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Thread: Lets see if I can sum up the housing miracle turned bust in one sentence

  1. #1
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    Default Lets see if I can sum up the housing miracle turned bust in one sentence

    The economy "prospered" on the assumption that people could sell their homes for a lot more money than how much they themselves paid for it.

  2. #2
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    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    Yes.

  3. #3

    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    Not bad. I would try:

    The economy prospered, so people bought more than they could afford.

  4. #4

    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    Quote Originally Posted by Big View Post
    The economy "prospered" on the assumption that people could sell their homes for a lot more money than how much they themselves paid for it.
    That's been true in the past, it's still true now in most markets, and it will be true in the future. Housing values always go up and down in cycles, but trend upward over time.

    People who are innumerate should not sign six and seven-figure mortgages unless they understand the terms. They should have hired someone for a few hundred bucks to review the loan, and had it explained to them.

    Most of the people upside down on their mortgages put very little money down, and they have paid very little to live in the house. In the end, it's as if they rented the house for a bit, and then moved out.

  5. #5
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    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    Flop,

    This scenario works when the profit between buying and selling is somewhat within limits if not fixed over time. When you have a runaway train where the third owner might have to pay 3 times more than the original owner in a matter of 7 years, that is a call for a major disaster.

    My main dismay is not so much with people's inability to pay but that so many failed to see how their mortgages were 2 to 3 times higher than of those people that bought the same house just 5-7 years before.

    Say you move in the house and you know your friend next door who bought the house just 5 years earlier is paying 1/3 of your mortgage. You have to be a fool to still want to buy that house. You know the bubble is about to burst.

  6. #6

    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    The combination of a rising market with ARM's was lethal. It's like shorting a stock that continues to go up. Stick with a 15 or 30 year fixed, and you're good to go. If rates go down, refinance. If they go up, who cares?

    Quote Originally Posted by Big View Post
    Flop,

    This scenario works when the profit between buying and selling is somewhat within limits if not fixed over time. When you have a runaway train where the third owner might have to pay 3 times more than the original owner in a matter of 7 years, that is a call for a major disaster.

    My main dismay is not so much with people's inability to pay but that so many failed to see how their mortgages were 2 to 3 times higher than of those people that bought the same house just 5-7 years before.

    Say you move in the house and you know your friend next door who bought the house just 5 years earlier is paying 1/3 of your mortgage. You have to be a fool to still want to buy that house. You know the bubble is about to burst.

  7. #7
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    Default Re: Lets see if I can sum up the housing miracle turned bust in one sentence

    A good example is this one small townhouse in the community where I live. There were owners there that bought it originally in late 90s for $60K. Then they sold it to this one girl who paid $90K for it. She lived there 5 years and sold it for $215K. Some Polish family bought it right before the bust and now they are watching their value plummet. Now there are still people living here that are paying a $60k mortgage on a similar small house that the Polish guy bought for $215. I always smile when I see him.

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