Comments on: Underwater Cars http://www.ritholtz.com/blog/2008/11/underwater-cars/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 19:53:21 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: DP http://www.ritholtz.com/blog/2008/11/underwater-cars/comment-page-1/#comment-128212 DP Sun, 23 Nov 2008 18:55:22 +0000 http://www.ritholtz.com/blog/?p=10548#comment-128212 You know, a lot of people technically "underwater" in their house did actually buy a house they <b>could</b> afford to live in and bought it because they wanted to live in it. Other than speculation there was this whole group of crazy out of touch people (like me) who bought a bigger house because they wanted to live in a bigger house with no real thought for what it's value might be in 5 years. Perhaps that's dumb, because it's based around mundane things like enjoying your life, raising a family and finding a better school than it is market returns, but it is what it is. I'm technically 150k down on this house, but either (a) I continue to live here as planned or (b) I move "up" another level and the next house is probably 250k+ less than it would have been at the peak, so really, am I better or worse off? In reverse, if this house had gone UP 150k on paper instead then either (a) I continue to live in it as planned or (b) the next house costs me 250k <b>more</b> than it would. Not to downplay the overall situation, obviously it is bad. Just making the point that "2 million people underwater in their house" does not necessarily mean "2 million people about to default". You know, a lot of people technically “underwater” in their house did actually buy a house they could afford to live in and bought it because they wanted to live in it. Other than speculation there was this whole group of crazy out of touch people (like me) who bought a bigger house because they wanted to live in a bigger house with no real thought for what it’s value might be in 5 years. Perhaps that’s dumb, because it’s based around mundane things like enjoying your life, raising a family and finding a better school than it is market returns, but it is what it is.

I’m technically 150k down on this house, but either (a) I continue to live here as planned or (b) I move “up” another level and the next house is probably 250k+ less than it would have been at the peak, so really, am I better or worse off? In reverse, if this house had gone UP 150k on paper instead then either (a) I continue to live in it as planned or (b) the next house costs me 250k more than it would.

Not to downplay the overall situation, obviously it is bad. Just making the point that “2 million people underwater in their house” does not necessarily mean “2 million people about to default”.

]]> By: awilensky http://www.ritholtz.com/blog/2008/11/underwater-cars/comment-page-1/#comment-128203 awilensky Sun, 23 Nov 2008 17:05:57 +0000 http://www.ritholtz.com/blog/?p=10548#comment-128203 You don't know the half of it regarding motorcycles, in particular, Harley Davidson. They issued loans to every stiff with a paycheck stub, sometimes with the name not matching the loan docs. Their default rate is approaching 80%, HD credit has cut back consumer loan underwriting for all but the highest FICO scores. HD's in defualt are easy to crash, to burn, and to strip. Need I say more, other than that HD is about to close its Yorktown, PA plamt. You don’t know the half of it regarding motorcycles, in particular, Harley Davidson. They issued loans to every stiff with a paycheck stub, sometimes with the name not matching the loan docs.

Their default rate is approaching 80%, HD credit has cut back consumer loan underwriting for all but the highest FICO scores. HD’s in defualt are easy to crash, to burn, and to strip. Need I say more, other than that HD is about to close its Yorktown, PA plamt.

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