Friday, September 08, 2006

Delinquency Rate Soars on Home Equity Loans

The Dallas Morning News Reports that "Last week, Moody's Investors Service reported that the delinquency rate in the home equity loan market rose 11 percent for the quarter ended in April from the same period a year earlier."

"According to Moody's, delinquent loans now represent nearly 7 percent of the total existing pool of home equity loans."

"This is the 11th consecutive month that the home equity delinquency growth rate has risen," Moody's Ben Garber said.

"The really bad news is that the more people who can’t pay their mortgages or home equity loans, the more likely it is that home prices will fall as they rush to sell the properties and get out of a bad situation."

113 comments:

  1. Context.
    What is the context?
    Is 7% above averge? Or below? How much does the rate fluctuate each month? Each year? Is there a correlation between delinquencies and defaults? Is the default rate changing? Which way?

    Without context, 7% delinquent doesn't impress.

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  2. "...the more people who can’t pay their mortgages or home equity loans, the more likely it is that home prices will fall as they rush to sell the properties and get out of a bad situation."

    Bring it on.

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  3. There has been some debate about this on this blog so, from the mouth of Learah himself...

    “Keep in mind that over time, home prices rise at the rate of inflation plus one-to-two percentage points – buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages."

    As a long-term investment, there are better vehicles than the house you live in.

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  4. This is an easy one. Take a HELOC to pay down your MEW. Repeat as needed. Untapped equity is dead money ;)

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  5. It appears that Ms. DiMartino wrote her story off of a press release, which is too bad -- I would be interested in knowing how Moody's came up with that 7% number. It's a much higher number than I 've seen reported anywhere else through the 2Q of this year.

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  6. I agree with data miner. The past few years were abnormally low in terms of defaults because hyper-appreciation "bailed" many people out.

    What is the historical average rate of default over, say, 20 or 30 years? This would provide some context for today's level.

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  7. I've been watching inventory this week through NVFH.com, and curiously, it's been on the rise again. We will have to see if this develops into a trend. More inventory added to an already bloated amount would not be good for the Real Estate Industrial Complex.

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  8. I haven't seen any information comparing the historical delinquicy rates for home equity loans, but found this little article that I thought was interesting.

    http://www.realestatejournal.com/buysell/mortgages/20060519-simon.html

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  9. Here's a little context for you - the amount of home equity loans outstanding today is much, much higher than it has ever been in the past.

    So a 7% delinquency rate on a much larger mound of debt combined with stagnant or sinking home prices spells big trouble. That's all the context you need.

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  10. John Fontain said...
    "Here's a little context for you - the amount of home equity loans outstanding today is much, much higher than it has ever been in the past."

    And your "fact" is based on what? Having a line of equity open (which gets reflected in city records and elsewhere as the full amount available), doesn't mean people have drawn on it. And if they have drawn on it, it doesn't mean they wouldn't otherwise have taken out more expensive non-secured loans such as car loans and credit card debt. I.e., your "fact" isn't a fact at all.

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  11. A little more context - Although 7% of all home equity loans are delinquent (that's one of every fourteen), not one housinghead on this blog or any other will admit to being delinquent.

    So right now - which of you housingheads is willing to admit you are part of the 7%?

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  12. John Fontaine asked:
    "So right now - which of you housingheads is willing to admit you are part of the 7%?"

    Personally, I'd like to know how many of the bubbleheads who sold their homes saying they were doing so in hopes of repurchasing at a lower price in the future ... were part of this 7% at the time of the sale?

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  13. Fellow Bloggers,

    I think you take a look at this FDIC report you may get a little more context on some of the delinquency information on HELOCs. The report is old 2004..but it's all I could find.
    Here is the link http://www.fdic.gov/bank/analytical/regional/ro20044q/na/2004winter_03.html

    Also, a quick snippet from it.
    "As home equity lending has soared in the past five years, more than doubling its share of total loans in bank portfolios, its credit performance has shown consistent improvement. The proportion of delinquent to total HELOCs was at 0.51 percent in second quarter 2004 (see Chart 5). This was the second lowest delinquency rate for all major loan categories, just behind multifamily properties at 0.53 percent, and far below 1.70 percent for all loans and leases."

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  14. John Fontaine,

    Lance has a valid point. I have 6 or Heloc's with lines into seven figures - but zero balances. Are my lines counted as home equity debt?

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  15. va investor - lance has a valid point? you're kidding right?

    how can a home equity loan be in default if you haven't borrowed against it?

    you and lance are amazing!

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  16. I think the article is talking about actual debt now the amount of debt you could possibly incur as a result of having a line of credit. If you are delinquent then you have already drawn against the line of credit or taken the loan.

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  17. I was responding to the comment about the ballooning amounts of heloc debt. What constitutes debt? Having a line or drawing on a line? Of course I realize one can't be delinquent absent a draw.

    My point is not the percentage of delinquent loans (although, in context, it is not a high number). My point is the measure of the overall dollar amount of debt.

    It would also be useful to know the LTV totals and whether these percentages have changed materially over the past 20 or 30 years. And also to put these numbers in context with an corresponding drop in consumer unsecured debt - i.e. people using heloc's to buy cars or pay college tuition etc. It is definately "tax-favored" to use a heloc.

