This statement is absolutely false. There is no such thing as a "margin call" on a 30 year residential mortgage. OldTrader
No margin call, but you can bet the bank can ask for more funds if it wants to, its in the fine print...
Not positively sure but common sense tells me that only one would incur cost of transfer ( fee). erie
I am not sure what state Digs is from. But the "its in the fine print" is sort of an impossible concept to me. I would really like to know where that fine print is. Many western states have antideficiency statutes. Which means the only security a lender has is the property. And if that property is abandoned the bank becomes the proud owner of the property. The bank can not go after the borrower for any differnce between the loan and the value of the property in many states. There is a "put option" in favor of the borrower that is intrinsic to a deed of trust or a mortgage. Academics and (myself) speculate this put option is one of the reasons home prices have stretched so far away from the value of the home. (i.e. home much it could throw off in rent.) At some point you say my friends are getting rich, I better take a flyer. (When you combine this with the demographic trends, the incredible amount of money people have, the lack of supply because californian's want to keep their low tax basis and a few other reasons, you begin to understand home pricing). If the house goes down a buyer in California can put the home to the bank for the cost of the put. (The down payment plus any principal paid.) So if you think about these 100% loans and interest only loans a borrower can control a very large asset with very little personal risk. So how within that scenario do you say the bank can ask for more money.
Jem, Don't be so quick to doubt your decision. Bubbles can have persistence that makes investors on both sides doubt themselves before they are over. I also subscribe to the notion that markets ALWAYS, in the long term, make the maximum amount of people wrong.....OWP Some localities show housing price decline By Roger M. Showley STAFF WRITER January 1, 2005 San Diego County housing prices may be way up from a year ago but some neighborhoods have witnessed a sizable decline from their all-time highs of 2004, according to a close reading of figures from locally based DataQuick Information Systems. The biggest loser appears to be Rancho Bernardo west of Interstate 15, where the median price tumbled more than 24 percent from its all-time peak reached in July. The other four areas experiencing the most significant declines were La Mesa, down 19.8 percent; Carmel Valley, off 16.7 percent; La Jolla, down 15.2 percent; and Poway, down 13.8 percent. DataQuick issues monthly home price reports that include comparisons to the same month a year before. On that basis, San Diego single-family resale houses rose more than 23 percent in November, compared to November 2003. Resale houses represent about half of all sales in the county, followed by resale condos and a group including newly built houses and condos and condo conversions. But looked at on a month-by-month basis, the picture is quite different. Half of the county's 48 ZIP code areas that had at least 20 resale transactions in November reached their peak in the first half of 2004 and have since fallen back. The overall county peak of $515,000 was down 1.9 percent from the all-time high of $525,000 in August. And this isn't true only in San Diego, said DataQuick analyst John Karevoll. "We had a statewide surge of very expensive homes (sold) and then it receded," Karevoll said. That change in market mix, he explained, helped push the median down from its record levels in many neighborhoods. Karevoll offered a second way to analyze trends: Look at the price per square foot to eliminate differences among the sizes of homes sold in the same neighborhood. Island low By that measure, Coronado came in with the biggest drop, down 23.3 percent from its peak $754.14 per square foot in July to $578.60 in November. The other four largest drops occurred in Old Town-Morena, down 14.5 percent; La Jolla, down 14.3 percent; Encinitas, down 13.9 percent; and Golden Hill, down 11 percent. Whether looked at by price or price per square foot, the declines do not necessarily herald the popping of the suspected "real estate bubble," detected by many economists. Many housing experts believe the market is merely cooling off from its overheated state and returning to "normal." But the neighborhood-level declines do provide further evidence for an overall slowing in San Diego's housing market and a shift in the direction of buyers, who should be able to drive harder bargains with sellers. Other signs have included many more homes listed for sale and much longer times on the market before escrow closes. Looking at the situation in trend-setting neighborhoods, Rancho Bernardo's 92127 ZIP code area, located west of Interstate 15, set a record median of $810,000 in July and then dropped back by 24.1 percent to $616,000 in November. Meanwhile, the neighborhood's price per square foot set a record $315.11 in November. Stephen McClure, an agent in McMillin Realty's Rancho Bernardo office, said there have been fewer sales of high-end properties in recent months. In RB's 92128 ZIP code area east of the freeway, he