Double dip in housing confirmed

[danefan]

Great time to buy if you're in a place with a decent inventory.

I bought two bank-owned investment properties in 2010 and just started looking to upgrade our primary residence. Great credit, very very low debt-to-income ratio. With floor level interest rates and flat property prices it almost a perfect buying storm......the only problem is I can't find anything under $850k worth looking at. And despite what a banker and/or mortgage calculator might say...there's no way in hell I can afford an $850,000 house with $20,000 a year taxes.

The thing is I know there are sellers out there are scared to put there house on the market. Weird vicious cycle right now.

[ASUG8]

Great time to buy if you're in a place with a decent inventory.

I bought two bank-owned investment properties in 2010 and just started looking to upgrade our primary residence. Great credit, very very low debt-to-income ratio. With floor level interest rates and flat property prices it almost a perfect buying storm......the only problem is I can't find anything under $850k worth looking at. And despite what a banker and/or mortgage calculator might say...there's no way in hell I can afford an $850,000 house with $20,000 a year taxes.

The thing is I know there are sellers out there are scared to put there house on the market. Weird vicious cycle right now.

Maybe it's not the case so much anymore, but several years ago I was amazed at what the banks said we could afford as a monthly mortgage payment.

I mean, we could have afforded it, if we gave up utilities, taxes, gasoline, vehicles, eating, fun.......

[93henfan]

Can't drive down a street in CA without finding vacant "shadow inventory" homes...easy to spot: Lawns/yards haven't been mowed/trimmed in over a year; broken windows boarded up; graffiti on door/garage. You won't hear any pols/economists/media discussing this due to the varying ramifications to the recovery. Yes, it temporarily stabilizes pricing, but eventually, they'll be sold, driving down surrounding values.
Sickening that when the values were being pumped up, BofA, JP Morgan, Citibank, WF, GS, etc...wallowed in the fat. When the jig was up, the taxpayers and property owners who pay their bills have ended up taking the hit, not the banks.
"Anger" doesn't even come close.

Oh, cry me a fucking river. Don't lump those GSE's (and that's what those fuckers are, when considered too big to fail) in with the thousands of community banks and credit unions around the country who DID take massive hits when property values fell and people started walking away from their houses in droves because they couldn't use it as an ATM anymore. If I had a buck for every gutless motherfucker who had the ability to make his home payment but CHOSE not to because he/she was now upside down I'd be a rich man. This country (and this economy) would have been able to withstand the justifiable foreclosures and home losses, but when you add on the strategic defaults, the burden has become insurmountable and you're adding massive insult to an already almost fatal injury.

A “strategic default” is when a homeowner stops making mortgage payments even though they could afford to pay. The trend grew through 2008 and by 2009 JPMorgan Chase analysts found 60 percent of all defaults were strategic.

60 fucking PERCENT of defaults were avoidable....if THAT doesn't make you angry, then you're hopeless, because THAT, my friend, is what has driven this economy to the brink of a depression. Take 60% of the foreclosure portfolio off the market...what would that do to home prices? Reduce bank/credit union losses by 60%...what would that do to their balance sheets/income statements? You can "blame" the financial institutions all you want, but that's pure BS and you know it. The blame for this debacle we're still in (and will be for the next 8-10 years) lies squarely at the feet of the strategic defaulters and those advising them to do so.

The best thing this country could do would be to reinstitute debtors prisons.

Hey, great post man.

So anyway, I need to unload my house by the end of August. Should I just walk away?

[AZGrizFan]

Oh, cry me a fucking river. Don't lump those GSE's (and that's what those fuckers are, when considered too big to fail) in with the thousands of community banks and credit unions around the country who DID take massive hits when property values fell and people started walking away from their houses in droves because they couldn't use it as an ATM anymore. If I had a buck for every gutless motherfucker who had the ability to make his home payment but CHOSE not to because he/she was now upside down I'd be a rich man. This country (and this economy) would have been able to withstand the justifiable foreclosures and home losses, but when you add on the strategic defaults, the burden has become insurmountable and you're adding massive insult to an already almost fatal injury.



