Anyone regular listeners to Rich Dad? I have no clue, I've only been paying attention for the last five years, so I value those who've seen a cycle or two. I can actually say that Rich Dad, Poor Dad was my first awakening. The demographics of the world as a post consumer society is pretty convincing. Maybe the CV will provide the second baby boom after all.

WoMD said:

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Shooter McGavin said:

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WoMD said:

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Shooter McGavin said:

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WoMD said:

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Shooter McGavin said:

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agneck said:

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People can't pay their house payment. There will be massive foreclosures. End of story.

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Massive foreclosures? End of story? Good grief.

The market is still undersupplied. Why would there be massive foreclosures if the folks could go ahead and sell their home? There are still market segments in DFW that have zero inventory.

There are also going to be forbearance and other programs to help.

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You're assuming there will be buyers lined up at that point. And that the sellers aren't significantly underwater if they sell at the new lower market value.

I'm planning on buying at that timeframe. But I have a lot saved, and ready to spend. But you're damn sure I'll be lowballing the hell out of folks, taking advantage of desperation and a larger inventory with lower demand. And I won't feel bad about it.

Maybe my patience won't pay off. In which case everyone's rebounded nicely and we all win. But I won't be surprised if there are lots of opportunities because of unfortunate circumstances.

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I make a living in the real estate business, for 36 years now. I think I have a pretty good finger on the pulse. The market is not going to dry up so badly that someone is going to be able to swoop in and buy a house wildly under market in the areas where people want to live.

The DFW market, where I work, is under built and under supplied. Will some of the buyers go away? Yes, but there will be buyers. Will some folks default? Yes. Will there be areas where there is an oversupply? Probably, but I'll bet that isn't somewhere you will want to buy, hence my comments. Is there going to be desperation? Perhaps, and you might get lucky enough to find someone like that, but rest assured there will also be other buyers with the same mindset. If you are looking in the Houston, Midland or other oil related markets then you probably will score a big win, but I don't think you're going to do it in the nicer areas of the Metroplex.

If you plan on going in and making low ball offers in the better areas, I suggest you utilize a very patient Realtor.

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How did it play out for you in 2008?

It will likely be a regional situation, I'd expect. In California (SoCal and sf areas) it looked more like how I described, and nothing like what you did. So perhaps it's better in the Texas market, so the thousands of suddenly vacant houses I found over there was an anomaly.

Or maybe the issues we saw back then were unique and nothing like what could happen now?

My point is, regardless of all of your decades of experience, this scenario is looking to be nothing like what we see now, so the fact that many areas are currently undersupplied will likely be irrelevant.. We have no clue how things will play out. But I bet it won't be as pretty as what you're describing. We won't know how it will play out for some time, of course. Either way, I'd expect that if millions end up unemployed, we will see a large number who can't pay their mortgage, as well as fewer people in a position to buy, shifting the supply and demand ratio dramatically. Or am I misunderstanding supply and demand somehow?

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You are not misunderstanding supply and demand, but I'm doubtful that the situation is going to be similar to 2008. And, obviously, the markets will change but to say that markets currently undersupplied is irrelevant is like saying that everything completely resets. It doesn't. You say it won't be as pretty as what I describe, but it won't be the bloodbath you are predicting either.

Real estate is local. Even in DFW, the submarkets are dramatically different. I wouldn't compare one regional market to the next, heck I wouldn't even compare Dallas to Houston. Totally different markets. What happens in "SoCal and SF" who knows. That state and real estate market is a little "out there".

Millions are going to be "temporarily" unemployed. The world isn't just going to stop down completely and in the aftermath things will pick up rapidly.

As in any situation like this, there will be winners and losers. It sounds like you have a chance to be a winner. Good luck to you.

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I hope you're right. Many very informed people aren't nearly as optimistic on that outlook, however. Or perhaps I'm not as optimistic from how I understand this disease to behave (I'm in medicine), and the current and potentially lasting impacts on our economies, but it's best to mentally prepare for worst case scenario.

I know nothing about the Dallas area, to be honest, as I have little interest in that region. Hopefully your area takes a minimal hit. But if things progress, there will be large areas in this country that will have a dramatic increase in inventory as the foreclosures add up everywhere, with nobody in a place to buy, just as they did in 2008. If I had the cash back then there were thousands of foreclosures everywhere with minimal competition that were ripe for the picking, where value had dropped by 50+% (which has since obviously shot well past where they were previously). This actually could be worse, if the millions who are unemployed can't instantly return to the financial stability of just a few weeks ago.

