Realty Check

I share your optimism. As Americans we have always held fast to the belief that "Home is where the heart is." Home ownership is the foundation of our capitalism and regardless of ups and downs our foundation will stand. It may take some hits but we will learn, adjust and move on...as home owners and investors. You can take that to heart and to the bank.

After 8 years of fog, we have great vision in the Oval Office. The market will bounce back and grow!

Well, this is probably pedestrian, if not banal, but it seems to me that there are some "it depends" qualifiers here. First, of course, is how much one can afford to lose whatever risk capital is necessary to invest in those foreclosures. The old school rule of thumb is that, if you can't afford to lose it, you can't afford an investment of this sort. That means that it probably isn't smart to divert retirement funds, for instance, into this kind of investment.
A second consideration is the character of the local real estate market -- both at the metropolitan level and the neighborhood level -- before the crash. Some areas may have been on life support before the crash and may not, as a result of that shock, ever come back enough to permit recouping of initial investment, much less generating a profit.
Another is that it's probably good to avoid even foreclosures in areas that had experienced wild and sharp speculation-driven price increases in the few years before the collapse, as those markets were so over-inflated that it's likely to take them a very long time to recover enough to generate seller-friendly markets.

So those are my common-sense caveats. That said, though, I've been eyeing some investment properties myself, though less focused on foreclosures.

Vicki: I,too, am an optimist. Those who are underwater should sit tight, keep paying if at all possible and wait for the rebound. Just as new housing is on a slight rise so, too, will existing housing in the not too distant furure.

As a Realtor, it is in my best interest to be optimistic. Frankly, there are enough signs that the market is stablizing, which it muut do before it starts rebounding. The glut of bank owned properties being sold (and keeping the market low) has to continue and get out of hte way before 'real' properties owned by 'real' people can take advantage of the bounce back. All the reporting needs to continue to be positive so Mr. and MRs. Everyday start to believe. I look for hte market to make very positive strides after the beginning of the year.. The sound you now hear is us hitting bottom. Better days are ahead!
Anybody wanna buy a house?

Yes, prices will rebound. But in some areas (many areas), it will take years and years. I remember looking at a house in about 1999 in the Santa Barbara area and lamenting to realtor how fast prices had risen in the past three years. He said, yes, but remember we are just getting back to 1989 prices now. There had been another one of those frenzied run-ups in the late 80s where people paid way too much for homes and it led to a collapse. As Bob Brinker notes, housing prices fell in 1991, 1992, 1993, 1994, and 1995. That was five straight years of decline. And that bubble was nowhere as insane as the one that happened in 2006. So, get ready for a long wait for prices to recover in most areas. It is not clear that they have even bottomed everywhere yet. I heard that in Palmdale and Lancaster, houses that were at $400k in 2006 are now at $100k. That is a 75% decline. Those have probably bottomed now, but they will be years or even decades before they get back to where they were.

The one thing that could bring prices back sooner is another bubble. The people of this country seem stupid enough to keep doing bubbles over and over again. They never seem to learn the lessons of bubbles, going all the way back to tulip bulb mania in 16th century Holland.

By causing these bubbles, they also interfere with a healthy gradual appreciation process that would allow us working peons to step up in housing every 10 years or so. Some of us still buy houses to live in and take a whole life view of where we want to be in 10, 20, 30, 40, and 50 years.

Wake up, bubble people!

Vicki
I too am an optimist and believe in the American dream. We need to sit tight, wait out the storm, and there will be a bright light on the horizon.

It doesn't matter what prices are if you can't keep up with the mortgage. If the paycheck gets bigger by 3%/yr and the bills increase by 10%/yr, what do you do? Eat less? spend less on what?? defer costly maintenance like a roof?

Some families may be able to depress their standard of living, but there are those who will have babies, need a new vehicle, get sick, loose a job, or just get too old to work. How do they keep the roof over their heads.

I got my mortgage while Clinton was still in office, and had no idea America could elect the clowns who got us here (and into a money sapping war). I'd really like to continue living under my own roof, but it gets harder as I approach 70.

As an appraiser, I am afraid a quick housing bounce back is far from realistic. As foreclosures increase, banks liquidate by listing their REOs at give away prices to attract cash investors. In the process, surrounding houses lose value quickly. Normal arms-length sales are disappearing. Appraisal value falling. REO sales still dominate the market. Had the government really mandated lenders modify loans or allow bankruptcy courts to make changes the damage would have been less. It is now too late. Recovery will take a long time.

Doesn't it seem strange that THE ONLY ADVICE government officials give homeowners having mortgage payment difficulties is to tell them to go back to their lender, or through a HUD/FHA Counselor (and then back to the lender) to obtain Home Loan Modification help?

Let’s investigate this for just a moment.

During the home sales boom cycle the lenders became VERY GREEDY. As the opportunity for profits went up, the ethics/legality/morality of the loans they made went down. Later in this process loans were even being made to persons with no jobs and little, or no income at all!

Oh, and where was the government during the loan feeding frenzy? They turned their heads and DID NOTHING!

The reports from borrowers who have completed Home Loan Modifications using these government recommended processes have been streaming in lately. VIRTUALLY ALL OF THESE REPORTS CONCLUDE THAT THE LENDER HAS GIVEN THE BORROWER VERY LITTLE, OR NO HELP AT ALL!!!

But, the government continues to tell borrowers that its assistance and the help of the lender is the best help available! WONDER WHY? IT’S THE MONEY!

Using this same logic, the best way to prepare your income tax and maximize your deductions is to go to the IRS for help!! Why do so many people (even the government officials we are speaking about) hire help to prepare their taxes? SINCE WHEN HAS FREE HELP EVER BEEN THE BEST HELP AVAILABLE?

So, what does the AVERAGE OUTCOME of a Home Loan Modification THAT YOU ACTUALLY PAY FOR really look like?

The firm I work for has averaged monthly mortgage payments reductions from between 20 - 50% for up to 5 years and the conversion of their existing loan to fixed interest rates in the 4 - 5% range for the full balance of the term of the mortgage! These averages come from over 200 completed resolutions!

Our firm is NOT ATTORNEY-BASED, unless paying higher fees is important to you, but does have substantial knowledge about specific legal issues. Our firm has reasonable performance guarantees, a 100% Money Back Guarantee and reasonable program fees (well under $2,500).

So, let’s do the math. Say you are a homeowner who has an existing 6.75% fixed rate 30 year mortgage of $200k, that has a payment with interest of $1,298. Using the average results shown above, your new payment at only a 30% modification is $909 for up to 5 years and you will save well over $80,000 in interest over the life of the note!! NOW THAT’S A MORTGAGE MODIFICATION WORTH THE FEES, DON’T YOU THINK??

Ok, so you don’t plan on staying in the house much over 3 years - using these same numbers you will save over $14,000 in monthly payments alone in that time!! IS THAT A MODIFICATION WORTH THE FEES?

The answer is simple folks - THE LENDER AND THE GOVERNMENT THAT REPRESENTS THEM DOESN’T WANT TO GIVE THE MONEY BACK!

Don't know if this will go anywhere. I've been working with Chase Mortgage now since May 28, 2009 for a remodification and like all the other large banking institutions, they have denied my applicaiton 3 times now for an imcomplete application. ALL of the information has been provided to them each time, but is not getting to the underwriter. I've sent them for the 4th time my information and this will be the last time!