Subj : Re: New to this
To   : Dumas Walker
From : boraxman
Date : Mon Apr 21 2025 11:38 am

On 20 Apr 2025 at 09:43a, Dumas Walker pondered and said...
 
 DW> >  DW> Yes.  The last time that happened, we eventually had a housing cris
 DW> >  DW> that set off a recession.  In that event, the housing prices rose w
 DW> >  DW> above what the houses were worth.  There was an eventual correct (a
 DW> >  DW> least in my area) and house prices fell back closer to their actual
 DW> >  DW> worth.
 DW> 
 DW> >  It wasn't just the housing price bubble, though, it was subprime loans
 DW> >  written as adjustable rate mortgages increasing that caused the default
 DW> >  rate to increase, yes?
 DW> 
 DW> There was that, too.  Something that people like to gloss over is that
 DW> those loans were being written in the 1990s, at least here.  They started
 DW> defaulting en masse in ~10 years when the rates increased.
 DW> 
 DW> But the fact that the house they signed that deal on was priced well
 DW> above what it was worth didn't help as it meant they were paying more
 DW> and made the houses more difficult to shift later.
 DW> 
 DW> Supposedly, around here, when someone accepted a "zero down loan," if
 DW> they actually had money to put down, that was added to the advertised
 DW> sale price of the house, i.e. I buy a $75k home and put $5k down, the
 DW> advertised sale prices was $80k.  Someone sees that and thinks they
 DW> might could get $85k for their similar home.  Eventually, the prices get
 DW> too high and houses stop selling.
 DW> 
 DW> I can believe that was happening.  I bought a $75k home in 1997 and, by
 DW> the Summer of 1999, people were trying to sell houses on the same street
 DW> that were the size of mine or smaller for over $110k.  When a couple of
 DW> owners tried $125k, that is when houses quit selling in that
 DW> neighborhood.
 DW> 
 DW> I knew the houses there didn't appreciate by 2/3rds in less than 2
 DW> years. I didn't have a zero-down loan, but others in that area did. 
 DW> When I sold in 2009, the houses were back to selling for about what they
 DW> were worth, just under $100k.
 DW> 

When I was first looking to buy a house, the bank was trying to throw money at me.  I went in with a conservative budget, and they were saying "You know you can borrow more".  Then they offer interest only loans.  They have no problem lending money for overpriced assets.

So the banks should all go bust!  They should bear most of the cost/risk of falling prices.

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 * Origin: Agency BBS | Dunedin, New Zealand | agency.bbs.nz (21:1/101)

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