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  18. va_investor said...
    "I was responding to the comment about the ballooning amounts of heloc debt.'

    I was too. But, in typical bubblehead fashion, John F. shifted the question after the answer he received disproved his point. I wrote to David about this very problem and how it should be against blog rules to manipulate another's words (such as taking them out of context, rearranging lines from the same or different posts by the same poster) and attributing quotes to people that they never made (such as the "Prices never go down!"). One can't have a rational discussion when these manipulations are allowed. Of course, my post on the subject didn't get through the comment moderation function ...

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  19. Found this small tidbit too.

    "Standard & Poor's (S&P) has shown that piggyback loans have a higher default risk than the others.

    The study examining the performance of 640,000 piggyback loans secured between 2002-2004 has shown that piggyback mortgages are 43% more likely to default than the conventional first mortgages even when one statistically controls for such factors as the FICO score of the borrowers."

    If the study referenced in the Dallas Morning News includes HELOCs associated with piggyback mortgages as well as those extended after conventional loans then perhaps we can say the delinquent folks are the piggyback mortgage holders and not necessarily people like VAI who have conventional mortgages, but happen to take out a HELOC afterwards.

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  20. Lance said...
    va_investor said...
    "I was responding to the comment about the ballooning amounts of heloc debt.'

    “I was too. But, in typical bubblehead fashion, John F. shifted the question after the answer he received disproved his point.”

    Ok folks, tell us. How can you have HELOC debt without taking out a loan?

    Which comment are you guys referring to? What next, are you guys going to start debating “what the meaning of “is” is?

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  21. I think the question being asked is this:

    "Do the HELOC numbers describe people who have been extended a line of credit as used it as well as those who have been extended a line of credit and not yet used it?"

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  22. Robert asked:
    "How can you have HELOC debt without taking out a loan?"

    Very simple ... When you arrange for a home equity line of credit with a lending institution, you go through a settlement on the loan just like you would for a mortgage taken out when you purchase a home. Loan documents are drawn up that show the full amount you are allowed to borrow (e.g. $100,000) and that gets recorded at City Hall as a the mortgaged amount. However, you don't need to borrow it (and pay interest.) That is why it is called "drawing on your home equity line of credit." It is recorded for the full amount to prevent you from going out and getting the same 2nd mortgage from multiple places which would result in none of them being really "secured" since there wouldn't be enough equity left to cover all these second mortgages if you defaulted. But again, you only get charged interest on the amount you actually "draw out" from the line.

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  23. This comment has been removed by a blog administrator.

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  24. ... so what you have is "debt" for all purposes (qualifying, etc.) except in regards to paying interest ... or paying back principal back for that matter since you haven't "drawn" it out ...

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  25. Again Lance, all your tap dancing and back-peddling isn't answering the question of how you can be delinquent (late on payments) if you haven't drawn on your equity line (the answer is that you can't). Therefore, a 7% delinquency rate means just that - 1 of every 14 who have drawn on their lines is delinquent.

    Now again, let's see a raise of hands - which one of you housingheads will admit to being delinquent?

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  26. Lance

    Right in principle. However, with the recent explosion in wacked out 0% down combinations, traditional percentages of HELOCs do not work anymore. Too many "HELOCs" which were actually initial mortgages jimmied up to allow people to buy in the bubble prices. So a far greater % of HELOCs are maxed out that what was the norm.

    To use your own perspective, a HELOC is neutral. In fact, it's a damn good financial tool when used properly (i.e. in replacement of alternate loan vehicles for purchases you would already have made [ex Car Loan], allowing deductability). But the recent explosion in HELOCs was to make the unaffordable, affordable...and thus were implicitly maxed out on day one.

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  27. Thank you originaldcer, that is very helpful.

    Now I'm impressed.

    I haven't gone to the source, but if it says "all" it should include those not drawn against. I don't know if spells big trouble yet, but one would assume that equity loans are more likely to be taken out by the more secure borrowers who would be less likely to be delinquent.

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  28. data miner,

    do you think that since it is capturing "all including those not drawn against" that perhaps it is overemphasizing the numbers a bit? I mean I am by no means a statistician, but I would more so like to know the amount of outstanding HELOC debt (HELOC already drawn on) and then look at how much of that outstanding debt is delinquent.

    and John great point. I think in the post I submitted earlier they mentioned that the piggybank loans were probably the cause of many of these problems. Lots of people used HELOCs to make the home purchase initially. It's not like they already had a home and they took out that line of credit.

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  29. I think that there should be a distinction made between heloc's that were "purchase money" (part of the initial purchase financing) and heloc's obtained later.

    Obviously, the former were maxed-out day one. They are a different animal from heloc's that may be unused or partially used by longer-term homeowners.

    The purchase money heloc's are inherently more risky loans than ones made to people who have owned awhile, established a payment history and accumulated some equity.

    From what I read above, it appears that it is the purchase money heloc's that are more likely to be in default.

    Anyway, I think that only the drawn amounts should be considered debt.

