Bear Stearns and Cedar Fair

I actually benefited greatly from an ARM. Our rate was 4.65%. We bought within our range though and after 4 years we're using the equity to upgrade into something much larger and with a 30 year fixed.

It's a great time to buy even if the rates are slightly on the high side. You can get a lot of house for your money.

Selling isn't as fun right now but or townhouse would top out even in a hot market.

I hate that this is no time to sell, because I'd love more than anything to move. But there's no way in hell right now I could sell my house without pissing away tens of thousands in equity, and I'm just ready to do that.

I've also benefited greatly from my ARM. In fact, I kind of regret that it was a 5-1...for the first 5 years it was 8.125% (which was on the low side in 1996), then after 5 years it could adjust annually in either direction but with a cap on how far it could go. It got down to below 4%, and I think now it's slightly below 6%. The expectation was that I would refinance before Year #6, but so far it's been a better deal to just hang on to the thing. I had thought that this year would be a good time to refinance, but now it looks like the Fed is going to send my rate tumbling again just in time for the annual adjustment. :)

But the key is that I bought a house that I could afford, and I didn't play the "flip 'n @#$!" as Jeff calls it. Banks love to use ARMs because they encourage refinancing, and refinancing encourages people to increase the principal on the loan, increase the term of the loan, and most important, to reset the amortization clock. Most of the interest on a mortgage is paid in the first half of the term, so naturally most banks would love to see you never get past the 15th year of a 30-year mortgage. That was how they sold bad loans to people who couldn't afford them: "Well, you expect your income to increase, your home value always increases, and you can refinance to a fixed rate (or another limited-term ARM) before this loan adjusts." Too bad that didn't prove to be the case!

--Dave Althoff, Jr.

I think part of the deal is that the originator gets paid based on the loan amount. "Who cares what happens to this customer five years from now, I'm getting PAID to set them up in a house/car they neither need nor can afford."

The *confidence* thing deals almost entirely with the international money market....the value of a dollar versus other currencies, the rates at which Chinese banks are willing to loan us money, etc.

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But there's no way in hell right now I could sell my house without pissing away tens of thousands in equity, and I'm just ready to do that.

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No kidding. I got my tax assessment just a couple weeks ago---over a 10% drop.

Luckily, tenure means never having to move.

My re-fi appraisal (post-divorce, not tax assessment, which is always low) in 2006 was way, way higher than what I bought it for, so I'm not worried about the value. I'm worried that no one wants to buy it in a timely manner. Certainly those "similar properties" (one of which is literally the same house as mine) were sold at the indicated prices, but how long did it take? No one wants to sit on two mortgages for six months or two years.

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Brian Noble said:

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But there's no way in hell right now I could sell my house without pissing away tens of thousands in equity, and I'm just ready to do that.

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No kidding. I got my tax assessment just a couple weeks ago---over a 10% drop.

Luckily, tenure means never having to move.

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Unfortunately, there are many people who still played the rules right (i.e. under bought / bought what they can afford, etc.) who are now being forced to sell, but because they were not sub prime are getting stuck with the mess (trouble getting a loan even with good credit, 20-30% or more loss in equity, virtually infinite time on the market, etc.). I wouldn't be so mad if I could at least deduct my loss on my taxes, but the IRS doesn't even allow that.

Which seems fair, considering the first quarter million appreciation wouldn't be taxed, either.

My value is back to about where I bought it three years ago---about 3% appreciation each year, and then we got hammered.

The big Pfizer R&D lab just down the road was shuttered, and my neighborhood had several dual-PhD families working in the labs. A good chunk of them have to move, 'cause even with the start-ups that are sprouting in the abandoned lab space, there just isn't that much of a call for protein-folding without the Big Pf.

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Jeff said:
My re-fi appraisal (post-divorce, not tax assessment, which is always low) in 2006 was way, way higher than what I bought it for, so I'm not worried about the value. I'm worried that no one wants to buy it in a timely manner. Certainly those "similar properties" (one of which is literally the same house as mine) were sold at the indicated prices, but how long did it take? No one wants to sit on two mortgages for six months or two years.

