when is a bailout not a bailout

for those of you advocating letting the system crash, i recommend that you study what happened during the great depression after the system did crash

then it was an oversold stock market, this time it is and oversold housing market

what we need is to create a gulag where the people that participated in selling the 'subprime' loans be grouped together and be forced to build their own shelters, utilities and grow their own food

and in the meantime, try and keep our economy from crashing
 
DonQuixote said:
for those of you advocating letting the system crash, i recommend that you study what happened during the great depression after the system did crash

then it was an oversold stock market, this time it is and oversold housing market

what we need is to create a gulag where the people that participated in selling the 'subprime' loans be grouped together and be forced to build their own shelters, utilities and grow their own food

and in the meantime, try and keep our economy from crashing
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I suggest looking to the pre-Depression time and the ineffective means that Hoover used to stave off the economic woes. It is as important to not do the wrong thing, and it would have been better without the ineffective attempts to stop it.
 
Don as I said before with hoomans if there is little inconvenience or pain people will learn nothing.
If a child has a tantrum and breaks a favorite toy. does he learn more if he has to do without that toy or if you buy him a replacement.
 
I think the word 'crash' is a misnomer. I think we should let prices settle and fall back to what they should be and not keep them at these over inflated values. People bought too high and they couldn't afford it. Housing is way too expensive and only sets up future first time homeowners to have to pay over valued prices, and they will undoubtedly be in more of a crunch because utilities will be even more in the future. The fact is that the homes shouldn't have gone up as much and as fast as they did. keeping them there only helps irresponsible people and hurts those that were smart about their purchases or those that were smart enough to wait.

Oh, BS can kiss my a$$. I'd be more inclined to help a homeowner who I could understand being ignorant of the market than an entire company dedicated to financial services. That's ridiculous and that bailout pisses me off the most.
 
Damocles said:
I suggest looking to the pre-Depression time and the ineffective means that Hoover used to stave off the economic woes. It is as important to not do the wrong thing, and it would have been better without the ineffective attempts to stop it.
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I thought critics say the government did not do enough quickly, right prior to the depression and this is WHY it lasted so long?

care
 
Care4all said:
I thought critics say the government did not do enough quickly, right prior to the depression and this is WHY it lasted so long?

care
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They do. However, Hoover did the wrong thing too late and with too little.

Which was my point.

For some reason speaking about Hoover doing the wrong thing at the wrong time and with too little is an attack on somebody else in some people's mind so instead of listening and researching I get a bunch of defensive block.

Read about it. Doing stupid things to stop it can be just as bad, and sometimes worse, than doing nothing.
 
Damocles said:
They do. However, Hoover did the wrong thing too late and with too little.

Which was my point.

For some reason speaking about Hoover doing the wrong thing at the wrong time and with too little is an attack on somebody else in some people's mind so instead of listening and researching I get a bunch of defensive block.

Read about it. Doing stupid things to stop it can be just as bad, and sometimes worse, than doing nothing.
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Not to mention attacking the WWI vets. Hoover just couldn't do anything right, which made no sense given his cv.
 
Kathianne said:
Not to mention attacking the WWI vets. Hoover just couldn't do anything right, which made no sense given his cv.
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Oh yes. And all they wanted was the pay they were promised, to actually attack them was just another addition to the already full pile of stupid he brought to bear on the problems of his time.
 
Damocles said:
They do. However, Hoover did the wrong thing too late and with too little.

Which was my point.

For some reason speaking about Hoover doing the wrong thing at the wrong time and with too little is an attack on somebody else in some people's mind so instead of listening and researching I get a bunch of defensive block.

Read about it. Doing stupid things to stop it can be just as bad, and sometimes worse, than doing nothing.
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agree!

care
 
[ame]http://en.wikipedia.org/wiki/Mellonomics[/ame]


Maybe it had something to do with this guy?
 
Mellon was a member of the South Fork Fishing and Hunting Club, whose earthen dam failed in May 1889 and caused the Johnstown Flood

Fun little fact about an interesting guy who held his post in our gov. for all the years leading up to the great depression.
 