While it won't be a decade long "get back to normal" mess, I would be shocked if there's anything close to an instant bounceback, "pick up where we left off", event. My point was simply if things bounce back, while unlikely, fantastic. We haven't lost anything, everyone wins. But if it's more drawn out, which is what many financial experts are concerned about, there will be a cascade of effects that dramatically impact millions. In that scenario, defaults and foreclosures will happen. And it won't be just a few. And while it will be regional in the range of severity, there is nowhere in this country (or the world) that won't have some acute (and likely lingering) hit. The more resilient markets won't have as much of an issue if this is resolved within the next 6 months, hopefully. But while Dallas may weather this storm well, other places, like Vegas for instance, will be hammered.

The best way to approach this (for me anyway) is to prepare and be ready to roll with the changes. It may come to nothing, and putting money in the stock market is a guaranteed win for those willing to put it in in the next few months. Or it may swing the other way, and real estate will be an opportunity for those who have been waiting on the sidelines, which unfortunately means taking advantage of the suffering of the millions who are impacted. Honestly, I'd rather we have that bounce back and we continue with the how things were a few weeks ago. Unfortunately, it's looking less and less like that will happen everyday.

Maybe I'm letting my medical knowledge (as well as my experience being a business owner in the past and a current CRE property owner) cloud my opinion, and I come off more negative than I intend. In which case, I apologize. I'm not as pessimistic as I sound, but I always make every effort to be realistic. Nobody knows how things will actually play out, which is why stating absolutes in either direction is silly. We can only roll with the punches, and play the hands we're dealt to the best of our ability.

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I've got eight purchase appraisals to do next week, so the market still has a very strong pulse around here.

Shooter McGavin said:

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WoMD said:

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Shooter McGavin said:

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WoMD said:

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Shooter McGavin said:

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WoMD said:

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Shooter McGavin said:

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agneck said:

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People can't pay their house payment. There will be massive foreclosures. End of story.

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Massive foreclosures? End of story? Good grief.

The market is still undersupplied. Why would there be massive foreclosures if the folks could go ahead and sell their home? There are still market segments in DFW that have zero inventory.

There are also going to be forbearance and other programs to help.

---

You're assuming there will be buyers lined up at that point. And that the sellers aren't significantly underwater if they sell at the new lower market value.

I'm planning on buying at that timeframe. But I have a lot saved, and ready to spend. But you're damn sure I'll be lowballing the hell out of folks, taking advantage of desperation and a larger inventory with lower demand. And I won't feel bad about it.

Maybe my patience won't pay off. In which case everyone's rebounded nicely and we all win. But I won't be surprised if there are lots of opportunities because of unfortunate circumstances.

---

I make a living in the real estate business, for 36 years now. I think I have a pretty good finger on the pulse. The market is not going to dry up so badly that someone is going to be able to swoop in and buy a house wildly under market in the areas where people want to live.

The DFW market, where I work, is under built and under supplied. Will some of the buyers go away? Yes, but there will be buyers. Will some folks default? Yes. Will there be areas where there is an oversupply? Probably, but I'll bet that isn't somewhere you will want to buy, hence my comments. Is there going to be desperation? Perhaps, and you might get lucky enough to find someone like that, but rest assured there will also be other buyers with the same mindset. If you are looking in the Houston, Midland or other oil related markets then you probably will score a big win, but I don't think you're going to do it in the nicer areas of the Metroplex.

If you plan on going in and making low ball offers in the better areas, I suggest you utilize a very patient Realtor.

---

How did it play out for you in 2008?

It will likely be a regional situation, I'd expect. In California (SoCal and sf areas) it looked more like how I described, and nothing like what you did. So perhaps it's better in the Texas market, so the thousands of suddenly vacant houses I found over there was an anomaly.

Or maybe the issues we saw back then were unique and nothing like what could happen now?

My point is, regardless of all of your decades of experience, this scenario is looking to be nothing like what we see now, so the fact that many areas are currently undersupplied will likely be irrelevant.. We have no clue how things will play out. But I bet it won't be as pretty as what you're describing. We won't know how it will play out for some time, of course. Either way, I'd expect that if millions end up unemployed, we will see a large number who can't pay their mortgage, as well as fewer people in a position to buy, shifting the supply and demand ratio dramatically. Or am I misunderstanding supply and demand somehow?

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You are not misunderstanding supply and demand, but I'm doubtful that the situation is going to be similar to 2008. And, obviously, the markets will change but to say that markets currently undersupplied is irrelevant is like saying that everything completely resets. It doesn't. You say it won't be as pretty as what I describe, but it won't be the bloodbath you are predicting either.

