The second wave

Nice to see someone's on the ball. I get into arguments with coworkers and friends who tell me 'it's such a good time to buy!' Ummm, no. The foreclosure crisis is far from over. It probably hasn't even peaked yet. It's just about one year ago now most banks stopped writing 2 and 3 year ARMS, that were at the core of the subprime meltdown. So, do the math... those won't be adjusting until a year or even 2 from now. We've got a long way to go. Property values will continue to fall for the next couple of years, and even then, they'll be very slow to rebound. But, it's healthy for the real estate market in the long run.

Leave it to the Globe to call them "Victims". My wife an I avoided being victims by using basic common sense. It went like this " Gee honey, do you think we can afford this house if the adjustable rate goes up ? No." End of conversation. Went with a fixed rate and a little smaller place. Maybe Barack will ride to the rescue of these poor victims.

The Boston Globe has consistently portrayed those who are losing their homes inaccurately as "victims", as if some horrible hoax has been played on hundreds, sorry, thousands of unsuspecting, uneducated people. The Globe keeps publishing editorials where they repeat the lie that resetting rates are what caused many people to be unable to afford their homes, when the truth is, most (more than 50%, by some estimates, as many as 70%) people never got to the first reset rate - they were behind in their payments from month 1.

From 2/15/2008:

" ... More than 700 properties in Boston fell into foreclosure last year, mostly products of a subprime mortgage market that lured financially unstable buyers with low introductory rates ..."

Resetting rates haven't "exploded" into a mess - certainly, they have made the problem worse, but the main problem appears to be people who took out loans they couldn't afford, given to them apparently by brokers who encouraged them to fudge their applications or looked the other way or were somehow complicit in the fraud.

I've even seen editorials from the Globe where they state, "it doesn't matter any more what caused the problem, we need to deal with the mess and find solutions," and then they go on about how we need government intervention (stop me if you've heard this one before, it's the mantra on Morrissey Blvd.) to help protect the "victims" from "unscrupulous lenders".

Sorry, but it still does matter what caused the problem. And, what caused the problem was greed. Even if it was "unsophisticated buyers", it doesn't mean we all have to suffer for their mistakes.

The day I believe otherwise is the day Casa Vida stands outside Ed McMahon's house protesting the bank's foreclosure.

We are all suffering. Better we suffer through this and bring some sanity to the situation (lower home prices, stricter lending guidelines) so we all benefit in the future.

CommonSense,

If Barack 'rides to the rescue' of these 'victims', guess who's going to pay for that folly: you and me. Can we then also be classified as 'victims' - of poor government?

John Keith is exactly right. There's no free lunch, someone would have to pay for a bailout. And it would hurt as many people as it helps - massachusetts is far too expensive for its own economic good, and would benefit from cheaper housing.

The globe's knee jerk populism is often painfully dumb. I'm not referring in any way to Binyamin here - in fact the globe business section is consistently its best part.

I stand corrected. I'm shocked to see this on Barack's web site. Note the mention of children to tug at your heart strings.

"The implosion of the subprime lending industry threatens to bring foreclosure to over two million households, including many families with children. Barack Obama has been closely monitoring this situation for years, and introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity. This bill also provides counseling to homeowners and tenants to avoid foreclosures. Finally, Obama’s bill requires the Government Accountability Office to evaluate and report to Congress on various state lending practices so that state regulations that undermine consumer’s rights can be identified and hopefully eliminated."

My 10 month old daughter has more teeth than this bill. But hey,, at least he's not calling for a federal bailout yet. Let's all keep our fingers crossed.

For the most part, didn't folks in Massachusetts stay away from the option ARM kool-aide? Aren't option-ARMs a bigger problem in California?

Actually, Lucas, it is a fine time to buy. Provided you are financially responsible and plan to stay in the home for a while. My wife and bought our first place recently and we did something very strange compared to other buyers: we put 20% down and got a 30 year fixed rate mortgage in the 5's. Basically, we bought what we could afford, when we could afford to do so. It took a few years of saving and living within our means, two things the vast majority of people our age fail to grasp (late 20s, early 30s.)

Mark, it isn't really a fine time to buy for people for whom price matters. If it doesn't matter that the price is dropping, and will continue to do so until next summer or so, then it is fine.

But your way of buying is absolutely the way to go.

Price matters to everyone. But when is a good time to buy? The answer is that it's different for each person depending on their situation. I'm going to enjoy my purchase, make wise improvements to it that will hopefully increase its value over time, and relish the fact that I'm finally not renting anymore.

There's not one blanket decision that's right for everyone. But it was right for me, at this time in my life. I'm not going to be monitoring the value of my house on a daily basis and obsessing over whether I could have gotten it for $1k cheaper.

If you're really doing the "math" you need to factor in interest rates. I'm impressed with Mark's (see above) buying strategy. He and his wife just bought at an enviable low Fixed rate and are pleased with what they got. Can't beat that; Those deals are the ones to get and if you're buying now you're doing well price wise. Prices may go down a little but they won't completely tank - no historical data supports this.
Low interest rates on a fixed loan make a HUGE difference in how much you end up paying especially over a good chunk of time.

And anyway my husband and I are looking to buy to live life - I'm not spending another two years in this same rental apartment so that I can save $20k or so on a future house I want to raise children in. I'd rather nail down the interest rate and get the house I want and live there. Buying a home is for living in --not gambling.

Math isn't gambling. Neither is investing.

And you stand to lose far more than 20k on most Mass houses with even a minor drop. For me, I'd rather monitor prices and live in a rental apartment and do other things with the 40-50k a year I am saving. But hey, everyone has different priorities

No historic data supports price drops? Funnily this is exactly what I was told when I told people I was selling out back in 2005, I didn't think anyone still believed this after the rather well covered price drops we are experiencing.

I note once again, for those unwilling to use google, that ALL govt and financial analysts involved think there will be price drops until summer 2009. And no Lawrence Yun doesn't count, except for humor value.

We would love to buy now, and give up renting, but I think you are right on Charles. So we Rent ON!

However, my husband has a friend who is (PhD-in what I don't know) predicting prices to drop to 10% of peak! Is this even remotely possible? Maybe on Mars?

We are already down 10% off peak, I believe. And yes, I'd say another 10% is likely to say the least.

Other places in the US are down 30% of peak already.

Its why I'm always amused by some of the comments, as they always posit the alternative to renting as losing a few $1,000, not 10s of $1,000s. If there are any losses at all, they will be more like $50,000 for most places.

Often times certain comments show that we are woefully bad at teaching basic financial concepts in this country. Gambling is a great example. I'd say most gambling isn't even gambling - the casino will win, the gambler will lose. Where is the gamble when there is an obvious outcome?

Gambling in the US has come to just mean "I don't understand Math, Probabilities, and Economics"