American Dream Rant.....

[riptides]

So, let me see....... Banks and Lenders raise rates, some lenders put people on the edge (stretch to get that dream!). Now a lot of people cannot make it, property taxes, insurance rates, adjustable rates, so foreclosure rates are rocketing.

Are the banks and lenders greedy? They are bringing this in themselves.
Unreal.

-Mike Z.

 

[MikePA]

Are the banks and lenders greedy?

At least as greedy as the people taking out the loans. Just because lenders offer easy money, doesn't obviate the need for borrowers to assume personal responsibility for how much debt they get into.

 

[cp1969]

It is because all these bankers lack imagination and the guts to invest in other areas besides houses. They are all tripping over themselves to get into the mortgage business...I hear advertisements that they will loan you 125% of appraised value on your house. Same way with cars...you can walk into a dealership and buy a new car today with $0 down. How looney is that?

But go talk to them about starting a business or buying some vacant land if you want to see the purse strings snap shut.

It is a copycat business model. Do what the other guy is doing. That's how we ended up with All in the Family, The Jeffersons, and Maude. One would have been plenty.

 

[MikePA]

In real estate markets where prices are rising, the lenders know they can sell a house for more in the future, it makes good business sense to get into the mortgage business, unlike loaning money for unimproved land. With a business loan, what assets will they have if the business flops?

 

[cp1969]

In real estate markets where prices are rising, the lenders know they can sell a house for more in the future, it makes good business sense to get into the mortgage business, unlike loaning money for unimproved land. With a business loan, what assets will they have if the business flops?

What goes up, must come down if there is no underlying economic explanation for the rise.

The same as they'll have if the real estate market crashes, thanks to idiotic loans these Johnny-come-lately mortgage (subprime, I think they're called) are making.

50 cents on the dollar--tops.

 

[kenmac]

In real estate markets where prices are rising, the lenders know they can sell a house for more in the future, it makes good business sense to get into the mortgage business, unlike loaning money for unimproved land. With a business loan, what assets will they have if the business flops?

Have you seen some of these houses/assets that are repod by the bank/ lenders ?
I've worked on some of these repos & b-4 the people move out they trash everything from the plumbing, heating & a/c systems to the electrical wiring . I've seen & charged thousands of $ to put these assets back together so that the lenders can sell them just so they can re-coupe some of their money. The rest of us pay for what they don't re-coupe

 

[MikePA]

The rest of us pay for what they don't re-coupe

How do I pay for what a bank in your area doesn't re-coup?

As long as banks have been lending money, there have been people who default and banks reserve funds to handle them.

Lenders don't put people 'on the edge'. Many people put themselves there.

 

[Bob_Skurka]

So, let me see....... Banks and Lenders raise rates, some lenders put people on the edge (stretch to get that dream!). Now a lot of people cannot make it, property taxes, insurance rates, adjustable rates, so foreclosure rates are rocketing.

So, let me see...... Our parents and grandparents saved before they spent, went to the banks for the least amount they needed, they kept some set aside for a rainy day, and they didn't extend themselves to the limit.

Today people want everything now. They over extend themselves on credit without thinking about the consequences of any sort of downturn in their personal finances. They lease cars instead of buying, they trade them every few years and are always behind. The average house today is twice the size of a home build in the 1960s but families are smaller. Typical homes have 3 to 5 TV sets and a cable bill that averages over $80 per month. Typical families have a home phone + 2 or 3 cell phones with average monthly bills over $100.

Is it the banks that are greedy or is it the people who buy houses that are too expensive and live lifestyles that are beyond their means???

They are bringing this in themselves.
Unreal.

-Mike Z.

Unreal.

Yup, the people are bringing this upon themselves. The banks are providing a service to these people who demand it and if the banks didn't lend the money then the customer would probably sue them.

 

[kenmac]

How do I pay for what a bank in your area doesn't re-coup?



many banks went out of business in the 80's ? because of so many bad loans. the fed. government bailed out some of these banks/ lenders, FHA loans etc, for making these bad loans. Fed. gov = tax dollars

 

[Kendall69]

A banker named David Hannum in 1869, said it best, "There's a sucker born every minute."
HistoryBuff.com -- P. T. Barnum Never Did Say "There's a Sucker Born Every Minute"

For longer than that, people have been suckers for all kinds of "deals". I don't blame the Bankers, as they were clever enough to find a way to screw millions of people legally.

No one forced these people to dive into these ludicrous loans. Read the paper work. I just got an offer on a credit card with ZERO percent for 6 months, then I read the paper work, and it said ( paraphrasing here) even though we just said we would give you 0% for six months, we may not really do that, in fact we have the right to change an of these offers at any time and raise th percentage points to whatever we feel like. Seriously my paraphrasing is not too far off from what they really said in the fine print.

