Heeeello US Homedebtors. Dr. Evil here. This is my son Scott, Number 2, various henchment, yadda yadda… I’m interupting your tedious blogging act-tiv-ities to explain my latest Evil® plot. It seems you people have foolishly played into my hands. Those papers you signed? Those loans are {air finger quotes} a-just-able. OooohOoooohOoooh, heeeeheee… cough, cough, hem. Excuse me. Now; These “a-just-able” loans are not the innocent shortcuts to no effort prosperity you were led to believe. Noooo, these a-just-ables are an Evil® international conspiracy designed to enslave you! If you are hearing my voice it is already too late! ALL YOUR Bases... er EQUITY ARE BELLONGING TO ME! Now for the good part, I am holding your mortgages hostage and you will pay me MORE. Yes, every month I will extort dozens of extra dollars. OooohOoooohOoooh, heeeeheee… cough, cough, hem. And who are we? This Evil® international conspiracy? {air finger quotes} “We” are your parents, your neighbors, your government. “We” be using your money to make sure you never get ahead ever again.
_pinky to corner of mouth, fade to black. We now return you to your regularly unfettered blogging.
10 comments:
Man, tough crowd.
I'm with you.
Muhaha...MUhaha...MUHAHA!
Oh, and thanks for linking to me. I appreciate it and never properly thanked you. As soon as I find time I will return the favor.
My sister-in-law was told in spring that she could get a toxic loan and that she would be OK because rates were going to be coming down soon. The hustler--I mean loan broker-- actually said that she was surprised that rates were going up, and that they would be heading down for the rest of the year. Good call.
I heard another commercial on a Sacramento area radio station pimping 100% financing. It was Centex Homes. Also offering 100% off selected options and upgrades. They were also offering no payments for 6 months through their financial arm. To me it sounded like, "Please, give us your origination fees and let us book the deferred interest as income for the next two quarters! We need the inventory off our books so we can move it from the assets field to the income field!" Evil is a good description. Litigation and legislation to protect the masses from their lack of education will follow. Duck and cover.
LOL :) Don't forget that you promised us an honest recap of Nina's numbers for the flip in Palm Springs.
Meanwhile I'll just sit on the sidelines and marvel at how low the market can go...
I did a first cut a few posts below:
3/1 or 1yr I/O loans last july were 4.5%. The LATime article says they put up $13,000 x4 or $52,000 down on $475,000 for a mortgage balance of $423k or $2200/month. Taxes are $420/month. Insurance and utilities another $200/month. Total $2800/month carrying costs x11 = $31,000.
So:
+$613k sales price.
-$423k mortgage payoff.
-$031k carrying costs.
-$075k upgrades.
-$031k agent fees.
+$053k Proceeds
-$052k return of seed capital
$1,000 profit or 2% return on investment. Alright, everyone knows I'm being generous. I still stick to my two claims; this was a very cheap educational foray and the only thing left is for a full accounting that reflects all the costs included. She lost money and she will say so next April 15th and I think we deseve as much honesty as the IRS. As I mentioned on her blog last year there were a few minor mistakes, 1st I think she paid a little too much. Flips make money at the front end. 2nd the improvements were too high end for the neighborhood and target market. 3rd agressive pricing after testing the market. Even so the loses are small. If all those mistakes only resulted in breaking even then imaginr the potential for the next flip when those mistakes won't be repeated.
As to the sidelines, there is no real sidelines. Now is the time for preservation and preparation. The time for predation is a while away. Laddered CDs. foreign deposits, inflation hedges, fixed debt & variable income. Don't ask me about commodities, they aren't rational so any answer would be equally irrational. If things get really bad I may buy and privately finance homes under these old conditions. There's a good chance I can sell the same home several times.
Agreed it's a cheap lesson if in fact a lesson was learned. I flipped my first home in '78 and have learned many lessons along the way that cost me serious money. Flips must be bought cheap, that's key. Then you have to know where to NOT spend money. Anyone can bling a house, it's knowing where to save that takes an eye. Finally, the work needs to be fast, as in 3 weeks, not 3 months. I've flipped homes that I never made a mortgage payment on.
Interesting - Phoenix has %5 of the national resale housing inventory (51500/900000), but has only %1 of the US population. Something is going to give, and soon.
Isn't that where Sun Stroke City is? Little more than Gods waiting room, it is. In constant need of new flesh to replace the continuous outflow of DNA.
PHX is trying real hard for the spotlight. Japan isn't in trouble so Honolulu isn't in the running. LA and SF are bit too big and diversified to be the worst. DC been down so long it look like up to them and along with burgeoning Federalism a tad protected. Miami got some good bubbleness.
My take; size matters. You cannot compare different metros of such different size.
Big Bust: Miami.
Med Bust: Phoenix edging out San Diego.
Small bust: Palm Springs.
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