The Town With The Most Screwed Housing Market In America

Nearly 90% of the homeowners in Mountain House, CA owe more on their mortgages than their house is worth. The average homeowner is down by $122,000. What are they doing to cut back? No more dinners at Applebee’s, buying 1 DVD a month instead of 50, canceling remodeling projects, and playing board games at home instead of going out to the movies, “But not Monopoly,” reports NYT, “with its real estate theme, it reminds them too much of real life.” One man is even cutting back on his scub and flying hobbies, and waiting until after Christmas to buy a high-def television. Wow. I think you’re going to have to dig a little deeper…

A Town Drowns in Debt as Home Values Plunge [NYT]

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  1. Caprica Six says:

    form the article: “In 2015, Mr. Martinez said, his monthly payments will be $12,000 a month. He laughed and shook his head at the absurdity of it.” That’s just crazy. He should have known his mortgage would balloon *someday.* I mean when I buy a house, it’s for the long term. I mean, I make a tidy six figures, but that’s waaay too much for anyone for a house by Tracy even! (I live in the SF Bay).

    • FatLynn says:

      @big keytee: I’d be willing to bet that some fly-by-night mortgage broker told him he’d be able to refi before that happened.

    • gnortenjones says:

      @big keytee: You beat me to the “WTF?!!!” comment. :)

      I’m hoping the the people portrayed in this piece are the exceptions, and not the rule, because like many others here, it’s hard to feel sorry for people making THIS stupid of decisions.

      Seriously, what kind of a schmuck looks at a mortgage with a potential $12,000 a month payment, and thinks it’s a pretty good deal?!

      And they guy who has to cut back from 50 dvds, and his hobby of flying? Boohoo.

      • floraposte says:

        @gnortenjones: I think it’s worth noting, though, that the article is mixing things–it starts out with the guy who’s unable to afford his mortgage, but then goes on to discuss people who aren’t identified as having that problem, and who have no indication of being in debt at all. They’re just nailed by the pop of the housing bubble, which can happen to you with a 30-year fixed-rate mortgage too. There’s no indication that the guy is cutting back on flying because he can’t afford his house otherwise, or that he took any actions, aside from buying a house in California in the last few years, that contributed to his current dilemma.

        I mean, I get the boo-hoo thing too, but I think it’s more that you’ve got somebody who feels he needs to be prudent despite his income as a result of the housing crash, and that his belt-tightening is just going to tighten the economy further.

        • Anonymous says:

          @floraposte: Not fair, floraposte. You actually read and comprehended the whole story, rather than just fly off the handle and voice outrage immediately.

    • Xerloq says:

      @big keytee: This is ridiculous. People need to understand the types of loans and when they’re best to be used.

      You get an ARM when you think rates are going down. You make sure they write in a cap on the amount the loan can adjust annually, with a clause that says the lender can’t add the difference back into the loan. Then you make sure you can afford the worst case scenario (e.g. your payment increasing by the max each year). Then you know you can afford it.

      IOs are for extreme short term loans.

      It’s ALWAYS a good rule of thumb to buy with the worst case scenario in mind.

  2. concordia says:

    People having to live within their means for a change?

    Gosh golly gee!

  3. Blueskylaw says:

    For people making six figures they are pretty ignorant or gullible. If you have a low interest rate you lock it in. You dont take interest only or ARM’s. If the broker tells you you can just refinance at a lower rate later on then you have to pay refinancing costs anyways, with a locked in rate at least you will be safe if rates skyrocket. This lack of basic thought annoys me to no end.

    • Anonymous says:

      @Blueskylaw: An ARM does sometimes make sense when you know you could afford your home payment even if it increased to the maximum. We got a 7/1 ARM instead of a 30-year fixed because we saved well over 1% on our interest rate and our loan would have to adjust upwards by the maximum amount for five straight years after that for us to end up losing money on the deal.

    • U-235 says:

      @Blueskylaw: But the refinancing costs just make the deal sweeter for the broker. Wouldn’t most homeowners just refinance through him? You know, since he got them such a sweet deal on their interest only ARM after all. And that just means more money in his pocket.

