View Full Version : War stories from the current housing crisis
http://www.msnbc.msn.com/id/24569891
Damn, well I guess you win some and you lose some :D
idiots get in over their head, lose their ass, & then the govt (taxpayers) bail them out, lovely.
the home owners & all those CEOs taking multi-million dollar bonuses should be forced to cover their companies' screw ups, NOT the rest of us.
Face_N_The_Crowd
05-12-08, 00:20
How about just the homeowner that signed on the dotted line? Anyone wanna bet that 99.99999% of them did NOT have the documents reviewed by both their attorney and accountant and then explained to them?
If someone signs something without fully understanding it - they are an idiot. If someone is an idiot, it should not be my problem. They and they alone need to eat it.
http://www.msnbc.msn.com/id/24569891
Damn, well I guess you win some and you lose some :D
So....the overall point of this is to poke fun at someone's failed investment due to a very poor housing market? Are we looking to learn about such pitfalls, or simply gloat in someones loss?
:rolleyes:
From the article:
Experts say speculators like Forgaard, who count on real estate values to keep rising to pay off their debt, play a risky game and doubly so when they use neg-am loans.
"You are essentially betting the house on the strength of the housing market and if you're that leveraged in debt and the market goes down, you're going to lose your shirt," said Austin King, director of the community organizer ACORN's Financial Justice Center.
"To do it eight or nine times over is eight or nine times as foolish as just doing it once," he said.
Speculator's failed investments have affected the property values of whole neighborhoods and contributed to the housing market's current condition. So, yes, he's a ****in' idiot (as was previously pointed out). And the financial burden of all this might fall on all the rest of us, unfortunately.
"I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.
"I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were," he said.
Stopped caring right around that point... Idiot.
bigshooter
05-13-08, 13:26
So....the overall point of this is to poke fun at lenders failed investment due to ignorant americans? Are we looking to learn about such pitfalls, or simply gloat in taxpayers loss?
fixed it for ya.
it's better to laugh than to cry.
The stupidity here is the loans. I did much the same thing during the real estate boom WITHOUT the creative financing. We stuck with basic 30 years for private and 20 years for commercial, and built enough equity and cash flow on that to keep things going. We speculated ONLY on the value of the real estate and not the financing. Because of that, we'll easily weather a year or two downturn and come out just fine. Right now, if I had to sell the properties, I'd lose some value off their max's, but I'd still be way ahead of where we started. I'm in it for the long run, and we'd still make a bunch of money because we didn't get so insane on the speculation.
I'm mostly just and investor in this. The other genius thing that my partner did was to set boundaries. Basically houses in our market that were small to mid range that would still have at least SOME market in downturn. a $450,000 house in North Carolina is going to not only lose value, but also sit on the market forever in a downturn. By only buying smaller to mid ($100K-250K), in nicer neighborhoods, we didn't get dinged too badly. We knew this was coming, and thought it through. Now if only I had MORE money to invest, now would be the time!
I will say this: There are stupid ****ers on both sides. Banks were giving $450,000 mortgages to janitors. Funds were backing these as hedges (making them speculative by definition and NOT hedges against risk). Janitors were stupid enough to get the mortgage.
I am of two minds. The fact is, if we let the economy ride for hedges/mortgagees, then everyone may pay MORE for their stupidity in not pricing risk appropriately into the markets. On the other hand, a few dead "bodies" would certainly help price risk a little better (in fact, we're already seeing that happen). I do think some economic incentives/bailouts could help prevent deeper fluctuations, and are probably good (and that coming from a Libertarian!) .
And while yes, I consided myself a libertarian, I do think that if the broader economy CAN BE aided in this sector, then we should try. The confluence of budget deficits, trade/current accounts, general inflation, energy/food inflation, along with the housing issue could run EVERYONE into a bad place.
Speculator's failed investments have affected the property values of whole neighborhoods and contributed to the housing market's current condition. So, yes, he's a ****in' idiot (as was previously pointed out). And the financial burden of all this might fall on all the rest of us, unfortunately.
Yes, speculators, and likely many more regular individuals who bought a primary home at the previous prices, because that was simply the price the market commanded. It was not a direct result of some investor buying all the homes on the block and then inflating their values, everyone was feeding into that fire.