Care4all said:
in general, homes double in value every 10 years...THIS IS THE NORMAL MARKET for real estate going back a CENTURY.....
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Not really. Home values went from around $4000 in the 1900s to around $12,000 in 1950. That's 50 years to not-quite triple in value.

From 1950 to 1980 average homes went from around $12,000 to around $40,000. That's a little more than triple over 30 years. But the size of average homes also increased from 2bed/1bath of the 50s to 3 bed/2 bath in the 80s, so a significant part of the average home value increase was due to the increase in size of average homes.

From 1980 to 2000, a 20 year span, average homes (still 3 bed/2 bath) increased from $40,000 to $180,000. There is your double-every-ten-years rate.

Today home values vary more over differing regions than ever before, so average price has less meaning than a decade ago. Part of this is due to technology allowing people to scatter (ie: move to less populated areas) while still working for their big-city office. The result is much higher prices of housing in the west, while prices in the east and south were moderating even before the housing credit crisis.

In short the rate of home value increase has been going up, with the few years being by far the worst. Home values where I live (a western, low-population state) were below the national average in 1990. But the values have shot through the roof, more than tripling since 2000 alone, and now are well above the national average. A 3 bed/2 bath home goes for almost $400,000.

Additional info:
In 1900 homes were usually purchased with cash. Long-term amortized loans were not available. In 1950 FHA loans averaged 4.25%, but housing credit regulations were imposed supposedly as part of an effort to conserve resources for the Korean War. By 1953 most of those regulations were removed. In 2000 average mortgage interest was a little over 8%.

Also, median income in 1900 was around $490. That made the value of an average home about 8 times the median income.

In 1950 the median income was around $3400, making the average home worth about 3.5 times the median income.

And in 2000, the median income was around $45,000, making home values about 4 times the median income.

Today the average home is around 8 times the median income level, putting us back to 1900 levels.
 
Good Luck said:
Not really. Home values went from around $4000 in the 1900s to around $12,000 in 1950. That's 50 years to not-quite triple in value.

From 1950 to 1980 average homes went from around $12,000 to around $40,000. That's a little more than triple over 30 years. But the size of average homes also increased from 2bed/1bath of the 50s to 3 bed/2 bath in the 80s, so a significant part of the average home value increase was due to the increase in size of average homes.

From 1980 to 2000, a 20 year span, average homes (still 3 bed/2 bath) increased from $40,000 to $180,000. There is your double-every-ten-years rate.

Today home values vary more over differing regions than ever before, so average price has less meaning than a decade ago. Part of this is due to technology allowing people to scatter (ie: move to less populated areas) while still working for their big-city office. The result is much higher prices of housing in the west, while prices in the east and south were moderating even before the housing credit crisis.

In short the rate of home value increase has been going up, with the few years being by far the worst. Home values where I live (a western, low-population state) were below the national average in 1990. But the values have shot through the roof, more than tripling since 2000 alone, and now are well above the national average. A 3 bed/2 bath home goes for almost $400,000.

Additional info:
In 1900 homes were usually purchased with cash. Long-term amortized loans were not available. In 1950 FHA loans averaged 4.25%, but housing credit regulations were imposed supposedly as part of an effort to conserve resources for the Korean War. By 1953 most of those regulations were removed. In 2000 average mortgage interest was a little over 8%.

Also, median income in 1900 was around $490. That made the value of an average home about 8 times the median income.

In 1950 the median income was around $3400, making the average home worth about 3.5 times the median income.

And in 2000, the median income was around $45,000, making home values about 4 times the median income.

