Why the Worst is Yet to Come.

[momisery]

tom, if you have another 20% to put down, or 10% if your wealthy. Or you could go for FHA and come in with less down. But if you have filed a BK it will take a couple years before you will be buying or refing much of anything. Some banks are working out deals with existing clients who are paying on their homes, but I do not think those deals are very good in most cases. Normally they are a sort of ARM, for a short time frame they will accept less, but once incomes go up they will want more. This means that every time your ahead you will not be again until you reach your maximum payment again.

My concerns were the health of my husband and knowing without him I could not pay for a house so I would be paying only to lose it. And I would not be able to sell it for what I had to pay for it so I could be held accountable for that debt and could not file a BK again for years. We are hoping to move close to family, getting out of MO, so letting it go made the best sense. We don't have to try to sell it now, which it will never sell for what we owe and realtor fees..

[Tom_Mi]

Ok, so let's play this thing out...

Foreclosures go nuts this year and Real Estate values reset to crazy-low numbers. Banks lose/write off gazillions.

For those of us with 20% cash to put down on a place, will a bank be able to lend me the money?

[JRScott]

North Carolina has a lot of shadow inventory too

[bulletproof77]

I really have to agree with DMC's original post. You could take the Florida scenario and directly apply it to Southern California and Nevada. Here in the West, the "shadow inventory" is tremendous..Realtor s and brokers are in the newspapers constantly complaining about the banks sitting on these properties. Are the banks THAT clueless that they believe the "boom times" will return ? No, I agree that we are not even close to the bottom of the housing market..I do think that strategic foreclosures will increase greatly in the next few years as people realize that there will be no real appreciation in their home's value and wish to conserve cash. I know in my own case, I faced my foreclosure with an initial sense of failure and sadness. Now I realize it was one of my better "business" decisions.

[JRScott]

Great quote OHBOY

[OHBOY]

What have we learned in 2065 years ?

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
- Cicero, 55 BC

[banca rotta]

I'm at least glad you have people to talk to on this. I don't outside this forum. I just look too gloomy and no one wants to listen.

Since we are so used to not having anything like this you can rest assure that's why it will happen and so many will not be prepared for when it does, rich or poor.

The funny part about "do something" is if we just wouldn't do something (we meaning the govt), there would have been more forclosures, more bk's, higher unemployment, the DOW 3000.

The good news however is we would probably be in recovery right now and grow our way out of the mess.

Homes, cars, stocks, fuel, food would be cheaper which would help those misfortunate and investors would swoop in and buy up property, struggling businesses, etc.

The govt bailouts, home buyer tax credits, cash for clunkers, stimulus just put the govt deeper in debt and when it all runs out in 6 months we will witness a much greater disaster.

Hope I'm wrong too but I feel I am not.

[DeadManCrawling]

Remarkably, there seems to be a consensus agreeing with this view, among my circle of friends and family. I suppose we may look like a bunch of "end of the world" wackos to outsiders, if we did not know them previously, but I really don't feel like a wacko.

Today seems a far cry from the survivalist movements of the 70's and 80's and the militia movements of the 90's.

There also seems to be a consensus among the population in general that something has gone horribly wrong. There are constant outcries to "DO SOMETHING!!". The problem is, no one knows quite WHAT to do. We voted, as a nation, for "change" and voted, it seems, based on that one word without requiring further definition. Now, I voted for Obama, and have never felt loyalty to either party or any particular candidate. However, I felt a bit hamstrung. It was either vote for "change", undefined as it was, or vote for the same. I knew the same was NOT going to help. So there was not much choice, in my mind.

It feels an awful lot like Obama and his government had no actual plans for AFTER winning. The goal, initially, was to GET ELECTED. "Then we'll sort it all out and make the changes". Problem is, they are as clueless as the rest of us. Seems we voted for a change . . in faces. . . but the same sorts of policies and responses.

I shuddered when Bush doled out hundreds of billions into the hands of Wall Street. I shuddered MORE when Obama took office and did the same.

At any rate, it seems we all know there is major trouble coming, but no one knows what to do. We moved to a smaller home in the country, will have a garden and chickens, on our half acre. I am researching and preparing to buy weapons, for the first time. I am a die-hard peace-lover but not everyone is, and if the worst happens, I have a duty to my family.

I look at it this way: If I am dead wrong (and I hope to God I am), then we will all be in better shape from the work, be more self-sufficient, be saving money on food, eating better food, and have saved money in nearly every aspect of our lives. It also is teaching myself and my family about nature, food, necessities versus desires, and so on. Invaluable learning for my 16 year old son.

If the rest of the world disagrees with our way of life, that is okay with me. If a crash of that magnitude happens, I would rather be prepared than not.

[banca rotta]

One question I have pertaining to this post "Why the worst is yet to come" and that is are any of you having difficulties discussing these types of issues with others such as friends, family, etc.?

It seems in residential, commercial real estate as well as all the other problems with debt, public and private that the worst has no choice but to come.