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  30. John Fontain said...
    "Again Lance, all your tap dancing and back-peddling isn't answering the question of how you can be delinquent (late on payments) if you haven't drawn on your equity line (the answer is that you can't). Therefore, a 7% delinquency rate means just that - 1 of every 14 who have drawn on their lines is delinquent."

    And AGAIN, Va_Investor and I were responding to your assertion that there was lots and lots of HELOC "debt" out there. You said:

    "John Fontain said...
    Here's a little context for you - the amount of home equity loans outstanding today is much, much higher than it has ever been in the past.

    So a 7% delinquency rate on a much larger mound of debt combined with stagnant or sinking home prices spells big trouble. That's all the context you need."


    Your assertion that a "larger mound of debt" exists is purely and simply not a "fact".

    So, please stop trying to change the question after we've answered your question not to your liking.

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  31. Va_Investor,

    I thought HELOC stood for "Home Equity Line Of Credit". If it does, how can it have been used for the purchase of the house since you have to have the house first to have equity upon which to get a HELOC on? Aren't these actually traditional second mortgages that are being referenced? and not HELOCs? With a difference being that there is no draw ... it is simply another mortgage in second position to the first and with most likely different terms? If we're referring to these traditional second mortgages as HELOCs than I think we're going to have a semantics problem that is going to confuse the less real estate knowledgeable on here. We're really talking two very different loan instruments used for two very different purposes ... and I've never heard an initial purchase second mortgage referred to as a HELOC. And if the less savy are combining the dollars on both to come to any kind of conclusion as to how much debt is being carried, then they are going to confuse everyone including themselves. They are adding apples to oranges.

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  32. Let's review:

    I said "the amount of home equity loans outstanding today is much, much higher than it has ever been in the past"

    and

    "a 7% delinquency rate on a much larger mound of debt combined with stagnant or sinking home prices spells big trouble."

    Lance, you said "Your assertion that a "larger mound of debt" exists is purely and simply not a "fact"."

    Well my dear Lance, please read this quote from Business Week in August 2005

    "Home equity borrowings have doubled over the past five years, to $911 billion."

    Here is the link:

    http://www.businessweek.com/magazine/content/05_31/b3945043_mz011.htm

    Note that this does not say "available capacity under equity lines" it says borrowings - i.e., the money has already been borrowed and must be repaid.

    The mound of debt is much, much larger than it has ever been in the past. And there you have your context - 7% of a larger mound of debt, combined with stagnant or sinking home prices spells big trouble.

    Lance, I trust you will do the honorable thing and at least admit you were wrong about the size and growth of home equity borrowings.

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  33. Lance said "the less real estate knowledgeable on here"

    That's not possible!!

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  34. John Fontaine,

    I think you are making a leap which is not justified. How do you know the definition of "borrowings" only includes drawn loans and not all "open accounts"?

    Also, as a ratio heloc borrowing has not increased as a percent of home value - since heloc's have doubled in the past five years AS have home prices. The absolute number of homeowners has also increased in the past 5 years.

    I don't know what the ownership increase number is; but that figure has to have some relevance to the total $$amount of debt.

    Lance,

    I don't know if purchase money loans are called "heloc's", but I do believe that many are set-up the same and taken as a draw at closing.

    Any loan officers out there?

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  35. JF said:
    ""Home equity borrowings have doubled over the past five years, to $911 billion.""

    We don't know for a fact if "equity" means "that which has been drawn" or "that which is available to be drawn." I believe it is the latter because the only number that gets put out there in the public records is the amount listed on the loan papers. The loan papers all say the "max available" amount. And when I get letters from mortgage companies wanting to refinance my line of credit, they all list that amount and say "We can lower the payments on your $100,000 mortgage to ...." I.e., They don't know what amount of this is drawn and what amount isn't.

    It would be nice to hear from a loan officer on this as based on everything I've ever learned related to finance and accounting, I think it is the "max" amount for which people are legally liable ... And that amounts "not drawn" are viewed as a "credits" against this liability.

    And if that is the case, then the stats you are referring to are credit line maxes and not credit line draws ...

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  36. John Fontain said...
    "Lance said "the less real estate knowledgeable on here"

    That's not possible!!"

    Ha ... I was trying not to embarrass you by referring directly to you .. Oh well ...

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  37. va investor and lance - let me give you a suggestion you can take or leave: if you want to maintain a shred of credibility or believability as investors or as being knowledgeable about real estate, don't do yourself the disservice of never conceding an argument or of reverting to silly claims like the word borrowings doesn't mean borrowings.

    And Lance, let me help you with something - home equity borrowings are not computed based on publicly available deed records, they are tabulated based on reporting by lenders.

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  38. John,

    Where do you get your facts from re: borrowing? I still believe that a question remains unanswered.

    Also, you fail to address my argument vis a vis total loan to value ratios.

    John, perhaps you know the answer to the purchase money heloc question?

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  39. Originaldcer,

    I have now gone to the link you provided above, and it's great. I recommend everyone take a look at it.
    http://www.fdic.gov/bank/analytical/regional/ro20044q/na/2004winter_03.html

    It was last updated on 12-7-04, but it is full of information.

