November 5th, 2008 at 8:01 am
Glad the election is over. In the discussion as Barry has outlined above, consider this; I think we are about to see the greatest transfer of wealth in history. Since the government has assumed bad debt of gigantic proportion, that debt has been transferred through companies and institutions onto the government books. The government will pay that debt in some fashion, and that will come from us, through higher taxes, and in other ways.

Just think about it for a minute. We are massively increasing an already massive national debt. We lose no matter what. If we default, we lose. Higher interest rates, we lose. Much higher taxes, we lose.

Doesn’t really matter, either, whether you think deflation or inflation. This transfer of debt is a transfer of future wealth. Government becomes the grasshopper, we continue, ever longer, as the ants…

Bruce,

you’re far too kind, one, you have to remember that the ‘ants’ had stores–in the story. Today? as if!~

+ you should, also, see the “Bailout” in its true light: “Takeover”..

I have a friend who bought an ocean view mansion in Laguna Niguel in 2005 for 1.6M. He hasn’t made a payment in almost 18 months.

And, they’re no closer to eviction than they were 1 year ago. I suspect they’ll be able to live there for another 6 months to a year. The bank just doesn’t want to take it back and each “short sale” offer delays the process another 4 months.

You could literally live indefinitely in a soon-to-be-foreclosed house. I have seen it.

Not bad to live in a 4000 sq ft place for free (except for electricity and gas). The place even has a smokin’ back yard and a spool (spa & pool). It’s a party place. Very nice.

Too bad I’m renting, or I’d think about doing it myself.

Chuck Ponzi

Heck, mail back the keys and offer to ‘housesit’ until they can find a buyer.. Now THAT’S Chutzpah!

Can we please sterilise anyone who thought it was a good idea to offer no-down loans in non-recourse states? Anyone that blindingly stupid should not be polluting the gene pool…

Under normal circumstances, I would be opposed to the idea. But in the current morass, it might just make sense to give such authority to judges for a limited period of time (e.g., until 2011).

Of course the likeliest course of action for those seeking to milk the situation for all its worth will be to stop making payments, pretend to cooperate with the lender to workout new payments terms (all the while making no payments) stall, stall, stall, and live free for a year or more before the county sheriff actually comes to physically evict you.

Near the bottom of the last housing downturn in California (~’96), it was taking lenders over a year to evict an ‘owner’ after they stopped making payments.

With this downturn being far worse, by the time the true housing bottom is reached (likely 2012) I’d be willing to bet that lag will eventually become 1-1/2 to 2 years.

“We sold a house for an big gain (100%) in 2006, and bought a home that is now a little underwater. But the reality is that the loss on the current home is about the same as it would have been on the prior house; had we not moved, we would have had that much less of a gain on the old house.”

Here’s my point: “much less of a gain on the old house” is not the same as a loss on the new house. Pretend when you’re writing this that you’re talking about stocks. I don’t think you would be trying to soften the blow this way.

Let’s say, for argument’s sake, you bought the old house in 1998 for $750,000 and you sold in 2006 for $1.5 million. If you had stayed in your old home, you wouldn’t have a loss at all, you’d still be up, say 80% from 1998.

I’m going to assume you bought a new home for $1.5 million (maybe you weren’t as foolish as many Americans). Now, you’re down 20% from what you paid in 2006.

Maybe I missed something. I’m not a quant, but I do know that folks don’t always see things clearly when it comes to their home.

~~~

BR: No, we traded up, but did not go crazy. And the house we passed on, has already fallen $500k in price.

Had we stayed where we were, we would have been in a less desirable house, and less attractive part of town; We are now 100 yards from the water, a block from a nature preserve and a block from a big waterfront park. So we paid for, and got, a big quality of life improvement for less than 20% price increase.

The real difference is the next house: If the current house drops 20%, but the house we want drops 20%, its big savings . . .

“If you’re underwater in California with a no-money-down ARM, why _not_ go into foreclosure after lining up a suitable apartment to rent?”

Or worse yet:

If you’re underwater in CA with a zero down ARM… why not mail your keys to the bank and live for free for a couple of months??? Just squat til the bank kicks you out…

I’m afraid thats what the more irresponsible of the folks in that situation will do.

On a side note:

We had one foreclosure in our little neighborhood. It was boarded up and looked like shit for three months. Then all of a sudden, its cleaned up, and there is a Windermere sign out front, and its on the market for an average price for our area… so something must be working.

I’ve also been receiving some new credit offers in the mail recently, and those weirdo mortgage ads with the housemoms shakin booty are all over yahoo again… so something must be working.