Mortgage Mayhem

[MixedPlateBroker]

Re: Mortgage Mayhem

Beware! The United States is at the peak of the worst national housing bubble in history. It's only begun. There will be blood in the streets.

Alarmist –noun 1.a person who tends to raise alarms, esp. without sufficient reason, as by exaggerating dangers or prophesying calamities.

If we were at the peak of a bubble, median sales prices would have been increasing until today. That's not the case. There's already been a slight downturn in values nationally w/some moderate regional downward adjustments.

To protect yourself;

1) Do not trust Mortgage Brokers
2) Do not trust Real Estate Agents.

They are both motivated by commission only.

I appreciate your concern, but it's a bit misguided. I personally know a number of mortgage brokers who get paid a base salary. And I'm sure we've all seen those Help-U-Sell realtor signs -- they work for a flat fee.

Just as in any occupation, there are good and bad apples. Most people wouldn't suggest that we don't trust the Chinese because they're trying to kill us with lead paint and tainted toothpaste. And so we should judge each person as an individual.

1. If you currently have a "Pay Option Adjustable Rate Mortgage", get out of it if you can afford to. If you can't afford to get out, Americas Watchdog highly recommends that you contact your lender & demand a fixed rate product. If this does not work, the homeowner might want to consult with a bankruptcy attorney.

First of all, it's not cool to demand a change to your mortgage terms when you've signed documents stating you understood what you were getting into and that you agree to repay the lender according to the stated terms. At least ask nicely. And bankruptcy should be the last resort for homeowners, especially considering today's tightened guidelines and the potential mortal blow to your credit scores. The FHASecure program is designed to help homeowners avoid foreclosure, if they have some (at least 2.25%) equity. It's better to look into short selling your home if you're upside down. Consult with a financial adviser (not the lender) to see if it's feasible.

2. If a homeowner is attempting to sell a home in many major US markets they will either have to lower their asking price, or they might be better off renting the home for at least three years.

You should consult with your realtor and escrow officer to find out what comparable homes in your neighborhood have recently sold for. The days of getting an offer with two backups in the first week on market are over. You could lose out on thousands of dollars by prematurely cutting your asking price. And not everyone can afford to absorb three years of negative cash flow on a rental property if rents are soft.

3. If you are a buyer, wait if you can.

In the opinion of Americas Watchdog, 2008 will bring more real estate price reductions in the southwest, southeast and northeast. In some markets like California, reductions could be 15% or more.

Foreclosures will get a significant bump in the next few years from market fallout. If you're thinking to pick up an investment property at auction, waiting = losing.

4. If you are an existing homeowner with adjustable rate mortgage, refinance your mortgage into either a 30 year fixed rate mortgage, or get a five or seven year adjustable rate mortgage and stay put. If an existing homeowner has a good mortgage product---say put.

Going from an ARM to an ARM doesn't make any sense in today's market, except in few extreme scenarios. The spread between ARM and fixed-rate mortgage (FRM) rates has never been smaller. Get a FRM if you're refinancing.

5. Individuals who are Veterans, homeowners/consumers who have average to even poor credit or first time homeowners, should strongly consider getting a FHA or VA Mortgage. FHA & VA mortgage products might be the absolute best mortgage products available in today's mortgage arena.

Finally something I can agree with.

6. If a homeowner or consumer is looking for a A+ honest mortgage lender, Americas Watchdog has endorsed American Interbanc as the best priced conventional mortgage lender doing business in the US for individuals with good to excellent credit ("the mortgage lender bankers go to"). American Interbanc's web site is at Http://americaninterbanc.com and their toll free number is 1-800-724-0004.

7. Do not finance or refinance your home without the National Mortgage Complaint Center doing a thorough examination of your mortgage documents. On average the National Mortgage Complaint Center saves consumers $500 to $1000 on their mortgage fees. The cost of this inspection service is $65, or for a full mortgage review to see if a consumer was cheated the cost is $150. The National Mortgage Complaint Centers Web Site is located at Http://NationalMortgageComplaintCenter.Com & their phone number is 1-866-714-6466.