Think about it it's a win win for the bank, there is no down side for them. You pay the interest, the value of the house goes up, now you can't pay the interest, and the bank gets your home, it's brilliant.

Do I like it, absolutely not, but am I going to profit oon some foreclosures, you bet.

 

[Bob_Skurka]

How do I pay for what a bank in your area doesn't re-coup?

many banks went out of business in the 80's ? because of so many bad loans. the fed. government bailed out some of these banks/ lenders, FHA loans etc, for making these bad loans. Fed. gov = tax dollars

Actually that was the savings and loan crisis not a bank crisis, S&L followed a different set of regulations and the oversight was much looser.


By the way, this new so-called crisis, is due to people who take out loans with ZERO % downpayments on homes they can't afford. Or those who are addicted to credit cards like a crack ***** is addicted to drugs. Individual responsibility is a forgotton concept in this nation.

The press is reporting this as the "sub-prime" lending problem. Sub-Prime means, in simple English, that these loans suck because they are risky. People are taking too much risk. They choose to do it to themselves.

 

[riptides]

So, let me see...... Our parents and grandparents saved before they spent, went to the banks for the least amount they needed, they kept some set aside for a rainy day, and they didn't extend themselves to the limit..

Interesting observation, but those days are long over. Today in order to suceed you need to be fast, extendable and take risk.

Today people want everything now. They over extend themselves on credit without thinking about the consequences of any sort of downturn in their personal finances. They lease cars instead of buying, they trade them every few years and are always behind. The average house today is twice the size of a home build in the 1960s but families are smaller. Typical homes have 3 to 5 TV sets and a cable bill that averages over $80 per month. Typical families have a home phone + 2 or 3 cell phones with average monthly bills over $100. .

Yes, some people, not all. I agree people could make smarter moves, but in some areas housing markets, especially affordable housing is non-existant. Heck, even some traditional old style 2 plus hour commute to job hosing is unaffordable. As far as size goes, well safe to say your average family is probably bigger than it was in the '60's. And more loosely coupled, mobile and fluid.

Is it the banks that are greedy or is it the people who buy houses that are too expensive and live lifestyles that are beyond their means???
.

I don't know, anyone tried buying a farm today?

Unreal.

Yup, the people are bringing this upon themselves. The banks are providing a service to these people who demand it and if the banks didn't lend the money then the customer would probably sue them.

And I still think the banks and lenders KNOW what the break point is. And I don't understand with the housing slump, why they would continue to practice rate hikes. This will only incur more foreclosures and more houses on the market. To them it is a lose, lose situation in my eyes.

-Mike Z.

 

[Bob_Skurka]

Interesting observation, but those days are long over. Today in order to suceed you need to be fast, extendable and take risk.

Yes, those days are long over, it is amazing how stupid we have become and how we did not learn valuable lessons from our parents. The most successful people I know put money into savings. That gives them the ability to change course at will and take risks too. Those who live on leverage and overextention clearly are the people who get into the most trouble.

Yes, some people, not all. I agree people could make smarter moves, but in some areas housing markets, especially affordable housing is non-existant. Heck, even some traditional old style 2 plus hour commute to job hosing is unaffordable. As far as size goes, well safe to say your average family is probably bigger than it was in the '60's. And more loosely coupled, mobile and fluid.

Yes, in some areas the commutes are very long and the prices are amazingly high, at some point people may realize that revitalizing city cores is an economical choice for housing. As far as size goes, the number of people living in a house has gone down. The square footage of their house has virutally doubled. Those are facts.

I don't know, anyone tried buying a farm today?

Mike, this is irrelevant. It matters not what you buy, it matters what you can afford to buy. If you overextend, you will likely end up in trouble of your own making.

And I still think the banks and lenders KNOW what the break point is. And I don't understand with the housing slump, why they would continue to practice rate hikes. This will only incur more foreclosures and more houses on the market. To them it is a lose, lose situation in my eyes.

-Mike Z.

Mike, put this whole thing into perspective. The sub-prime market is only a small fraction of the lending market. The forclosure rate is roughly 00.54% of the market. Those who pay late (30 days behind) is right about 5.00% of the whole market.


I believe you ane I are agreeing on many things, but we disagree on who is to blame. I blame the individuals who overextend, you blame the institutions who do the lending. But overall we both see the same problem, we just think it needs to be fixed differently.