said the 8.3 percent drop from the $632,500 peak reached in June was more typical of what he has noticed. That area's price per square foot dropped 6.9 percent from the peak in October. "There's a lot of homes on the market but they've been on the market for the last three months," McClure said. "They simply haven't sold because the market is not nearly as strong as it was." La Mesa-Mount Helix not only saw a large decline from its all-time peak of $557,500 in April but it was one of the first areas to start dropping, DataQuick figures show. At the same time, its price per square foot has risen in fits and starts over the last two years to hit a record $384.17 in November. High or low? Vickie Fageol, an agent in a Re/Max La Mesa office, said her clients believe either prices have dropped for good or that they have leveled off and will rise again soon. "The mind-set (among buyers) has been changed," she said. "They no longer are offering more than the asking price or dying to get an offer in as soon as they see a property. They know they have a little more time." As for sellers, Fageol said they are bracing for a wait of 60 days or more before they get an offer and many are dropping prices within two weeks or a month if they aren't getting any action. "We have to educate them that it's not like the spring, where they sell in three hours and have bidding wars," she said. Scripps Ranch, the first neighborhood to reach its peak, $742,500 in March, plummeted to $615,000 in April and rose again to $732,500 in July before ending at $700,000 in November. December prices and annual totals will be available later this month. Scripps' record $351.84 price per square foot in September dropped 8.8 percent by November. Market analysts often advise looking at prices on a year-over-year basis rather than month-by-month because of seasonal fluctuations. In Scripps Ranch, there may have been another factor at work. Lynn Hamilton of One Source GMAC Real Estate said the early peak may have occurred because owners who lost their homes in the October 2003 firestorm used insurance payments to buy replacement homes in a tight, competitive market in the spring. Since then, the number of listings has increased and buyers have been less pressured to move fast. "People, now when they look at homes, they figure, and their agents, too, that there's a little negotiating room in the price," Hamilton said. Ginni Field in Prudential California's Carmel Valley office said sellers can no longer automatically get 5 percent to 10 percent more than their neighbor did six months ago. If the Carmel Valley median dropped by 16.7 percent from a record $1,082,500 in August to $902,000 in November, perhaps that's the adjustment a current seller should make, she said. On the other hand, the price per square foot in November was only 1.8 percent off the record peak of $377.76 in July. "Many want to wait and see in January if we'll have another insanity market like we had the beginning of last year," she said. "I don't know. I think we'll have a nice, solid market. I'm not a bubble believer. I believe we'll have a strong, comfortable market." In less hectic markets, buyers often have waited until after the Super Bowl before getting serious about moving. This year, football may play an even bigger factor if the Chargers' winning ways continue. While many places set record prices months ago, six neighborhoods with at least 20 resales in November recorded all-time highs that month â San Carlos 92119; El Cajon 92020; Oceanside 92057; Golden Hill 92102; City Heights 92105; and Logan Heights 92113 â and it is possible others may rise to all-time peaks in 2005. On a price-per-square-foot basis, there were five records set in November besides western Rancho Bernardo and La Mesa-Mount Helix: northern Chula Vista, Encanto, Linda Vista, northern El Cajon and San Carlos. Real estate graduate students at the University of San Diego believe overall resale home prices will increase by 12.2 percent this year, reaching a record $616,222 by December. In a summary of their analyses issued last month, Kevin Truglio, one of those in the university's master's degree program, said factors driving prices upward include continued demand and relatively low interest rates. He and other students based their predictions on DataQuick reports going back to 1990 and assume past trends will remain unchanged, according to their faculty adviser, Joan B. Anderson. Many economists feel 30-year, fixed-rate-mortgage interest rates will rise this year to 7 percent from the sub-6 percent level of most of 2004. Demand in San Diego will largely depend on job creation, which USD economist Alan Gin predicts will equal or exceed 2004's estimated level at 15,800. Tony Farrow of Tri-City Funding in Carlsbad said he advises his clients who are trying to sell their homes without a real estate agent to consider offering better terms rather than lower prices to buyers. For example, a buyer might prefer a second trust deed. "Lowering the price might not necessarily be the way to sell because sometimes the borrower is short on cash," Farrow said. Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.com