  4. NefariousNewt says:

    I could feel sorry for a lot of these folks, but I don’t for some reason. I grew up poor and that means I grew up frugal, and no amount of success in my career has caused me to become a spendthrift. But then you can’t prepare for everything, especially a global economy that’s in the tank. Now these folks are having to live the lifestyle they should have been living all along — let’s hope once we get past this, the lessons will stick. But if recent history is any indication, the answer is no.

  5. tedyc03 says:

    I used to live here. This is sad.

    Still, they got themselves into this by being greedy and foolish. It’s just sad that they have to learn the hard way.

  6. starrion says:

    I feel sick after reading that.

    Are we going to see whole towns abandoned?

    And yes, I am sure some mortgage broker told him he would be trading up by the time the balloon payments came due. Because prices always go up, Up, UP!

    Except when they don’t.

  7. craptastico says:

    maybe that town should start teaching basic math in school. How can so many people live so far ahead of their means? Anyone who buys 50 DVDs a month has some serious problems. Maybe if he got another job instead of spending 5 hours a day watching movies he could make ends meet.

    • samurailynn says:

      @craptastico: People who buy 50 DVDs a month don’t watch them all. They just like to see the shiny boxes all lined up on a shelf in their living room.

    • floraposte says:

      @craptastico: Again, there’s no indication that anybody but the first family is living beyond their means, just that they’re taking steps in light of the plummet of the housing market.

      Even in my fairly stable area, many folks who bought a couple of years ago are slightly underwater now because even our modest drop in value exceeds the little they’ve paid. It doesn’t mean they bought stupidly or got a bad mortgage or are spending frivolously. I think commenters are trying to paint this as an “it couldn’t happen to me” scenario, but in an economy that pulls down house values, anybody with a mortgage, conservative or no, can be vulnerable to being upside down.

      • alexawesome says:

        @floraposte: No, commenters are incredulous that “not buying 50 dvds” or “not going out to eat” is seen as tightening the belt or tough consequences of the bad economy. It’s hard to sympathize with that when we’ve been eating in for months, saving every penny, and seeing a movie once a month without buying any dvds or other luxury items.

        Just about everyone is going to feel a pinch, but it sucks a whole lot more for some people than it does for others.

  8. GothamGal says:

    My heart really goes out to Kenny Rogers who can no longer afford his hobbies of scuba diving and flying. He must be devastated that he can no longer buy 50 DVDs a month and is down to one. How horrible is it that he must wait for the Christmas sales to buy an HDTV.

    I had no idea that this country was in that bad of shape.

    • m4ximusprim3 says:

      @GothamGal: Wouldn’t you think that if you’re spending $1500 a month on DVD’s, you’d already have an HDTV?

    • Corporate_guy says:

      @GothamGal: The funny thing is that for the price of that one dvd he could get netflix and continue to get lots of dvds to watch.

      • skrame ? says:

        @Corporate_guy: He’s not buying them to watch. He’s going to use them as bricks to build a new house out of, after he goes bankrupt and his current residence is repossessed.

    • Fist-o™ says:

      @GothamGal: I’m sorry. but it must be done:

      “You got to know when to hold ‘em,
      Know when to fold ‘em.
      Know when to walk away,
      Know when to not BUY 50 JESUS EFFING CHRIST ON A POGO STICK DVD’s PER MONTH!!!

      NO Sympathy, Mr. Rogers. None.

  9. Bahnburner says:

    Sadly, these people feel that it’s the government’s fault for not “protecting” them. Even sadder still is they now expect the government to rewrite the rules of their ill-conceived mortgages. And even sadder than all of this is that the government probably will…only at the cost of freedom.

  10. Franklin Comes Alive! says:

    FTFA:

    “He has cut his DVD buying from 50 a month to perhaps one, and is waiting until the Christmas sales to buy a high-definition television. He does not indulge much anymore in his hobbies of scuba diving and flying.”

    Am I really supposed to feel sorry for these people? Maybe it makes me a jerk, but sounds like most of them are getting what they deserve.

    • Snarkysnake says:

      @Franklin Comes Alive!: @Franklin Comes Alive!:

      No, I don’t think you should feel sorry for them.

      Does anybody beside me think that if they have time for 50 DVD’s a month (thats almost 2 a day) and scuba diving and flying,that they have time to GET A SECOND FUCKING JOB to like,pay for their lifestyle ? I work a couple and it looks like the guvmint’ will take taxes from my check for each one to pay for dimwits like this.

