Refi's....the next round of foreclosures steps up to the plate!!

Yesterday I made my weekly trip to 4 local City/Town halls to research titles on 38 properties that are schedualed for foreclosure.

So I don’t waste any more time than I have to, I don’t even bother with homes purchased between 2002 and 2007, the peak years, these people are just too far UPSIDE DOWN. They owe more than their homes are now worth.

The houses I look at usually have mortgages that were originated in 1999 or earlier. After almost 10 years MOST people SHOULD have some equity.


Out of the 38 properties I researched, all with mortgages originated BEFORE 1999. EVERY SINGLE ONE had been REFI’d at LEAST 4 times during the boom years.

Here’s a few examples…

3 bed Ranch purchased in 1998 for $89,000
Refi’d in 2001 for $110K
Refi’d in 2003 for $150K
Refi’d in 2005 for $180K
Refi’s in 2007 for $245K!!!

3 bed Cape purchased in 1999 for $106,000
Refi’d in 2002 for $135K
Refi’d in 2004 for $175K
Fefi’d in 2007 for $265K

Out of 38 properties NOT ONE…Not a SINGLE HOME had 1 cent of equity in it, they were ALL upside down. Now this is not NEWS to many people here, but what we all need to remember is…

THIS is what FUELED our economy for the last 6-7 YEARS!!! It was built on a house of cards. If you wonder how bad this will get simple look at the refi data from the BOOM years. The numbers are absolutley shocking!!

We have a MONSTER of a recession here and getting bigger.

It’s time to PAY UP AMERICA.

I’ve seen a lot of that here too with the phone calls that we get from advertising. People are just upside down everywhere. I would say that out of about 20 calls there is maybe MAYBE 1-3 that have any equity, and usually it’s not that much equity, AND those houses with little equity usually need work to bring them up to par. Pretty sad state of affairs…

As my wife and I were watching an episode of “My house is worth what?” I noticed that when the RE expert told them what their home was worth, the hostess said something like, " With the appraised value of $200k, the owners have a profit of $60k. So it looks like they have enough money to do more renovations." I told my wife that’s like saying that my credit card gave a profit $1500 when they increased my credit line. A house will only give you a profit if you sell it for more than you paid.

These people sold their futures to buy what they wanted TODAY!!

The thing we have to remember when looking at future price depreciation in housing is… With the economy slowing, gas, food, and utility prices soaring, these people can no longer afford these homes.

This will be the next wave to hit the housing market. The next leg down won’t come from the people who PURCHASED over priced homes during the boom years. The next leg down will come from the MAJORITY of Americans who HAD equity in their property but traded it for things that they didn’t need! Unfortunately the numbers of these folks FAR surpass the number of people who purchased at the peak of the market with sub-prime or ARM mortgages. This is somethign that very few people have realized. They soon will!!!

Check this article out…

just another example of how the government/ fed/banks are screwing up free trade in america. It makes good buisness sense for the banks to loan us the money. They knew the government would be held accountable if the economy went downhill. The Government liked the growth to the housing market, but it was artificial. I could run my own country if all i had to do was print paper to give citizens the feel of wealth and comfort.

Well we’re still going downhill. moving at a fast rate and the government is trying to pull all the breaks it can. Now all of us are hoping the train wont derail.

I really can not stand this anymore. we need a president who REALIZES whats going on and is ready to take action to correct america. If Ron Paul is on the ballot i’m voting for him otherwise i’m not voting. If it were up to me i’d let Ron Paul be president for more than the 8 years possible. Until our economy was straightened out for good because i dont see an quick fixes to it.

Well I guess we get really good deals on Real estate in the mean time. I believe Investors are gonna be the ones who turn around Real estate now. Banks / lenders have tore it down now its Investor who have to build it back up. Banks knew they had a safety net (government) to fall back on.

I think the foreclosures help the rental market tremendously. you can find properties that cashflow like crazy now.

This looks like it means that everyone that was trying to drive more expensive SUVs than their neighbors truly could not afford them. They bet the farm on their home’s “value” only to find it’s not there anymore. I know prices have fallen in some areas, but it looks like there are still lots of people trying to hold out for their price even in a bad market. This will definitely make for some interesting discussions with my wife and our Realtor when we start putting in offers. Things that may have seemed downright offensive to sellers 6-12 months ago may become their new reality in this market. I definitely don’t want to overpay when we’re not really sure where the bottom will be.

Liquidity brings up a great point.

Investors are ALWAYS the ones who recognize VALUE before anyone else. Investors will be the ones who bring these abandoned homes back to usefulness. A few years ago NIT WITS that CALLED themselves investors thought they could buy ANYTHING and make money. They were NEVER REAL investors. I’ve been an investor for 20+ years and LAUGHED at my friends who thought they were INVESTING in pre-construction condos in Florida. None of those “INVESTORS” have been able to GIVE their new condos away.

Want to REALLY slow the drop in home values??

Instead of bailing out Wall St. Investment Banks why not offer a 10% Capital gains tax across the board (regardless of holding time) to investors that buy and REHAB distressed real estate. Think about it…The Goverment gets 10% from a home that now sits empty. The banks get rid of a property that is costing them money everyday, Cities and Towns get property tax income from a home worth MORE than it was 3 months before, and investors make some money!! An additional benefit to these banks would be a HUGE infusion of CAPITAL. Oh, their gonna take a BIG hit, but they’ve already figured those losses into earnings projections. If you had a loser relative who you loaned $20,000 to and KNEW he was never going to pay you back, would you take $10,000 from one of his friends and write off the debt??? I know I would. That money is GONE. It will take 10 years for home values to even APPROACH 2005 levels. Take what you can get, recapitalize the banking system, stop printing money, and things WILL get better!!! I would guess the U.S dollar would rally which of coarse would mean oil prices would FINALLY come down!!!

These idiots in Washington better realize real soon that if they don’t offer incentives to investors to buy these properties THE MARKET will offer those incentives. They will come 2 years from now in the form of FIRE SALE PRICING!

2 years ago I posted an Article by a Swiss banker. In it he said that the day is coming very soon when almost NO ONE will want to even think about buying real estate. Think about how insightful that was. Now I realize that we’re all investors here. We’re ALWAYS going to own property. But…I see articles already expressing the BENEFITS of NEVER owning a home!!

Talk about FULL CIRCLE!!

Liquidity - I am not trying to start anything here… I know that when we start talking about politics things can becomre really heated… :O) Anyway, I just wanted to point out that not voting will not do you any good. Actually, it is impossible to ‘not’ vote… Even if you don’t show up to cast your vote, it is the same as if you had showed up and voted for whoever wins… :O)

Your right about that, but I really dont believe in either of them (obama or mccain )

I may still vote for 1 of them but its a last case scenario.