    Like this for example:

    "Lenders should also be aware of HELOC use. Drawdown rates for HELOCs are edging up, from 44.4 percent in first quarter 2000 to 48.3 percent in first quarter 2004. However, these utilization rates remain well below the peak of 60.7 percent reached in first quarter 1991. The utilization rate is an important metric for lenders to watch, because a rise could indicate that consumers are drawing more on HELOCs for spendable cash and are in a weaker position to repay the loans."

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  40. Data Miner & OrigDCer:

    The FDIC analysis you referenced is updated quarterly. You can find the most recent report (at least 1Q 2006) if you root around the FDIC website.

    For those interested in the topic of mortgage statistics in general and in partial answer to the questions raised on this thread, I recommend Fannie Mae's Statistical Summary of Housing and Mortgage Financing Activities (2006). It's on their website. I do so with some unease, knowing that in the hands of at least one regular poster, it is like giving a loaded gun to an infant.

    The good stuff, like the Moody's report that started this thread, is proprietary.

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  41. John Fontaine,

    I am sure that you will quickly acknowledge your misstatements being the honorable person you are.

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  42. Lex,

    Thanks for the suggestion, I will check it out. Meanwhile, I did look at the quarterly FDIC Outlook updates. They don't cover the same topics each quarter, but they do have other very interesting topics likes this one from Summer 2006:

    http://www.fdic.gov/bank/analytical/regional/ro20062q/na/2006_summer04.html

    It's called "Breaking New Ground in U.S. Mortgage Lending" and covers non-traditonal mortgage loans made to sub-prime borrowers.

    In other words, it covers a favorite topic around here: people who have stretched with an exotic loan to buy a house. It has so much information (as does Winter 2004) that I have not synthesized it to any concusions yet.

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  43. va investor - with regard to total loan to value: the borrowings are real, all of the 'value' isn't.

    Prices in NoVA are down 8% now on a YoY basis. That demonstrates how quickly the LTV ratios can be turned on their head.

    All those who purchased in NoVA in the last year and put down 5% or less (I believe the average down payment in 2005 was 2%) are already underwater. Many have ARMs. They won't be able to refinance them. If they want to sell because of the rapidly declining market, they'll be forced to bring cash to the closing - cash that many recent buyers just don't have.

    Things are turning ugly very quickly.

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  44. john fontaine,

    What about data miner's findings? Can you not conceed you were wrong about the mushrooming debt?

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  45. The report I referenced above.

    http://www.fanniemae.com/ir/pdf/resources/housingmortgage.pdf

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  46. John F said:
    "(I believe the average down payment in 2005 was 2%)"

    That is not a credible number. Most purchases were "move-ups" with people rolling their equity from one house to another. Even for first time buyers as a whole, that number isn't credible. I could buy something like between 5% - 10% for first time home buyers, but overall when you factor in that the "move-ups" will have been buying with at least 25% down, the across the board number is probably somewhere beween 10% and 25% ...

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  47. Lance said...
    “That is not a credible number.”

    Lance, why concern yourself with creditable numbers? There’s no bad time to buy!!!

    http://www.federalreserve.gov/SECRS/2006/July/20060726/OP-1246/OP-1246_66_1.pdf

    -The most recent data available from a survey conducted by the National Association of Realtors (2) shows that first-time homeowners - 40% of all borrowers in 2005 - had an average down payment of only 2% on homes costing $150,000, but 43% of these homeowners had no down payment at all.-

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  48. Robert quoted:
    "- had an average down payment of only 2% on homes costing $150,000.

    Do you realize how few homes sell for as little as $150,000? And you're trying to extend that "2% down" to EVERY home purchased? Sometimes I can't tell if you're manipulative or just plain stupid. And that is correct, for a smart buyer, there are no bad times to buy. And for stupid people like you, there really are no good times to buy. You'll find a way to get a bad deal no matter the market.

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  49. Robert seems to not get the point more often than he gets it. John Fontaine posted blatantly false numbers, only to be "defended" by old robert who doesn't understand the numbers.

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  50. va_investor said...
    "Robert seems to not get the point more often than he gets it. John Fontaine posted blatantly false numbers, only to be "defended" by old robert who doesn't understand the numbers."

    Agreed. Robert is by no means the sharpest tool in the shed. But, be it from malice or sheer incompetence, his recurrent posting of "blatantly false statements" should be banned as they stand in the way of meaningful discussion. His malicious out-of-context posting and false attribution of "quotes" should alone suffice to ban his comments altogether. He certainly doesn't garner any points for the bubblehead argument. Speaking of liabilities as we were the other day, one could say Robert is a veritable liability for the bubbleheads and their arguments.

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  51. It is always funny when Lance talks about incompetence...

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  52. Lance said...
    “And that is correct, for a smart buyer, there are no bad times to buy. And for stupid people like you, there really are no good times to buy. You'll find a way to get a bad deal no matter the market.”

    Damn Lance, you’re starting to sound like the common troll. Yea, I think I see some troll droppings up there.

