Say Bye Bye

[Joeaksa]

Sorry guys but some of us are doing very well thank you! Except for my house payment, I owe no one anything, period and just this last week my house has stopped its free fall in value and I expect it to rebound by late August and start going up again in value.

On the other hand there are people like my current copilot. He is 40-ish years old, single but living with someone full time. Worked at his current job for almost 4 years now.

We had a discussion about things today and he is not happy here as he feels that he is getting cheated. He wants to be in the left seat but has no-where near the experience needed to make the move on an aircraft like this yet. I am helping him as I can, but he is not ready to fly every other leg from the right seat, not to mention move over to taking over the left seat. He is making (am guessing here) around $100k a year doing this job. Thats the good news.

Bad news is that he owns a house in SoCal that he has been in for around 2 years. He paid about $450k for it and its now down to $350k in value. He owed over $400k for the house at the time of purchase as he has an ARM loan (2 years to go on it) and the bank has been offering him "less than interest only" payments on the house, which he has done every month. He owed $405k on it when he bought the house and now its up to $418k this month. I asked him why he did not want to convert it to a regular 30 year loan and he said that he could not afford to. Why I asked?

Well, he has a payment on his brand new pick-up, his brand new motorcycle payment, a house payment on a place he splits with another family member back where they grew up ($800 a month) so in the end he has $4000 in payments to make every month when almost everything is added in the mix. If that is not enough, he has just made an agreement to buy an airplane for $30k or so.

Notice that I said "almost everything" in the above statement? My jaw dropped when he then went on to tell me that he had around $100,000 owed to credit cards as well!

Guys, I have no idea how this gent is going to get and keep his head above water. His girlfriend works but she makes minimal wages as a sect so she cannot help a lot. This has just blown me away how someone can get this far under and still does not see that they are in trouble, real trouble financially. He has no savings what so ever and if things start getting really difficult in the economy he is sunk.

[jyl]

I think you've been saying this (that houses in your area have stopped going down) for several months now . . .

Originally Posted by Joeaksa

just this last week my house has stopped its free fall in value and I expect it to rebound by late August and start going up again in value.

[the]

LOL, that's so true. Gotta give it to the Arizonan Pelicans for the Eternal Optimists in Real Estate Award.

[RANDY P]

Originally Posted by Joeaksa

Sorry guys but some of us are doing very well thank you! Except for my house payment, I owe no one anything, period and just this last week my house has stopped its free fall in value and I expect it to rebound by late August and start going up again in value.

On the other hand there are people like my current copilot. He is 40-ish years old, single but living with someone full time. Worked at his current job for almost 4 years now.

We had a discussion about things today and he is not happy here as he feels that he is getting cheated. He wants to be in the left seat but has no-where near the experience needed to make the move on an aircraft like this yet. I am helping him as I can, but he is not ready to fly every other leg from the right seat, not to mention move over to taking over the left seat. He is making (am guessing here) around $100k a year doing this job. Thats the good news.

Bad news is that he owns a house in SoCal that he has been in for around 2 years. He paid about $450k for it and its now down to $350k in value. He owed over $400k for the house at the time of purchase as he has an ARM loan (2 years to go on it) and the bank has been offering him "less than interest only" payments on the house, which he has done every month. He owed $405k on it when he bought the house and now its up to $418k this month. I asked him why he did not want to convert it to a regular 30 year loan and he said that he could not afford to. Why I asked?

Well, he has a payment on his brand new pick-up, his brand new motorcycle payment, a house payment on a place he splits with another family member back where they grew up ($800 a month) so in the end he has $4000 in payments to make every month when almost everything is added in the mix. If that is not enough, he has just made an agreement to buy an airplane for $30k or so.

Notice that I said "almost everything" in the above statement? My jaw dropped when he then went on to tell me that he had around $100,000 owed to credit cards as well!

