Why are the prices of houses falling in CO? (short sale, foreclosures)

[dvflyer]

Originally Posted by formercalifornian

the market is soft, and they think prices will drop further over the next couple of years.

Soft enough to offset the rent they are paying? I think I understand the concept but would need to see real-life numbers to make it sink in.

If they rent for a couple of years, that rent $$ is gone. At a conservative $1000/ mo rent, that's $24,000 wasted in that two years. If they buy a house now, their home value (on paper) will/ may decline. If it declines $24,000 in those same two years, they are still better off because some of their payment has gone to principal and they have the interest payment write off.

The only reason I can see to rent is in hopes of getting that bigger house when/ if it comes down in value because you can't afford it now.... in which case, you are running too thin anyway.

Anyone is welcome to school me because so far, whenever I read the rent-until prices come down- argument, I just don't get it.

[Threerun]

Originally Posted by Tom Emmerling

Notice I said it can be really difficult, but not impossible. There are alot of people out there who are self employed and who do not have high 600 credit scores. Probably more than we all realize. For them it will be nearly impossible to get a loan without a down payment.

I'll do loans to these folks, if they have pledged equity or established roots. It's called community bank lending and if you know your borrower..It'll mitigate the risk. Folk's that breezed in looking to cash in on a 'hot' area will suffer more, you know the type of folks that 'hang out a shingle' because the market was booming.. Those folks will feel a bust worse than the one's that have been around the area for a while..

But good self employed folks in general? Nah- they'll manage. Seen it in the late 80's. Hell they came out better for it, actually.

[formercalifornian]

Here's a link to a website that may be of interest to those who have frequented this thread. Don't let the bare-bones appearance scare you off. Take a look around, and punch in some numbers. There's some really good stuff here!

Hugh's Mortgage and Financial Calculators

As an example, using Hugh's amortization calculator, I punched in a conservative $250k loan (the median house price in my neighborhood which is pretty affordable for the region) at 6.25% for 30 years. The payment came out to $1539, which does not include taxes and insurance, so you can add in a few hundred more. Over the course of two years, I will have ~$6000 in equity from paying down principal. I have also paid about $15k in mortgage interest each of those two years, which is a proportional reduction in my AGI (adjusted gross income). If my tax bracket is 20%, I've saved ~$3000 in taxes.

[TimtheGuy]

Originally Posted by formercalifornian

Oh, yay! Let's encourage people to buy vacation houses with 0% down when the primary market is at a stand-still. I'm sorry, but that just doesn't make me feel all warm and fuzzy about current lending standards and their effect on the real estate market.

ahh......the "secondary market" has nothing to do with vacation/2nd homes! So, I think we can throw your comments 'out the window' as you don't have a clue.

[TimtheGuy]

Originally Posted by Threerun

I'll do loans to these folks, if they have pledged equity or established roots. It's called community bank lending and if you know your borrower..It'll mitigate the risk. Folk's that breezed in looking to cash in on a 'hot' area will suffer more, you know the type of folks that 'hang out a shingle' because the market was booming.. Those folks will feel a bust worse than the one's that have been around the area for a while..

But good self employed folks in general? Nah- they'll manage. Seen it in the late 80's. Hell they came out better for it, actually.

Now that is RISKY for a community bank!! Are you sure you are really a banker???

[TimtheGuy]

Originally Posted by Tom Emmerling

Only about 3 weeks ago it changed so that you need the 10% down again. There for a long time (not sure exactly when) you could get 100% financing and also the interest only loans. Now those are going or even gone away. These companies that took these high risk loans are going out of business because they have lost so much money. That is why it has changed recently.

??

As previously stated for "regualar" conforming loans (less than $417k) NO DOWN PAYMENT IS REQUIRED and INTEREST ONLY is still available as well!

The 'real' lenders have not gone anywhere!

[formercalifornian]

Originally Posted by TimtheGuy

ahh......the "secondary market" has nothing to do with vacation/2nd homes! So, I think we can throw your comments 'out the window' as you don't have a clue.

I obviously misunderstood your reference to the secondary market as referring to the real estate market, rather than the mortgage market. You could be helpful and enlighten me to my mistake, so I can learn why your 0% down secondary market loans are a good thing. Doesn't that mean that you've just packaged up the risk and passed it off to someone else? Now, your comment about only portfolioing 70% LTV loans makes sense, but someone is going to have to pick up the pieces down the line when those high-risk loans fail.

[CosmicWizard]

I am inclined to agree with formercalifornian. Some of us are not aware of all the ins and outs of the mortgage business. Rather than seeing us as idiots becasue we miss your point, gently and kindly show us the error of our ways. Those of you who know the businees please EDUCATE rather than being snarky or condescending. Remember, there was a time when you too didn't understand everything about the business. We can all learn from your experience and wisdom.

blessings...Franco

[formercalifornian]

Originally Posted by NewAgeRedneck

I am inclined to agree with formercalifornian. Some of us are not aware of all the ins and outs of the mortgage business. Rather than seeing us as idiots becasue we miss your point, gently and kindly show us the error of our ways. Those of you who know the businees please EDUCATE rather than being snarky or condescending. Remember, there was a time when you too didn't understand everything about the business. We can all learn from your experience and wisdom.

blessings...Franco

I deserved it. I was snarky first, but thanks for coming to my defense.

[TimtheGuy]

Just releasing a little steam as I get tired of people preaching on this website about how other people should be conducting their finances/mortgages when they generally know just enough to be dangerous. People are also way too influenced by the doomsday media.

Sure it would be great if every borrower could put down 20%+ on thier house. BUT, that is just not realistic in today's world. There are plenty of people who will do great buying their 1st home with $0 down.

Here is a real example that I am closing in the next 30 days: an engaged couple in their early 20's are getting married in 2 months. Both have good full time jobs with moderate pay, minimal debt and a great "go-getter" attitudes. They have saved a few thousand $. They qualify for a 1st time homebuyer program that currently offers a 6.125% 30 year fixed rate. They are looking at starter homes in our area that run about $200k. These homes are going to be 20-50 years old. Their debt to income is going to be under 30%. They are going to do a $0 down loan with seller paid closing costs and save their few thousand dollars for any repairs that come up and/or as reserve funds.

Why should they rent for 1-5 years while they save up the 10% ($20,000)or 20% ($40,000) down that some people seem SO SURE is the answer when they can get GREAT terms on a $0 down loan right now to start their lives together??

Would you consider this irresponsible lending??

Also, I will say again...contrary to the media $0 down loans are alive and well and working! And you don't need 700+ credit scores to get them!These are agency loans I am referring to (Fannie Mae & Freddie Mac). There are good borrowers taking these loans out and they will perform!