Quote of the Day

If, as I cautiously predict, we're about to hit a massive foreclosure wave which is going to hit people at just about every income level there is a certain party whose name starts with the letter 'D' which might find it beneficial to start branding themselves as Friends of Homeowners with some smart policy proposals to back them up. - Atrios (who happens to be an economist)

This is good news/bad news. The bad news is that a lot of people may lose their homes. If you looked at the chart I posted that showed sky rocketing (unprecedented really) increases, you have to wonder how that happened. I see a sea of $400,000+ houses around my part of town, and I've always wondered who the fuck all these people are that can afford these houses. I've got to be in the top 10% of wage earners in this country, and I sure as hell can't afford anything anywhere near that.

The answer, of course, is creative financing. People who bought on short term speculation with interest only loans may have done okay, but I seriously doubt that they have taken the profits and bought an affordable house with standard financing. Then there are the thousands and thousands of irresponsible people who simply wanted much more house than they could realistically afford. They are going to get creamed.

That's going to hurt the insurance companies who insured the mortgages. The mortgage companies will get paid regardless. Thus insurance rates will go up for the rest of us, because insurance companies simply cannot take a loss. They always get their money someplace, and that someplace is the average of everyone else who didn't screw up.

Then housing prices will drop, new construction will massively slow down, and you'll see a glut of expensive homes sitting empty.

That's the bad news.

The good news is that the boyfriend is in the real-estate business.. prepping and re-selling foreclosed properties and such is part of it. I'm not sure if I want the Corvette in yellow or silver yet.

John will like this report that details what's going on in the mortgage business. It exaplains why the mortgage companies dilliberately screwed people - knowing full well they were going to monumentally screw home buyers.

If anybody is planning to buy a house - it's simple how you do the financing. Get pre-qualified, and find out how much you can afford with a 15 year fixed rate loan. Buy a house that costs substantially less than that. If it's not as nice as you would like, that's too bad, that's what you can afford. There are some options with the 20%, so you don't have to pay PMI. I have a 2nd for the 20% at 15 years fixed that is slightly higher rate than the first. At this point, I could write a check to pay off the 2nd, but remember - mortgage interest is deductable. The key is to get rock bottom interest rates over 15 years and keep the rate fixed.

Jennifer and Eric Hinz of Somerset, Wis., are feeling the squeeze. They refinanced out of a 5.25% fixed-rate, 30-year loan in June, 2005, and into an option ARM with a 1% teaser rate from Indymac Bank. The $1,483 payment for their original mortgage dropped to as low as $747 with the new option ARM. They say they had no idea when they signed up, however, that the low payment adds $600 in deferred interest to their balance every month. Worse, they thought the 1% would last three years, but they're already paying 7.68%. "What reasonable human being would ever knowingly give up a 5.25% fixed-rate for what we're getting now?" says Eric, 36, who works in commercial construction. Refinancing is out because they can't afford the $15,000 or so in fees. "I'm paying more, and the interest is just going up and up and up," says Jennifer, 34, a stay-at-home mom. "I feel like we got totally screwed." They say their mortgage broker has stopped returning their phone calls. Indymac declined to comment on the loan's specifics.

Actually.. I may need to start looking at Ferraris.