Neither Americas Watchdog nor National Mortgage Complaint Center is listed on the national BBB website. And both the aforementioned companies and American Interbanc all seem to rely heavily on PR pieces (direct and fed to media outlets) to pat themselves on their backs. And for a lender so highly praised by Americas Watchdog, independent praise by satisfied clients is noticeably absent on the Google-scape and here on their BBB page.
It doesn't take much imagination to hypothesize that perhaps the three companies are heads sprouting from the same corporate beast. Examination of mortgage documents? They could be passing client and loan info to American Interbanc in an attempt to cherrypick business. Direct lenders have been accused of similar practices in the past.

8. Consumers should not fall for too good to be true "no cost" mortgages or Internet solicitations.

Another pinch of truth here.

9. Consumers & homeowners should demand honest answers from elected officials. Americas Watchdog for years has been advocating that banks and mortgage bankers disclose the same fees that mortgage brokers must disclose. Specifically "yield spread premiums". A "yield spread premium" is a kick back mortgage lenders get for increasing a consumers interest rate/monthly mortgage payment. Mortgage Brokers have to disclose these fees, banks or mortgage bankers do not.

OK. So now they're saying mortgage brokers can be better to deal with than direct lenders or banks? No argument here.

BEWARE: If it is cheaper to rent than to buy with a 20% downpayment and a FIXED 30 year rate, you are being screwed.

Most anyone who's been renting the same place for at least five years in an area with increasing population could expect to pay 50%-100% more on a mortgage for a comparable place now -- unless they've been getting hit with regular rent increases. The warning might hold water in some place like Buffalo, NY though.

[SusieMisajon]

Re: Mortgage Mayhem

http://afp.google.com/article/ALeqM5...pjRy9lr1u3nIzw

Britain is right now, at this moment, having a bank run...the lines of people waiting to get their money out reminds me of another time, back in the
late twenties.

[kamuelakea]

Re: Mortgage Mayhem

If we were at the peak of a bubble, median sales prices would have been increasing until today. That's not the case. There's already been a slight downturn in values nationally w/some moderate regional downward adjustments.

Okay so we are just going over the peak of the roller coaster. So what? Does that mean its a great time to buy?

I appreciate your concern, but it's a bit misguided. I personally know a number of mortgage brokers who get paid a base salary. And I'm sure we've all seen those Help-U-Sell realtor signs -- they work for a flat fee.

Whatchout gang. Dis guy is one soood talkah. "a number of" could be one. and "base salary" doesn't rule out the fact that most are paid on commission or percentage as well.

As far as the "flat fee realtors", they are all flat fee. Whether its 6000.00 or 6%, its still a flat fee. They only way they get that fee is by closing the deal and thats the only thing they work for, closing the deal. That is why one should never trust any agent or broker. NOBODY.

First of all, it's not cool to demand a change to your mortgage terms when you've signed documents stating you understood what you were getting into and that you agree to repay the lender according to the stated terms.

What is not cool is for an entire industry to turn a blind eye to the total abandonment in lending standards over the last few years and for people like you to go whistling along like there is nothing wrong. The govenement is most at fault for letting this happen. The mortage brokers and real estate agents and appraisers are just the slimely implementors.

You should consult with your realtor and escrow officer to find out what comparable homes in your neighborhood have recently sold for.

Never consult with either of these clowns who only have one interest, close the deal. Consult with a financially smart friend or relative who does not have a stake in the deal. Hire a financial advisor to look over you income and ability to pay etc. Never trust a realtor or mortgage broker.

Foreclosures will get a significant bump in the next few years from market fallout. If you're thinking to pick up an investment property at auction, waiting = losing.

I don't know exactly what you are saying here. The only people who are going to lose are those who bought in the last 4 years, who cannot afford their current or future payments and who do not sell NOW. They are going to be forclosed upon and so they will lose.

Neither Americas Watchdog nor National Mortgage Complaint Center is listed on the national BBB website.