  11. Trai_Dep says:

    The idea that banks filled with professionals who spend their lives evaluating dozens of loans a day approved someone like that for a loan that entailed eventual payments of $12,000/mo is fraudulent and criminal.
    Sure, the family that buys/upgrades a home a handful of times their entire lives – and endlessly bombarded by marketers to ignore common sense – has some culpability as well, but it’s mortgage companies’ JOBS to say no.
    The guy will pay (and pay, and pay) yet the people that approved the absurd loan walked off with six-figure bonuses (at least). Tell me what’s more abhorrent.

    • rpm773 says:

      @Trai_Dep: I think it’s criminal insofar that we’re all in a financial mess now because of the banks’ actions..even the ones who got into the housing market conservatively by buying good property with a down payment and a fixed rate, or those who didn’t get in at all.

      However, I can’t extend the sympathy to the people who got into these ARMs who are now in a mess. Either they decided to buy a place they couldn’t afford, or they decided to game the system thinking they could sell an make a profit before the market fell. There is never any excuse for the former, and for the latter, well, those who play with fire get burned.

  12. concordia says:

    Man, this story really hits home. To think that Kenny Rogers would be so popular and still have problems like this.

    Ladyyyyyyy…

    • 6502programmer says:

      @concordia: Apparently, while he did know when to hold ‘em, know when to fold ‘em, know when to walk away, and know when to run, he didn’t know when to buy in and when to sit and watch the game. Maybe it should have been covered in a song…

  13. Murph1908 says:

    When I first heard about interest only loans when I bought my house in 2004, I wondered who thought that was a good idea.

    30 year fixed for me. Nice to be in a home I can afford, and if things get worse for me, at least my housing payment will stay nice and steady.

    Oh, and the guy was buying 50 DVDs a month? WTF? That’s 12.5 a week. If they were all 2 hour movies, that’s 25 hours of movies every week. It’s gotta be porn.

    • hovy says:

      @Murph1908: DVD ‘collectors’ (addicts) regulary drop hundreds of dollars on new DVDs every month and then end up not watching them. I see it happen all the time on a DVD forum I read regularly.

      It’s insane.

      • Dilbitz says:

        @hovy:

        My aunt does that every tuesday when the new ones come out. She doesn’t even know what the movie is about, but she’ll buy it casue it’s new. Most of them aren’t even opened. I ended up selling most of mine to pay for food and gas. :(

    • Oranges w/ Cheese says:

      @Murph1908: Well technically.. for the first several years, 60%+ of your payments go to interest anyway – so for the first few months at least the payments would be almost identical to those in a “normal” mortgage.

  14. LiquidGravity says:

    I’m going to blame the consumer here and you can yell at me all ya want.

    Boo hoo! That is what happens when you go against all consumer common sense and buy a home that anyone with a brain could tell you is a way over inflated price.

    Interest-only mortgage loans! Come on. If you only pay the interest on something then you aren’t reducing the amount owed. That is the kind of math you learn in 6th grade. FYI: It works the same way for credit cards.

    Bubbles pop. Dreams die. I’m sick of feeling sorry for people that made dumb decisions.

    • Ninjanice says:

      @LiquidGravity: Thank you! I have no sympathy for people that live beyond their means. Why would you buy a house and pay an interest only loan for 10 years. You may as well rent (unless you’re trying to buy a house as an investment instead of buying it for shelter). And as far as the broker giving him a loan he couldn’t afford, he could have said no. This guy KNEW what the terms of his loan was. He KNOWS that his payment is going to go up. It wasn’t a problem until he figured out that he wouldn’t be able to sell his house for a huge profit before the payment went up. He took a risk and it bit him in the ass. Too bad. When I bought my place, I knew what I could afford before I even looked at any houses. When I got approved for my mortgage, I was approved for quite a bit more than I needed for the type of place I wanted. Sure, the broker wanted me to go for the bigger loan and bigger house, but I said no. It was that simple.

    • medusasbedhead says:

      @LiquidGravity: Feeling sorry is one thing, although I’m with you on this one; it’s hard to feel sorry for a bunch of people that made hilariously (horrifically?) stupid decisions. It’s when we have to *bail out* all these morons that I get a bee up my butt about it.