    John Fontain said...
    “(I believe the average down payment in 2005 was 2%)”

    Lance said...
    “That is not a credible number.”

    robert said...
    http://www.federalreserve.gov/SECRS/2006/July/20060726/OP-1246/OP-1246_66_1.pdf

    Lance, the numbers have some credibility. Mr. Fontain said he believed it was 2% i.e. he thought he read/heard/saw somewhere that it was 2%. I did a 5 second search with google, and came up with a pretty creditable link to what he may have been referring to. Care to elaborate any more on the link above? Such as; what percentage of home purchases in 2005 were by first time buyers? Alas, you’re no fan of data, or facts. I think (ok Lance, I said I think, I could have easily said; I believe, I recall, as far as I remember) you have only posted two links to any sort of data. And who needs data? Not when, and that brings me to my next topic:

    Lance said...
    “His malicious out-of-context posting and false attribution of "quotes" should alone suffice to ban his comments altogether.”

    Lance said...
    “…… that there is never a bad time to buy if it is a home you are buying….”

    “….I do believe that for a prospective homeowner (or longterm investor) there
    IS…. no bad time to buy”

    “In brief, if you are looking to buy a home, the thought of resale value shouldn't even cross your mind…..”

    So, are these the quotes you are referring to? A few regular readers will recall you having me “posting them on my fridge”. I obliged. Your typical mode of operation has been to post as fast as possible, as often as possible with no regard to data (it means absolutely nothing) or facts as seen by the quotes above, and others. I intend remind readers of your “buying guide” just so they know where you stand with the data i.e. it’s not needed. Now, if these indeed are the quotes you refer to, you want to recant? You want to backpedal? Then do so and I’ll post than on the fridge.


    Now as for my own troll droppings (sorry David):

    Lance said...
    “And would I have like a big house with at least 3 bedrooms? Sure, but I settled for a small one with 2 bedrooms and a basement rental that helps me meet the mortgage payment.”

    Good luck on that basement rental. Maybe the you can live out you infatuation with David’s mom with your bitter renter. What’s it going for now, $3K a month? Hey, you’re gonna need all the help you can get right. Gotta shore up your equity as DC has taken a face plant in the past few months. So, what’s it gonna be? Down two more points then start its trek back up? No worries right? Because:
















    Lance said...
    “…… there is never a bad time to buy….”

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  53. va_investor said...
    Robert seems to not get the point more often than he gets it. John Fontaine posted blatantly false numbers, only to be "defended" by old robert who doesn't understand the numbers.


    Go ahead va_investor, please elaborate more on those numbers. What percentages of home buyers in 2005 where first time buyers?

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  54. Robert,

    Are you really so stupid that you don't understand the the 2% figure ONLY applies to first time buyers AND to homes purchased by them that cost no more than $150,000. I.e., we are talking about maybe 1 in 100 purchases. John Fontain had said that ALL home purchases were made with only 2% down. Are you really that stupid or maliciously manipulative? Either way, if David wants this blog to continue he will need to censor your comments or risk having only Bubbleheads on here. You are a liability to him and other bubbleheads.

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  55. Robert & John, as of this moment you're on DOUBLE SECRET PROBATION!

    ReplyDelete
  56. lex (are you a lawyer?),

    You stole that me. I used the Animal House reference last month and David DELETED it.

    *deminimus not curet lex. remember this from l.s.

    ReplyDelete
  57. Gee, sorry investor, I didn't know you owned the copyright, and I apologize for not memorizing your posts in case they get deleted.

    how 'bout this:

    Robert & John, it's the COMFY CHAIR for you!

    I will now repair to my deck, where I intend to spend the afternoon drinking & listening to Mozart.

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  58. Lance said...
    “John Fontain had said that ALL home purchases were made with only 2% down.”

    He did not say so emphatically, he said:

    (I believe the average down payment in 2005 was 2%)

    And from the link, I see how he could have misconstrued the facts. (there I go again, “facts” something that you care nothing about)

    However, what I think the link shows: (chime in any time with conjecture)

    -The most recent data available from a survey conducted by the National Association of Realtors (2) shows that first-time homeowners - 40% of all borrowers in 2005 –

    40% of all borrowers in 2005 where first time home buyers. i.e. 40% of 05 buyers did not “move up” and had no equity from a home sale for down payment on said first purchase.

    -had an average down payment of only 2% on homes costing $150,000, but 43% of these homeowners had no down payment at all.-


    Of the 40% of home buyers in ’05, the average down payment on a $150K home was 2%. 43% of first time home buyers in ’05 had no down payment.

    Am I misunderstanding that?

    Well, I guess it really doesn’t matter because:


    Lance said...
    “Do you realize how few homes sell for as little as $150,000?”

    Lance does not know of any $150K homes so, therefore they do not exist.

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  59. Lex said...
    “Robert & John, as of this moment you're on DOUBLE SECRET PROBATION! “

    OK, but if you guys change the handshake and secret decoder ring, remember to fill us in when we get back

    ReplyDelete
  60. Robert said:
    "40% of all borrowers in 2005 where first time home buyers. i.e. 40% of 05 buyers did not “move up” and had no equity from a home sale for down payment on said first purchase."

