Comments on: Real Homes of Genius: January Recap and Compton Prices Rising. At Least in Theory.

By: tazman

tazman — Thu, 14 Feb 2008 01:05:23 +0000

Dr. Doom said “Some of you argue from a moral perspective stating that this couple has an obligation to uphold their commitment. Others argue that it is the smartest thing they can do since economically, it no longer makes sense to keep opening the blue mortgage book and sending off checks for an asset that is continually declining. I’m a bit torn between both sides.”

I’m not torn at all, they absolutely be sending off their checks to the mortgage company. The argument about sending money off to a depreciating is a red herring. Anyone who has ever purchased a car on credit goes through the same thing for between 2/3 and 3/4 of their loan term on the vehicle. People forget that the structure (ie the actual home) of a house actually wears out over time, just like your car. The only difference is how long can a structure continue to exist vs. the car without major repairs. If you look at your tax statement in most states/localities you’ll notice that your taxes actually show a different value for the home and the actual land. You’ll also notice that from year to year, it is the LAND value that is appreciating, not the structure value. I guess bottom line is, don’t buy what you can’t afford… and i don’t feel sorry for you one bit.

By: drhousingbubble

drhousingbubble — Sun, 03 Feb 2008 04:14:31 +0000

@Jenny,

First, congratulations on your sensible housing purchase. You are absolutely right in that the intention of this blog wasn’t to keep people from buying ever. It was to keep people from getting burned from buying overpriced homes with exotic mortgages. In fact, a national housing downturn will negatively impact my investment properties but unless I can justify the price via market rates, lease rates, and local area incomes I am simply speculating as well.

@Exit,

That is absolutely correct. Many of these lower to middle income areas exploded because this is where subprime loans thrived. They were the areas to get pumped up and the first to get taken down due to the market. The margin of error for many of these people is very slim. Incomes never ever justified prices even today’s current prices. Compton is down anywhere from 8 to 10 percent depending on which zipcode you look at. The median price is roughly $380,000 where last year it was $415,000.

By: rick

rick — Sat, 02 Feb 2008 16:35:48 +0000

The rise of Compton is just the last straw of a bubble.

This is the same like any bubbles. First the quality ones rises beyond reasonable level, then the crappy ones and even substitutes rise to levels beyond belief. And like the stock market, the junk stocks usually have much better returns when reaching the peak of the bubble. Usually they rise at the last leg of the bubble like crazy and then tumble first.

Anybody remember the fish oil company that rises several hundred percent when it announces that it will be buying websites?

By: Exit

Exit — Fri, 01 Feb 2008 23:15:02 +0000

from Businessweek via Yahoo

http://finance.yahoo.com/real-estate/article/104340/Housing-Meltdown

RHOG nationwide…

By: John B.

John B. — Fri, 01 Feb 2008 23:01:17 +0000

I, also, saw the Dateline segment on Stockton housing and the couple who were walking away into foreclosure. The fact that the product they purchased is depreciating is hardly an excuse for default. A house is purchased for shelter not investment, if it was, for investment, then it must have a presumed risk as with a stock.
When a purchased vehicle declines in value, the owner does not consider default, were that the case the economy would long ago been in shambles.