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America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

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Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#91

Post by nommm-nommm »

NikolaNovak wrote: post #84
John23832 wrote: post #29

Earlier quoted context omitted.

> Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. I think that is blaming the victim. As the article says, you have repair people describing the terms of the loan to people. If they don't understand what they're selling (and I'm sure they don't) then how can you expect the average person to? Not to mention the pressure selling that is probably being used…

Can you elaborate on the homeowners considering their home an investment - and why they shouldn't? I've moved from Europe to Canada 20 years ago, and I'm still coming up against it all the time - I consider home/condo a utility, a bill paid for purpose; it can go up, but it can also go down. EVERYbody around me thinks I'm crazy and that houses are #1 best investment ever.

Most Americans (and apparently Canadians) think their home is a very good place to park their entire net worth. Meaning they think its guaranteed to appreciate and appreciate faster than all other assets and investments a person has.

They also tend to only look at raw numbers that look impressive unless you don't think about it too much rather than the whole picture. Grandma bought her house in 1970 for $10,000 and sold in 2005 for $100,000 (made up example). Looks impressive at a glance, however, What's the carrying cost of the house, transaction costs, inflation, and the performance of other investment vehicles during that time period?

This thinking is part of what drove the 2000s housing bubble. Its also part of what causes people to become "house poor," meaning a very large part of their income and assets go towards their primary residence leaving them unable to save any money and have no retirement fund.

http://www.usatoday.com/story/money/personalfinance/2014/05/...

>a recent Gallup poll shows that Americans now believe housing is the best long-term investment, beating out stocks, bonds, and gold.

The reality is house prices stay about lock step with inflation on average over the long haul. There's other reasons why I house is a bad investment even if they did outpace inflation. Not that they are a bad thing to buy or own, I am a homeowner myself, its just not a great financial investment.

The American government also subsidizes home ownership in various ways which can play into the fantasy.

>I consider home/condo a utility, a bill paid for purpose; it can go up, but it can also go down.

This is a great attitude. A home can be a fantastic thing to own. It is great at providing housing! It can provide a sense of pride. Its just not a great financial investment and every portfolio should be diversified even if it were.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#92

Post by Bartweiss »

lllr_finger wrote: post #26
Bartweiss wrote: post #21

Earlier quoted context omitted.

Changed within the last hour.

Even with blue-green deployments and a separate AMP solution, it's unlikely that they did a during-business-hours release just to prevent paywall workarounds for a tiny subset of their pageviews.

Agreed.

But by observation, it did change during that timeframe. Possibly they simply updated their AMP solution to better consistency with their non-AMP delivery, and this happened to be the effect we saw.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#93

Post by jholman »

John23832 wrote: post #58
roymurdock wrote: post #39

Earlier quoted context omitted.

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…

> I'll go ahead and say this. Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment.

I'll go ahead and say this. My home is certainly an investment. I allocated some capital to some real property, and this real property generates value for me every day, which I might have purchased otherwise (indeed, would have been nearly forced to). Because of the ability of my home to generate value in this manner, I expect that others might want to own it, and so it can probably be resold. I also am pretty optimistic about my ability to resell it for more than I bought it for, although perhaps not at such a price such that the purchase was as profitable as, say, buying an Vanguard ETF.

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#94

Post by [deleted] »

djrogers wrote: post #75
FireBeyond wrote: post #68

Earlier quoted context omitted.

"blame during the financial crisis of 2007-08 as many consumers took on home loans they had no intention of ever making good on" Citation needed - for the number of consumers who "took a mortgage they never had any intention of paying" (your example), versus "people who took on a mortgage they couldn't keep paying (after the ARM bubble, which, let's not forget, all the banks were promising would be a matter of "refin…

> people who took on a mortgage they couldn't keep paying (after the ARM bubble Citation needed - most of the indexes used for anchoring ARM rates either dropped or stayed steady leading up to and through the sub-prime mortgage crisis. An ARM fixed to LIBOR for example would have dropped in rate when it adjusted. Problems did occur with non-standard loan types - Interest only, balloon payment mortgages, etc. however…

[deleted]

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#95

Post by [deleted] »

djrogers wrote: post #75
FireBeyond wrote: post #68

Earlier quoted context omitted.