That includes the larger new home builders, much like the one which I did land/project acquisitions for years for until '06. We were paying too much money for farms to develop in areas that were not ready to be swamped with $400K-$500K plus homes, and building more and more expensive in the better areas that were at their price point already. All while there was talk of the "bubble bursting", we (though I often advised against) still paid top dollar for more projects. That played a part in things I assure you, as builders everywhere in the country were doing it in excess, not just us.
The man in the article had 3 potential scenarios: the housing market would go up, or stay steady, or go down. Two of the three would have worked fine for him, but the third was the reality. That is also the reality of investing, so should no one invest in real estate anymore??
How would that be any different than someone buying gold today at $870 per ounce believing it will go up, but then it drops to $700 in a few months? Sure, it looks like a bad move now, but what if that same someone believed gold peaked at $650 per oz and liquidated months ago before it went where it is now?
Yes, low housing prices affect us all far more than, let's say, low gold prices. But can we blame one man's idea so harshly when almost everyone was playing the game?
Nathan_Bell
05-13-08, 16:54
Yes, speculators, and likely many more regular individuals who bought a primary home at the previous prices, because that was simply the price the market commanded. It was not a direct result of some investor buying all the homes on the block and then inflating their values, everyone was feeding into that fire.
That includes the larger new home builders, much like the one which I did land/project acquisitions for years for until '06. We were paying too much money for farms to develop in areas that were not ready to be swamped with $400K-$500K plus homes, and building more and more expensive in the better areas that were at their price point already. All while there was talk of the "bubble bursting", we (though I often advised against) still paid top dollar for more projects. That played a part in things I assure you, as builders everywhere in the country were doing it in excess, not just us.
The man in the article had 3 potential scenarios: the housing market would go up, or stay steady, or go down. Two of the three would have worked fine for him, but the third was the reality. That is also the reality of investing, so should no one invest in real estate anymore??
How would that be any different than someone buying gold today at $870 per ounce believing it will go up, but then it drops to $700 in a few months? Sure, it looks like a bad move now, but what if that same someone believed gold peaked at $650 per oz and liquidated months ago before it went where it is now?
Yes, low housing prices affect us all far more than, let's say, low gold prices. But can we blame one man's idea so harshly when almost everyone was playing the game?
Long semi-rant about th housing mess.
Worked as a broker for a few years, saw the writing on the wall and got the hell gone when the A paper dried up. Still have friends in the game, though most are on the title side now, and they still are seeing people going in too deep. Few things that got us where we are.
Federal Law. The Equal opp housing act stated that you could not decline a larger % of minority borrowers than white male borrowers. So you have a situation where lenders are being required to write some notes that they would previously have ditched.
In order to stay in compliance with the laws they had to start making creatively underwritten programs. Initially this was 10% instead of the traditional 20%, then it became ok to roll closing costs into the note. Still not a lethal situation. Then 5%, than just pay closing costs and move in. Oh, you work cash basis? The underwriters then started to have to find ways of verifying income, bank statements, tax returns, a note from your CPA.
Now, had these programs stayed in the niche they were designed for, helping poor get homes for the first time, it would have been ok. Which leads us to the second problem.
Shortsighted banks/dumb borrowers. The banks were seeing that they were not losing as much $$ as they had feared on these notes, and these were to folks who that had assumed would be bad risks. They then started pushing these programs out into the general population.
Fecal material meet air displacement impeller.
Now you have a person with a good credit history who can and has made his payments his/her entire life, the banks seemed to think that the borrower inthis situation knew what they were doing. Wrong, the acturials who had come up with the old underwriting guidelines had known what they were doing, making it hard for the average Joe to really screw up when purchasing a home. Well with the new programs available, there was a big chance for Joe to screw up.
Previously a $100k house was a good one in his neighborhood. Well with all of this insane amount of cheap money available that same house was suddenly worth $250k, at least according to the comps from several other homes that went for nearly that much. Then it became $325k.
Smart Joes saw this and said cool I will refi the $79k I own on my home at this really cheap money rate and have a sweet note and own my home outright much sooner.
Fairly smart Joes said I will refi my $79k and another $20 k to do improvements and still pay my house of cheaper than originally planned.
Reckless Joes went whoo-hoo I am going to borrow the entire 'value' of myu home and start buying and flipping other houses because the sky is the limit.