    There you go, living in your alternate universe again ... constructed of your own "facts." That's 40% of borrowers ... That's NOT 40% of 05 buyers. I guess the fact that many many homes are paid for cash never even crossed your mind.

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  61. Lance said...
    “That's 40% of borrowers ... That's NOT 40% of 05 buyers. I guess the fact that many many homes are paid for cash never even crossed your mind.”

    Sure it crossed my mind. But, since you brought it up, I take it you’re diligently searching for the percentages of first time home buyers that paid with cash. Let us know what you find OK! I wonder, could that be “many many” number of folks? We are talking about first time buyers here, no profit from the sale of a home for a down payment, bitter renters and all.

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  62. robert,

    I think you are on to something. The bitter renters have spent years saving like mad so that they can now pay cash for that first home!

    The only problem is that the home, had they bought it in 2000 would have cost 100's of thousands less than today. And that the $500 per month savings (assuming it was "saved") now totals only 30k. Oh, dear.

    No problem! The bubbleheads will now wait patiently for prices to drop 70%. Surely, their "timing" will be better this time.

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  63. Robert,

    The couple who bought my last condo were first time buyers. They came in with close to $300K in cash and financing the balance. Yeah, they both had good middle-income jobs ... But they probably also had parents who'd been homeowners along the way. When I'd sold my first condo, I'd had a similar situation where the first time single homebuyer plunked down the whole $135K purchase price in cash. But that's right, in your alternate universe everyone is just like you ... and depending solely on the savings they are stashing away from renting.

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  64. And oh Robert, I forgot to add ... We should definitely do away with the creative financing that allows people like you (and me when I bought that first condo) from buying. Only people with rich parents should be able to get into that first home! Giving people the opportunity to sacrifice and work at getting into that first home just isn't right!

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  65. Lance said...
    “The couple who bought my last condo were first time buyers. They came in with close to $300K in cash and financing the balance.”

    There we go, just what I was looking for. Cold hard data on the percentages of first time home buyers paying cash. Thanks Lance, I’ll make sure to link this for future reference.

    va_investor said...
    “I think you are on to something. The bitter renters have spent years saving like mad so that they can now pay cash for that first home!”

    Thanks va_, as always, your post add credibility and substance. I’m sure that the 8.7% drop in DC is some sort of error. And the 43% of first time buyers with no down payment are nothing compared to the millions that paid cash!

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  66. This comment has been removed by a blog administrator.

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  67. Robert ... aren't VA loans "no downpayment 100% loans? hmmm ... so, YOU did 100% financing, but you don't think that similar creative type financing like ARMS, IOs, neg amortization loans should be available for others to get into that first house? How noble of you! I guess you're just more responsible than they are. They need you to look after them.

    ReplyDelete
  68. VA Loans are zero downpayment loans. Robert, did you think that this was irresponsible, risky, or foolish? I doubt it.

    ReplyDelete
  69. va_investor said...
    “VA Loans are zero downpayment loans. Robert, did you think that this was irresponsible, risky, or foolish? I doubt it.”

    It depends on which country I was in at the time.

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  70. lance said - "the 2% figure ONLY applies to first time buyers AND to homes purchased by them that cost no more than $150,000."

    I can't imagine the down payment rate of 2% rises for first time buyers buying homes more expensive than $150,000. If anything, the down payment % probably was lower for more expensive homes.

    Anyway, the original point is still valid. Prices are dropping, down payments were low, and the equity of most recent buyers has been wiped out by these August price declines.

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  71. Lance said...
    “Robert ... aren't VA loans "no downpayment 100% loans? hmmm ... so, YOU did 100% financing”

    OK Lance, please tell me of any 100% financed no down payment VA Loan. Post the link, an anecdotal story anything. I’m pretty sure I can find quite a few folks in which their VA loan down payment was hundreds of times more costly than your current abode. While we’re waiting, I’ll gather children round to have Uncle Lance tell us about “sacrifice” and “nobility”

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  72. Since I’m gathering the children and all, I’ll edit my post
    /blow up mode off/

    robert said...
    Lance said...
    “And oh Robert, I forgot to add ... We should definitely do away with the creative financing that allows people like you (and me when I bought that first condo) from buying……Giving people the opportunity to sacrifice and work at getting into that first home just isn't right!...”

    Thanks Lance but no, the only thing “creative” about my first mortgage was a VA loan.
    So please Lance,

    TELL US ABOUT SACRAFICE LANCE

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  73. robert,

    With a VA Loan, even some closing costs are financed. In other words, over 100% financing. Are you saying that this is not true?

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  74. Robert,

    If you don't know that VA loans are "no downpayment loans", then you didn't take a VA loan. You are lying.

    Q: How much is my entitlement?

    A: Your basic entitlement is $36,000. For loans in excess of $144,000 to purchase or construct a home, additional entitlement up to an amount equal to 25 percent of the Freddie Mac conforming loan limit for a single family home may be available. This loan limit changes yearly. This means that qualified veterans could get a no down payment purchase loan of up to $417,000 through December 31, 2006 effective January 1, 2006.

    Q: Is there a maximum loan limit?

