Fascinating example of how a house price "correction" works– California

Generali

Sorry to reawaken The Thread That Wouldn't Die but if you're interested in following US house prices, the Case-Shiller index is the one to watch.

They don't cover every market but the weighting works well and they seem to compare like-with-like well too.

ManAtHome

Yeah, but couldnt possibly happen here - different fundamentals an' all, no siree we don't do inflation and credit crunches and, errrm Northern Rock, nope, sounds a bit Grand Canyon/over there to me.

"Strong eCONomy", 9-0 for rate cuts - blimey, what could possibly go wrong...

cafenervosa_2

It sounds bad already and this is only the start...

http://news.yahoo.com/s/nm/20071221/us_nm/usa_housing_social_dc

Pobby

I have a friend on the west coast of the US who is/was a mortgage broker.Business is not bad as it pretty much does not exist.A few months ago she was earning a packet.Almost overnight the lenders drew their horns in so dramatically that even if anyone wanted to take on a mortgage it was almost impossible to find a lender.

Back on this side of the Atlantic,I was again talking to a South West based broker.The picture was similar with much tighter lending criteria.He also was finding it difficult to drum up business.

Amazes me how lenders are bolting the stable doors after the horse had fled.I am baffled at how loose lenders have been and how quickly and deeply sentiment has turned.

pamaris

Pobby wrote: »

I have a friend on the west coast of the US who is/was a mortgage broker.Business is not bad as it pretty much does not exist.A few months ago she was earning a packet.Almost overnight the lenders drew their horns in so dramatically that even if anyone wanted to take on a mortgage it was almost impossible to find a lender.

Back on this side of the Atlantic,I was again talking to a South West based broker.The picture was similar with much tighter lending criteria.He also was finding it difficult to drum up business.

Amazes me how lenders are bolting the stable doors after the horse had fled.I am baffled at how loose lenders have been and how quickly and deeply sentiment has turned.

Yeah, recently I was reading about "negative amortization mortgages". It is worse than interest only; you do not even pay the interest so the capital owed increases each month! Don't think those loans are availably anymore! yikes

Pobby

http://www.mtgprofessor.com/A%20-%20Amortization/how_does_negative_amortization_work.htm

Check that out.Really makes sense----not!

What happened to.``Hello Mr.Building Society manager``
``Hello Mr. and Mrs.Pobby``
``We want to buy a house``
``Do you.I see you have an account with us,tell me,what do you earn.We will need this backed up with proof``
``We earn £xxxxx``
``Oh good,I see that is is 3.5 times of your earnings.for the house you wish to buy.OK we will be willing to lend.Good bye,we will be in contact as soon as the funds are available``.

Now somehow,that has a comfortable ring to it!

Generali

Pobby wrote: »

http://www.mtgprofessor.com/A%20-%20Amortization/how_does_negative_amortization_work.htm

Check that out.Really makes sense----not!

What happened to.``Hello Mr.Building Society manager``
``Hello Mr. and Mrs.Pobby``
``We want to buy a house``
``Do you.I see you have an account with us,tell me,what do you earn.We will need this backed up with proof``
``We earn £xxxxx``
``Oh good,I see that is is 3.5 times of your earnings.for the house you wish to buy.OK we will be willing to lend.Good bye,we will be in contact as soon as the funds are available``.

Now somehow,that has a comfortable ring to it!

Hey, you go back a few more years and the conversation would go somthing like this:

Prospective House Buyer: "I'd like a mortgage, please"
Building Society Manager: "How much are you looking for?"
PHB: "£20,000"
BSM: "Right, that works out at £96 per month. It's ok, we'll lend you the money as you don't appear to be a woman*. All you need to do is save at least £96 per month with us for a year and you'll need a deposit of at least £2,000. Oh and we'll need proof that you earn at least £8,000 a year."









*AFAIK, a woman was unlikely to be able to get a mortgage in the 1960s/70s.