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Americans Hold Over $4.1T in Consumer Debt

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Re: Americans Hold Over $4.1T in Consumer Debt

#41

Post by obstinate »

peteretep wrote: post #39
slg wrote: post #17

The most dangerous problem with the housing crisis in 2008 was not the amount of debt. It was the feedback loop that was created by defaulting on that debt. Foreclosed homes naturally have a lower value than non-foreclosed homes. Homes are priced by looking at recent comparable home sales. If your neighbors to both your right and left have had their houses foreclosed on, the value of your home will go down. If the va…

> Foreclosed homes naturally have > a lower value than non-foreclosed > homes Why?

I don't think the statement you're quoting is correct, however, they do tend to have a lower value. Here are some reasons:

- Buying a foreclosed home is much more arduous due to bank processes, decreasing demand.

- Foreclosed homes tend to be in worse shape. The owners may not have had the means or desire to maintain after realizing they would eventually lose the home.

Re: Americans Hold Over $4.1T in Consumer Debt

#42

Post by [deleted] »

peteretep wrote: post #39
slg wrote: post #17

The most dangerous problem with the housing crisis in 2008 was not the amount of debt. It was the feedback loop that was created by defaulting on that debt. Foreclosed homes naturally have a lower value than non-foreclosed homes. Homes are priced by looking at recent comparable home sales. If your neighbors to both your right and left have had their houses foreclosed on, the value of your home will go down. If the va…

> Foreclosed homes naturally have > a lower value than non-foreclosed > homes Why?

[deleted]

Re: Americans Hold Over $4.1T in Consumer Debt

#43

Post by chrisabrams »

coredog64 wrote: post #28
rlpb wrote: post #23

Earlier quoted context omitted.

> Homes are priced by looking at recent comparable home sales. If your neighbors to both your right and left have had their house foreclosed on, the value of your home will go down. Surely the lower valuation on your home is incorrectly low, though? Or is there some actual reason why buyers would want it less?

The banks use "comps" to figure out the maximum loan value. Assuming the housing nearby as similar, their actual sale price provides the price signals markets crave.

Comps have nothing to do with loan value. Your income, credit, and assets and debt decide what your max loan value is.

Re: Americans Hold Over $4.1T in Consumer Debt

#44

Post by mikeyanderson »

peteretep wrote: post #39
slg wrote: post #17

The most dangerous problem with the housing crisis in 2008 was not the amount of debt. It was the feedback loop that was created by defaulting on that debt. Foreclosed homes naturally have a lower value than non-foreclosed homes. Homes are priced by looking at recent comparable home sales. If your neighbors to both your right and left have had their houses foreclosed on, the value of your home will go down. If the va…

> Foreclosed homes naturally have > a lower value than non-foreclosed > homes Why?

It also doesn't fit the real estate agents incentive structure so they don't show the foreclosed homes and thus less competition for purchase and thus lower price.

Re: Americans Hold Over $4.1T in Consumer Debt

#45

Post by aaronblohowiak »

chrisabrams wrote: post #43
coredog64 wrote: post #28

Earlier quoted context omitted.

The banks use "comps" to figure out the maximum loan value. Assuming the housing nearby as similar, their actual sale price provides the price signals markets crave.

Comps have nothing to do with loan value. Your income, credit, and assets and debt decide what your max loan value is.

your financing can be denied if the house doesn't appraise, depending on your deal with your lender

Re: Americans Hold Over $4.1T in Consumer Debt

#46

Post by dpweb »

grandalf wrote: post #33
omilu wrote: post #2

Combine low wages, increasing loan delinquency, and the probable start of trade wars with mexico and china and I can't see how this doesn't turn out to be like 2008 on steroids.

More likely we'll see more forms of non-dischargable consumer debt. This is debt which is not discharged when someone declares bankruptcy. Every time you hear a politician advocating more student loans (rather than more affordable higher ed), one of the reasons they do this is because student loans are non-dischargeable. Think about someone who is 18 and takes on lots of debt. There would be very little reason not to…

Defaulting isn't a big deal even to the banks. They can just price it into the product.