60 fucking PERCENT of defaults were avoidable....if THAT doesn't make you angry, then you're hopeless, because THAT, my friend, is what has driven this economy to the brink of a depression. Take 60% of the foreclosure portfolio off the market...what would that do to home prices? Reduce bank/credit union losses by 60%...what would that do to their balance sheets/income statements? You can "blame" the financial institutions all you want, but that's pure BS and you know it. The blame for this debacle we're still in (and will be for the next 8-10 years) lies squarely at the feet of the strategic defaulters and those advising them to do so.

The best thing this country could do would be to reinstitute debtors prisons.

Hey, great post man.

So anyway, I need to unload my house by the end of August. Should I just walk away?

That's fine, man. Become part of the problem.

[93henfan]

To get serious for a minute, the payoff on my house is $5K below what Zillow says my house is worth. We haven't had a recent appraisal, but Zillow seems in the ballpark.

I really do need to unload the house by August, because I can't afford child support, rent in DC where I hope to relocate ASAP, and the mortgage. I mean, I could eat Ramen and do it, but fuck that. I don't want to enter the world of renting out my house. So, I need this thing gone, I have three months to do it, and we haven't even listed it yet. I have four options at this point. List it at (or near) my bottom line and hope it sells quickly, ask bank for deed in lieu of foreclosure, short sell, or just let her go.

Thoughts?

[AZGrizFan]

To get serious for a minute, the payoff on my house is $5K below what Zillow says my house is worth. We haven't had a recent appraisal, but Zillow seems in the ballpark.

I really do need to unload the house by August, because I can't afford child support, rent in DC where I hope to relocate ASAP, and the mortgage. I mean, I could eat Ramen and do it, but fuck that. I don't want to enter the world of renting out my house. So, I need this thing gone, I have three months to do it, and we haven't even listed it yet. I have four options at this point. List it at (or near) my bottom line and hope it sells quickly, ask bank for deed in lieu of foreclosure, short sell, or just let her go.

Thoughts?

Well, that's pretty easy. First: be careful trusting Zillow...it's fairly conservative at times. Second, put it on the market immediately at a reasonable price, but one at which you could make some money to help out with the financial aspect of the divorce. If it's priced right it should move, and if offers come in at/below your mortgage balance, the bank shouldn't have an issue with a short sale given your current predicament. Then, if it doesn't sell by the point where you have to fish or cut bait, go ahead and give it back. just don't do what alot of spinless, no-character motherfuckers do and strip the house prior to giving it back....you'd be AMAZED at what I've seen in some foreclosures. (and I wouldn't think you'd do that.... )

By the way, yours is a situation where I would say foreclosure (if that's the ultimate result) is justifiable. Divorce can and usually does absolutely WRECK finances and credit....personally I'd do everything I could to limit the damage going forward...but that's just MHO.

[93henfan]

The wife has been very decent about the whole deal. Child support is not going to kill me (18% of my gross income is what it works out to). My folks are building a house on their land to rent to her for less than half (closer to 1/3) our current mortgage. They are also built-in daycare, so my wife's expenses are going to be pretty low and the child support will meet her needs. This also leaves me with a nice wad of cash to dote on the boys with. Other than reduced time with my boys, I'm looking forward to the divorce. With almost six weeks of vacation, I'll get an extra month with them anyway.

So that's some pretty reassuring talk on the house. I'll push to get the sucker on the market soon. There are four other houses in our subdivision currently for sale and I can comfortably list for lower than three of them and match the fourth and my house is nicer than that one.

I don't foresee any need to wreck my credit. I'm also sitting on some cash that would allow me to cover about 10% of the payoff if need be.

