Our financial system is crumbling this week.

[lukethedrifter]

My area: Princeton Heights

BTW...I bought in October of 2006...right in that dip.

and I thought you were SoHa cool.


Check out the new Billy Goat Chip Factory and fried chicken joint yet?

I am not SoHa cool...by about 4 blocks. Funny story, there is a salon at the end of my block called SoHa (even though it is in Princeton Heights)...she's gotten angry calls from people in the South Hampton neighborhood complaining that she technically isn't in SoHa so she should change her name. Amazing.

I haven't checked out the Billy Goat Chip Factory and fried chicken joint yet...where are they at?

Loughborough and Macklind where there was a BBQ joint for awhile.

[TimeForGuinness]

We actually played it rather conservative considering what many people were willing to loan us.

We did too...I found out what they said we *could* afford, rather than what we *wanted* to afford. I was in between 2 and 3 times my salary (didn't count bonuses or wife's salary)...and we're very comfortable. We probably could have afforded more, but we were cool where we were at.

The bank was almost 5 times my salary...I about fell out of my chair. I laughed about how it was going to be furnished with air mattresses and that I would never be able to take a vacation or go out to a bar.

[Popeye_Card]

Why are they buying a house if they are month to month on their bills? That's a horrible idea. If someone bought a house in 05 and got laid off in 08 and has a year of mortgage payments built up and in 09 runs out of money, then that i understand.....however, that's not what is going on. a lot of people bought thinking they'd make a quick buck, then foreclosed when they realized they couldn't/couldn't afford their mortgage.

Just b/c a lot of people did it doesn't make it any less dumb.

Well define "month to month on their bills". Like I said, I have a stable income, savings, etc. And I own a house. But if I lose my job--and in the current job market it's no sure thing that you'll find a new one soon--I would look to put my house on the market about 1 month after being jobless. Because right now, it'll take several months to move a house unless you absolutely slash the price. And while my savings can last me a little while, without dipping into my 401k etc., I can't afford to make house payments for over a year.

If nobody bought houses unless they could cover the payments for over a year in case of emergency, hardly anyone would be buying a house.

Not month to month: (Savings + Unemployment for a year)/12 - Monthly Bills > 0

I guess that doesn't really define "not month to month" and it ignores a lot of stuff. But, back to my original point, that's how I would approach any loan, not just a mortgage.

I don't know how realistic that is for a good majority of Americans. For a $200k loan, you're talking about ~$20k just for the mortgage over a year. Plus utilities (another ~$5k a year). Plus any car payments. Plus any other bills. Most financial advisors aren't going to advise you to keep over $20k in liquid savings.

Yes, it's obvious that we live in a pretty debt-driven society. But I keep pretty darn good control of my finances and save pretty well, and even I would struggle mightily with being out of work for 12 months. Maybe not declare bankruptcy, but it would pretty much wipe me out.

[TimeForGuinness]

My area: Princeton Heights

BTW...I bought in October of 2006...right in that dip.

and I thought you were SoHa cool.


Check out the new Billy Goat Chip Factory and fried chicken joint yet?

I am not SoHa cool...by about 4 blocks. Funny story, there is a salon at the end of my block called SoHa (even though it is in Princeton Heights)...she's gotten angry calls from people in the South Hampton neighborhood complaining that she technically isn't in SoHa so she should change her name. Amazing.

I haven't checked out the Billy Goat Chip Factory and fried chicken joint yet...where are they at?

Loughborough and Macklind where there was a BBQ joint for awhile.

I loved that BBQ joint...I'll check it out soon. I was wondering why it looked cleaned up with a new awning.

[AWvsCBsteeeerike3]

Why are they buying a house if they are month to month on their bills? That's a horrible idea. If someone bought a house in 05 and got laid off in 08 and has a year of mortgage payments built up and in 09 runs out of money, then that i understand.....however, that's not what is going on. a lot of people bought thinking they'd make a quick buck, then foreclosed when they realized they couldn't/couldn't afford their mortgage.

Just b/c a lot of people did it doesn't make it any less dumb.

Well define "month to month on their bills". Like I said, I have a stable income, savings, etc. And I own a house. But if I lose my job--and in the current job market it's no sure thing that you'll find a new one soon--I would look to put my house on the market about 1 month after being jobless. Because right now, it'll take several months to move a house unless you absolutely slash the price. And while my savings can last me a little while, without dipping into my 401k etc., I can't afford to make house payments for over a year.

If nobody bought houses unless they could cover the payments for over a year in case of emergency, hardly anyone would be buying a house.

Not month to month: (Savings + Unemployment for a year)/12 - Monthly Bills > 0

I guess that doesn't really define "not month to month" and it ignores a lot of stuff. But, back to my original point, that's how I would approach any loan, not just a mortgage.

I don't know how realistic that is for a good majority of Americans. For a $200k loan, you're talking about ~$20k just for the mortgage over a year. Plus utilities (another ~$5k a year). Plus any car payments. Plus any other bills. Most financial advisors aren't going to advise you to keep over $20k in liquid savings.