Guys, I have no idea how this gent is going to get and keep his head above water. His girlfriend works but she makes minimal wages as a sect so she cannot help a lot. This has just blown me away how someone can get this far under and still does not see that they are in trouble, real trouble financially. He has no savings what so ever and if things start getting really difficult in the economy he is sunk.

Your friend is toast. He will never, ever qualify for a loan to replace the one he has now. Going to fixed will just mean he will pay what he's supposed to, which admittedly he can't afford.

Sorry but he has no outs- unless he talks BIll Gates into paying cash for his home.

rjp

[1967 R50/2]

Originally Posted by Joeaksa

On the other hand there are people like my current copilot. He is 40-ish years old, single but living with someone full time. Worked at his current job for almost 4 years now.

We had a discussion about things today and he is not happy here as he feels that he is getting cheated.

Bad news is that he owns a house in SoCal that he has been in for around 2 years. He paid about $450k for it and its now down to $350k in value. He owed over $400k for the house at the time of purchase as he has an ARM loan (2 years to go on it) and the bank has been offering him "less than interest only" payments on the house, which he has done every month.
.

I don't feel sorry for your friend. His problems have absolutely NOTHING to due with inflation, $150 oil, the housing downturn or anything other than his own irresponsibility.

There is no reason somebody making 100K a year can't make payments on a 400K home..even with a maturing ARM. He needs to sell his bike, his interest in the 2nd home, sell the interest in the plane and probably put a few other capital items on ebay. With the capital raised he could pay off his credit cards and live a comfortable life.

[Joeaksa]

Originally Posted by jyl

I think you've been saying this (that houses in your area have stopped going down) for several months now . . .

You are correct. I have been watching it go down by $10k a month for the last 18 months now. Six weeks ago it went to $7500, four weeks ago to $5k a month and now its down to $3000 two weeks ago. In the next week or so it will hit bottom and start going back up if things continue like this.

Are you having difficulty understanding this? Another Pelican who is a realtor agreed with my readings in my area and posted proof that the N. Phoenix area has started to rebound.

Sorry if your house is not on its way back to being profitable but hassling me about mine does no one any good.

[Joeaksa]

Originally Posted by 1967 R50/2

I don't feel sorry for your friend. His problems have absolutely NOTHING to due with inflation, $150 oil, the housing downturn or anything other than his own irresponsibility.

There is no reason somebody making 100K a year can't make payments on a 400K home..even with a maturing ARM. He needs to sell his bike, his interest in the 2nd home, sell the interest in the plane and probably put a few other capital items on ebay. With the capital raised he could pay off his credit cards and live a comfortable life.

Agreed with you and Randy on this. He has done this to himself and is actually digging the hole even deeper with each month. He does not realize that he can stop this spiral downwards and just keeps buying and buying things that he does not need, but since he can make payments on it, he does it.

Its people like this who are causing problems like we have in this country, and lending institutions who continue to lend to them!

[RANDY P]

for a good laugh, tell him to take the minimum payment asked on each credit card, then multiply it by 12.

Then, subtract that number APR from the of the credit card in question. The difference is what is applied to principal expressed as a percentage of your payment monthly.

rjp

[Joeaksa]

Randy,

What he is doing is that he is applying for new credit cards every few months that have a 3-4% interest rate, then bouncing balances around from card to card to try to keep things low.

What he does not realize is that eventually no one will give him a new card and his FICO has to be very low by his doing this. Whats going to happen when these balloon up to 18-21% and he cannot get anymore cards to transfer balances to ?

He is not thinking ahead (or not thinking at all) but its not my problem...

[RANDY P]

BK 13 my friend, BK 13.

rjp

[Porsche-O-Phile]

Joe, you're a smart guy on some things but on this housing thing you're simply, 100% dead wrong. Look around out there. Seriously. If you honestly think housing prices in Phoenix (or anywhere else) are "rebounding" or "about to rebound", I've got a bridge to sell you. And I'll even throw in some oceanfront property in Nebraska. You're absolutely delusional if you think you're going to see sustained appreciation anytime soon. Turn down that Thorazine drip. . .

