Comments on: The Foreclosure Story Number 2: $136,000 a Year Income to Foreclosure. http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/ How I Learned to Love Southern California and Forget the Housing Bubble Sun, 07 Sep 2008 23:21:18 +0000 http://wordpress.org/?v=2.2.2 By: Dumbfounded http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-14870 Dumbfounded Sun, 18 May 2008 04:53:33 +0000 http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-14870 This woman's want to purchase a home was a simple math equation that she made more complicated than it had to be. She made $130,000 last year; I'm willing to bet she finally broke the six figure salary mark during the housing craze these last few years. But, I'll give her the benefit of the doubt and assume she made that type of money when she initially purchased the home. Typically a buyer can afford a mortgage of up to 33% of his/her monthly household take home pay (and that's assuming there are no significant outstanding debts like student loans, high credit card balances, etc.). $130,000 divded by 12 times 33% equals $3575.00. Based on the three mortgages listed in the article, she was paying $2,740.00 (exluding taxes and insurance) per month. So, theoretically, she should have been able to afford the three mortgages. But like so many people, she probably had other significant bills like auto, insurance, Starbucks habit, etc. She leveraged her financial future on the mistaken assumption that the housing market would not drop in price. I am a law enforcement officer; let's suppose I decide to commit a crime because the end result would yield me a great amount of money--enough to change my lifestyle. I have the inside track on how officers think and conduct their investigation. Now, let's say I got caught and was convicted. The judge sentences me to 15 years in prison (remember, this is hypothetical). My response is "I thought I would only get probation since I was a law inforcement officer. I also am sure I will get my conviction overturned on appeal...just because it's rare that officers are sentenced to prison. The Real Estate version of my response is “I’ll find a comparable job soon”. My point to all of this is this person did not fully understand the historical nature of her "field of expertise", for a lack of a better phrase. Even if the market "bottoms out" in '09, it does not mean that prices will shoot right back up; prices my just stagnate for a couple/few years until the economy picks back up. I am so tired of hearing of the "people waiting on the sidelines" to swoop in an purchase the over supply of homes available. I think those people are very few and the majority of people who wanted in on the great home ownership dream actually purchased within the last few years. Besides, if we are in a Recession, layoffs are coming, which will cause housing prices to futher drop or, in the best case scenario, stagnate. This woman’s want to purchase a home was a simple math equation that she made more complicated than it had to be. She made $130,000 last year; I’m willing to bet she finally broke the six figure salary mark during the housing craze these last few years. But, I’ll give her the benefit of the doubt and assume she made that type of money when she initially purchased the home. Typically a buyer can afford a mortgage of up to 33% of his/her monthly household take home pay (and that’s assuming there are no significant outstanding debts like student loans, high credit card balances, etc.). $130,000 divded by 12 times 33% equals $3575.00. Based on the three mortgages listed in the article, she was paying $2,740.00 (exluding taxes and insurance) per month. So, theoretically, she should have been able to afford the three mortgages. But like so many people, she probably had other significant bills like auto, insurance, Starbucks habit, etc. She leveraged her financial future on the mistaken assumption that the housing market would not drop in price. I am a law enforcement officer; let’s suppose I decide to commit a crime because the end result would yield me a great amount of money–enough to change my lifestyle. I have the inside track on how officers think and conduct their investigation. Now, let’s say I got caught and was convicted. The judge sentences me to 15 years in prison (remember, this is hypothetical). My response is “I thought I would only get probation since I was a law inforcement officer. I also am sure I will get my conviction overturned on appeal…just because it’s rare that officers are sentenced to prison. The Real Estate version of my response is “I’ll find a comparable job soon”. My point to all of this is this person did not fully understand the historical nature of her “field of expertise”, for a lack of a better phrase.

Even if the market “bottoms out” in ‘09, it does not mean that prices will shoot right back up; prices my just stagnate for a couple/few years until the economy picks back up. I am so tired of hearing of the “people waiting on the sidelines” to swoop in an purchase the over supply of homes available. I think those people are very few and the majority of people who wanted in on the great home ownership dream actually purchased within the last few years. Besides, if we are in a Recession, layoffs are coming, which will cause housing prices to futher drop or, in the best case scenario, stagnate.

]]> By: Scott http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-5245 Scott Tue, 08 Jan 2008 11:33:08 +0000 http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-5245 In the late 1980’s many people with sub prime loans walked away from their homes/mortgages. Check the Dallas stats to see what the effects were on housing following the unprecedented bank and S&L failures and decline in market values. The repossession and write down of property values so they could be sold again caused a tremendous decline in property values of the neighboring properties.With the additional incentive of not facing taxes on the forgiveness of debt, that is just another incentive to take on a risky mortgage that you can’t pay. Why not, you have everything to gain and nothing to lose. In the late 1980’s many people with sub prime loans walked away from their homes/mortgages. Check the Dallas stats to see what the effects were on housing following the unprecedented bank and S&L failures and decline in market values. The repossession and write down of property values so they could be sold again caused a tremendous decline in property values of the neighboring properties.With the additional incentive of not facing taxes on the forgiveness of debt, that is just another incentive to take on a risky mortgage that you can’t pay. Why not, you have everything to gain and nothing to lose.