[AZGrizFan]

The wife has been very decent about the whole deal. Child support is not going to kill me (18% of my gross income is what it works out to). My folks are building a house on their land to rent to her for less than half (closer to 1/3) our current mortgage. They are also built-in daycare, so my wife's expenses are going to be pretty low and the child support will meet her needs. This also leaves me with a nice wad of cash to dote on the boys with. Other than reduced time with my boys, I'm looking forward to the divorce. With almost six weeks of vacation, I'll get an extra month with them anyway.

So that's some pretty reassuring talk on the house. I'll push to get the sucker on the market soon. There are four other houses in our subdivision currently for sale and I can comfortably list for lower than three of them and match the fourth and my house is nicer than that one.

Don't GIVE it away....if it's nicer, price it as such.

[93henfan]

Don't GIVE it away....if it's nicer, price it as such.

True. Leave some room to allow the buyer to counter and make them feel like they won.

[ASUG8]

I just did a loan modification with BofA on some investment property that is dramatically underwater. I'll nearly certainly lose money on this "no lose proposition" from '06, but I'll hold on to it until I can mitigate some of the losses.

[danefan]

I just did a loan modification with BofA on some investment property that is dramatically underwater. I'll nearly certainly lose money on this "no lose proposition" from '06, but I'll hold on to it until I can mitigate some of the losses.

Does it generate positive cash flow?

[AZGrizFan]

I just did a loan modification with BofA on some investment property that is dramatically underwater. I'll nearly certainly lose money on this "no lose proposition" from '06, but I'll hold on to it until I can mitigate some of the losses.

Does it generate positive cash flow?

Exactly, and even if it's not "positive", be sure you're considering all the tax consequences before you label it a money loser.

[danefan]

Does it generate positive cash flow?

Exactly, and even if it's not "positive", be sure you're considering all the tax consequences before you label it a money loser.

And don't forget about the Passive Activity Loss Limitation when considering the tax benefits.

[AZGrizFan]

Exactly, and even if it's not "positive", be sure you're considering all the tax consequences before you label it a money loser.

And don't forget about the Passive Activity Loss Limitation when considering the tax benefits.

You're gonna be pissed when you wake up 3 days from now and realize you handed out all this free legal advice while you were high on morphine.

[ASUG8]

I just did a loan modification with BofA on some investment property that is dramatically underwater. I'll nearly certainly lose money on this "no lose proposition" from '06, but I'll hold on to it until I can mitigate some of the losses.

Does it generate positive cash flow?

Nah, golf course vacant lot for investment property - didn't work out as planned. Me and AZ discussed options last summer if the bank didn't give me refi options, but they did the right thing (still squeezing me, the turnip). The money isn't lost until you sell it, so I'm still hangin' on.

There are no tax benes that I'm aware of since it doesn't have a dwelling on it, so I can't even deduct the interest.

[danefan]

Does it generate positive cash flow?

Nah, golf course vacant lot for investment property - didn't work out as planned. Me and AZ discussed options last summer if the bank didn't give me refi options, but they did the right thing (still squeezing me, the turnip). The money isn't lost until you sell it, so I'm still hangin' on.

There are no tax benes that I'm aware of since it doesn't have a dwelling on it, so I can't even deduct the interest.

Since its an investment you should be able to deduct the interest, but only to offset invest income and again limited by the passive activity rules. See Form 4952 http://www.irs.gov/pub/irs-pdf/f4952.pdf" onclick="window.open(this.href);return false;.

[ASUG8]

Nah, golf course vacant lot for investment property - didn't work out as planned. Me and AZ discussed options last summer if the bank didn't give me refi options, but they did the right thing (still squeezing me, the turnip). The money isn't lost until you sell it, so I'm still hangin' on.

There are no tax benes that I'm aware of since it doesn't have a dwelling on it, so I can't even deduct the interest.