    • KyleOrton says:

      @LiquidGravity: He was in the market for some common sense, but maxed out his credit card speculating on Beanie Babies and limited edition unrated American Pie DVDs.

    • Martin65 says:

      @LiquidGravity:
      I want to avoid piling on here, but I must.

      First of all, I’m in that club called “6 figure income” (barely, but I’m in the club).

      Not only do I not buy 50 DVD’s a month – I can’t imagine how I’d afford them. Same goes for an HDTV. In my house, a $50 discretionary expenditure is a dinner table conversation, with pros and cons. We never ever ever use revolving debt for ANYTHING. If we don’t have the cash in the bank already, we don’t buy it. I save, in a mix of investments and simple cash, 25% of my income, and I drive a 1997 Jeep with 188,900 miles on it. Our mortgage is easy to pay because we made a big down payment on a small house and have a fixed 30.

      My pity for Kenny is nil, as anyone with good income now or in the future could face a sudden and long-term decline in their earning capability and should plan accordingly.

      I’ve been through it before. In the year 2002 I made exactly 1/10th of what I made in the year 2000. I had the same house I live in now and while it was tough, because we had planned for not only tomorrow evening but the next year and ten years after that, we not only got through it, we never once were late with a house payment.

      One more rant and I’ll get off my high horse.
      I read stuff about people “cutting back” by buying one less TV or downgrading to fewer premium cable channels and I howl with laughter at these pathetic examples of “frugality”. Frugal living is about buying only what you NEED to feed, shelter and clothe yourself, plus the costs you need to absorb to do your job. If I see another “cash strapped” person in the news with a shopping cart full of cereal and pre-packaged ready to eat meals I’ll scream.

  15. Sparkstalker says:

    The first thing we did on our new house was refinance our construction loan (which converted into an ARM with a fixed rate, 30 year mortgage. I don’t understand how people don’t get it. I’m no financial whiz, but it just makes sense…maybe you have to cut out some of the luxuries to afford the payments on a fixed rate, but better to do it ahead of time instead of when you’re facing eviction.

  16. dwhuntley says:

    You gotta live within your means. Out of all the people that have foreclosed, I’ll bet the great majority of these people simple could not afford the house at the point when they bought it. Forget about after a few months go by and they may lose there job. The money lenders were dumb enough to give someone a loan who couldn’t afford it. That’s where the problem is. If you can’t afford a house don’t buy one! Simple as that!

  17. legotech says:

    I’m just boggled at the DVDs…I can’t think of 600 movies I’d like to watch once, never mind OWN

  18. mlradio says:

    There are plenty of people that are truly in trouble with mortgages — but the NYT chose a group of idiots it’s hard to feel sorry for.

    How can you feel sorry for the guy that has to wait until the Christmas sales to buy his high definition TV? And has to cut back on his scuba-diving and flying hobbies? Seriously? Cry me a river! Sounds just like those millionaire who are crying in their wine glasses as they are being forced to sell off their second yachts because they can’t afford to keep both boats.

    • postnocomments says:

      @mlradio: No sympathy for these people either, but their stupidity affects each one of us. Unfortunately to get the economy back on track we’ll have to bail these idiots out. The government mission now is to never allow banks give people loans that can balloon to a ridiculous $12,000/mo. They let it happen and look where we are now.

  19. mugsywwiii says:

    That $12k/month payment doesn’t sound right. It’s be good to know how that loan was structured. It’s interest only for the first 10 years (article doesn’t say negative amortization), so assuming he still owes the same amount in 2015, and assuming the interest rate is a rather high 10%, interest will only be accruing at a rate of $5k/month. It would take ~70 $12k payments to pay off the full principle. That’s a pretty strange loan – interest only for 10 years, then pay off the whole house in 6 years?

  20. caj11 says:

    Um, buying 50 DvDs a month? Maybe they meant to say RENT 50 DvDs a month, but even so, who has that much time on their hands to watch that many movies in a month? That’s almost two movies every night. I’m confused.

  21. Bahnburner says:

    Alex, I was making the point that these people aren’t really suffering at all, and are part of the problem…were you agreeing with me?

