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  1. #21  
    Quote Originally Posted by NRG
    Look at what $515,000 will buy you in Cali.
    Does a bit better in Ohio.
  2. #22  
    Quote Originally Posted by NRG
    Do mortgage brokers do margin calls?
    not sure I understand the question?
  3. #23  
    Quote Originally Posted by treo2die4
    Actually, this is not entirely accurate. In reality, the bond market supports the creative financing by valuing the mortgage back securities accordingly. It is interesting to note the market is beginning to balk at these types of financing - and for good reason - to the point the available terms have become significantly less attractive to lenders.
    Point taken. thanx
  4. #24  
    Quote Originally Posted by NRG
    Look at what $515,000 will buy you in Cali.
    As they say. "Location, Location, Location!!!" That house is in Thousand Oaks. That same house in say, Blythe or Needles is probably 1/5 that price. But who the Hell wants to live there?

    All I can say, is thank your dieites my home is paid for!
    MaxiMunK.com The Forum That Asks, "Are You Not Entertained?"

    Remember: "Anyone that thinks the Treo should just work right out of the box, shouldn't own a Treo..."
  5. #25  
    Quote Originally Posted by NRG
    Do mortgage brokers do margin calls?
    I don't think so, but I don't know for sure. I think the "margin call" is when someone loses a job, or has to move, or for whatever reason needs to get out of the house. One reason why a real estate downturn isn't a massive "pop" but rather a "hiss" as more and more people exit their depreciated houses.
  6. #26  
    Quote Originally Posted by KRamsauer
    I don't think so, but I don't know for sure. I think the "margin call" is when someone loses a job, or has to move, or for whatever reason needs to get out of the house. One reason why a real estate downturn isn't a massive "pop" but rather a "hiss" as more and more people exit their depreciated houses.
    In reality, mortgage brokers do not get margin calls as a margin call is typically associated with selling a stock short and then having the value decrease significantly.

    That's why I didn't understand your question - mortgage brokers would typically not be in that position. They could, however, incur a loss that could be similar if they closed loans that were not hedged or locked with a particular investor. But that would be associated with a decrease in the value of a closed or committed loan where the market interest rate is lower than the rate they committed to the borrower.

    (yeah, i know, most of you are hearing the sound the teacher makes in all the Charlie Brown cartoons... )
    Last edited by treo2die4; 01/13/2006 at 01:19 PM.
  7. #27  
    Back to the initial question.....

    The CPI since 2000 has been:

    2000 3.4
    2001 2.8
    2002 1.6
    2003 2.3
    2004 2.7
    2005*3.0
    *estimated

    So,actual inflation has had minimal impact on the US Ecomony. In reality, the potential for high inflation has had the impact as it drove Fed policy for that last couple of years.
  8. #28  
    Quote Originally Posted by treo2die4
    In reality, mortgage brokers do not get margin calls as a margin call is typically associated with selling a stock short and then having the value decrease significantly.

    That's why I didn't understand your question - mortgage brokers would typically not be in that position.
    Margin calls can also happen when you use margin to go long a stock (in this case long a house) and then the value of that stock (or house) declines to a point where more collateral (in addition to the stock/house) is required to support the loan.
  9. #29  
    Quote Originally Posted by treo2die4
    Perhaps in your market - value is driven by location and demand. Now don't get me wrong, I feel the same about that property in my market, that doesn't however make it so in California.
    This is true, but did you see that house???

    WOOF!

    That thing isn't worth that kind of money unless it has a giant beer tree in the back!

    That being said, I had to get my house appraised the other day for a home equity loan, and my house has appreciated $180000 in less than 3 years. And that's after 3 of the worst hurricane seasons on record. The south Florida housing market is just crazy right now. It's so bad, apartment complexes are being converted into condos and townhomes, and forcing the renters out.
    I'm back!
  10. #30  
    Quote Originally Posted by KRamsauer
    Margin calls can also happen when you use margin to go long a stock (in this case long a house) and then the value of that stock (or house) declines to a point where more collateral (in addition to the stock/house) is required to support the loan.
    Boy, you're really thinking creatively on the financing end of things. I'm not aware of anyone offering quite that type of terms. Though it probably does exist, I am sure it's quite rare in the housing market..... In the larger home financing market, the only type of usual financing that could be similar is a loan that provides for negative amortization (interest incurred is greater than the required monthly payment). But even in this case, the typical result is a recast of the payment schedule and not the need for additional collateral. And it would be a cost to the borrower, never the mortgage broker.

    Were you thinking more along the lines of commercial lending?
  11. #31  
    Quote Originally Posted by treo2die4
    Boy, you're really thinking creatively on the financing end of things. I'm not aware of anyone offering quite that type of terms. Though it probably does exist, I am sure it's quite rare in the housing market..... In the larger home financing market, the only type of usual financing that could be similar is a loan that provides for negative amortization (interest incurred is greater than the required monthly payment). But even in this case, the typical result is a recast of the payment schedule and not the need for additional collateral. And it would be a cost to the borrower, never the mortgage broker.

    Were you thinking more along the lines of commercial lending?
    I was really just thinking out loud. I know nothing of mortgage financing. It would surprise me if such a mechanism existed (as I mentioned in the earlier post). Although to me, the immediate prepayability is an odd structure, so maybe there are more oddities in the product than I know.
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    #32  
    Quote Originally Posted by Insertion
    As they say. "Location, Location, Location!!!" That house is in Thousand Oaks. That same house in say, Blythe or Needles is probably 1/5 that price. But who the Hell wants to live there?