Granted you are in a particularly good situation because you're close to retirement, you don't have a lot of debt and it sounds like you've been pretty responsible with most of your financial decisions - so even a 30% decline likely wouldn't matter too much to you unless you were planning on selling soon. But to come on here and act so polyanna-ish and smug about it is very out of character. I don't like being a pessimist, but I definitely prefer to be a realist and the reality right now is that housing is GOING to decline. Almost universally. The exceptions are going to be VERY rare. Not 1-in-10, not even 1-in-1,000, more like 1-in-100,000. If you're fortunate enough to have one of those, go buy yourself a lotto ticket because you are a very, very lucky guy. There's simply no way on God's green earth you're going to see sustained appreciation. Not a chance. As a pilot I figured you'd have decent overall situational awareness skills, but on this issue they seem completely absent. . .

I wish the best for you - I really do - but I hope you're not setting yourself up for very, very bitter disappointment by having your head in the sand on this one. I honestly hope you're in a position where it doesn't really matter and you can just hold onto the place for a while even if you get whacked with a substantial value decline.

The declines are definitely coming - and they are NOT regional. They are being driven by drying-up financing which is dessicating the pool of potential buyers (destroying demand). Destroy demand, what happens to price? C'mon - this is Econ. 101. Here's a good article on the subject:

http://patrick.net/housing/contrib/fdic.html

Again, I'm not saying this stuff to be a pessimist - I'm saying it so that (hopefully) you don't get burned. All I can do is point to the weather radar and show you the big red blotch right in front of us. If you choose to fly into it, that's your business.

[sammyg2]

My best friend's brother (I've known him for 35 years) bought a house about 4 years ago for $545k. It's worth maybe $400k now. He got one of those interest only ARMs that can't be re-financed for 5 years without penalty and has a big balloon payment after 10.
He was making about $20 an hour at the time and the only was he could make the $3200 a month payment was to rent out both of the other two bedrooms AND rent out the haphazardly converted garage.
Since then he lost his job (his fault. he had an attitude and threatened to quit over something, they said there's the door). He got another job making less which he also lost because he thinks he's too good to work for that low of an amount. He hasn't found another job yet and isn't looking that hard because he still has $5k left from the $100k inheritance he got from his grandfather's death. He spent a good portion of that on a large fishing boat and a ford diesel truck to pull it. It's helped him stay just ahead of his payments so far but has pissed the rest away so all that will soon end.

At the time he was buying this house his friends all said "DON'T DO IT!" "YOU CAN'T AFFORD IT!"
We said it loud. We said it often. We explained why he shouldn't do it, why he couldn't afford it, why he would lose the house and all the bad stuff that will come from it. I personally told him that he better not come knocking on my door asking to sleep on my couch or asking me to bail him out when he loses the house. his response? "I DON'T CARE, I'M BUYING IT!"

Now there is no doubt he will lose that house. Soon. He even admits it. There is no doubt he will be flat broke without a place to live. did I mention he has a wife and a kid?
What pisses me off is that we (taxpayers) are going to have to cover his a$$ and clean up his mess. We'll have to pay for his stupidity. We'll have to pay for his irresponsibility.
We'll have to pay to clean up his mess because he's too lazy, to dumb, and doesn't care about the difference between right and wrong. He should be the one to be punished, not everyone else.
If I were in charge (and you're glad I'm not) I'd pass a law that said you could not walk away from a mortgage unless you filed BK, and I would make it much harder and much more painful to file BK.
I'd say that if you agreed to pay back a loan (any loan), then by God you were going to pay it back. If you couldn't afford it I'd make it a 40 year loan, or 50, or 100 but one way or the other you would have to pay it back. That would stop this mess and punish the ones who are really responsible for creating it.

