Is there any way prices can appreciate from here?

NEW -> Contingent Buyer Assistance Program
<p>Just curious momo, why use an impound account ... and why use tax rebate to pay ... I guess this is more of a financial management question as opposed to a true housing related question.</p>

<p>Why not set aside the money out of your paycheck into a savings account that earns 5% (as opposed to nothing in impound) as well as adjust your tax exemptions so you don't give Uncle Sam a tax-free loan every year?</p>
 
I agree with Fraychielle because you are losing money to inflation but making it up by paying extra on the mortgage. If you have the discipline to put the money away and pay later you would net more money. I know I struggled with it so I set up a separate savings account that takes out a certain percentage from my paycheck each month. Since you are used to not having that money every paycheck you probably wouldn't even notice. It took me about six months of wondering why my paycheck was smaller than I expected.
 
You're both correct, I'm being financially lazy.





Most lenders I've dealt with pays about 2% interest on escrow / impound accounts. Back when I got mine, savings account and money market didn't pay much, so the difference was too small for me to care. But today you can do far better with a money market or savings.





If you're looking to squeeze every last penny out of your dollar, you could take extra deductions (why loan Uncle Sam free $?) and deposit your $ over at HSBCDirect.com.





They pay 5.05% APY (6% promotional) and you only need $1 to open/maintain the account. They give you an ATM card too. It'd be a good alternative to escrow account with your lender. You can get the same deal from e-trade, but I don't think they have an office in Irvine? There's a HSBC bank in Irvine at Culver Plaza with ATM.
 
<p>MOMOPI, </p>

<p> This is exactly what I do with my all my escrow accounts (for many different things). But I do them with my investment company. I think rate of return on these little accounts is 5.14%, the down side is you need to keep $100k+. I don't mind its a cheap and free way to earn interest and I don't to keep it stuck in some place that might not pay.</p>

<p>-bix</p>
 
Robert Kiyosaki is bearish on real estate!

<a href="http://finance.yahoo.com/expert/article/richricher/24515"><strong>Robert Kiyosaki</strong> Why the Rich Get Richer</a>

<a set="yes" href="http://finance.yahoo.com/expert/bio/richricher/robert-kiyosaki" title="See more articles by Robert Kiyosaki"><img src="http://us.js2.yimg.com/us.yimg.com/i/us/fi/pf/images/people/bio_richricher.png" alt="Robert Kiyosaki, Why the Rich Get Richer" /></a>





Throwing Good Money After Bad

<p>by <a href="http://finance.yahoo.com/expert/archive/richricher/robert-kiyosaki/1" title="See more articles by Robert Kiyosaki">Robert Kiyosaki</a></p>







Posted on Friday, February 16, 2007, 3:00AM



<p>All booms eventually go bust. </p>

<p>We all remember the stock market crash of 2000, and most of us remember the real estate crash after the implementation of the 1986 Tax Reform Act. Today, many people are anticipating another real estate crash. </p>

<p>Unfortunately, despite our understanding of booms and inevitable busts, it's always near the top of a boom that "dumb money" buys in. Currently, this has set the scene for a potential market bust of which few people are aware. I'll describe it today's column, and advise how best to prepare in my next column.


</p>

...(deleted to fit)...

<p><strong>Smart Money, Bad Times</strong>


</p>

<p>The good news is that during deflationary times, smart money reenters the market, so crashes are great for smart people with smart money. Instead of listening to the optimistic economists, then, you should eliminate bad debt and improve your debt-to-equity ratios on good debt.


</p>

<p>Most important, study; if you want to be smart, you need to learn. I'll discuss what you should study in the second part of this column. For now, be aware that if deflation comes and there's a recession, it won't have much effect on the poor. Instead, it'll punish middle-class people who think they're rich because their houses and stocks have gone up in value.


</p>

<p>I'll explain more in a couple of weeks.</p>
 
<p>Here are some highlights of that article that bug me.</p>

<p>"If such deflation happens, cash will become king." True but we have yet to see deflation in the US since we are on the credit standard vs. the gold standard. Gold could become king as it has in the past during deflation. Especially if the Fed starts to fight deflation with lowering interest rates and injecting more money or dollars into economy.</p>

<p>"In a deflationary market, the value of your home can drop. If the value drops, the bank may call in your loan. Even if you've never missed a payment, and even if you're ahead on the payment schedule, the bank can call in your loan if they feel the value of the property is lower than the loan amount." Where hell did he pull that one from? Yeah the bank is going to want your home when they are adding REO's on their balance sheets every day. No, banks don't want the homes from the people who don't pay their mortgage let alone the homes from people who do pay their mortgage. It's no wonder why we have people like Casey Serin. </p>

<p>As my rich dad used to say, "When dumb money chases smart money, the party's over." Mr. Kiyosaki: Warren Buffett called and wants to correct your rich dad's quote to what Warren said "When the wise leave, only the fools are left."</p>

<p>Some will debate this but deflation is when an asset or commodity does not rise at the rate of inflation. It is not a price drop, it has to be consistent to be considered deflation and if you look at housing prices now and compare it to inflation they are dropping and if it continues for three quarters it will be deflation.</p>
 
<p>To me Cash has always been king. Credit is when you can't afford to pay the whole, but then again, leveraging cash is one hell of a way to make money. But you must always take it cautiously, there's always a big risk vs. reward ratio when the reward becomes very good.</p>

<p>-bix</p>
 
<p>I wonder how this story will affect new home prices... perhaps they will go down? hmm.</p>

<p><a href="http://money.cnn.com/2007/02/28/news/economy/newhome_sales/index.htm?postversion=2007022812">http://money.cnn.com/2007/02/28/news/economy/newhome_sales/index.htm?postversion=2007022812</a></p>

<p>Perhaps someone can forward this to the sales people at John Laing, Lennar, Lyon, etc... For whatever it is worth, I'm begining to see a trend in these news stories...</p>

<p>Do we have more regional data to compare with the national trends?</p>
 
I wish it would cause home prices to drastically drop. However, that will not be the case so we can keep expressing our disgust on this blog about how ridiculously home prices are in Orange County...especially Irvine.
 