So with that in mind, let's pose a similar question. Do American consumer's constant demand for cheaper goods drive their jobs to China, or do corporations move jobs to China to increase their profits and that puts American workers out of jobs? Chicken or Egg?

 

[MossRoad]

Interesting observation, but those days are long over. Today in order to suceed you need to be fast, extendable and take risk.



Yes, some people, not all. I agree people could make smarter moves, but in some areas housing markets, especially affordable housing is non-existant. Heck, even some traditional old style 2 plus hour commute to job hosing is unaffordable. As far as size goes, well safe to say your average family is probably bigger than it was in the '60's. And more loosely coupled, mobile and fluid.



I don't know, anyone tried buying a farm today?



And I still think the banks and lenders KNOW what the break point is. And I don't understand with the housing slump, why they would continue to practice rate hikes. This will only incur more foreclosures and more houses on the market. To them it is a lose, lose situation in my eyes.

-Mike Z.

I disagree...

Housing here in Northern Indiana is still affordable if you are willing to move into an older neighborhood as a starter home. Buy a house for 50K when you are 20. Stay in it and pay it off by 30. Sell it and buy a 100K house and your payments stay the same. Pay it off by the time you are 40. Sell it and buy a 150K house, etc... you can move up to a nicer home every 10 years and your payments never go up. If you double your mortgage payment on the principle, you can do it every 5 years.

Families are smaller today than when I was a kid. All my friends came from families with 4 or more kids. Today, my kids' friends are mostly only children, with very few that have more than two siblings.

My parents gave me two simple pieces of financial advice when I was a kid... "Don't spend more than you make. You'll get in trouble if you do." And, "Never take out a mortgage that is more than 2X your annual income. Not you and your spouse's annual income, YOUR annual income."

I completely agree with the thought that too many people today live beyond their means simply because they want nice stuff. I like nice stuff, too. If I want something, I save up for it and then buy it, not the reverse.

 

[scott_vt]

I completely agree with the thought that too many people today live beyond their means simply because they want nice stuff. I like nice stuff, too. If I want something, I save up for it and then buy it, not the reverse.

Mornin Moss,
Well stated !!! My oldest boy has been on his own for almost
1 1/2 years. We were talking the other day and he stated that he didnt feel that he was ever going to be able to buy a house He is a computer science major grad that makes darn good money IMO. I told him that I was out on my own for four or five years before I bought my first home !

The problem is that young people today want instant gratification ! Its almost ingrained in their way of thinking that they should be able to walk out into the market and plunk down a few bucks and have a home !

 

[dmccarty]

The problem is that young people today want instant gratification ! Its almost ingrained in their way of thinking that they should be able to walk out into the market and plunk down a few bucks and have a home !

Amen. I was out of school 7 years before I could buy a house and I was on my own a year or two before I finished school. The house sizes are huge. My first house was 1250 square feet. Our second house is now 2400 sf and we have no intention of moving from this one. The first house was a typical ranch house built in they 70s. Alot of the new houses I drive by have to be around 3,000 sf. Back around 2002 we went on a Parade of Homes and the cheapest house was about 375K. Most where around 500-600K with one at 750K. Multiple subdivisions had houses with these prices and 3000 sf or larger. I don't know how most people could afford this...

Later,
Dan

 

[Bob_Skurka]

My parents gave me two simple pieces of financial advice when I was a kid... "Don't spend more than you make. You'll get in trouble if you do." And, "Never take out a mortgage that is more than 2X your annual income. Not you and your spouse's annual income, YOUR annual income."

The problem is that young people today want instant gratification

There is a HUGE amount of wisdom in those statements above!

My first house was 1250 square feet.

Mine was 1345 square feet, built in 1944. I was happy as a pig in slop to have it. Heck we had 1 bathroom, 3 bedrooms and 2 closets Oh, and when you sat on the toilet you could look down at your feet and see through the rotted floorboards to the basement, which had the added benefit of providing ventilation for the bathroom

Alot of the new houses I drive by have to be around 3,000 sf. . . I don't know how most people could afford this...

The community a few miles north of me is building rapidly. The new homes are often 4,000 to 6,000 square feet. My daughter attends the Catholic school there and I am on one of the school committees; on the same committee are 3 real estate agents. In a side discussion one evening the R.E. agents were talking about all the people who are buying these big homes, often with ZERO down payments and 100% loans. Those who do put up a down payment do not put down the "old traditional" 20% or 25% down, but they do put down 5%. They admitted that many buyers for big homes are doctors, lawyers, etc who actually buy the homes with big down payments, but they said they were shocked at the high percentage of dual income families that stretched themselves so thin to buy these homes that they knew would not be able to afford them over the LONG HAUL.