Real estate is local. Even in DFW, the submarkets are dramatically different. I wouldn't compare one regional market to the next, heck I wouldn't even compare Dallas to Houston. Totally different markets. What happens in "SoCal and SF" who knows. That state and real estate market is a little "out there".

Millions are going to be "temporarily" unemployed. The world isn't just going to stop down completely and in the aftermath things will pick up rapidly.

As in any situation like this, there will be winners and losers. It sounds like you have a chance to be a winner. Good luck to you.

---

I hope you're right. Many very informed people aren't nearly as optimistic on that outlook, however. Or perhaps I'm not as optimistic from how I understand this disease to behave (I'm in medicine), and the current and potentially lasting impacts on our economies, but it's best to mentally prepare for worst case scenario.

I know nothing about the Dallas area, to be honest, as I have little interest in that region. Hopefully your area takes a minimal hit. But if things progress, there will be large areas in this country that will have a dramatic increase in inventory as the foreclosures add up everywhere, with nobody in a place to buy, just as they did in 2008. If I had the cash back then there were thousands of foreclosures everywhere with minimal competition that were ripe for the picking, where value had dropped by 50+% (which has since obviously shot well past where they were previously). This actually could be worse, if the millions who are unemployed can't instantly return to the financial stability of just a few weeks ago.

While it won't be a decade long "get back to normal" mess, I would be shocked if there's anything close to an instant bounceback, "pick up where we left off", event. My point was simply if things bounce back, while unlikely, fantastic. We haven't lost anything, everyone wins. But if it's more drawn out, which is what many financial experts are concerned about, there will be a cascade of effects that dramatically impact millions. In that scenario, defaults and foreclosures will happen. And it won't be just a few. And while it will be regional in the range of severity, there is nowhere in this country (or the world) that won't have some acute (and likely lingering) hit. The more resilient markets won't have as much of an issue if this is resolved within the next 6 months, hopefully. But while Dallas may weather this storm well, other places, like Vegas for instance, will be hammered.

The best way to approach this (for me anyway) is to prepare and be ready to roll with the changes. It may come to nothing, and putting money in the stock market is a guaranteed win for those willing to put it in in the next few months. Or it may swing the other way, and real estate will be an opportunity for those who have been waiting on the sidelines, which unfortunately means taking advantage of the suffering of the millions who are impacted. Honestly, I'd rather we have that bounce back and we continue with the how things were a few weeks ago. Unfortunately, it's looking less and less like that will happen everyday.

Maybe I'm letting my medical knowledge (as well as my experience being a business owner in the past and a current CRE property owner) cloud my opinion, and I come off more negative than I intend. In which case, I apologize. I'm not as pessimistic as I sound, but I always make every effort to be realistic. Nobody knows how things will actually play out, which is why stating absolutes in either direction is silly. We can only roll with the punches, and play the hands we're dealt to the best of our ability.

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I've got eight purchase appraisals to do next week, so the market still has a very strong pulse around here.

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Which no one has disputed. What has been pointed out many times on here, is question of how things will play out 6-12 months from now IF this situation continues. Short term, there should be minimal impact regardless (although I've heard from many people who had buyers put purchases on pause until their job situation is in a more confident state). The issue will be how things will look in 6 months once banks start wanting their mortgage payments to resume. If this situation hasn't shown a very strong indication of a return to normal, then no one should be surprised that the pulse will be significantly weakened. How things look now remains irrelevant in making that determination.


Seems to be a common sense concern, but I guess not...

A real estate professional was saying the other day that at least at this point banks are saying they make a bigger effort to restructure loans instead of foreclosing. Learning lessons from the last go round. Still I think there will be a downturn and possibly some big opportunities for future investments

That's been the case since lending money began.

My financial advisor sent me a summary of the CARES act through their company. One thing that shocked me was the ability of a homeowner to stop mortgage payments for up to 6 months if the loan is federally backed/owned. Also can't foreclose until late May at earliest (believe May 22)

No doubt efforts to prevent any collapse if we have a fast enough recovery by fall.

mwp02ag said:

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The guy being interviewed is missing out some very big points. Including the fact we have this thing called immigration. We are not looking at a total decline in population, we may see a decrease in new home building in the US going forward but that will be very different than comparing our population to Japan.

Carlo4 said:

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My financial advisor sent me a summary of the CARES act through their company. One thing that shocked me was the ability of a homeowner to stop mortgage payments for up to 6 months if the loan is federally backed/owned. Also can't foreclose until late May at earliest (believe May 22)

No doubt efforts to prevent any collapse if we have a fast enough recovery by fall.