There are so many folks that we cannot even discuss these matters with since it looks like we are just negative and selling them fear. The problems are so bad that if all 6 billion people on the earth "think positive" it still won't make a dent.

Even when we watch some business related news on TV there are those that predicted the coming real estate and stock market crash 4 to 5 years ago and not only were they laughed at then, but even now they are being ridiculed for predicting a much worse crash.

I guess the way things will play out is we will witness the biggest transfer of wealth from those not paying attention (or thinking positive) to those that are making prudent descisions.

I wouldn't give anyone any investment advice but I have to say those that are paying attention (and do some research on what's coming) will probably profit more from the crash and those that put their faith in "green shoots" and the "obama recovery" will certainly get burned.

[DeadManCrawling]

You are correct. I, and many folks, tend to use the 8k figure since it has been so prominent in the news. The actual figure is, in fact, $6,500 for people purchasing another home.

Good catch, I definitely did not intend to confuse anyone.

Best,

-dmc

[OHBOY]

"DeadManCrawling": I really appreciate being able to read your well written report, find it very stimulating and most interesting pertaining to your thoughts on the defaults in the FL housing market in connection with how the banks are making their books look good. THANK YOU (!) for all the time spent to compile the details.

As it probably is just an error,I hope I don't come across as 'nitpicking', but please allow me clarify that the credit for 'move-up/repeat home buyers' is not $8000 (as for first time buyers). It is however 'up to' $ 6500.

https://www.federalhousingtaxcredit.com/faq2.php

[momisery]

People owned homes so they could have 1. a place for their family even during down turns 1. have something that did grow in value to add as a nest egg and to live in since it would be paid off during retirement. As my great grandfather said, land is t he soul and you need to own all you can. And he did, he had a farm to leave to each kid with one extra left over to give to the oldest son.. that would be 8 farms. he aquired t hem by paying back taxes on them, the owners split and were happy to be out from under the tax burden and have a new start out west or some place new. I never knew him, but I certainly heard the stories. he would offer they could stay on.. at times I hate to admit it, but he was a bit of a rober baron, at other times I just give up and decide was is truth is truth.

Now, with that in mind what went wrong is that no one could pay for their home with all the job disruptions going on, and people borrowed against their equity to pay for kids college which is so stupid, medical bills still stupid, and then of course those who bought boats, cars, trips and dreams. Our homes were not meant to be banks, but then where do you turn if you need the money when your income has dropped in earning power?

Are we on the brink.. gosh I don't know really. I know we survived the great depression, my dad who is 90 remembers it very well, and I know I made it though the one that included double digit inflation, double digit undemployment, chased the jobs from the northern run down factories with high energy costs into the south. This one, well, it finished chasing jobs off our shores I guess. I am more afraid because I am older and there is no way to make up what I have lost, that I do know. It will turn again, it always does, but it will be slower, and it will take a while to have a boom but it will boom again. The boom is the only time the rich get richer, and that is what the boom and bust is all about, so I do not see it stopping soon. i just hope I am dead and gone by the next time around. Far to stressful at 60, let alone at 80 or 90 like my dad is seeing. He is stressed because he knows the far reaching effects of the last great depression, how long it took to dig out. And his worries are that business is not loyal to this country now days, people think of starting up an online business with worketrs from India, or mfg and shipping jobs overseas for cheaper labor. They use to think about hiring here and making our country a great place to live and a strong nation. With that loss in thinking, our taxes will be wiped out and so will our military strength, and our peoples desire to fight for our county. Those things scare me, and they could happen.

[JRScott]

It really upsets me to say you are right on DMC.

The only thing I have noticed is that the taxpayers are NOT on the hook for all the big bailouts and stimulus as I thought was the case early on into the crisis.

Since the printing presses are running 24/7 we will see it when the govt defaults on it's debt and the dollar tanks.

The poor and middle class's finances will be wiped from the globe faster then the 2004 tsunami.

It kills me that I have to think of today as the "good old days" knowing there is a good chance that things will unfold this way.

We are on the hook. Just so you know.

They've doubled the money supply (well more than doubled it in the last year).

The 1970s rampant inflation was created by increasing the monetary supply by 13%.

So within the next 2 years you'll start seeing heavy inflation. The Fed will have to raise interest rates to try to stave it off but I'm not sure they'll be successful with the amount printed.

[banca rotta]

It really upsets me to say you are right on DMC.

The only thing I have noticed is that the taxpayers are NOT on the hook for all the big bailouts and stimulus as I thought was the case early on into the crisis.

Since the printing presses are running 24/7 we will see it when the govt defaults on it's debt and the dollar tanks.

The poor and middle class's finances will be wiped from the globe faster then the 2004 tsunami.

It kills me that I have to think of today as the "good old days" knowing there is a good chance that things will unfold this way.

[florida]

Thanks DMC - I guess in regards to the timeframe, we'll just have to wait and see.

As far as the banks making offers, we are firm that we will not accept ANY offer. We just want out of this neighborhood while we can. I just don't think it is going to turn around anytime soon and in reality, my guess is that it will only become worse.

Take Care...