BBB is meaningless. They call businesses and try to EXTORT a membership fee so that you can be listed as an "approved business". Has nothing to do with whether the particualar business is reputable or not.

Most anyone who's been renting the same place for at least five years in an area with increasing population could expect to pay 50%-100% more on a mortgage for a comparable place now

Yes, and real estate travels in cycles. That is why anyone considering buying a home now should simply compare their after tax saving cost of buying to the amount they could rent the same home for. Take the cheaper option.

For example, if a 80 year old cottage in Kapahulu would sell for 750,000, then your mortgage and taxes on a 6% 30 year would be about 4500 per month. After tax savings of about 30%, you would still be paying 3000 per month. Plus you are responsible for all repairs and home owners insurance. Now you're back up to 3500 a month. If you can rent the same home for less at a time when we are closer to the peak than the trough, then you are way better off renting.

What this current environment and its mortage brokers and real estate agents will do is tell you they can get you a 4.5% teaser loan so that the initial payments will be closer to the cost of renting. Then in 5 years, your payment doubles and the home is now worth 550,000 and your are screwed. But the mortgage broker and the real estate agent got their commission and are enjoying life.

Forget all the rest of the mumbojumbo big word stuff that they used to convince you and confuse you. Just compare ownership costs and rental postential of the same property and make your decision that way.

There is almost no reason for any average working stiff to get any loan other than a 10 to 20% down, FIXED rate mortgage. None. These were historically loans given only to wealthy investors. Now they are entrapping millions of Americans into debt slavery and or forclosure.

Again, Beware my friends. Be very carefull.

[SusieMisajon]

Re: Mortgage Mayhem

Is it true that if your mortgage company goes broke, you stand to lose your house, even if you have kept up with the paymens?

hopeful bump

[MixedPlateBroker]

Re: Mortgage Mayhem

Susie,
Bottom line is that you don't have to worry. Most companies - whether they are banks, lenders, etc - sell the mortgages they fund to the secondary market within a year. In the off chance that a company is holding your mortgage when it files bankruptcy, the bankruptcy trustee will supervise the selling of mortgages to the secondary market. In some cases, entire divisions of a company are sold off, which could include the loan servicing division.

The main thing is to contact whomever was last servicing your mortgage if they happen to file bankruptcy so you can make sure your payment goes to the right place. Another tip to remember is never sign up for the automatic payment service of the company which holds your mortgage. I've spoken to dozens of homeowners who've had their credit histories damaged because automatic payments weren't applied correctly or because of some "glitch" in the system. It's better to pay the tradiitonal way via check as you'll have proof of payment on your account statement.

[SusieMisajon]

Re: Mortgage Mayhem

Thanks for the reply.

[MixedPlateBroker]

Re: Mortgage Mayhem

Okay so we are just going over the peak of the roller coaster. So what? Does that mean its a great time to buy?

Yes, it's a great time to buy ... if you're not a speculator simply looking to flip a home for quick profit. Real estate has always and will continue to be a great long-term investment. Look at any chart of median home prices that spans 20, 50, even 100 years and you'll see what I mean.

Whatchout gang. Dis guy is one soood talkah. "a number of" could be one. and "base salary" doesn't rule out the fact that most are paid on commission or percentage as well.

As far as the "flat fee realtors", they are all flat fee. Whether its 6000.00 or 6%, its still a flat fee. They only way they get that fee is by closing the deal and thats the only thing they work for, closing the deal. That is why one should never trust any agent or broker. NOBODY.

By "a number," I mean dozens. And the term "base salary" already inherently implies that someone gets paid something else on top of their base - whether it's hazard pay, a monthly bonus, commission or what have you - otherwise it would just be called a salary.

Most realtors are actually paid commission. Sorry to bore most of you with the following clarification, but "flat fee" means a person performs a specific service for one set price regardless of the dollar amount of the transaction whereas "commission" means a person performs a service for a fluid price dependent on the dollar amount of the transaction. This dusty S-B article might help if I'm still not making sense. If someone was selling a million-dollar property, it's quite obvious that $6,000 is not the same as 6%, which would be $60,000.