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The government can't prop up the economy indefinitely, it can only soften the blow by prolonging the pain.

Mtn_Guide said:

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Carlo4 said:

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My financial advisor sent me a summary of the CARES act through their company. One thing that shocked me was the ability of a homeowner to stop mortgage payments for up to 6 months if the loan is federally backed/owned. Also can't foreclose until late May at earliest (believe May 22)

No doubt efforts to prevent any collapse if we have a fast enough recovery by fall.

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The government can't prop up the economy indefinitely, it can only soften the blow by prolonging the pain.

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Exactly. The temporary cushion might be enough. But if this continues long enough, it will hit all of these lenders and home owners who have lost their jobs and who are delaying payments all at once. There's only so much leeway that banks are able to give, even if they want to give property owners assistance. If we can't get this turned around within the next few months, eventually it will catch up to everyone. Banks don't want these properties, but you can't expect them to take on this burden indefinitely.

I remember in 2008, looking at dozens of the hundreds of possible foreclosure sales around where I lived, and the story was consistent...they'd try to work with the banks and restructure loans for a few months, then stop paying altogether for an additional 6 months until they were evicted. And to top it off, a majority absolutely trashed the houses on their way out the door. A bit petty, considering they'd been living there for free (or close to free) for close to a year. Really sad to see, considering it was a relatively nice middle class area. Different scenario than this, I know, but the effects may be similar. It's hard to say for sure right now, as we're only in the 2nd or 3rd inning of this mess.

As an aside, banks will take a beating in this scenario. Also, people are living on credit cards now more than ever, and if this continues long enough, those potential defaults will also hit banks all at once. Will be watching those bank stocks very very closely in 6-12 months...

Default scenario?

Interesting comments on the semi-professional landlords being hit the hardest. Might've been mentioned earlier, but it makes a lot of sense. The Airbnb crowd has exploded the last few years. As this didn't exist in 2008, I'm curious just how many of these properties are actually out there. I honestly can't see any way these properties won't be in the default category if they relied on financing. And do these properties even qualify for the option to defer mortgage payments?

This alone would make up a huge percentage of increased inventory in some parts of the country.

jja79 said:

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That's been the case since lending money began.

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Thanks for the snarky response. I don't understand the reason for doing that here.

The point was he expected more patience than what was seen in 2008.

jlAG97 said:

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Can't buy forever homes if you won't be able to get out of your current one without absorbing huge losses

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Well if both homes loss 15% and you buy a more expensive expensive home, you save money

inoffensive username said:

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jlAG97 said:

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Can't buy forever homes if you won't be able to get out of your current one without absorbing huge losses

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Well if both homes loss 15% and you buy a more expensive expensive home, you save money

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Either way, owning a home isn't about making money. If you want one, buy one. If you don't, don't. If you buy one that's bigger than you need, getting a good price is overrated. The upkeep will make you sorry you splurged.

I apologize that came of as snarky. Wasn't meant that way at all. Lenders have always had work out departments for this very reason. Most mortgages are sold off so investors other than banks have more exposure.

SteveBott said:

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Interesting thread. One huge difference in the 08-11 recession we do not have now is crazy ass sub-prime mortgages. They were 100% financing down to 580 credit. Geez.

They were also 2-3 year balloon type deals with your payment doubled or more If you stayed in them longer then the teaser start rate. The bet on the coasts was use them and sell for a profit before being called. It worked like a charm for a while. Then blew up.

Texas did not have a huge price bubble but did have those mortgages. We flat lined and had mild value loss compared to the coasts but throw in sub-primes and we got hit. We no longer extend credit like that. Those crazy loans are gone.

Good riddance

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We have had and still have those loan products. This time they are disguised as FHA loans at 3.5% down with PMI, 3.5%- 5.0% fixed 30 year notes all based on annual income and debt to equity. These products are offered as conventional products as well now. The housing market specifically within the $300,000 and under sector has been in a hyper inflationary period for at least 5 years due to these loan products. What will happen with Fannie, Freddie and Sallie?

The investors are starting to raise minimum credit score requirements.

WoMD said:

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Default scenario?

Interesting comments on the semi-professional landlords being hit the hardest. Might've been mentioned earlier, but it makes a lot of sense. The Airbnb crowd has exploded the last few years. As this didn't exist in 2008, I'm curious just how many of these properties are actually out there. I honestly can't see any way these properties won't be in the default category if they relied on financing. And do these properties even qualify for the option to defer mortgage payments?

This alone would make up a huge percentage of increased inventory in some parts of the country.