  22. mushroom104 says:

    This article is ridiculous. Am I supposed to feel sorry for these people? Buying 50 DVDs a month? WTF? I don’t think I even own 50 DVDs total, most of mine are used.

  23. ckaught78 says:

    I am trying to understand why the guy who bought the forclosed property is going to have to cut back. WHile they don’t mention what type of financiing he had I would imagine his payment is the same today as it was when he purchased the house last year. As long as your income has stayed the same and you have a fixed rate mortgage your monthly expenses shouldn’t change regardless of how much value the house loss. If my house looses 10k in value this month, does that mean I have 10k less to spend? No, I can still go out and do all the same things I did before.

    Additionally, I agree with most of the people here in that I have no sympathy for any of these homeowners. I bought my first house when I was 24. I knew what my payment was going to be on day 1 and I knew what it would be in day 100. Everyone is quick to blame Wall-Street for this mess, but Main Street is just as much to blame. Perhaps I should stop paying my mortgage so I can get some govment cheese.

  24. sspeedracer says:

    Upside down by 100K+ they should walk away. Only a fool twice over would continue that payment.

    • mugsywwiii says:

      @sspeedracer:
      Fortunately some people believe in personal responsibility, otherwise this mess we’re in would be even WORSE.

      • orlo says:

        @mugsywwiii: Those responsible people are helping to pay bank CEO’s paltry 10% bankruptcy performance bonus this year. You still lose money walking away from a first mortgage, while certain bankers made millions and the people who sold you an overpriced home made thousands.

    • JustThatGuy3 says:

      @sspeedracer:

      Yup – walking away is your right in the case of all California first mortgages, and I would never blame a borrower for using it, just as I would never blame a lender for raising the rate on an ARM when the note allows for it.

  25. bobloblawsblog says:

    i LOVE IT how they all turn to drinking at the end. cheers to that!

  26. ZalmanCamel says:

    ARMs…many of these were generated when the prime rate was at 0.5%. Which way did they expect the rates to go?

    And 500 DVDs an month? Poor white trash me borrows them from the public library!

    Scuba diving? I was really into it. Marriage, house. Kids. I chose my [right] priorities.

    • JustThatGuy3 says:

      @ZalmanCamel:

      Actually, for a lot of people, their ARM rates are coming DOWN. Friend of mine has an ARM at 2% under prime that he got in late 05. At that point, it was 5%. (Prime was 7%) It just adjusted, and it adjusted to 2%, since prime is 4%. His interest component on his mortgage got more than cut in half.

  27. ralfhutter says:

    Looks like a buying opportunity. Suckers. Big Fat Gluttonous Americans living beyond their means. Wake up America, you work at Walmart, you can’t afford that 60″ plasma TV and that 4 bedroom house.

  28. Scoobatz says:

    Being upside-down on a mortage has nothing to do with taking financial responsibility. I am fed up with articles combining the two. Their credit problems will not magically disappear when home prices begin to increase again.

    • Scoobatz says:

      @Scoobatz: Sorry, I meant underwater, not upside-down — a term that means the same thing when discussing car loans, but is not trendy enough for the housing crisis, I suppose.

    • floraposte says:

      @Scoobatz: Thank you. I’m not convinced the reporter grasps the difference between being underwater and being unable to make one’s loan payments.

      • JustThatGuy3 says:

        @floraposte:

        The reporter definitely does grasp that:

        “Most people pay very little attention to what their equity stake is if they can make the mortgage,” said First American’s chief economist, Mark Fleming. “They think it’s a bummer if the value has gone down, but they are rooted in their house.”

  29. kwsventures says:

    And this is my problem, how? Oh, it is not my problem. Boo hoo, another tear jerker housing story. Cry me a river.

    • JustThatGuy3 says:

      @kwsventures:

      Well, unless you’re (a) independently wealthy, (b) entirely invested in near-zero-risk securities, and (c) not subject to US taxation, it definitely does affect you.

  30. Anonymous says:

    I currently live in Mountain House. Having arrived in California at the height of the real estate bubble, I held on and rented a home there instead of buying. I now sadly see many homes vacant and many of my friends upside down on their loans.