Most people who want to buy, sell or refinance a home actually want to close their deals as quickly as possible. I have yet to run across a client who would prefer the process to be a long, drawn-out affair. I know I certainly wouldn't trust someone getting paid minimum wage to go the extra mile to get me the best financing to purchase a home or to sell my home for top dollar within 45 days of putting it on the market.

Whatchout gang. Dis guy is one soood talkah.

Thank you for the compliment. "Sood" is a brave person or victor of enemies, apparently.

What is not cool is for an entire industry to turn a blind eye to the total abandonment in lending standards over the last few years and for people like you to go whistling along like there is nothing wrong. The govenement is most at fault for letting this happen. The mortage brokers and real estate agents and appraisers are just the slimely implementors.

It's amazing how this guy abandons his talking points and jumps to the next one once his position becomes indefensible. I'm surprised he doesn't work for the White House. But seriously, broad negative generalizations are really in poor taste. They're more typical of racists, misogynists and other hate mongers. Like I said before, judge each person as an individual. Lending guidelines aren't to blame, the people who abused or circumvented the guidelines are to blame -- those ... individuals. I'm sure no one would appreciate it if I went around ranting that Big Island transplants from Oahu shouldn't be trusted because they can't handle the pressures of big city life and ran away to the Big Island. Good thing I'd never make such an ignorant statement.

Never consult with either of these clowns who only have one interest, close the deal. Consult with a financially smart friend or relative who does not have a stake in the deal. Hire a financial advisor to look over you income and ability to pay etc. Never trust a realtor or mortgage broker.

A financially smart friend or relative who has no knowledge of the dollar amount of recent home sales in your neighborhood or what the current listings are is about as helpful as any stranger picked at random shopping at Ala Moana. I love my mom, but I'd never rely on her for legal defense counsel if I somehow found myself on trial.

I don't know exactly what you are saying here. The only people who are going to lose are those who bought in the last 4 years, who cannot afford their current or future payments and who do not sell NOW. They are going to be forclosed upon and so they will lose.

Again moving away from the talking point. My advice was in response to the statement that buyers should wait, if they can. If a buyer found a good deal among foreclosure listings, they should not wait to make an informed bid. Waiting means they simply miss the opportunity to possibly pick up a property at well below market value. Anyone who follows the real estate market knows that foreclosures are up this year and the forecast is for the trend to continue.

BBB is meaningless. They call businesses and try to EXTORT a membership fee so that you can be listed as an "approved business". Has nothing to do with whether the particualar business is reputable or not.

That's funny. According to his highly-touted Americas Watchdog site:

Top Five Do’s

1. Check out the mortgage lender you are about to do business with. Check with the local Better Business Bureau and check the rip-off report on line for any negative reports or postings about the lender.

Yes, and real estate travels in cycles. That is why anyone considering buying a home now should simply compare their after tax saving cost of buying to the amount they could rent the same home for. Take the cheaper option.

For example, if a 80 year old cottage in Kapahulu would sell for 750,000, then your mortgage and taxes on a 6% 30 year would be about 4500 per month. After tax savings of about 30%, you would still be paying 3000 per month. Plus you are responsible for all repairs and home owners insurance. Now you're back up to 3500 a month. If you can rent the same home for less at a time when we are closer to the peak than the trough, then you are way better off renting.

What this current environment and its mortage brokers and real estate agents will do is tell you they can get you a 4.5% teaser loan so that the initial payments will be closer to the cost of renting. Then in 5 years, your payment doubles and the home is now worth 550,000 and your are screwed. But the mortgage broker and the real estate agent got their commission and are enjoying life.

Forget all the rest of the mumbojumbo big word stuff that they used to convince you and confuse you. Just compare ownership costs and rental postential of the same property and make your decision that way.

There is almost no reason for any average working stiff to get any loan other than a 10 to 20% down, FIXED rate mortgage. None. These were historically loans given only to wealthy investors. Now they are entrapping millions of Americans into debt slavery and or forclosure.

Again, Beware my friends. Be very carefull.