Today the average home is around 8 times the median income level, putting us back to 1900 levels.
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interesting problem and statistics

but let me give some specifics regard my mother's foray into real estate

in 1965 she sold her home in the pacific palisades, ca for $48,000 (3 bdrm, 1 1/2 baths)

she bought a home in santa barbara, ca for $48,000 (3 bdrm, den, formal dning rm, entry hall, 2 3/4 baths one 1 acre) she sold it for $96,000 in 1975

she bought a house in the village of santa ynez, ca for $67,000, 2 bdrm, 1 3/4 bath, frml dng room and entry hall on 5 acres in 1975

we added a master suite (770 sq ft) with a mini kitchen, and 1 3/4 wheelchair accessible bath and bed sitting room all wheelchair accessible, replaced the heater and added a/c in 2000

we remodeled two of the baths to shower bathes and repaired water damage in one of the baths and replaced the articulated garage door in 2005

the property has an automated watering system (using drip lines for all but the lawn) and an oversize finished 2 car garage with a pantry

oh why go on, its appraised value was $1,800,000 last month

we are 1/2 hour from santa barbara, 2 hours from downtown la - there are doctors and lawyers that commute from here to la - the school districts are quite good

however, if we decided to sell, it would take from 6 months to a year to find a buyer

but if we added a barn...it would add about $100,000 to the value of the place and help it sell faster (this is horse (and other types of animals) country)
 
DonQuixote said:
interesting problem and statistics

but let me give some specifics regard my mother's foray into real estate

in 1965 she sold her home in the pacific palisades, ca for $48,000 (3 bdrm, 1 1/2 baths)

she bought a home in santa barbara, ca for $48,000 (3 bdrm, den, formal dning rm, entry hall, 2 3/4 baths one 1 acre) she sold it for $96,000 in 1975

she bought a house in the village of santa ynez, ca for $67,000, 2 bdrm, 1 3/4 bath, frml dng room and entry hall on 5 acres in 1975

we added a master suite (770 sq ft) with a mini kitchen, and 1 3/4 wheelchair accessible bath and bed sitting room all wheelchair accessible, replaced the heater and added a/c in 2000

we remodeled two of the baths to shower bathes and repaired water damage in one of the baths and replaced the articulated garage door in 2005

the property has an automated watering system (using drip lines for all but the lawn) and an oversize finished 2 car garage with a pantry

oh why go on, its appraised value was $1,800,000 last month

we are 1/2 hour from santa barbara, 2 hours from downtown la - there are doctors and lawyers that commute from here to la - the school districts are quite good

however, if we decided to sell, it would take from 6 months to a year to find a buyer

but if we added a barn...it would add about $100,000 to the value of the place and help it sell faster (this is horse (and other types of animals) country)
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I would imagine the current housing credit crisis would play a large part in why it would take so long to get appraised value out of your mom's place.

But my point in the above statistics was to point out that the current expectation of housing values to double every ten years is not a hundred year old market expectation. Instead it is a phenomenon that began in the 80s, abou t the same time people's view of the housing market changed from buying a family home to being an "investment."

Part of the reason we changed how we view the purchase of a home has to due with being far more mobile than any other time. When I was growing up it was expected for a family to stick around because the working class started working for a business and stayed working for the same business until retirement. So the time spent living in a house was at least 30 years, more often the rest of the adults' lives.

But in the 80s it became common for a worker to shift jobs 3-4 times during their working career. Moving became more common and more often. Living in one place longer than 10 years became the exception rather than the rule. But under the "old" rules of house value increase coupled with interest rate increases, buying a house you'd leave in only 10 years was a losing proposition. So the market adjusted to the new conditions by significantly increasing the rate a house increases in value. With a rate of doubling in 10 years or less, it became affordable to buy a house on a 30 year mortgage and still afford to leave it - with some significant profit - in 10 - 12 years.

But market adjustments of that type are not stable. Add to the instability of artificially induced value gains to the problem of over extended credit, mix in a stagnant economy, and you end up with a recipe for disaster.
 
Good Luck said:
I would imagine the current housing credit crisis would play a large part in why it would take so long to get appraised value out of your mom's place.

But my point in the above statistics was to point out that the current expectation of housing values to double every ten years is not a hundred year old market expectation. Instead it is a phenomenon that began in the 80s, abou t the same time people's view of the housing market changed from buying a family home to being an "investment."