    I must state though, that the reason Mountain House has the highest number of people upside down on their mortgages, is that the community is entirely new. It was created at the beginning of the housing bubble and never had homes for sale at a reasonable price. Thus, everyone who owns a home there bought it during the bubble. Compare that to the neighboring community of Tracy that’s existed for a hundred years and of course the percentage of people upside down will be lower, since most owned their owns before the bubble.

    In their defense, they are not greedy people. They are middle class home owners who were forced out of the Bay Area housing marked up and over the Altamont Pass into the Central Valley in order to afford a decent neighborhood to raise their children. We are there for the very same reason, simply because we could not afford to rent anything closer to the Bay Area on a single income.

    Unlike them, however, we are not home owners. I moved to California at the height of the bubble and resisted buying a home, as I didn’t want to be crippled with debt. However, there is enormous social pressure on people to own a home. Especially when you have a child and don’t want the stigma of being a second-class citizen (renter) among your piers. Now it’s all congratulations on my foresight but a couple of years ago, I came close a couple of times to just giving in and buying property.

    Anyways, now that the prices have dropped, we plan to wait another year or two and pick up a home at a reasonable price.

  31. G-Dog says:

    My wife and I got in the hole because of medical bills and the job market. These guys were buying 50 DVD’s a month? I wish I had those kind of problems.

  32. ohayou_kun says:

    Scuba and flying hobbies? Wow, the life of the former rich. They really need to live like the majority of the world. Poor and frugal, that’ll teach them to stopy being so wasteful.

  33. redkamel says:

    theres one kind of people I never feel sorry for: dumbasses.

  34. ElizabethD says:

    I love the commenters here who say “Get a second job!” I don’t know about where you live, but in my state (RI) many, many people can’t even find a “first” job, never mind a second one. Not even at McDonald’s. (We have the highest unemployment of any state.) This isn’t even taking into account the families that bought a house when both spouses were working, and one has since been laid off, resulting in a monthly payment that can’t be managed on the remaining salary. (This would apply to my own household for the past 18 months, alas.)

    So, I’m as quick as the next gal to say, Don’t spend what you don’t have. But the whole premise of a mortgage (not a crazy mortgage, just a regular conservative mortgage) is that you live in what you don’t own, and pay the mortgage-holder a monthly sum toward the purchase price. Most of us don’t “own” our homes. Some of us planned carefully to afford our mortgage payments, only to find that careful planning undone by unforeseen economic events.

    Sigh. Just venting!

  35. Anonymous says:

    I live one exit from Mountain House. There are billboards EVERYWHERE trying to push property in Mountain House, and some of the billboards are really stupid (one says “We had America’s Top Models before TV did.) I never knew how bad the housing market was there, but I always wondered why they’re pushing property so much. Now we know…

  36. SlappyFrog says:

    Ok, I’m confused. Let’s say six months ago the house was worth the same as the mortgage and your mortgage payment was ‘x’ dollars and you could afford to pay it.

    Today your house is worth less than the mortgage, your mortgage payment is ‘x’ dollars and you can’t afford it?

    What exactly is different? Were you making mortgage payments using an equity line? Than you are an idiot and deserve to lose your house.

    Otherwise, shut up, live in the house for 5 to 15 years and don’t worry about it.

    • Scoobatz says:

      @SlappyFrog: This is similar to a comment I made previously. What does the appraised value of a house have anything to do with your ability to make the loan payments? Because my house is not worth what it used to be, I can’t afford to go to the movies anymore or eat out in restaurants? Am I missing something? The comparison is absurd.

      • orlo says:

        @Scoobatz: Maybe they were planning to live off of a new equity loan taken out after the valuation “increased”?

        • mugsywwiii says:

          @orlo:

          For a lot of people, the problem is that they were planning on refinancing their ARMs before they adjusted, but their house dropped in value so they can’t refinance.

  37. albear says:

    WTH? can someone really watch 50 DVD’s a month? (if you’re unemployed, yes)

  38. bagumpity says:

    Did anyone else notice that the article had a very sarcastic tone to it? The reporter kept harping on the fact that people were buying absurd luxury goods (wine, DVDs, etc) while talking about “cutting back.” It was almost accusatory, as in “these people screwed up when they bought their houses, and now the keep on spending their foolishly…”

    Or was it just me? I mean, $24 for a Shiraz? In California? Puhleaze.

