Comments on: Southern California Housing Report: Median Price $250,000 down 50 Percent from Peak Reached in 2007. Prices Back to 2002 Levels. $41,000 Away from Going Back to 2000 Prices. Home Price Deflation.

By: mario

mario — Mon, 31 Aug 2009 01:44:48 +0000

Loan Officer,
While the Euro is 15% higher than it was last year, All of the countries in E.U. are economically in the same boat as the US.
With great R.E. bargains in the E.U. it is doubtfull that Europeans will return to the US R.E. market anytime soon.

By: DG

DG — Thu, 26 Feb 2009 21:11:20 +0000

Sean O. I’ve run the numbers about 1000 times and there is almost no scenario where I make out better over 5 years or 30 years by sticking with my mortgage versus walking. We’d be exceptionally lucky if the market in 5 years is dead even with where it is now. In that case my $375,000 note is worth $175,000. On year 5 I will owe $355,000(40 year loan). I already have $20,000 in the bank from not making payments. I may well have $40,000 by the time they foreclose. I can rent a place and save $1500 a month over what I am currently paying. $1500×12 = 18,000 a year. Now if I save all this money ,and I can honestly say if no emergency arises I’m damn good at saving money, 5×18 = $80,000. Add the $40,000 I saved during the foreclosure process and suddenly I have 120k as a down payment. I can buy that same house and only have a $50,000 mortgage. So to review on year 5 I can either have a note for $355,000 or a note for $50,000 on the exact same house. Do you see why your logic makes absolutely no sense from a financial standpoint?

By: js

js — Wed, 25 Feb 2009 18:48:04 +0000

“have to agree with loan officer. Nationally, the rent/own ratio has come into balance in many areas, housing starts are way down which means there is no additional inventory coming, home affordabilty is at it’s best level in years.”

Well ok what about LOS ANGELES? Yes, this is to some extent a national blog but it’s even more a Southern CA blog. Because the rent/own ratio is still out of whack anywhere you’d want to live in L.A. (maybe not Compton), and neither have we really reached any level of affordability to incomes here. Maybe we never will. In which case my advise would continue to be: leave California!

By: Sean O.

Sean O. — Wed, 25 Feb 2009 01:14:36 +0000

How about this for an idea. Let’s all put our houses on the market at the same time, and then, lets all go to the banks and demand all our savings be liquidated at the same time.

Sure, we can all panic and head for the exits at the first taste of a dip in values, but all that will accomplish is chaos, and ensure our own behvior brings about that which we are trying to avoid.

No one knows for certain the future value of any asset unless everyone tries to sell at once, and then we all know it will be close to nothing.

By: Partyboy

Partyboy — Tue, 24 Feb 2009 19:47:21 +0000

Sean,

It seems as though your issue is more about the “morality” of walking away vs. paying and not the actual financial implications of that decision. You said in your post, “you never lose money if you pay off your mortgage”. This is incorrect. You will lose money because of a little thing called opportunity cost. If paying a mortgage = $3000/mo and renting the same house = $1500/mo, then paying the mortgage is a $1500 loss in the form of opportunity cost. Long term, well very long term, there may be some benefit to paying the mortgage but by walking away and pocketing as much as possible on the way out, it is very likely that an identical home to what someone owns now could be bought for 50 cents on the dollar in a few years when their credit score recovers. If you do not disagree with this premise, how can you think that paying the mortgage is a good idea?