You have to wonder about divorce rates too. Money issues are the single leading cause of divorce (or that is the claim). If these people have these big homes but no money to "live" a life, then you'd have to think their stress levels are high and their family life sucks.

But is it their fault for buying these big homes or the banks fault for lending them the money? Or maybe is it "society's fault" for making them want things they can't afford? I tend to think we all make choices in life. Many of those choices are stupid. But they are our choices to make and no bank ever twisted my arm to buy a bigger house, to take more risk, to go deeper into debt. JMO.

 

[dmccarty]

You have to wonder about divorce rates too. Money issues are the single leading cause of divorce (or that is the claim). If these people have these big homes but no money to "live" a life, then you'd have to think their stress levels are high and their family life sucks.

But is it their fault for buying these big homes or the banks fault for lending them the money? Or maybe is it "society's fault" for making them want things they can't afford? I tend to think we all make choices in life. Many of those choices are stupid. But they are our choices to make and no bank ever twisted my arm to buy a bigger house, to take more risk, to go deeper into debt. JMO.

When we saw the McMansion subdivisions we kept asking ourselves who could afford these homes? Even on two good salaries we would have had to eat pork and beans after the mortgage was paid on these houses even WITH 20% down. What was sad about the homes is that they where not quality construction. They did not have the best materials they where just large houses made up of large rooms. The designs sucked and had very little thought other than make it bigger. There was only one house that was an exception. In the most expensive house they put up plywood on the ceiling, stained it like mahogany and charged accordingly. Junk. Just Junk.

Our Money Rule #1 is that we live on my pay. Whatever the wifey makes the wifey makes. I really don't understand why people buy these houses. Its not like 2 or even 4 people can really use 3000, 4000, 5000 sf homes. People complain about the big bad SUV destroying the world so they buy a Prius, park it in the McMansion and fell good. The cost to live in these things is high with the cost to run the house much less the property tax. The stress on the couple has to be high and help drive up the divorce rate.

But it is THEIR money and THEIR problem not mine.

For the most part that is. Our tax dollars did have to bail out the S&L's. Remember the Keating Five? I wonder if that will come back to haunt McCain. I don't think banks loose money on repo as long as the house market does not take a dive. If the market has crashed then they are going to loose some money.

Just because the bank WANTS to give you money does not mean you have to take it.

Later,
Dan

 

[MossRoad]

I lived with my folks until I was 24. Payed my way through school as I went by sometimes working 3 jobs while attending school and dating my wife. Payed my folks rent with physical labor (dad bought a tractor after I moved out ). Got married to a girl that did the same thing. We bought our first home a few months before we got married (no, we didn't shack up first ). It was 720 square feet. Real nice a cozy for the newlyweds! We had to borrow $18,000.00 and had to pay three points to get the interest down to 12.5%. But we managed to pay it off in five years. Then we bought 20 acres and payed that off. Then we had our first child. We bought a larger used house (1300 sq ft.) and payed that off. Had a second child.... etc... We have been paying as we go since high school graduation. If we both lost our jobs today, we could still maintain our home, taxes and nice schools for the kids on both of us making low wages. That's the key. Never live up to or beyond your means. Live well below your means and pay off all debts ASAP. We have never passed the standard deduction for income taxes when itemizing. Closest I ever came was about $200.00. We have a credit card that we pay off each month. We also have a debit card, but that is just a plastic check. The money has to be in the checking account before we use it. This is common sense stuff, folks.

Our parents were correct and you can still live like that today if you want to. Debt free is attainable on average wages. Nice, warm homes, good food, good schools, good cars, heck, even a nice tractor are all there with the peace of mind that you don't have to give it all back if you lose your job. You just have to be patient and earn it, pay for it and enjoy it.

 

[BillyP]

I disagree...

Housing here in Northern Indiana is still affordable if you are willing to move into an older neighborhood as a starter home. Buy a house for 50K when you are 20. Stay in it and pay it off by 30. Sell it and buy a 100K house and your payments stay the same. Pay it off by the time you are 40. Sell it and buy a 150K house, etc... you can move up to a nicer home every 10 years and your payments never go up. If you double your mortgage payment on the principle, you can do it every 5 years.

But for how long will this trend last? The housing market is on a downhill slide and gaining speed fast. Here is a good read on the problem Safe Haven | US Housing Meltdown

I do think banks should take their share of the blame. After all, they're the ones that approves the applications. Then there's the greedy credit card companies. They almost shove credit cards down a person's throat. Then they whine, moan and groan when they have too much bad debt out. Let's not forget all the car manufacturers. No money down, cash rebates, 7 years to pay, no payments for 3 months...