    All I can say, is thank your dieites my home is paid for!
    Well said. How can anyone compare a house in Ohio and CA? When you can rely on 300 days of sunshine a year you are going to pay more, when your salary is triple what it is in Ohio, guess what, you are going to pay more. That house will probably sell for asking price or more, it is simple supply and demand. Yes the mortgage companies will lend you what they can cause that is where they make money.

    My house is not paid for, but in the 4 years I have been paying a mortgage on it the value has tripled.
    "If It Weren't For The United States Military"
    "There Would Be NO United States of America"
  13. #33  
    Quote Originally Posted by cardio
    Well said. How can anyone compare a house in Ohio and CA?
    That's the exact point of my counter-example. Just looking at the apparently dilapidated house is and the asking price of 500K out of context is not an indication of anything. The price point is not a function of the building. It is a function of the structure.

    So, a 500K asking price, even for that monstrosity, is not necessarily an indication of inflation gone wild.

    Inflation is a function of buying power of the currency. To make side-by-side comparisons year by year, adjustments have to be made. To make side-by-side comparisons location by location, adjustments have to be made. Otherwise, you're comparing apples and oranges (or in this case castles and shacks).

    Not to mention, to see the value of real estate, you need to look at the valuation for the land versus the structure. Based on the appearance of the structure, you could wish to pay 100K. But, the structure can be replaced. So, you are very likely paying for the land (i.e. location, location, location).
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    #34  
    Prices were that wacko in CA 10 years ago.

    I think you're right... low inflation and low interest rates (along with limited supply in some places) has lead to price hikes.

    On the flip side, when inflation is high, prices may flatten or decrease, but the real cost to a homeowner will be about the same because of the higher interest rate.

    Don't get me wrong, I'm one of those missing "pinkos" and would love to blame this on the Fed or Bush or someone, but I think Shopharim is right.

    If there's a bad guy involved in this, it's the lenders making marginal loans. When interest rates go up, there are going to be a lot of people who qualify now, but won't be able to make their payments.
    Less than 400 posts to get my own little treo icon!
  15. #35  
    Quote Originally Posted by santa
    If there's a bad guy involved in this, it's the lenders making marginal loans. When interest rates go up, there are going to be a lot of people who qualify now, but won't be able to make their payments.

    I would agree with your last sentence - many many people have financed their home with a loan that have no business using given their financial profile.

    But then again, that is also a 2 way street - a significant number of buyers in the so-called hot markets choose loans based on the idea they want to buy as much home as they can, speculate on the gains and then sell the property before the loan ever has a chance to hurt them. It's just like any speculative investment - there is risk, some choose to take the risk, others don't.
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    #36  
    Quote Originally Posted by treo2die4
    I would agree with your last sentence - many many people have financed their home with a loan that have no business using given their financial profile.

    But then again, that is also a 2 way street - a significant number of buyers in the so-called hot markets choose loans based on the idea they want to buy as much home as they can, speculate on the gains and then sell the property before the loan ever has a chance to hurt them. It's just like any speculative investment - there is risk, some choose to take the risk, others don't.
    Agree.

    Many are just trying to get into their first home. But others are just playing the market.
    Less than 400 posts to get my own little treo icon!
  17. #37  
    Quote Originally Posted by santa
    Prices were that wacko in CA 10 years ago.

    I think you're right... low inflation and low interest rates (along with limited supply in some places) has lead to price hikes.

    On the flip side, when inflation is high, prices may flatten or decrease, but the real cost to a homeowner will be about the same because of the higher interest rate.

    Don't get me wrong, I'm one of those missing "pinkos" and would love to blame this on the Fed or Bush or someone, but I think Shopharim is right.

    If there's a bad guy involved in this, it's the lenders making marginal loans. When interest rates go up, there are going to be a lot of people who qualify now, but won't be able to make their payments.
    Unfortunately, in my area in particular, it's not just the low interest rates that are hiking the prices. Recently there has been an influx of Latin and South American money into south Florida, buying up a lot of real estate, since it's a far safer investment than keeping money in their domestic banks. Venezuelans are buying up the real estate in case their economy crumbles or their banks and accounts are "nationalized", therefore driving down supply and driving up demand. It's great if you're looking to sell, not so much if you're looking to buy.
    I'm back!
  18. #38  
    Quote Originally Posted by shopharim
    That's the exact point of my counter-example. Just looking at the apparently dilapidated house is and the asking price of 500K out of context is not an indication of anything. The price point is not a function of the building. It is a function of the structure.

    So, a 500K asking price, even for that monstrosity, is not necessarily an indication of inflation gone wild.
    SIR! One mans dilapidated montrosity is another mans castle.

    For you, the price of my humble abode goes up to $600,000. Not a penny less.
    MaxiMunK.com The Forum That Asks, "Are You Not Entertained?"

    Remember: "Anyone that thinks the Treo should just work right out of the box, shouldn't own a Treo..."
  19. #39  
    Quote Originally Posted by Insertion
    SIR! One mans dilapidated montrosity is another mans castle.

    For you, the price of my humble abode goes up to $600,000. Not a penny less.
    A bargain for sure. I would be uncooth to give you anything less than a cool million pesos
  20. #40  
    Think of all the continual loud and harsh attacks on Bush on the economy from the Dems in 2004. Now think of how many Dems are attack Bush on the economy in the last 6 months. None. I think that silence is the loudest testimony the economy is doing pretty good, all things considered.
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