Yes, it's obvious that we live in a pretty debt-driven society. But I keep pretty darn good control of my finances and save pretty well, and even I would struggle mightily with being out of work for 12 months. Maybe not declare bankruptcy, but it would pretty much wipe me out.

Then perhaps Americans shouldn't feel they're entitled to live in $200K houses. I think that has more than been proven.

[Popeye_Card]

Then perhaps Americans shouldn't feel they're entitled to live in $200K houses. I think that has more than been proven.

In that case, what should we do with the millions of $200k houses we have built? $200k doesn't go very far in most US cities.

I don't think it has much to do with "entitlement". That's what the market has established as a value for a house of moderate size and quality (or tiny and crappy in some markets). If those people don't buy and rent instead, then you're going to see a run-up in rental rates. Free markets and all that.

[Hungary Jack]

There really isn't anything wrong with debt, provided you use it to finance an asset that increases in value, e.g. a home. On average, you might borrow at 5-7% to finance an asset that under normal circumstances increases in value at 3% per year, but you also get a place to live.

It's borrowing beyond ones established (historical) means that can get you into trouble. If the monthly payments overwhelm you, there isn't much difference between a $200k house and $1 Million house.

And then there are those who speculated by borrowing at 5% on a teaser rate in anticipation of a 20% increase in value followed by a quick flip. I have zero sympathy for these people.

[AWvsCBsteeeerike3]

Why are they buying a house if they are month to month on their bills? That's a horrible idea. If someone bought a house in 05 and got laid off in 08 and has a year of mortgage payments built up and in 09 runs out of money, then that i understand.....however, that's not what is going on. a lot of people bought thinking they'd make a quick buck, then foreclosed when they realized they couldn't/couldn't afford their mortgage.

Just b/c a lot of people did it doesn't make it any less dumb.

Well define "month to month on their bills". Like I said, I have a stable income, savings, etc. And I own a house. But if I lose my job--and in the current job market it's no sure thing that you'll find a new one soon--I would look to put my house on the market about 1 month after being jobless. Because right now, it'll take several months to move a house unless you absolutely slash the price. And while my savings can last me a little while, without dipping into my 401k etc., I can't afford to make house payments for over a year.

If nobody bought houses unless they could cover the payments for over a year in case of emergency, hardly anyone would be buying a house.

Not month to month: (Savings + Unemployment for a year)/12 - Monthly Bills > 0

I guess that doesn't really define "not month to month" and it ignores a lot of stuff. But, back to my original point, that's how I would approach any loan, not just a mortgage.

I think you're expecting a lot. Most people were told to treat a house payment rather differently than other loans because they were supposed to think of them as assets which would appreciate and could even be used to secure additional loans. We got a home equity line of credit in order to make some improvements on the house, which now doesn't look so smart. My father is pretty smart about this stuff and he had no objection to it. My bank, which is pretty well respected and still in decent shape (and I'm very pleased with on the whole), was marketing this as though it were a good idea. Even Dave Ramsey makes homes an exception to his debt-free spiel. So homes have been treated as something different than other loans. I didn't know much about it at the time, and I trusted what other people said I could afford. We actually played it rather conservative considering what many people were willing to loan us.

See. Good for you. You're a beacon of common sense in a world gone mad...even though you say it wasn't a good idea, you haven't gone bankrupt because of it. good job. if everyone was like you, we wouldn't be in this position.

That all may seem to go against common sense, but the word from most experts was that common sense didn't apply in this area.

When experts start saying that, it's time to question the experts....especially the ones that stand to make money off you.

[Freed Roger]

And then there are those who speculated by borrowing at 5% on a teaser rate in anticipation of a 20% increase in value followed by a quick flip. I have zero sympathy for these people.

speaking of this, whatever happened to the house flipping shows that used to be on TLC etc? I don't notice them on at all anymore, -am I missing them? I would watch those with Mrs. Freed (-brain dead veg-out TV) most of it was West Coast centered - the LA area or Vegas. many of the house flippers would be clueless, yet managed to come out ok in spite of their stupidity, so it was a happy ending. I'm guessing that shows not on anymore because its no fun to watch without a happy ending.

[Hungary Jack]

And then there are those who speculated by borrowing at 5% on a teaser rate in anticipation of a 20% increase in value followed by a quick flip. I have zero sympathy for these people.

speaking of this, whatever happened to the house flipping shows that used to be on TLC etc? I don't notice them on at all anymore, -am I missing them? I would watch those with Mrs. Freed (-brain dead veg-out TV) most of it was West Coast centered - the LA area or Vegas. many of the house flippers would be clueless, yet managed to come out ok in spite of their stupidity, so it was a happy ending. I'm guessing that shows not on anymore because its no fun to watch anymore without a happy ending.

Maybe this is the "media" AD was referring to. I remember those shows. They'd buy a pig sty and spruce it up and sell it within 30 days before the first mortgage payment was due. Crazy stuff.

The next reality show will be some Wall Street layoff who has to make ends meet working at Pottery Barn and nights at a salsa club.