True enough. My question would be if the debt-to-income ratios were enforced, credit histories relevent, sub-prime mortgages non-exsistant,
would the real estate boom have even happened?
If home prices grew into these unattainable figures and there was no one there to buy them without the help of creative financing, would those inflated prices have even exsisted?
That is terribly difficult to answer, but it is likely there would have been a boom, albeit a bit more muted.
The boom really was loudest in big time markets, where properties went from modestly expensive to outright crazy expensive. I think this was a product of the property flippers and the income and success of people far from the sub-prime market.
The sub-prime bust feeds the bigger housing bust, because much of how people react and proceed (consumer confidence) feeds off the news. The news is all about the sub-prime disaster, and the speculation of a bigger housing bubble bursting. Consumers react and it is realized as reduced demand in a market that was ripe with inventory.
It is a buyer’s market right now. We tried to sell our rental property last year, cut the price twice, but not even one nibble. I don’t know if that was the fault of the realtor or the timing of the market, but we shrugged our shoulders, took it off the market, and got a tenant.
Hang in there. 
bolding mine
And that’s great for me… My wife and I are going to be buying our first house either Q4 '08 or Q1 '09. We live in SW Metro area now, and moving to Vancouver is going to do two things.
- I’ll get what almost amounts to a 10% raise in my take home because I won’t be paying Oregon Income taxes (yes, they’ll get me in other ways… )
- I can spend almost $150,000.00 less for the same house in Vancouver as it would cost in, say Baverton.
I feel bad for most of the people who are getting foreclosed on though.
Well, if you really want to get a deal, go look a little further up the road at Ridgefield and Battleground. Ridgefield had a major league development boom that’s fallen out so hard they’re begging people to take those bigass houses off their hands right now. Battleground has been static value or dropping as well for much the same reason, but it’s generally a more modest area than Ridgefield, which is kinda McMansion central. If you dig the McM look, you know where to go! Ridgefield has better freeway access, though, since I’m assuming you’re still planning on working in Oregon (and you might want to check on the income tax thing because if I recall correctly Oregon has methods in place to still collect from tax expats who move to Washington. I got no cite aside from hearing people bitch about it…) Also look around the Van Mall area and Padden Parkway right now, as well as in the Burton area of Vancouver. Those are areas with a lot of unsold new house inventory going on. I expect Camas and Washougal are going to take a hit as well, it’s kinda starting now–especially on the more modest homes down the bluff from McMansionland. Camas, Washougal and Van Mall also put you closer to the 205 corridor for a marginally better commute.
You might want to get your preapproval now if you can and start shopping–nine months is a good timeline to find the right house at the right price, and if the market should upturn you’ll see it happening and be ready to jump early. There are a lot of people out there who’ve had their houses on the market a few months and you can lowball like a mofo–the worst that happens is they say no, and you can check in a month to see if their minds have changed with another mortgage payment. The houses you want to look for are the ones that are vacant and have a high days on market number–those are your desperate sellers. Get an agent who’ll give you unlimited access to RMLS listings and start looking around now. By the time you’re ready to go you’ll have an encyclopedic knowledge of the areas you want and how prices are going–never start looking when you’re “ready,” start well before because there’s a learning curve involved in home buying.
You might want to check with Wealthbridge Mortgage out on Greenbrier Parkway–I’ve worked closely with a lot of their brokers and they’re pretty clean, low pressure and ethical. Very professional outfit to deal with, at least for appraisers–and how a lender treats an appraiser is important. These guys don’t pressure for “more value, more value,” they check their numbers first, then go ahead based on cautious numbers, not optimistic ones. Whatever you do stay AWAY from Lighthouse Mortgage Group in Vancouver–they’re a bunch of slimy weasels who’d sell you your own mother when you actually contracted to buy THEIR mother! 
Yes indeed, but the ads made it sound like anyone not leveraging their equity by loans was dumb. They never mentioned having to pay it back, though. And the pain would have been a bit less if it had been inflicted earlier.
In the Bay Area the boom predated creative financing, though it might not have lasted so long. Even the collapse of the bubble didn’t cause the market to collapse, much to my surprise.
My sister-in-law offers ARMs in an Amway-type setting. People with little training and education convince people to refinance their homes with PowerPoints on dining room tables. They market to middle-to-lower income folks, who may be attracted by the quick cash and the lower payments for 5 years.
Are schemes like this also causing the crisis?
I suspect so. I’ve heard people on the radio about to be foreclosed thanks to refinancing. When the rate resets, people who could afford their mortgages suddenly no longer can.
