MORE RANDOM THOUGHTS ON HOUSING AND LENDING

1. I believe there is a coming storm in the Phoenix housing market that no one is talking about that will only add to the housing dilemma. What is it? The sudden explosion in property valuations by the county (Maricopa) assessor. My own residence saw a 67% increase in valuation for 2007 (over 2006) and a bump of another 11% for 2008 over the increased 2007 level. It will mean hardship for many as the increases will be added to the woes created from dealing with ARM resets. And, there is no way to fight the valuations since they are probably still under actual values. It's just that the "sticker shock" will lead, in my opinion, to a tax revolt similar to the one experienced in California back in 1977.
2. Remember back after the stock market crashed in 2000/2001 there were law firms advertising for clients who lost money in the market to sue their brokers? A cottage industry was born and is still going on today. Lose money, blame (sue) your broker. And, to a large extent, it worked. Lawyers made a fortune.....Well, get ready for part two! The lawyers should all gather in a convention to learn how to sue the lenders who "forced" people into "bad" loans in which nothing was explained. I believe that many who lost their homes will and can recovery lots of money. I don't think they should, however.
3. There are some in congress and on Wall St. calling for a bailout for sub-prime lenders. They don't need it, let them close. It won't do a thing for the homeowners. Unless............and only if, they are allowed to go back and refinance all of the predatory-like loans into conforming loans, thus possibly saving their borrowers financially when they need it most and taking NO fees for doing so. This is absolutely the wrong time to shut off credit to people who need to restructure their mortgages the most! And, banks do not want to own houses.
4. Every Saturday I post the WEEKLY MORTGAGE RATES as another of the many financial tools available on my blog. In the post each week I say, "Do not refinance your house and combine consumer debt for the purposes of Debt Consolidation. Most lenders do not agree with me. However, why make unsecured debt secured by your home? Isn't that, in theory, putting your household at more risk than not in case something goes wrong?" Now, you know why I have always felt this way. I am also against using the equity in your own home to buy more income property. Always have been.
5. Just finished reading Your Home Isn't the Nest Egg That You May Think It Is from the WSJ. This type of thinking is starting to pop up everywhere and I don't get it. Who wouldn't want the comfort & safety of owning a home? And, the fact that equity builds up over a long period of time and can eventually be turned into income at retirement is great. Unless, of course, you live live with mom until age 65.
6. $1,300...$2,000...there goes your mortgage from CNN Money profiles a sub-prime borrower who got into trouble. "But the larger loan was fixed for just two years. After that, the rate would adjust every six months, which is typical for subprime borrowers. " They can't claim that they didn't know that the payment wasn't going to increase after the 2 years. "Fast forward a couple of years, and the Sanons, like so many other subprime borrowers today, are struggling to keep their heads above water. As the housing market boomed, refinancing or selling your home was a simple solution for borrowers who had trouble making the mortgage payment. Now that the housing market has stalled, subprime borrowers are stuck with loans they really couldn't afford in the first place." That's both true and unfortunate. Exactly why they need access to credit as I outlined in #3 above.
7. Subprime loans accounted for 19% of originations nationally in 2006. See the list by market HERE. Most were in California. I have heard that the percentage of all existing sub-prime loans is somehwere between 5-10%. Only 4.84% are delinquent. In 2006, 0.50% of credit worthy borrowers were delinquent. The worry is that the "liar loans" in the prime market may become an issue. No one really knows. Just another something to worry about that doesn't really affect you and me. So, why worry?