    A: There is no maximum VA loan. Lenders will generally lend up to 4 times the amount of a veterans entitlement without requiring a down payment.


    www.homeloans.va.gov/faqpreln.htm

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  75. I don't think robert has ever had a VA Loan.

    ReplyDelete
  76. John F. said:
    "I can't imagine the down payment rate of 2% rises for first time buyers buying homes more expensive than $150,000. If anything, the down payment % probably was lower for more expensive homes."

    That's right, first time buyers purchasing $1,000,000 properties are doing so with 2% down ...

    It's simply amazing how bubbleheads tend to project their financial capabilities onto everyone else!

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  77. Either robert doesn't understand his own loan (quite possible) or he is lying and loses any credibility, however small, he may have had.

    Neither way looks good.

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  78. With the 8% YoY price drops, waiting to buy just one year would have saved the average DC buyer about $35,000 off the price of their home.

    And just think, another year from now I'll be saying the same thing, except the savings will be up to about $70,000.

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  79. Va investor - off topic I know, but how are people supposed to believe you are a big time real estate investor when you didn't even know what a cap rate was when you first started posting on this blog.

    Not a dig, I'm really curious.

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  80. john,

    Saving 70k is not nearly as attractive as having bought pre-bubble or mid-bubble and "saved" a couple hundred thousand or more.

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  81. john,

    Although I don't own "commercial" real estate, I am familiar with the term "cap rate". Was that discussion, early on, the one about the rental house in Baltimore?

    That was where the "bubbleheads" did not understand the basics of analysing a "deal".

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  82. Lance said...
    “If you don't know that VA loans are "no downpayment loans", then you didn't take a VA loan. You are lying.”

    va_investor said...
    “I don't think robert has ever had a VA Loan.”

    Lance, Va_investor, you are both naive, and ignorant.
    Here are a few examples of the cost of a VA loan, I would highly recommend that you both study each example thoroughly:

    http://www.dav.org/
    http://ppoopp.host.sk/war/index.htm (for the images)
    http://www.fisherhouse.org/
    http://www.nps.gov/kwvm/
    http://www.wwiimemorial.com/
    http://thewall-usa.com/

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  83. VA loans (technically, loans guaranteed by the VA) may be for 100% of the purchase price, but do not have to be. Keep in mind limits are placed on loan amounts, not purchase price.

    Re cap rates, in all fairness I have to say I have never heard anyone use the term in connection with residential investment properties. All successful residential landlords (I'm talking individuals, not Avalon Properties) can tell you their net operating income without looking; mention cap rates and you would probably get a blank stare.

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  84. Again Robert changes the question when the answer to his original question isn't what he expected:

    "robert said...
    OK Lance, please tell me of any 100% financed no down payment VA Loan. Post the link, an anecdotal story anything."

    There is no maximum VA loan. Lenders will generally lend up to 4 times the amount of a veterans entitlement without requiring a down payment.

    www.homeloans.va.gov/faqpreln.htm

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  85. Va_Investor,

    You'll note that Robert never actually says he is a veteran ... Just tries to lead the reader to make that assumption. My bet is that he's never even been out of the country.

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  86. lance,

    In a former life, I closed hundreds of VA Loans. The vast majority were 100% financing. Only when the purchase price was over the VA Loan limit was cash put down.

    It is possible that robert does not know this. He has a "track record" regarding comprehension.

    ReplyDelete
  87. Lance said...
    “Again Robert changes the question when the answer to his original question isn't what he expected:”

    No Lance, I have not changed the question. I would however suggest that you and Va_inverstor take trip to any VA military hospital and tell an amputee that his VA loan cost him nothing.

    ReplyDelete
  88. Lance said...
    “You'll note that Robert never actually says he is a veteran ... Just tries to lead the reader to make that assumption. My bet is that he's never even been out of the country.”

    My bet is you’re not qualified to speak of sacrifice.

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  89. va investor - one of the first times i had a discussion with you on this blog i explained that return on investment wasn't nearly as important a metric as return on equity when it comes to evaluating real estate holdings.

    You were like a deer caught in headlights when I explained why.

    So again I ask, how are people supposed to believe you are a big time real estate investor when you didn't know these things when you first started posting on this blog?

    This is a serious question.

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  90. Sorry John, I have no recollection of that conversation. Frankly, I don't claim to "big time" anything and I don't care about "cap rates".

    ReplyDelete
  91. btw John,

    What date was that thread? I'll look it up in the archives. Re-educate myself.

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  92. va investor - you don't claim to be big time?

    i thought you said you had tens of millions in real estate investments in one discussion a while back? something like "my personal residence is worth over $2m and my investment properties are worth many multiples of that." i'd consider that 'big enough time.' is that not really true?

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  93. This comment has been removed by a blog administrator.

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  94. John,

    are you trying to "bait me"? Please give me the earlier reference you were talking about re: "deer in the headlights".

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  95. va investor - not 'caring' about cap rates, ROE, ROI, and various concepts is distinctly different from not 'knowing' about them.

    I still have a problem buying the idea that you are a big time real estate investor who didn't 'know' about these concepts when you first started posting on this blog. Kinda like a 'big time' stock investor who 'isn't familiar with the p/e ratio.'