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A lot of these Airbnb properties are second homes etc. I operate three Airbnb properties but that is not their primary purpose. I use two of the them for employee housing for 4 months out of the year, then rent them out as short term rentals for extra income.

The third is a duplex in a ski resort town. One unit is long term rental and the second unit is Airbnb so I can block it off and use it when I want.

Mtn_Guide said:

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WoMD said:

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Default scenario?

Interesting comments on the semi-professional landlords being hit the hardest. Might've been mentioned earlier, but it makes a lot of sense. The Airbnb crowd has exploded the last few years. As this didn't exist in 2008, I'm curious just how many of these properties are actually out there. I honestly can't see any way these properties won't be in the default category if they relied on financing. And do these properties even qualify for the option to defer mortgage payments?

This alone would make up a huge percentage of increased inventory in some parts of the country.

---

A lot of these Airbnb properties are second homes etc. I operate three Airbnb properties but that is not their primary purpose. I use two of the them for employee housing for 4 months out of the year, then rent them out as short term rentals for extra income.

The third is a duplex in a ski resort town. One unit is long term rental and the second unit is Airbnb so I can block it off and use it when I want.

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Sounds like your system is a relatively good spot to be in comparatively speaking. But the question I pose is, how many people are going to be able to handle (or want to be) paying the entirety of multiple mortgages all of a sudden? Even with the deferment for a period of time, how long until those Airbnbs go back to being reserved at a rate high enough to pay for themselves? If this goes on long enough, I'd imagine that it will be a factor in some markets. And from my perspective, second homes will be the first to go anyway. I'm sure that folks are already considering unloading them while the supply and demand is in their favor, to get out in front of the problem before value goes down or it because a position of desperation.

Again, doom and gloom scenario, but it is entirely realistic if things persist IMO.

SteveBott said:

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Sorry but FHA are NOTHING like sub-primes. The underwriting, evaluations are totally different. Don't be fooled by down payment. Will FHAs foreclose? Sure and so will other loans. But the market is totally different now. We have much better evals from the lenders.

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2004-2008, due to creative financing there were 0 down mortgages being underwritten using stated income with no documentation or income verification


Non QM still exists but now requires 10-20% down and bank statements to prove income

I know all about non QMs. I tell people you can get those loans but do not want them. Some ugly terms

Non QM mortgages aren't necessarily higher risk. There is a specific definition of QM included with the ATR regulations. Interest only mortgages are non QM. One time close construction loans with a construction period over 1 year can be non QM. The terms QM and non QM are in no way related the what previously was called prime and subprime. We originate non QM mortgages with the same credit score requirements and down payment requirements as QM @ QM rate plus 0.25%.

jja79 said:

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Non QM mortgages aren't necessarily higher risk. There is a specific definition of QM included with the ATR regulations. Interest only mortgages are non QM. One time close construction loans with a construction period over 1 year can be non QM. The terms QM and non QM are in no way related the what previously was called prime and subprime. We originate non QM mortgages with the same credit score requirements and down payment requirements as QM @ QM rate plus 0.25%.

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Do you still have a buyer for your non QM?

JJ did not know your loans were nonQMs. All the lenders sending me pricing on their loan programs are 2-3 points above conventional. We used to call them Alt-A loans back in the day of subprime.

Alt-As, non-QM loans are documented in different 'alternative' rules and ratios. For example you can submit a bank statement loan. The lender will add up all your deposits into your accounts and use that for gross income. Self employeds need this loan at times.

Even the stated loans are coming back. But yes Alt-A needs top credit unlike subprime

We put them on the balance sheet.

Our non QM is probably 15% of our originations and are all full doc, same credit profile and fall into non QM primarily because of DTI. Minimum 20% down payment and are typically 760 mid score and are all jumbo.

Yea those profiles make sense.

What percentage of borrowers max out (or close there) the qualified amount?

Very very few. I typically can approve 50% more then they want to Pay. Sometimes 100% more

Wonder how the effect of -$30/Bbl oil will affect the TX and NM markets now?

Crazy stuff happening.

94chem said:

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inoffensive username said:

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jlAG97 said:

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Can't buy forever homes if you won't be able to get out of your current one without absorbing huge losses

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Well if both homes loss 15% and you buy a more expensive expensive home, you save money

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Either way, owning a home isn't about making money. If you want one, buy one. If you don't, don't. If you buy one that's bigger than you need, getting a good price is overrated. The upkeep will make you sorry you splurged.

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This. Being house poor sucks.

SteveBott said:

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Very very few. I typically can approve 50% more then they want to Pay. Sometimes 100% more

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How much money do most people put down? On average?