Best time to buy : Q3-Q4 2008?

NEW -> Contingent Buyer Assistance Program
<a href="../../../account/262/">bkshopr</a> :





You really hit my perspective on the head about Jamboree living. This is OC! You have to drive to work anyways, you can't walk anywhere (even to the closet thing) and no downtown really exists.





We don't need to live like rats on top of each other, this isn't an Island, this is one of the most spread out areas in the world, give me a break!








My conclusion : I want a detatched condo out in the woods, I'm willing to wait and save for it. I want to work on Jamboree but not live there, its not necessary.
 
Justin,





You are correct; the graph only tells us when the trouble will occur, not all the foolish ways borrowers got themselves into trouble. Many will not be able to afford the reset, and they will lose the house in foreclosure.





<em>"So you would estimate that for semi-savvy consumers at least a few months before their ARM expires they want to jump ship and are forced to sell and cut the losses."</em>





Many will try. They will list their house for sale at a "wishing price" and it will sit there unsold until the ARM explodes. The cumulative effect of all these listings will be to eliminate appreciation in the best case scenario for bulls. It is called "overhead supply;" it is what short sellers look for in stocks.
 
Justin -- That chart is great if you want to study the macroeconomic environment, but it presents national data, not OC data. So it would be tremendously foolish to attempt to time the market based on that chart, as IrvineRenter has stated he is doing.
 
Of course, I understand.


But it does give you a good picture of what is going on in the world of lending today.





Some of it will apply to OC, some of it won't.





Everyone is so helpful on this forum, I've turned a lot of people onto irvinehousingblog.com and i will continue to do so!





Irvine Renter: What does it take to get access to the main page? Who posts? is it like some sort of seniority system?
 
We know from the Map of Misery that 32% of new and refinanced mortgages in Orange County were Option ARM. It is also known that 48% of originations in Orange County were interest-only. Option ARMs were the cash-out refinance mechanism of choice for people buying luxury cars and taking vacations "on the house." The lenders which populate our board will tell you there are many Alt-A "liar loans" throughout Irvine. We are not immune here. In fact, when you combine the data from this chart with the one above, it can be argued that we in the major metropolitan areas of California make up the majority of the problems in the ARM reset chart, and we will be particularly hard hit.








<img src="http://www.irvinehousingblog.com/wp-content/uploads/2007/03/map_of_misery.jpg" alt="" />
 
Justin,





Zovall and I are blog administrators, IrvineSingleMom and Graphix are contributors with unlimited posting priviledges, and we may be welcoming another contributor soon. If you have something you would like to contribute, you can email me or Zovall, and we will go from there.
 
I was in the mortgage industry until the sub-prime meltdown lead to massive lay offs, I also did a lot of statistical research on housing prices in college so I know my way around a bit. I've only briefly begun studying southern california real estate. That's pretty sad if 30% of our county goes up for foreclosure, hopefully not everyone was over leveraged.





A word on I/O: Interest only is just recently becoming a bigger problem, savyy borrowers would do 30 yr fixed w/ 15 yr I/O. The best way is to pay the principle all in one lump at the end of the year and invest it in a high yield savings account in the meantime, that way you are paying principle all in one lump and your payment recalculates. If you budget each month for principle+ interest but have the benefit of making the I/O payment you are getting the best of all worlds.





however, we all know that not everyone in socal is a savvy borrower, or even a savvy human being :)
 
As for the people who go through foreclosure they may become renters but not all can. If that person were to apply for one of my units he/she would not be renting from me. I don't even think IAC would rent to them. It may become a good time to become a slum lord though.
 
Justin - Welcome to the club of ex-mortgage people. We do have our share of over leveraged people in OC and the foreclosure problem is really just beginning. Last month NODs were down from the previous month but this month we have ticked up a bit. In April people get tax returns and catch up with their mortgage and property taxes. I know I have seen this before and I am sure you have too. The foreclosure demographic is really changing and banks are taking back places well below market. NODs are up 129% and REOs are up 964% YOY. It is more than just foreclosures, supply and demand, it also involves jobs and their wage growth but what people forget and Robert Shiller proves is it involves psychology. Ask any Realtor right now and psychology is shot and it is because of us and the MSM. LOL. What would be foolish is to listen to snide remarks from angry people who don't watch or understand the microeconomic market. This is what is known as stage two. And people say I'm bitter.
 
At least we can profit off our extensive knowledge, I almost feel bad for some of those overextended people... almost





I can't wait for more psycological price dropping! Come to daddy!
 