    Sorry if i'm outing you, because I know this blog is supposed to be about housing and not the commenters. But i take offense to your frequent reference to your purported background, experience, and investment prowess when attempting to dismiss as insignificant any and every point of concern about risk in today's housing market.

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  96. Robert said:
    "No Lance, I have not changed the question. I would however suggest that you and Va_inverstor take trip to any VA military hospital and tell an amputee that his VA loan cost him nothing."

    See, again, rather than do the honorable thing and admit that (1) he was wrong about VA loans not requiring a downpayment and (2) that he lied saying he had had a VA loan, he continues to change the question. No one ever discussed the sacrifices of Veterans. That has NOTHING to do with our discussion about (1) your being wrong to say that VA loans require down payments and (2) that you lied when you said you'd had a VA loan. Additionally, I see you still aren't saying you were a veteran. I think that answers the question as to whether you are just plain stupid or just a pathalogical, manipulative liar. You are a liability to David and the other rational bubbleheads. You are a road block to rational discussions on this blog.

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  97. Va_Investor,

    John Fontain knows he's been beat! Whenever he can't win an argument, he tries to discredit the messenger. He and Robert are really nasty nasty people. They're not looking for answers or anything other than to just "be right" at any cost. They don't reflect well on the bubbleheads and their arguments. Unethical people like these two are a liability to David and the rational people who believe in a bubble. John Fontain and Robert are not only just plain wrong in most of their "facts", but underhanded, unethical individuals. If I were a Bubblehead, I'd be demanding that David block them from this blog.

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  98. John Fontain,

    I don't know whose comments you are reading, but they obviously are not mine. I have talked about the cyclical nature of real estate from day one. My predictions have been on the table since day one.

    Again, please put up or shut up. Do you have the date or month of the thread where you supposedly embarassed me and revealed me for the poser I am?

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  99. va investor - why do you decide to quickly delete your 7:38pm post in which you say do have over "10 million in real estate" and that you "don't care about cap rates, ROE or ROI"?

    Does the former contradict something else you've posted before or does the later look obviously unbelievable subsequent to saying it? Is that why you deleted your post?

    This is as good a time as any for the blog readers to better understand the credibility of your purported background. We wouldn't want any undue reliance, now would we?

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  100. This comment has been removed by a blog administrator.

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  101. John,

    I deleted that comment because it seemed like too much of a "bragg". I also realized that that was probably your intent - to make me look like a braggart (sp?).

    You are the one who came up with this topic "out of nowhere". The only purpose I can see is to divert attention from robert's obvious lies and to cover your most recent ridiculous statements.

    What are your bonifides?

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  102. John,

    You are showing your ineptitude. All it takes for Va_Investor to have rental properties worth $10 million is ONE 6 - 8 unit apartment building in the heart of Washington. Va_Investor has said she has properties in 3 or 4 cities ... Assuming she has on average 1.5 properties in each city, that would easily put her over the $10 million mark. That makes her a very successful individual which is all she's ever claimed to be. A successful "big time real estate investor" as you put it, would have investments in the hundreds of millions of dollars. But again, when you can't counter the message you try to discredit the messenger. You can't face the truth, can you? Perhaps that is why you, unlike Va_Investor, is so unsuccessful. Even to your detriment, you will deny the truth. Even when it is staring you right in the face!

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  103. btw John,

    If you think 10 million is "big time", you are running with the wrong crowd.

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  104. My bonifides? Successfully culling the truth, as I have just done.

    Goodnight.

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  105. john doesn't know what a "bonafide" is! Another poser revealed! He really doesn't know what a bonafide is ... Incredible! I bet he knows what "make that a big mac with fries on the side" means ... Probably hears that hundreds of times a day. LOL

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  106. John, Do you get to wear one of those great paper hats!? Wow, must be a rush "doing it our way" for us all day!!!! LOL Ever met Ronald McDonald! ... Ah the perks of the job!

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  107. Hey John Fontain,

    I am still waiting for that reference. If it does not exist, just admit it.

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  108. Lance said...
    See, again, rather than do the honorable thing and admit that (1) he was wrong about VA loans not requiring a downpayment and (2) that he lied saying he had had a VA loan, he continues to change the question. No one ever discussed the sacrifices of Veterans.

    Lance, post your fax number and I’ll send you my DD-214. I (just like any other veteran) paid the down payment for my VA loan. The cost? A few years of my life. I think that has value does it not? I think, in exchange for X, you get Y. Hence, Y cost something. How much would you “charge” per year? In many cases the cost of the down payment of some VA loans are more than your current home will ever be worth.

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  109. Robert,

    Bottom line: VA Loans ARE 100% financing.

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  110. va_investor said...
    Robert,

    "Bottom line"

    Is that veterans earn the VA loan (and then some).

    ReplyDelete
  111. va_investor said...
    btw John,

    "If you think 10 million is "big time", you are running with the wrong crowd. "

    Cump change right va_? I bet your pool boy makes that much in a summer.

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  112. John Fontain "has left the building".

    ReplyDelete