]]> By: Rearview Hindsight http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-4342 Rearview Hindsight Wed, 26 Dec 2007 10:15:02 +0000 http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-4342 Thanks, Doctor, for another dose of that hard medicine. When all of this was happening I asked myself many times "how can these people afford this"? Everywhere I looked there were new SUVs, granite countertops, and TV shows that highlight the most extreme spending possible - biggest boats, fanciest cars, monster houses. As a technology professional I make a pretty good buck but I really started to think I was missing something profound until I understood that these people were simply spending future earnings (debt) and had zero intention of ever paying it back. Just like the US gov't has no intention of paying back 9 trillion in debt. We need a change. We need to abolish the Federal Reserve and all of the big government that complacency built. We need Ron Paul in 2008. Google for Ron Paul and listen to what he says and then think about it a little bit. Or, vote for one of the standard plastic candidates because it's somehow more politically correct than voting for the guy who is speaking the truth. Thanks, Doctor, for another dose of that hard medicine. When all of this was happening I asked myself many times “how can these people afford this”? Everywhere I looked there were new SUVs, granite countertops, and TV shows that highlight the most extreme spending possible - biggest boats, fanciest cars, monster houses. As a technology professional I make a pretty good buck but I really started to think I was missing something profound until I understood that these people were simply spending future earnings (debt) and had zero intention of ever paying it back. Just like the US gov’t has no intention of paying back 9 trillion in debt. We need a change. We need to abolish the Federal Reserve and all of the big government that complacency built.

We need Ron Paul in 2008. Google for Ron Paul and listen to what he says and then think about it a little bit. Or, vote for one of the standard plastic candidates because it’s somehow more politically correct than voting for the guy who is speaking the truth.

]]> By: bearmaster http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-2935 bearmaster Sat, 24 Nov 2007 02:03:54 +0000 http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-2935 Interesting post about the professional on the show. When people living the good life hit the ditch financially, denial is probably the most common psychological posture. When somebody loses a regular 9-5 job, he doesn't typically take steps to minimize his expenditures immediately. Or maybe he just does simple triage and trims around the edges - cut out the daily trips to Starbucks. The person keeps putting off making big decisions about major expenditures because of uprooting the lifestyle. Unfortunately by the time the urgency of performing major triage finally sinks in, the person is already financially sunk. In the dotcom downturn in 2001-2003, there were stories about charities seeing cash poor laid off dot com execs driving up in BMWers and Audis and wanting a few grand to pay their expenses for the month. Mortgage, car payments, kids' school tuition, etc. Such charities are used to helping a struggling low-income single mom with some food or a little money - nothing like that. Of course some got huffy if they were turned down because they had donated to the charity before so they felt entitled. "Aid groups see more requests from from once affluent Collin agencies say high-dollar relief sought by some is unrealistic", Dallas Morning News, May 20, 2003, April M. Washington. Excerpt: http://atrios.blogspot.com/2003_05_18_archive.html#200329694 Interesting post about the professional on the show. When people living the good life hit the ditch financially, denial is probably the most common psychological posture. When somebody loses a regular 9-5 job, he doesn’t typically take steps to minimize his expenditures immediately. Or maybe he just does simple triage and trims around the edges - cut out the daily trips to Starbucks. The person keeps putting off making big decisions about major expenditures because of uprooting the lifestyle.

Unfortunately by the time the urgency of performing major triage finally sinks in, the person is already financially sunk. In the dotcom downturn in 2001-2003, there were stories about charities seeing cash poor laid off dot com execs driving up in BMWers and Audis and wanting a few grand to pay their expenses for the month. Mortgage, car payments, kids’ school tuition, etc. Such charities are used to helping a struggling low-income single mom with some food or a little money - nothing like that. Of course some got huffy if they were turned down because they had donated to the charity before so they felt entitled.

“Aid groups see more requests from from once affluent Collin agencies say high-dollar relief sought by some is unrealistic”, Dallas Morning News, May 20, 2003, April M. Washington.

Excerpt:
http://atrios.blogspot.com/2003_05_18_archive.html#200329694

]]> By: ARW http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-2910 ARW Wed, 21 Nov 2007 15:22:46 +0000 http://www.doctorhousingbubble.com/the-foreclosure-story-number-2-136000-a-year-income-to-foreclosure/#comment-2910 She owe's $600k but only pays $2740/month? That don't sound right even with a pay option. She owe’s $600k but only pays $2740/month? That don’t sound right even with a pay option.

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