What would be interesting though would be credit offerings, cards for instance, that are not dischargable, but with better terms or interest rates.

My concern though is mandating classes of debt as non dischargable by law, banks wont necessarily pass the savings along to the customer, so the laws should allow certain types of debt to be dischargeable but subject to your agreement with the bank. So you get a non dischargeable card at 2 pts less than the normal one.

Re: Americans Hold Over $4.1T in Consumer Debt

#47

Post by [deleted] »

chrisabrams wrote: post #43
coredog64 wrote: post #28

Earlier quoted context omitted.

The banks use "comps" to figure out the maximum loan value. Assuming the housing nearby as similar, their actual sale price provides the price signals markets crave.

Comps have nothing to do with loan value. Your income, credit, and assets and debt decide what your max loan value is.

[deleted]

Re: Americans Hold Over $4.1T in Consumer Debt

#48

Post by grandalf »

dpweb wrote: post #46
grandalf wrote: post #33

Earlier quoted context omitted.

More likely we'll see more forms of non-dischargable consumer debt. This is debt which is not discharged when someone declares bankruptcy. Every time you hear a politician advocating more student loans (rather than more affordable higher ed), one of the reasons they do this is because student loans are non-dischargeable. Think about someone who is 18 and takes on lots of debt. There would be very little reason not to…

Defaulting isn't a big deal even to the banks. They can just price it into the product. What would be interesting though would be credit offerings, cards for instance, that are not dischargable, but with better terms or interest rates. My concern though is mandating classes of debt as non dischargable by law, banks wont necessarily pass the savings along to the customer, so the laws should allow certain types of debt…

> Defaulting isn't a big deal even to the banks.

True, but the ceiling on the amount that can be loaned to a person is limited by the market-driven interest rate for packages of dischargeable debt.

> not dischargable, but with better terms or interest rates

Yes, I think we'd see aggressive refinancing offers and all sorts of other semi-dark patterns... which would be irrelevant to the 98% who don't declare bankruptcy, but likely quite life-changing to those who do.

Re: Americans Hold Over $4.1T in Consumer Debt

#49

Post by slg »

obstinate wrote: post #41
peteretep wrote: post #39

Earlier quoted context omitted.

> Foreclosed homes naturally have > a lower value than non-foreclosed > homes Why?

I don't think the statement you're quoting is correct, however, they do tend to have a lower value. Here are some reasons: - Buying a foreclosed home is much more arduous due to bank processes, decreasing demand. - Foreclosed homes tend to be in worse shape. The owners may not have had the means or desire to maintain after realizing they would eventually lose the home.

You forgot the incentives for the seller. A home sale is likely the biggest transaction that most people are ever involved in. A traditional seller is more likely to hold off for the right buyer or price. For a bank, it is just one of many transactions. They are less likely to hold out for a specific price and will be happy to sell for 90 cents on the dollar to simply move on to the next transaction.

>I don't think the statement you're quoting is correct, however, they do tend to have a lower value.

I am curious why you say that quoted section was incorrect when you seem to agree that the value of foreclosed homes is lower.

Re: Americans Hold Over $4.1T in Consumer Debt

#50

Post by TheOtherHobbes »

NumberSix wrote: post #30

The United States has a total resident population (as of January 23, 2017) of 324,420,000 people (about 324 million). Source: https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Thus, $4.1 trillion in consumer debt works out to $12,638 per person. The Gross Domestic Product (GDP) in the United States was worth 18036.65 billion (about $18 trillion) US dollars in 2015. That is about $55,424 per person. Note…

Other consumer debt includes mortgages.

I'm sure there were people making similar arguments about the health of the US economy before 2008.

http://inflation.us/wp-content/uploads/2015/04/niareport84.j...

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