42% hit in house values, my guess is that would be bad..

I was talking 30% as in mortgage payment only, not total debt.
Still not sure where you get 30% from as no lender requires that - usually referred to as the top ratio, and the total debt ratio is the bottom ratio. Lenders use the 36%-60% range even if the only debt is a mortgage - they are only interested in the bottom ratio. And there are a ton of "No Ratio" products out there that don't even look at DTI, along with "No Income" products.
Real estate will be fine. Sure there will be an adjustment...who knows how big, but it is only temporary. It will come back, it always does. My brother's house dropped 37% in Huntington Beach in 1991. Even if the 42% drop happens now, that house would be worth $1.45 Million, and it was worth $500K after the last adjustment of 37%, and he bought it for $800K...still $750K ahead assuming the "BIG" adjustment hits.

Still not sure where you get 30% from as no lender requires that - usually referred to as the top ratio, and the total debt ratio is the bottom ratio. Lenders use the 36%-60% range even if the only debt is a mortgage - they are only interested in the bottom ratio. And there are a ton of "No Ratio" products out there that don't even look at DTI, along with "No Income" products.
Real estate will be fine. Sure there will be an adjustment...who knows how big, but it is only temporary. It will come back, it always does. My brother's house dropped 37% in Huntington Beach in 1991. Even if the 42% drop happens now, that house would be worth $1.45 Million, and it was worth $500K after the last adjustment of 37%, and he bought it for $800K...still $750K ahead assuming the "BIG" adjustment hits.
as usual HM your right on the money

You're right about fraudulent lending practices. But in the end, they will reap what they sow. They got the commission up front, but they'll get the house back one day in return when the owner defaults.
That is the problem. Majority of the loans are sold as mortgage back securities (MBS's). Lenders aren't holding the paper on these loans so they could care less about ratios etc. Sorry but 60% hell even 50% DTI ratio is jsut insane even if that is fully amortizing P&I loan. If they have one hiccup in their income they are in a world of hurt.

so I guess the prudent thing is to lay in the curb, look up at the sky and hope you don't get hit? There are plenty of people upside down in boats and cars as well, one breakdown away from repo. Stupid people aren't relegated to just real estate, and smart people don't panic and rush for the door. If you are prudent in your financial life, what are you worring about. Seems to me there are alot of folks on here just wanting something to happen so they can gloat. If the "experts" on here KNEW what is about to happen, can you help me out on picking lotto numbers? Nostradamas (sp) where are you?

so I guess the prudent thing is to lay in the curb, look up at the sky and hope you don't get hit? There are plenty of people upside down in boats and cars as well, one breakdown away from repo. Stupid people aren't relegated to just real estate, and smart people don't panic and rush for the door. If you are prudent in your financial life, what are you worring about. Seems to me there are alot of folks on here just wanting something to happen so they can gloat. If the "experts" on here KNEW what is about to happen, can you help me out on picking lotto numbers? Nostradamas (sp) where are you?
very true Bob. At this point one has to look at R/E as a long term investment and not bank on short term appreciation.
I guess it would go along with all the people gloating about how much money they made over the last 5 years.

RE should always be treated as an investment, not an atm card to fund toys. I still don't get the point of all the chicken littles. Only sure thing is dying and nobody knows anything about that either. or do they..............................

RE should always be treated as an investment, not an atm card to fund toys. I still don't get the point of all the chicken littles. Only sure thing is dying and nobody knows anything about that either. or do they..............................
I think the Hindu's are not letting us in on their secret.

Looking at indicators and past history does not make one a "chicken little". On the other hand, if you think people with 60-100K of income who borrow 500-600K are financially "stable", well.....maybe only if they have a lot of money in the bank and not a lot of debt. But if they did, they wouldn't need an "affordability loan".
All I'm saying is that people are buying houses they cannot afford. Period. Just because a lender used some accounting tricks to lower their payment did not make it affordable. Nobody has explained to me how someone who is over their head in a house is going to survive when the market corrects itself. And it WILL correct itself, because history has proven the economy and real estate to be cyclical in nature. I guess it's easy to say the good times will never end when you're sitting on top of the heap. That's what everyone said about the DOTCOM bubble as well..... :cool:

Looking at indicators and past history does not make one a "chicken little". On the other hand, if you think people with 60-100K of income who borrow 500-600K are financially "stable", well.....maybe only if they have a lot of money in the bank and not a lot of debt. But if they did, they wouldn't need an "affordability loan".
All I'm saying is that people are buying houses they cannot afford. Period. Just because a lender used some accounting tricks to lower their payment did not make it affordable. Nobody has explained to me how someone who is over their head in a house is going to survive when the market corrects itself. And it WILL correct itself, because history has proven the economy and real estate to be cyclical in nature. I guess it's easy to say the good times will never end when you're sitting on top of the heap. That's what everyone said about the DOTCOM bubble as well..... :cool:
Sadly most of Southern California has to live pay check to pay check to afford a home.I make a good living and live within my means but by no means is my mortgage 25% of my income.Most people in my age bracket (29yo) are still living at home with there parents let alone buying homes.It is my impeccable credit and good money managment that allows me to unfortunatley live over my head.I purchased my Condo 2.5 years ago and am sitting on 200K+ worth of equity.(I went with a 30 year fixed)I would never refi my home for toys and do not believe in being in debt.
I have thought long and hard about that 30 year fixed and I think it might have been a bad choice as I knew I would be out of the house in under 5 years and payed an extra XXX a month that ended up going toward interest anyways.
I am going to be listing my Condo right after the first of the year and stepping into a house.I am only taking about a 50K step as I am moving from South OC to Corona but I am still wrestling with what loan to go after. I will be putting half of my equity towards the new home and I was going to use the other 100K to invest in property.(I will not blow it on toys)
My Mortgage broker who is a good family friend knows what I am looking for and has suggested a 10 year fixed interest only loan.(Tricky Arms scare me) I am thinking of doing this because there is no way in the world I will keep the home for over 10 years.also if the market was going to drop chances are it would be back in 7-10 years.

so I guess the prudent thing is to lay in the curb, look up at the sky and hope you don't get hit? There are plenty of people upside down in boats and cars as well, one breakdown away from repo. Stupid people aren't relegated to just real estate, and smart people don't panic and rush for the door. If you are prudent in your financial life, what are you worring about. Seems to me there are alot of folks on here just wanting something to happen so they can gloat. If the "experts" on here KNEW what is about to happen, can you help me out on picking lotto numbers? Nostradamas (sp) where are you?
Getting your car or boat repo'd is one thing, losing your home is a lot more serious IMO. Notice I said "HOME" and not house, condo etc... We are conservative with all our properties, but even is I was more risky I would never leverage my HOME to buy other properties, cars, boats etc... I know many people that are doing this though banking on the market increasing. If the market declines, like it always does, they are in trouble.
You don't have to be Nostradamas to predict a decline in the market because everything cycles. Six years ago we were making a killing in the stock market and then it declined (some would say crashed). Since the stock market decline real estate has been good. I think we are seeing the begining of a shift in the market.
If you think anyone predicting a real estate decline is a "chicken little" I guess you think the same thing about the analyst that are predicting the same. With you being in the business though I would not expect you to say anything else, at least not publicly. The friends I have that are in the business are already telling me their business is slowing down.
I could care less either way. We have money in both real estate and stocks, bonds etc... If real estate keeps increasing in value great, if it declines then I will look for some deals.