First of all, in most cases, the original lender (the Bank) sells that loan up stream to Fannie etc. Make your payments and you will never hear from them again. If you think Greenspan is not aware of the sensitive nature of the housing market and will keep rates down you are living on another planet. Everyone keeps running around with their hair on fire about higher interest rates. The real estate/construction business is the largest business in the US. The disruption of higher interest rates to that segment would be felt across the country. People speculating on new homes will get hurt in some cases. but that is not the housing market as a whole. That is buying an IPO with no income at $50/share, LOL!!! SteveD
What a short memory you have. Do you not remember the California real estate declines of 1980-84 and 1990-95 where real estate went down 30-40%? Do you think this will never happen again??? Where was Greenspans' sensitive ass when hundreds of thousands of people handed back the keys to their dreams and went bankrupt??? Do you really think Greenspan cares about individual home owners? And individuals do not buy "the housing market as a whole" do they? They buy individual homes in individual cities at individual points in time. While I too believe the housing market in the U.S. will be fine in the longer run, I think at certain times in certain higher "beta" cities investing in real estate can be ruinous to ones financial well being. I think that time is at hand. Can I prove it? Nope. But I see divergent signs everywhere that flash danger to me and my family. Am I worried that the bubble has continued racing ahead way past where I thought it would end? Not at all...as I have posted everywhere here bubbles can and do go much further than anyone can dream (and that can cut both directions BTW). If you look at my previous post a couple of postings up, you can see Coronado, California real estate is a wild ride. In the last 6 months there has been a 24% downward swing. This is not the same as investing in South Dakota or your Texas (Steve D) where you have to wait sometimes the better part of a decade to see that sort of move. And there is quite a difference between the heartland where Steve D is....in Texas a major hit in real estate prices can mean 10k....in California it can mean 300k. Entry is everything. Buying into California real estate after an 8 year run-up is suicide historically, especially now with the divergent signs of flat income, job, and population growth. The fuel for this bubble is Greenspan's fertilizer...B.S. The smell is unmistakable. Or is it different this time???
Could you imagine if everything you purchased was based on how high of a monthly payment you could afford and not what amount of value or utility you gained from having it? Number one mistake you make at the car dealership is not talking solid numbers, but letting the salesman dazzle you with the monthly payments. (84 months, but only $249 ) So much for the rational decision making in the market. Why is it ok to ignore price when buying the largest asset of most people's lives? What are home appraisers and lending institutions thinking? I guess we can ask the guy runnging Fannie Mae. If you can find him. I think he will be at a congressional hearing sometime soon. Lets see how hard it is to extradite him from Bermuda. There is such a campaign of anxiety created by the real estate industry and society at large to buy now or never that young people sell their financial souls to keep up with Jones's. Does anyone save 20% to put down. You know like they taught you in school. Aww cmon that's silly, first rule of making money: use someone else's. What is scary is that is what homebuying in California is all about. It is not a place to live and raise a family but a prospecting claim. Ever visit a ghost town? They were created by the same mentality. 0% down, ARMS when the lending rates are at 40 year lows?. 40 year lows, no interest loans? Well the goverment sponsored entities like fannie, freddie are expecting us to bail them. Where is the concern over these risky lending practices? Has man not historically endured to secure private property and assets so that his family may have long term prosperity? When did debt spending become an acceptable means of subsistence? Having so called equity in your home is not wealth. When you own the title to the property you have wealth. When someone else sends you a monthly bill you are a debtor(slave). How can people in their forties refinance for another thirty years? What in the hell are they thinking? Does anyone expect to pay for their own retirement? Obviously it is someone elses problem. Let the next generation pay for us when we are old. I don't want to hear b.s. stories fifteen years from now about how the baby boomers are eating dogfood because social security isn't providing. Remeber that crap in the 80's. Well at least the blue hairs will have shiny coats. You don't need a new SUV and a Mercedes. Home valuation is not the same as wealth. If you have ten thousand dollars worth of comic books, they are only worth what the next slob will give you for them. STOP SPENDING YOUR RETIREMENTS ON CRAP YOU IRRESPONSIBLE HIPPIES. I will not fund your retirements. And while your at it stop drinking so damn much. I will not buy your insulin and lipotor so you keep eating fries. That being said I really shouldn't have access to a computer at 3 in the morning.