Monday, January 17, 2011

Mortgage changes

So why do so many people seem surprised that the mortgage rules are slowly but surely going back to the way they were less than a decade ago? We predicted about 18 months ago that within 2 years it would be the straight forward 25-30 yr mortgage, 10% down, higher interest rates, etc. About the only thing I am waiting for now is the confirmation on interest rate hikes (more than one), and 10% down. But people are freaking out about it.... why? It was obvious something had to be done.

It was made far too easy and that has caused a great pile of poo. Lenders are not getting their money back as more and more people default, housing prices are way too high for what you get out of the deal, and it was just plain insane. There are crappy little run down houses in my city that started out at $30,000 that are now $250,000. Gimme a damn break. They are not worth anywhere near that and it was insane that people were willing to pay that much just so they could call themselves homeowners. Now the poo is hitting the fan and many people are looking around all confused and perplexed. It doesn't take a rocket scientist to figure out that this was a disaster waiting to happen.

I for one though am ticked. I am ticked off that I will probably have a much harder time buying a home now because of all the idiots out there who went far beyond their means just because they were too stupid to see how stupid they were. I chose to back off on the enticement of a low interest rate because I saw how expensive the houses were being listed at and knew that I would end up paying even more on the home than I would have if I had bought when the interest rate was higher and money-down was higher. I know that the bucket of sticks down in the poorest area of town is NOT worth anywhere near over 200 grand so I refused to get caught up in the hype during the past 7 or so years. But too many others went in like they had no clue whatsoever what was going to happen - and now we are all going to pay for it.

I went around looking online at properties in the US again for fun and nearly choked to death at what could be bought for under half a million. Keep in mind that a friend of mine just bought a home here in December for $410,000. It's lovely. But it's smaller inside than you would think from the outside, it has no yard or driveway or anything yet (just dirt) and the yard is actually quite small. Meanwhile, I could pop on down to Bar Harbor, Maine and buy a lake front property that is actually an ocean inlet, with 1.5 acres of land, freaking giant house with a double detached garage that has a full living quarters upstairs, AND a cabin set back from the main house as well with 2 bedrooms and gorgeous view. Right down to the lake with 2 warfs. All for $499,000. What's going on that I can dish that out in my boring city in the middle of the barren prairies and not even get a third of the lovely value of that Maine home? Some blame the crash in the US but the fact is, I have been watching home prices for years, addicted to house buying programs since well before the US mortgage crisis came to light, and homes there have always been a lot lot cheaper than in my boring city. Even homes in Vegas, Orlando beach fronts, Palm Springs, etc. What's up with that?

Why people got so happy up here about buying a house the big bad wolf could cough on and knock over, for $300,000 is completely beyond me. And why they could not guess that interest rates might do them in in a short time is beyond me. It's pretty sad to know that right now if I bought an old home that wasnt even updated inside, I would be forking out well over 200 grand and paying over half a million by the time my full mortgage was paid off --- YIKES!!! But so many people did this and now they are worried and scared, and people who were hoping to be able to buy a home but waited and tried to be responsible are going to pay for it too. Thanks to all those who fell for the little enticing offers over the past 5-7 years - you screwed it over for the rest of us, not just yourselves!

2 comments:

  1. This is one of the problems of a central bank setting interest rates rather than allowing them to fluctuate based on market forces. Intervention always warps the economy, often leading to catastrophe.

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  2. Oh totally, it was a disaster waiting to happen yet they kept fiddling with all sorts of measures, supposedly to make it easier for more people to afford a home, but it went the opposite way and drove prices through the roof. The 'affordable housing' units that went up in my city were selling for about $95,000 when they were built It was all over the papers to own your own home for only $600/month. Now those very same homes, only about 4 years later, have been selling for over $200,000!!! How's that for 'affordable housing'?? But I also look to the people who signed the dotted lines without really thinking ahead. People that earn a lower end middle class wage have been buying $300,000 homes. I don't know why they thought they could do that?? The banks and govt can change the rules, but the people don't have to flock blindly along and follow. But they did.

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