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On the flip side of it, though, think about how nice the prices to BUY are right about now. This is actually a great time to buy a home, assuming we're at the end of the downturn in prices. My guess is that in some areas the downturn is over. Other areas, like California have a long ways to go yet.

As for the ARM debate, I had a five year ARM on my condo. I fully intended on moving out of the condo before five years so it seemed like a great way to go. Circumstances prevented the move, so I simply refinanced to a conventional loan well before this debacle occurred, thank God.

I think the bigger problem than the housing crisis right now is the value of the dollar. It is currently worth absolute s**t right now. That is another big factor in the higher oil and other commodities prices.

Remember the days when people bought houses and lived in them until they were paid off? I would dare think our parents (or Grandparents) are the last of that fading trend.

"PITI": pronounced "pity" for a reason!

Telling a (less than financially savy) person they can "just" refinance their home when their ARM goes up makes "just" refinancing sound like it is painless. Then you get people who keep refinancing to find out eventually they can't because they owe more than their house is worth, or because the APR is nuts. Then they can "just" let the bank foreclose. JUST?

I bought my house with my ex-hubby in '93. I refi'd because I wanted the equity to do some improvements plus I got a lower APR. I am one of the lucky ones that my home's value has almost doubled since '93.
Now where that sounds all fine and dandy the problem is with every re-fi, you get the equity but then you lose the years you've paid. I couldn't afford a 15 year mortgage so had to do 30 again, meaning I will have a mortgage long after it is time for me to retire. Not a pretty thought at all :(

But as it stands my fixed APR is 5.5% so thats cool, now if the city I lived in would just stop approving their stupid tax levies maybe my mortgage would stop going up! :(

Jo

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Brian Noble said:

My value is back to about where I bought it three years ago---about 3% appreciation each year, and then we got hammered.

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Sounds like our situation. Not that we plan on selling, we plan on staying in our home as long as we can. But our home is almost now worth the purchase price in 2005, despite putting down %12 on a loan that was originally going to be a %0 down, there's no way we could get a home equity loan at this point if we want to do home improvement, consolidation, or whatever.

The dollar factor definitely plays a role as well. While we have a fixed loan, our budget is a little tighter on recreational spending because the price of gas has nearly doubled compared to when we first bought our house, and food in some areas have nearly doubled as well. It's only going to get worse, just wait until beef and chicken skyrocket because of the price of corn doubling since 2006, since we are burning our food supply to fuel our vehicles. Meanwhile, the dollar continues to lose value.

~Rob Willi

^....what an absolute waste of all that corn. I was pleased with the idea of a renewable fuel source...until the facts started really coming to light. Even IF ethanol is going to be part of the solution (and it very well MIGHT be) - then corn is certainly not the best source for ethanol production...not even close.

Not necessarily fair if you consider:

#1 If your employer purchases it as part of a job relocation, they can deduct the loss.
#2 If the bank forecloses, they can take a loss.
#3 If it's a rental property, you can take a loss.
#4 The appreciation wasn't taxed in the past if you rolled it into a new house. But if you didn't, well, you got hammered.

In my case, my house is now 20 - 30% below what I paid for it 6 years ago, and a lot of people said I had a bargain then. (Given the condition, even with a full house inspection, I think I got ripped off, but that's another story...)

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Brian Noble said:
Which seems fair, considering the first quarter million appreciation wouldn't be taxed, either.

My value is back to about where I bought it three years ago---about 3% appreciation each year, and then we got hammered.

The big Pfizer R&D lab just down the road was shuttered, and my neighborhood had several dual-PhD families working in the labs. A good chunk of them have to move, 'cause even with the start-ups that are sprouting in the abandoned lab space, there just isn't that much of a call for protein-folding without the Big Pf.

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