No more of this ridiculous liberal BS about blaming the mortgage providers. All they did was giver the borrowers exactly what they were begging for. It's not their responsibility to babysit the consumer. They have parents for that if they are too immature to exist on their own.
Now, on the other hand: if the people running the mortgage companies were irresponsible enough to run them into the ground because of incompetency, then they need to be punished also. If you take a job running a company you darned sure better know what you are doing or don't take the job.
All those executives who work for a failed or failing company should be stripped of all personal assets. Every penny. Make them freaking homeless. There's a difference between giving consumers what they want even if it's a bad idea and running a company into the ground. Punish them with a big stick.
That would send a message, subtle as it may be

[jyl]

How are you assessing the value of the house? What I mean is, specifically how are you determining its value so precisely at any given time?

Originally Posted by Joeaksa

You are correct. I have been watching it go down by $10k a month for the last 18 months now. Six weeks ago it went to $7500, four weeks ago to $5k a month and now its down to $3000 two weeks ago. In the next week or so it will hit bottom and start going back up if things continue like this.

Are you having difficulty understanding this? Another Pelican who is a realtor agreed with my readings in my area and posted proof that the N. Phoenix area has started to rebound.

Sorry if your house is not on its way back to being profitable but hassling me about mine does no one any good.

[jyl]

Your acquaintance and Joe's pilot acquaintance are obviously headed for BK.

But why do you say the taxpayer is going to pay to clean up their messes?

Are you thinking of the housing bill currently pending in Congress? That bill will not do a thing for your acquaintance, he won't come close to qualifying. The bill was not designed to help people in his position. Same for Joe's acquaintance.

Originally Posted by sammyg2

My best friend's brother (I've known him for 35 years) bought a house about 4 years ago for $545k. It's worth maybe $400k now. He got one of those interest only ARMs that can't be re-financed for 5 years without penalty and has a big balloon payment after 10. [rest snipped]

[island911]

Originally Posted by Wayne at Pelican Parts

I think you'd better research that a bit more. WaMu was one of the stocks I sold short in March...

-Wayne

Thanks. I've been watching the stock too; but my question had been whether WAMU had been so bad in all of this that recovering was impossible. --Randy P. cleared up a whole lot of the why they are in trouble. (thanks Randy)

So, the Q still is; will WAMU pull out of this? ...tabs crystal ball seems to say 'no.' ..anyone else?

[RANDY P]

on WAMU -nope. no one wants to service that portfolio.

On Joe's deal, who cares if he plans to keep it? It is what it is...

[Joeaksa]

Originally Posted by jyl

How are you assessing the value of the house? What I mean is, specifically how are you determining its value so precisely at any given time?

Having three friends who are realtors helps, and keeping an eye on the comps in the area as well as Zillow. Mix all that together and its a SWAG. Houses are going on the market and being sold in my area and new houses are already being built in this area, so its not depressed like it was 12-18 months ago.

Am not selling anytime soon so its not a big issue to me but our part of town is one of two areas that are turning around faster than the rest of the city and country as a whole.

Joe

[jtkkz]

In my neighborhood, couple houses sold for way over asking price. So still good in my area.

So far so good, cause some pockets of areas in the SF bay area are still holding up.

[jyl]

OK, a WAG (Wild-Ass Guess), I can see.

What I didn't see, was how you could track the value as precisely as your original post seemed to imply.

Originally Posted by Joeaksa

Having three friends who are realtors helps, and keeping an eye on the comps in the area as well as Zillow. Mix all that together and its a SWAG. Houses are going on the market and being sold in my area and new houses are already being built in this area, so its not depressed like it was 12-18 months ago.

Am not selling anytime soon so its not a big issue to me but our part of town is one of two areas that are turning around faster than the rest of the city and country as a whole.

Joe

[BLEW911]

Two questions for the "experts"............ Am I in danger banking at Wa Mu? & Are there any healthy banks out there??

Don