will be popular and there may be lot of refinances and price might keep going up as the affordability goes up.

50 year mortgages (or even 1000000 year mortgages) are still more expensive than interest only mortgages.

As a side note, I was "pre-approved" for a 40 year mortgage last May. At 6.5%+, increasing the term does little to reduce the size of the payment.

But 50 year mortgages will not lower the size of the payment. The rate will be higher than that of a 5/1 ARM and P+I will be higher than I only no matter what you say.

Moreover, serial refinancing will not work in a non-appreciating environment. I start hearing a lot of stories in which FB's are having difficulties extracting enough equities to pay their mortgages.

Talk about timing!

"Californians plan exit strategies" is the first article, and it's very revealing. I love the couple in their 50's talking about selling their Moreno Valley home and moving to North Carolina, golfing doing pottery and growing their own vegetables. Not so fast! Buying was the easy part, selling is where we seperate the men from the boys. The article describes people in different stages of life with various incomes but it seemed like everybody had the same unreal expectations. Most had just bought or had only lived in their homes for a few years, and they're talking about retirement? What seemed shocking was that "exit strategies" were on just about everyone's minds. What is going on in the minds of homedebtors? It would appear that they think the whole world is going to stand still while they "cash out" and walk away in an effort to turn "paper" profit into spendable cash. "Everyone will keep buying, so I'll be able to get out from under this $hitbox and even though I may not be pretending I'm a potter in North Carolina at least I'll get a big screen out of the deal".

Wonder what's going through this suckers mind!

It's official, home sales have dropped for the third month in a row:

http://news.yahoo.com/s/nm/20060125/bs_nm/economy_existinghomes_dc

What is going through the mind of a homedebtor? What is more important is what is going through the mind of a prospective buyer, and that is clear: why should I buy now when prices are clearly in decline and the market is over the hump? The market is fresh out of buyers, and that's the main issue here in my mind.

"There is something out there."

It is the truth.
And it is going to hurt.

I think people are pointing to the 50-year out of desperation. Maybe trying to convince themselves that there is something out there that will prevent the market from crashing and sending them into foreclosure.

Perhaps we should have "Half-life Mortgages". Imagine, a term as long as the half-life of plutonium. You do not have to pay it all off until the civilization falls, rises, and falls again! Payment will be just a bit higher than an I/O ARM. Rate adjusted monthly.

"Leaving California" makes the case that the state job market is not the reason folks are leaving...but take away the real estate boom and a lot of employment will go *poof*