Thanks for the feedback SmartAleq
As far as the taxes thing goes, I just got my new job in Vancouver, so I won’t be paying the Oregon income taxes then. You are right though, in that if you live in WA but work in OR, you still pay them. In fact, Clark County is something like the 4th biggest (maybe 5 or 6, I can’t recall) tax paying county for Oregon… and it’s in Washington!
I’ve lived in Woodland and the 'Couv before, so I am familiar with the area. Unforunately, my wife’s job is in Portland, near Lloyd Center, so she’ll still be making the drive. I don’t want to make it too long. Putting us near the 205 (Camas proably) would be better than the 5, since traffic is usually a little better on the 205, and the bridge work on I-5 will be starting in a couple of years. That’s going to be a nightmare. Plus, it’d be nice to be close to Camas Meadows. It’s a fun course.
Also, I work for a bank that has a mortgage group. We have some pretty good employee benefits on that side of things, so I’ll probably go through us. I stay pretty current on the consumer side, even though my world is all commercial. In addition, I have a pretty good idea of what the builders are going through, especially with some netwroking I know some builders who are going through some rough patches and get the house for a steal.
Sounds like you have it dialled, whatami! Best of luck to you finding your dream house!
The amount of ignorance about mortgages by borrowers is disgusting. In the brief time I worked in a call-center for a mortgage company I learned that people will sign their name 592 times on an A.R.M. and still have no idea why their payment went up two years later. I’d take their calls many times a month- they’d scream and cry and ask “How can I afford another $340 a month!” and threaten to sue (aside: why do people think that those who work in call centers give a damn if their employers are sued? Most of them would love to see somebody stick it to them). Some would swear that “I DON’T HAVE AN ADJUSTABLE RATE MORTGAGE!” and at first some were so convincing I retrieved the loan records, and of course when I did the first words at top were ADJUSTABLE RATE MORTGAGE with their said 592 signatures on it, around it, by it, arranged into a picture of a duck around the ARM sign, etc… Used to piss me off, and all the moreso because I realized THEY HONESTLY DIDN’T KNOW THEIR PAYMENT WAS GOING TO GO UP EVEN THOUGH IT SAYS IT EXPLICITLY IN THE DOCUMENT THEY SIGNED!
Another call I got all the freaking time- you wouldn’t believe how often- was “Yeah… my house payment is $500 a month and that’s $6000 a year and I’ve been paying on it for 5 years and that’s $30,000…” and by then I always f&cking knew where this was going… “…but my balance is only $4,000 less and I wanna know why right now or I’m gonna get a lawyer!”
Well sir, do you remember when you signed your name, affixed your seal, bit down to form a wax indenture of your teeth upon, cut your thumb and pressed your fingerprints and blood upon, and swore on the jawbone of St. Norman the Flatulent in front of 500 men in the agora that “I Mongolio D. Roid acknowledge this disclosure and amortization and agree to pay $240,000 over 35 years in exchange for the $100,000 I am borrowing?” after which you bathed ritually in the blood of a bull and kissed the document you’d signed?
“Yeah, what about it? I’m not askin’ about that I’m asking why I haven’t got $30,000 of my house paid off yet and if you don’t show $30,000 off my balance I’m calling a lawyer!”
But what kills me is that if I, with no business experience and having no business/finance education, could sit on my fat bum and listen to everybody talk about their 80/20 mortgages and people who had “Send Me His Scalp” Credit Ratings and the like and think “Damn… this is going to be a disaster…”, which I did for two years and I think even said so on these boards, why the hell couldn’t the mortgage buying corporations see it? I mean that was a no brainer and I can’t for the life of me understand how so many billions were lost on it.
That is an excellent question. I think too much blame has been put on shady mortgage brokers and dumb punters. Punters are always dumb, and their are always shady middlemen, who are only very small fish anyway. What is amazing is that big, respectable financial institutions have been buying these packages of loans from the smaller fish, apparently on trust, without looking inside the package, so to speak. They are the real culprits, because their complacency allowed the bubble to form. People say that the packages are too complex… well, don’t buy them then. Or consider them high risk and lower your offer price accordingly.
I listen to Neal Boortz, a talk radio host who used to be a lawyer. He says he routinely made a tape recording of real estate closings, telling the people, “You understand if you don’t do this, your house will be foreclosed? You understand your payment will go up in five years?” etc. Each time the people said “yes yes yes.”
So, on those times when he got calls from lawyers saying, “My clients said you never informed them of this that and the other!” all he had to do was pull out the tape recording and that was the end of that.
To give you some idea of the possible scope of the problem, this is from an article in today’s Atlanta Journal-Constitution:
Georgia is a bit of a bellwether on the subprime mess, because it has perhaps the most expeditious foreclosure procedure in the country. And our foreclosure rates are through the roof. Shape of things to come nationwide.