  39. JayDeEm says:

    I find a certain irony in the ‘Living Outside Their Means’ comments in the mortgage threads. Many of the people now in trouble would have been well within their means buying the same house just a couple years earlier or if the banks didn’t create the bubble in the first place by selling bad loans.

    Of course they could have just waited, but greed, fear of getting priced out and panic seems to have won out over patience and common sense.

  40. JustThatGuy3 says:

    @Xerloq:

    ARM’s aren’t necessarily for _extreme_ short-term loans. I have a 7 year ARM, since I know I’ll be moving before 7 years, and it cut 7/8 of a point off a 30 year fixed. And yes, I could still easily make the payments if it went up to the max after seven years.

  41. ideagirl says:

    By “dig a little deeper,” I assume you mean get out the backhoe…these people are in way over their heads.

  42. mythago says:

    You can sure pick at some of the individuals in this article, but I think a lot of the poster here just do not get what the real-estate situation in California was like before the meltdown.

    Prices had been shooting up for YEARS. Sleazy brokers abounded and banks looked the other way. People were terrified that if they waited to buy a house they’d be priced out of the market forever, and they were sure that if it didn’t work out, they could refi or sell, because housing prices in California always go up, y’know?

    I heard perfectly intelligent, educated people who assured me that it was impossible for prices to drop, that CA has limited land, that housing ALWAYS goes up, and that the only thing that would happen in the long term was that the rate of growth would diminish. People really, truly believed this, and not because they were ignorant and greedy; just like in the dot-com boom, they honestly thought the laws of physics had changed.

  43. patodonnell39 says:

    This is such a perfect snapshot of so many things that are wrong with this country. $650K for a house 60 miles east of town? I thought I knew what dumb was. I was wrong. I feel zero sympathy for people on the coasts who got us into this mess.

    • JayDeEm says:

      @patodonnell39: See mythago’s comment above… It’s dead on. I used to live in California, in southern Orange County just a few miles from where that horrible ‘Real Housewives’ show was set. This was not by choice mind you, I just happened to grow up there. Unfortunately I was still too young and early in my career to be able to buy a house when they were actually affordable, so I rented instead.

      The great part about renting is that you get no tax deductions, and your rent goes up every year in accordance with the surrounding real estate market. Either that or your apartment is converted to a condo and you get to find a new place to live in an even tighter rental market. All the while wages remain pretty flat, and the increased cost of living cuts into any down payment you might have been saving for.

      Blame the ‘people on the coasts’ all you want, but without being in that environment it’s very difficult to understand what it was like.

      For my part, I decided to remove myself from that environment entirely and buy in a different state. I’m upside down anyway, but nowhere near where I would have been had I stayed in CA, and I can still afford my payment. Not everyone had this option though, thankfully my employer was willing to allow a transfer.

  44. du2vye says:

    It’s ironic that many of the financial articles trying to put a “face” on this mess pick such poor examples that few people can identify with. I doubt if most of the millions that have lost their homes or are in foreclosure now. buy 50 DVD’s a month, etc.

    Up until a few months ago, Wall Street and Whitehouse quackers were saying ‘the economy is fine’, denying a housing bubble and calling the U.S. a nation of whinners. Instead of fixing medical debt that was fueling half of the bankruptcies, they swept it under the rug by making bankruptcy harder to get (if not impossible).

    Now they are trying to sweep bad loans under the rug too.

    Wall Street’s ideal economy puts 99% of the wealth in the hands of 1% of the population. The stupidity is that 50% of the population believes they are in the 1%. Now that’s good marketing — and really stupid.

  45. synergy says:

    Maybe if they’d played a little more Monopoly they would’ve known how to handle their bills and money.

  46. BusinessHut says:

    Aside from adjustable mortgages, which aren’t mentioned in the summary, how does the value of your house have anything to do with whether you can afford it now? If you bought a $500k house and you were able to afford the mortgage then, why can’t you now? Sure, it might make you sick to pay that mortgage if your house is worth $100k less, but hey that’s the housing market. It can’t always be going up. Live at your house, pay the mortgage you decided you could afford a year ago, and wait for prices to return to normal.