Monday, March 12, 2007

Stop shopping for homes and get your house in order


This has been quite a bearish day on the WSJ. Two articles came to my attention.







1. http://online.wsj.com/article/SB117252218857019738.html
2. http://online.wsj.com/article/SB117329581356629863.html?mod=todays_us_the_journal_report

Yes, its a paid subscription, so here are some "fair use" quotes.

"If you don't qualify for a loan because you have no down payment, stop shopping for homes and start getting your house in order. To save more, spend as if you've already bought a home. If your mortgage payment would be $2,500 and your rent is $1,500, deposit the $1,000 difference automatically into a high-yielding savings account each month."

But but but... that's what I'm already doing! ;) But a mortgage payment of only $2,500... how I wish. This used to be common old advice. Click on my $2,859/month article from last month if you want to know more on what I'm doing.

"

Q: But I have to live somewhere! And I have to pay something for a place to live. Certainly it's better to pay "deductible" mortgage interest than rent.

A: Buying a house with a long-term mortgage is just another form of renting.

Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter's money. And it takes 20 years before a typical borrower pays more principal each month than interest.

"I have to pay something" is a rationale that home buyers use for going deeply in debt and paying tens or hundreds of thousands of dollars in interest to buy a house that, they mistakenly believe, will make a big profit for them down the line."


Ok, which of you secured a job at the WSJ? ;)

I'm thinking the lead Sheeple are noticing that their is a burning smell in the theater. They're quietly slipping out the exits. Pretty soon a lot of people are going to be walking away from their investments and that won't be pretty.

Got popcorn?
Neil

6 comments:

GoBig said...

"Mortgage Interest is rent"...do you know how many times I've had to explain this to people? This is a very true statement. Home-buyers don't own their house until they pay off the loan. The bank owns the house...you are just a renter until you pay it off.

wannabuy said...

Gobig,

I think quite a few of the sheeple will be ready to listen... in about three months. ;) Too late, hang on.

Oh, if you want entertainment:
http://forum.brokeroutpost.com/loans/forum/1/2.htm

They're freaking out because quite a few mortgage underwriters are now maxing out at 90% CLTV and are demanding some for of income proof. Note that that income proof, while being called "FULL DOC," is actually old fashioned "reduced doc."

So the squish down has started. I expect this do do a little number on March closings and have a large impact on April closings.

And April is when CR is showing the overhang in employment... ugh oh. Hang on folks. This roller coaster has left the station. And its one of those that starts with a plunge... Just be patient, as there is a little up-hill first. But very little...

Got popcorn?
Neil

TJ & The Bear said...

Saw your post on CR's blog, and frankly... you're still way too optimistic.

I don't care how many hundreds of people you've met packing $100K+, it isn't enough to save a single gated community let alone the housing market. How much of that money's tied up in stocks or MBS-loaded retirement funds, too? That'll go "poof" before long.

Those same people didn't save $100K catching falling knives, either.

There are so many nails being pounded into the housing coffin that it'll soon be more steel than wood.

wannabuy said...

TJ

Oh, it will be bad. But eventually people will buy. I've even calculated at what price its worth buying no matter the appreciation/depreciation.

But you're right. Most won't catch a falling knife. The rest of 2007 should be interesting. Oh, I think some of March can still be salvaged. But read those brokers forums. I'm enjoying the schadenfreude as they scramble to complete deals they thought were all ready done! ;)

Got popcorn?
Neil

TJ & The Bear said...

The BU/BO posts *are* entertaining, aren't they?

BTW, how goes the wedding plans?

wannabuy said...


BTW, how goes the wedding plans?


Well. Well enough that I didn't feel guilty this week for my time on blogs. :)

Ok, my fiancee is absolutely frazled over the invitations... ummm... I'm male, what do you mean the patterns of the paper and the envelope don't match? Don't the colors match? (I think...)

Me? I got online and bought everything that was on my to-do list. :) Ok, more wine... figured out a bit more on stuff for the kiddies, purchased a few things "just in case...", purchased $50 dollars worth of goodies for the wedding that would have cost $200+ to rent, did phone, DSL, TV (for fiancee mostly, I usually am reading/blogging), and other stuff for our first joint place, Cashier's check for said apartment, verified gas and electricity would be turned on, finalized renter's insurance after comparing 6 companies... Moved my auto insurance to my fiancee's company, did a dance lesson, purchased my last tux parts (own tux except for "white parts")... Did a few thank you notes (gifts are already coming in, including from blogging friends. That was a nice surprise).

So overall, I did well with the wedding this weekend. I'm keeping up with everything.

Oh, did I mention I drink about 12 cups of coffee every day? I'm not kidding! My doctor was shocked when I told him (as he looked at my EKG one more time and couldn't tell). :)

Also, I badgered three groomsmen to get fitted for tuxes, helped arrange the ski weekend (no bachelor party, something more classy and fun for all), and found the replacement for the usher who can't make the wedding (out of country on business for 3 months...).

Oh, I also bought teeth whitening stuff, per fiancee insistance, to get rid of evidence of said coffee. (Oh, nice coffee bar at our wedding... but that was planned weeks ago.)

This week I have to actually pick up the keys for the apartment, be there for the utility people to set things up, pay the caterer a bunch, get fiancee ok with accepting a big check from me to cover wedding bills that are coming in, attend an event with fiancee...

And I bet we change the appetizers again... (because that just seems to be part of planning a wedding)

So don't worry, wedding stuff is actually going well. :)

Got popcorn?
Neil