"blame during the financial crisis of 2007-08 as many consumers took on home loans they had no intention of ever making good on" Citation needed - for the number of consumers who "took a mortgage they never had any intention of paying" (your example), versus "people who took on a mortgage they couldn't keep paying (after the ARM bubble, which, let's not forget, all the banks were promising would be a matter of "refin…

> people who took on a mortgage they couldn't keep paying (after the ARM bubble Citation needed - most of the indexes used for anchoring ARM rates either dropped or stayed steady leading up to and through the sub-prime mortgage crisis. An ARM fixed to LIBOR for example would have dropped in rate when it adjusted. Problems did occur with non-standard loan types - Interest only, balloon payment mortgages, etc. however…

[deleted]

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#96

Post by [deleted] »

intrasight wrote: post #53
roymurdock wrote: post #39

Earlier quoted context omitted.

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…

I think you've hit the nail on the head when it comes to houses - people form irrational sentimental attachments to their real estate.

[deleted]

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#97

Post by lovich »

roymurdock wrote: post #39
John23832 wrote: post #29

Earlier quoted context omitted.

> Consumers can say no, and if they had better financial education and/or financial prospects, maybe they would. I think that is blaming the victim. As the article says, you have repair people describing the terms of the loan to people. If they don't understand what they're selling (and I'm sure they don't) then how can you expect the average person to? Not to mention the pressure selling that is probably being used…

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…

This maybe doesn't apply for many people in the us currently, but in my age group (late 20s) student loan payments are so high that it's not worth moving to a lower cost of living area. Staying in the city where the jobs are and the higher pay is, nets you more money at the end of the month even if rent is >30% of your pay.

Having a large static payment is making cost of living a much less important part of my cohorts finances

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#98

Post by chillingeffect »

SubuSS wrote: post #86
John23832 wrote: post #58

Earlier quoted context omitted.

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…

>Your home is NEVER and investment. A house that you own, maybe. But, I repeat, your home is never an investment. Can you expand a bit more on this? Usually it might not directly turn into an investment, but it does act as a 'savings vehicle' in many cases. For example when I moved to US a long time ago, the choice was between a 1200 rent and a 1600 mortgage (assuming I put a down of 25k or so). At that point it felt…

It's an illiquid investment that appreciates at a rate that varies in conjunction with inflation. You might win or lose, but it's tough to predict, varies with geographical area and in relation to inflation and wages.

There are many graphs that show aspects of this, here is one useful one I found: http://lesjones.com/2008/11/25/inflation-adjusted-us-house-p...

Re: America’s Fastest-Growing Loan Category Has Eerie Echoes of Subprime Crisis

#100

Post by ethbro »

John23832 wrote: post #58
roymurdock wrote: post #39

Earlier quoted context omitted.

I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." There are at least 2 sides to every loan - the originator and the borrower - and it helps to examine dynamics on both sides of the table. Is the book in the US generally stacked towards originators? Certainly, as I argue, with financial literacy being so low, most home-owners wanting to do anything to avoid moving, and family/…

> I'm not blaming the victim, I'm appealing for a more nuanced viewpoint than "fuck Wall St." I think we can amicably disagree. I'm not in the "fuck Wall St." camp. I understand what it is supposed to do and the value it is supposed to provide. > Maybe I'm wrong and I'm one of the lucky, shrinking few who still has this option, the option of mobility than once made the US great? Because I'm young and employable? Yes.…

> and to have spent money moving

Point that at the ~52k median US income, a long distance move + the inevitable missed weeks without a paycheck is not a trivial decision for a lot of people.

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