New home sales have a margin of error of + or - 20% and with cancellation rates at 30%-40% a correction for the worst is more likely. Inventory is up to a 7.7 months supply add the cacellation factor and it is higher. If you can find out what the supply number is for the west it would give you a better idea of price drops. The drop in sales for the west is really staggering even for slow down in the market. If this keeps up we should see more price drops and bigger incentives. OC has a lot of inventory in the pipeline and with weak 1% job growth and population decreasing either bigger price drops or cancelled projects will happen. Patience will pay off.
 
Question: In Irvine are their ordanances in place that states once a builder begins developing a site he must build out regardless of what the market is currently doing?
 
Question: In Irvine are their ordanances in place that states once a builder begins developing a site he must build out regardless of what the market is currently doing?
 
<p>From Bloomberg:</p>

<p>Kenneth Heebner, the manager of the top performing real estate fund over the past 10 years, said the economic damage from high-risk mortgage defaults is only going to get worse. </p>

<p>``We have a trillion dollars of subprime mortgages and we're going to have huge defaults,'' Heebner, 66, said in a telephone interview today from his office in Boston. ``If you're looking at the housing market, it's not the darkest before dawn, it's the darkest before pitch black,'' Heebner said. </p>

<p>Heebner, cofounder of Capital Growth Management LP, said the market for subprime loans could ``shut down'' as U.S. mortgage companies including Freddie Mac stop buying them. Delinquencies and defaults are the highest in at least seven years, according to a Feb. 22 report by Barclays Capital.</p>

<p>SUMMARY:</p>

<p>FREDDIE AND FANNIE REFUSE TO BUY CERTAIN SUBPRIME LOANS = LESS AVAILABLE CREDIT = LESS PEOPLE CAN AFFORD TO BUY = <strong>LESS DEMAND</strong> = LOWER PRICES</p>

<p>FREDDIE AND FANNIE REFUSE TO BUY CERTAIN SUBPRIME LOANS = LESS AVAILABLE CREDIT = LESS PEOPLE CAN AFFORD TO REFI WHEN THEIR ARM RESETS = HUGE DEFAULTS = <strong>MORE SUPPLY</strong> = LOWER PRICES</p>

<p> </p>
 
Nice find skeptic! Heebner pulled all the money out of the homebuilders and other residential stocks in his RE fund in 2005. He was on CNBC about six months ago saying this and of course they had some "expert" shouting at him that he was wrong. It has since taken a dip but his overall performance is exceptional.
 
<p><a href="http://www.johntreed.com/Kiyosaki.html">http://www.johntreed.com/Kiyosaki.html</a> </p>

<p>For those who follow "Rich Dad, Poor Dad", I think the above link is worth a read.</p>
 
<p>I did a quick number check on the new home sales number and for the West it looks even worse than I thought. I will post tomorrow with a cleared head and double check the numbers.</p>

<p>ocprince - John Reed also has a great mantra on positive cash flow on that site. He is much more realistic than most RE "investors". I will try to update you on VP tomorrow or at least by the end of the week. Looks like a few are having trouble with their finances.</p>
 
<p>hi graphrix,</p>

<p>thanks for still thinking about me. I drove around VP again today and saw more properties up for sale. One that particularly interests me is the one on Taft. It just listed yesterday, and although still shows as active on the MLS; the listing agent (Lesslie Jacobie) has it being in escrow on her website. If that's true then I guess people are still snatching up million dollar properties like hotcakes despite the slow market.</p>
 
<p>ocprince - The one on Taft is so so. It's on a busy street for VP, it is older 68 and my best friend is a contractor you will need his phone number. I would have to see the interior in person but the blue, green and pink carpet, paint and wallpaper will have to go. I'm surprised Leslie would have listed it without those minor fixes. She is actually a really nice person and has been an RE agent here forever. You can try a lowball offer since it fell out of escrow but the owner doesn't need to sell because he has hardly if any debt on it. Probably because he bought it in 68. It is priced the same as the other comps but the market has changed.</p>

<p>Up the street is 18631 Amate Circle and he seems to be a bit behind on his mortgage with plenty of equity. 17931 Lincoln has an auction date already set this month with a decent amount of equity. Both are worth taking a look at especially the one on Amate.</p>

<p>I think there are a lot of pocket listings right now because there are more signs than what is showing up on the MLS. The one on Prado is back up but without the picture of the "built in" BBQ. Also the sleaze is using a pay option arm payment on the flyer. You can meet him in person every weekend and I am sure he would love somebody to talk to since no one is ever there. It should be interesting to see if more come up this spring.</p>
 
thanks graphrix. I did see the Amate circle property on my NTS list (my records have a date set for 3/9 already); It surprises me that even though he has quite a bit of equity in this home he doesn't have it listed for sale. I haven't followed the foreclosure records all that long, but the few that I have seen in this kind of position probably have something up their sleeve to bail them out at the last minute. Invariably, I would follow them and the sale date would get postpone week after week and then finally the auction is cancelled. Again I don't have any experience in buying a home this way, but I can't see why else someone would risk losing 500K in equity without even attempting to sell it. Could there be any other reasons?
 
Out of curiosity I "googled" the above address and noticed the same thing happened to Amate's owner back in 7/05. Obviously, he pulled through then so I assume he'll pull through again.
 
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