Part of the reason we changed how we view the purchase of a home has to due with being far more mobile than any other time. When I was growing up it was expected for a family to stick around because the working class started working for a business and stayed working for the same business until retirement. So the time spent living in a house was at least 30 years, more often the rest of the adults' lives.

But in the 80s it became common for a worker to shift jobs 3-4 times during their working career. Moving became more common and more often. Living in one place longer than 10 years became the exception rather than the rule. But under the "old" rules of house value increase coupled with interest rate increases, buying a house you'd leave in only 10 years was a losing proposition. So the market adjusted to the new conditions by significantly increasing the rate a house increases in value. With a rate of doubling in 10 years or less, it became affordable to buy a house on a 30 year mortgage and still afford to leave it - with some significant profit - in 10 - 12 years.

But market adjustments of that type are not stable. Add to the instability of artificially induced value gains to the problem of over extended credit, mix in a stagnant economy, and you end up with a recipe for disaster.
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gl

we had two houses in the sf bay area and sold them when we moved to my mother's place to take care of her

we sold those two houses to buy two houses in west richland, wa and a house for our older son

you might say that we, and others like us, are partially responsible for housing inflation, but those houses were part of our retirement scheme.

we provided housing for those that could not afford to purchase a home

we have not done as well as we would have liked and we have to pay about $100,000 in state and federal taxes relevant to my mother's estate and not being able to roll over our investment in our son's house (it was part of a 1030 exchange), but our older son now has a home for his wife and son to be and will eventually repay us for our loss to taxes and what we invested in his home/business


however, back to the sub-prime mess, when lenders lend to credit poor buyers on the assumption that the market will not correct or just plain lend to people that cannot repay their loans, they have not only destabilized the economy, but failed their fiduciary responsibility

not unlike investors that purchased stock on margin prior to the great depression

1) keep a cash cushion
2) do not buy what you can not afford
 
DonQuixote said:
but those houses were part of our retirement scheme.
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That right there is one of the main factors that significantly changed the housing market. People changed from looking to a house as a family home to live in possibly for life, and started looking to a house as an investment from which they could draw funds at a later date. But for that change in view to work, the value increase of houses had to be significantly accelerated.

DonQuixote said:
however, back to the sub-prime mess, when lenders lend to credit poor buyers on the assumption that the market will not correct or just plain lend to people that cannot repay their loans, they have not only destabilized the economy, but failed their fiduciary responsibility
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Yes, the financial institutions screwed the pooch by approving loans to borrowers with questionable ability to repay. IMO, one motivation for such loans was the fact that they were supposed to be able to soak that particular market with the balloon payments and interest rate increases, since the high risk loan market commands much higher interest rates. But they did not anticipate the sheer number of such loans going into default, leaving a glut of repos on the market, which in turn screwed their standby plans of repossessing a house at twice the original value.

But the borrowers screwed up, too. If they could barely afford the payments under the sub-prime period of the mortgage, how the hell did they expect to be able to handle the balloon payment and marked interest increase they knew would come later? Considering the average payment increase required, they would have had to expect some type of miraculous growth in their income. Even if the overall economy had not stagnated, even if it had grown at twice any historical rate, they could not have realistically expected their income to grow at the rate necessary to handle the payment increases designed into the mortgage they signed.


When I purchased my house, I planned out very carefully, to include two fall back plans if something happened so I could not continue my military career. I projected inflation according to the experts of the time to plan for future budgetary requirements besides the house.

And even then I almost got caught short when inflation went boingo in the 70s. There were a couple of tight years.

When I bought the land for my retirement home, I paid cash I'd saved for that purpose. Luckily the land boom had not hit Montana yet so I got 20 acres for a good price. Then when I retired, I sold my house and was able to use the funds to build my retirement home free and clear of debt.

I use credit cards only enough to maintain a high credit rating. (and frequent flyer miles) But I pay all charges off every month, making sure the payment is at least a week ahead of the due date.

I HATE being in debt.

We'd be in a lot better shape as a society if others - to include the government - hated debt as much as I do.
 
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