<p>Justin,</p>

<p>I have an interest only for 10 years and my mortgage is 6.5 % fixed for 30 years. I am paying just the minimun to meet the interest only. I am putting my extra income in a mutual fund. Please tell me what is the best strategy to pay off the priciple and the timeline for payment? I just started this loan 6 months ago.</p>

<p> </p>

<p> </p>
 
Timeline for payment? Do you have access to an amortization i/o calculator? Plug in the balance, interest rate, term and it should split out a payment just for I/O. Calculate the amount of principle you want to pay at years end (divided by 12 to get monthly of course) and that should recalculate the overall loan balance.





I always recommend investing the principle you defer each month in a high yield savings account, share certificate etc ( in your case mutual fund )





12 month lock w/ 5-6% APR is a good start.





it varies by bank, but most let you add on one time,





so... start in july, put your principle for 6 months (jan-jun) in one lump sum, do this again for july-dec on january 1





should be a few hundred bucks for free and if you run into money troubles you can always not put in for one 6 month period of time.





The amortization calculator will recalculate the total loan balance and tell you how many years are left.





http://ray.met.fsu.edu/~bret/amortize.html that lets you do one ballon payment, but the best are excel based ones
 
http://www.hsh.com/calc-amort.html





That one is better, you can select a yearly principle only payment addition.





I had an excellent one at work for I/O products, unfortunately I no longer have access to it.





A 10 year I/O option on a 30yr fixed product is excellent, especially if you are a savvy borrower, which it sounds like you are.





I always would tell people to take I/O even if they didn't need it, just for extra security during those first years. I would always give them the principle + interest payment too, calculated on a traditional 30 year fixed amortization schedule.
 
<p>Justin</p>

<p>Are you suggesting that I should make a principle payment at the end of every year for 10 years instead of just paying the interest only for 10 years and then drop a bundle to pay the principle after the 10 years is up.</p>
 
It all depends, do you want a relief in payment every 13th month or on your 121st month a huge drop?








if you want to keep something similar to your I/O payment for the life of the loan it would make more sense to do so on the 121st month once I/O expires





then the new payment, calculated on a lower remaining balance, won't be much more than your existing I/O payment, correct?
 
<p>Justin:<em>"I always would tell people to take I/O even if they didn't need it, just for extra security during those first years."</em></p>

<p>Care to elaborate why anyone should take I/O even if they didn't need it? What does extra security mean? Thanks</p>
 
Justin:<em>"I always would tell people to take I/O even if they didn't need it, just for extra security during those first years."





</em>I suggest you read <a title="Permanent Link to Financially Conservative Home Financing" rel="bookmark" href="http://www.irvinehousingblog.com/2007/03/01/financially-conservative-home-financing/">Financially Conservative Home Financing </a>and tell me what you think.





IMO, I/O is foolish and risky under most circumstances. If you need I/O to have the ability to make a lower payment, then you are simply paying too much or overextending. I/O provides no equity cushion which is what you really need to be secure. You are far better off budgeting on a 15-year amortization but taking out a 30-year loan. If for some reason you can't make the 15-year amortization payment, you can fall back to the 30-year schedule. Unfortunately, human nature is to make the lowest payment possible. Whenever this is an option, it is what people do. That is why so many got in trouble with negative amortization in Option ARMs.





Your idea of taking out an I/O loan and saving extra for a large principal payment is a good one, but in the real world, nobody would do it. If people are not forced into saving through amortized principal, they won't do it. Something in life always comes up to consume that savings payment: always. IMO, one of the reasons people have relied on home ownership as an investment vehicle is because they are forced to save through their principal payments. Most people are not good at saving.
 
I'm looking at it thru my eyes, what I would do. Your average consumer won't be able to save that principle payment but it is always another option. What's wrong with paying principle every month on an I/O product then if some unplanned expense comes up you don't have to refi or risk missing a payment. It's more flexibility I think, especially for first time buyers who could not be 100% financially secure yet or might have career change etc. What about x-mas time when you need some extra cash for more presents or something?





Bottom line : a responsible consumer can benefit from I/O if they have unplanned expenses etc. that's the point i was trying to give off





I understand that the way I budget is pretty much inline with the financially conservative, so I recommend what I do, it is just one option I throw out. I understand an I/O product won't benefit a subprime borrower very often, but <a href="../../../account/262/">bkshopr</a> has one so I was throwing out some options of payment strategy and budgeting.
 
You must log in or register to reply here.
Back
Top