When I got out of the mortgage game Reckless Joe was calling the other categories of Joes dumb as they were missing out on the big Green. RJ mised the point that he was playing with the roof over his family's head, and not an investment commodity. Now SJ and FSJ are sitting pretty and RJ is either a millionaire who really is not going to be in too bad of shape, or he is trying to keep the balls in the air so as not to lose everything.
Stupid Policy. Once this trend ran for a few years and did not spike out an absurd amount of our economy started to become utterly dependent on the cheap money flowing out of these investment interests. Instead of looking forward and realize that we cannot base our economy on building and decorating caves for one another, the Fed pushed ever more $$ into the stream.
Then they allowed the mortgages to be bundles and sold, pretty much guranteeing that the mortgage initiatives that were meant to help the poor became the big $$$ boys new favorite toy.
/rant largely over
As for driving the price up with a one guy buying a house. One, nope, but I am aware of a couple large developements that 'sold' their first homes at high enough prices to push up everything within a 3 mile radius, including their development.
/ok its over now
As for driving the price up with a one guy buying a house. One, nope, but I am aware of a couple large developements that 'sold' their first homes at high enough prices to push up everything within a 3 mile radius, including their development.
This is exactly what I was part of here in N.J. and PA, and it all started with the competitive price for ground we had to pay on a per approved lot basis. Those prices went up, so it was reflected directly in the price of the homes we built.
However, another BIG factor in determining the final price of the homes was the cost to construct. These costs spiked at the same time we were paying top dollar for land ('04-'05), driving prices up even further.
It got to a point when we refused to outbid other builders/developers more than not, but only after new home sales started slowing.
variablebinary
05-14-08, 02:22
I hope all these house flippers go broke and starve
Here in Utah the housing market has jumped to obscene prices because some pieces of shit think its funny to buy up whole new developments and jack up the price 25% so that people that actually want to live there and raise their famalies there cant afford homes anymore.
I can respect investors who help communities by turning around derelict properties, but these days it seems to mostly revolve around screwing the working man wherever possible
But can we blame one man's idea so harshly when almost everyone was playing the game?
Foolish and ill-advised is stilll foolish and ill-advised no matter how many people are doing it.
Foolish and ill-advised is stilll foolish and ill-advised no matter how many people are doing it.
Listen, I am not saying that I personally would have gone his specific route if I had the money to use in that way. Too may loose ends. However, many before him made fortunes doing exactly what he did when the market was strong, and many will do so again when the market upswings again. Like buying stock, sometimes you win and sometimes you lose. Some stocks may be riskier than others (some say diversifying is for idiots, some swear by it) but they may also be the ones that pay big sooner.
Or cost you fast.
when a stock flops the investor gets nipped.
when the housing market flopped EVERYONE is getting nipped.
then again, we might was well pay for their fugg up.. the govt already has us paying to bail out the airlines, illegals' healthcare, title 19 leeches, & all other broke ass loafers..
when a stock flops the investor gets nipped.
when the housing market flopped EVERYONE is getting nipped.
You are right on. However, this was never in question. Whether someone like our investor friend is liable for the bubble bursting is.
I seem to recall that the construction market tanked in the late 1980's/early 1990's as well (at least in some parts of the country), and then there was the Dot Com bust of 2000. But I don't remember the economy being in as dire straits then as now.
Gutshot John
05-15-08, 10:13
I seem to recall that the construction market tanked in the late 1980's/early 1990's as well (at least in some parts of the country), and then there was the Dot Com bust of 2000. But I don't remember the economy being in as dire straits then as now.
In fact the dot-com bubble/corporate scandals/9-11 and subsequent market crash destroyed far more wealth in this country than the current housing crisis. To the tune of 2-3 trillion dollars. In fact it can be argued that it was this loss that is still rippling through the economy. The real estate market doesn't even come close. Even still it wasn't really that big of a deal. Americans have forgotten what genuine economic catastrophe really is.
Late in a "boon" investors are invariably buying at high prices, when an inflated market corrects, these people lose the most. Whether it be financial or real estate markets, markets correct and are ultimately healthy. This is not to say that people won't lose money if they invested late.
Does this suck for them? yes, but it hardly means "dire straits." Despite the occasional correction the economy will keep chugging along nicely for our lifetime.
I would have to say that this gentleman is at least half-responsible for his situation. However the law offers him some protection under Bankruptcy.
I don't think he's a moral failure, but I hope he's learned his lesson...more importantly I hope the Banking industry and Fed have learned their lessons.
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