Since its an investment you should be able to deduct the interest, but only to offset invest income and again limited by the passive activity rules. See Form 4952 http://www.irs.gov/pub/irs-pdf/f4952.pdf" onclick="window.open(this.href);return false;.

Like I said there's no "qualified dwelling" and no income from the lot. I think I'm just FUBARed until the market comes around sometime in 2020.

[danefan]

Since its an investment you should be able to deduct the interest, but only to offset invest income and again limited by the passive activity rules. See Form 4952 http://www.irs.gov/pub/irs-pdf/f4952.pdf" onclick="window.open(this.href);return false;.

Like I said there's no "qualified dwelling" and no income from the lot. I think I'm just FUBARed until the market comes around sometime in 2020.

Pretty sure you can deduct the interest against any other investment income you may have. Same as if it were interest paid on a margin account. Your not holding it to build a 2nd home right? Might be worth looking into again.

[ASUG8]

Like I said there's no "qualified dwelling" and no income from the lot. I think I'm just FUBARed until the market comes around sometime in 2020.

Pretty sure you can deduct the interest against any other investment income you may have. Same as if it were interest paid on a margin account. Your not holding it to build a 2nd home right? Might be worth looking into again.

It's not a huge amount of money, but depending on your rates I might need to hire you next tax season (assuming the drugs aren't fabricating these deductions)

[93henfan]

I'm too dumb to understand anything Danefan says, but he sounds like he knows his shit. Not bad for a school like Albany.

[ASUG8]

I'm too dumb to understand anything Danefan says, but he sounds like he knows his shit. Not bad for a school like Albany.

He's at that freaky confluence of Law and Finance - I can only profess knowledge on the finance side, not the taxation side and certainly not the LEGAL financial taxation side.

[AZGrizFan]

I'm too dumb to understand anything Danefan says, but he sounds like he knows his shit. Not bad for a school like Albany.

He's at that freaky confluence of Law and Finance - I can only profess knowledge on the finance side, not the taxation side and certainly not the LEGAL financial taxation side.

That's the trifecta, right there.

[BDKJMU]

How housing could rebound -- in 2025
Ready to be Depressed?

House prices have fallen further in the past five years than they did in the Great Depression – and there's no sign the free fall is about to stop.

Downtrend resumes
The Case-Shiller index of U.S. national house prices fell again in the first quarter, S&P reported Tuesday.
The index is off 33% since it peaked in 2006. The peak-to-trough decline during the Great Depression, by contrast, was 31%, says Paul Dales of Capital Economics in Toronto.
That's not the only eye-opener out of Tuesday's Case-Shiller report. Real house prices, adjusted for inflation, are back at levels last seen in 1999, says Patrick Newport of IHS Global Insight.
Going by per capita income and disposable income per employee, housing is now 24% cheaper than usual, says Dales – making houses as big a bargain as they have been since Gerald Ford was stepping in White House garbage cans.
But don't mistake those statistics for an argument that prices are likely to rise any time soon. While house prices are now on par with levels seen a decade ago, the economic outlook for the United States and most of its citizens looks a lot less optimistic now than it did in 1999.
Incomes have been falling as more workers are forced to compete with cheaper overseas labor, and the leverage that Americans used for years to fill a growing wage gap now looks like a decidedly mixed blessing. Massive debt and government belt tightening are likely to keep a lid on the economy for years, further limiting household gains.
And maybe the biggest shift is people's view toward housing. After the stock bust of 2000-2001 many Americans noticed their houses kept appreciating and started viewing real estate as a winning asset class. But the collapse of the housing bubble means that thought is mostly history, which will limit the pool of willing buyers even with prices at striking low levels.
So how long till you get your head back above water on a house bought at the top of the market? Try 2025. In after the Depression-era housing bust, Dales writes, prices took 19 years to reclaim their previous peak. If you're in the market for a greatly depressing thought, it's a good one.
http://finance.fortune.cnn.com/2011/05/ ... es_fortune" onclick="window.open(this.href);return false;