This is simply tackling the issue ass backwards. First of all, prospective homeowners should determine how much house they can afford. I won't go into the boring details since there are countless online calculators which would help determine and explain this for them.

Then a person should decide how long they plan to hold onto the property. Blindly insisting on a 30-year fixed-rate mortgage doesn't make much sense if you're in the military, won't be in Hawaii for longer than six years and don't plan to keep the property. In that case, a lower-cost, lower-rate 7/1 Adjustable Rate Mortgage would provide initial savings and monthly savings with no downside over a 30FIX.

A person also needs to look beyond simple tax deductions and the cash flow difference of renting vs. buying. They also need to take into account that a home purchase means they're acquiring an asset which adds to their net worth as time passes and also grows in value. The $750,000 cottage in Kapahulu may also be selling for $800,000 in two years and interest rates may have increased one or even two percent in the same period.

All that said, common sense tells most people that in certain situations hiring an expert--one with whom you've developed a relationship and whom you trust--is often better than going it alone. Yes, you can always ask your local Home Depot for advice on how to repair the multiple leaks in your home's plumbing. You can do research online and even recruit your neighbor for muscle. But I think most of you would rather hire a plumber who is in good standing with the BBB and perhaps whom your friends and family have had good experiences.

[Mokihana]

Re: Mortgage Mayhem

DH and I own a real estate appraisal business. One of the traps we've seen happen over the last few years is when people buy large houses, with zero down and interest-only payments. Three years later they're in trouble and end up in foreclosure.

Not saying all the loans like that are bad; but we're starting to see more foreclosures here in Oregon because of loans like that.

Right now it's a buyer's market here. Homes are taking longer to sell, many times sellers are having to give concessions, and house prices may begin coming down soon. So far, so good, however.

It's amazing to me when I see a house sell for say, $795,000 or so... CASH. Once we did an appraisal where the guy bought a multi-million dollar mega house for cash. He was a basketball player.

I think I might be in the wrong business! However, I'm only 5' 4", so basketball is out.

[kamuelakea]

Re: Mortgage Mayhem

Yes, it's a great time to buy ... if you're not a speculator simply looking to flip a home for quick profit. Real estate has always and will continue to be a great long-term investment. Look at any chart of median home prices that spans 20, 50, even 100 years and you'll see what I mean.

I'm am sure you are one of the few honest mortgage borkers oh I mean brokers out their but this statement is either terribly ignorant or dishonest.

I believe people like Robert Schiller, YALE Economist, studies this for a living, has no economic interest in his conclusion (that I can tell). He has studied house prices in the U.S. from 1890.

His conclusion: Home prices have risen at the rate of inflation plus 0.4%. Yep that's whopping 0.4% per year for you having to pay for all improvements, all property taxes and insurance. Not a very good investment when compared to the stock market which has beat inflation over the long run.

Fact is home prices will ultimately return to prices determined by income. Median home price in Hawaii has always been from 3 to 5 times median household income. You do the math.

It's amazing how this guy abandons his talking points and jumps to the next one once his position becomes indefensible. But seriously, broad negative generalizations are really in poor taste.

Once again, you shift from sounding like you are trying to be a reasonable professional to another mortgage borker, i mean broker. If you can look yourself in the mirror and say that you don't recognize that we are at the end of a 3 to 5 year period which defines the most lax lending standards in the history of the country maybe ever but at least since the 1920s leading up to the Great Depression, then you are ignorant because that is a fact.

There has never been a credit housing bubble like this before. If I am wrong, please tell me when??? No doc loans, ARMs, negative amortization. Loans for illegal immigrants. No income? No Problem. Bad credit? No problem. That has been the environment the last few years. If you don't see that, then you are not very knowledgable about your own business.

This is simply tackling the issue ass backwards. First of all, prospective homeowners should determine how much house they can afford.

If you don't know this (I'm sure you are just ignoring it), condo prices in Honolulu droped nearly 50% in value (including inflation) from just 1993 to 1998. How would your military family with the ARM you talked them into in 1993 feel in 1998 about your financial advice???

Like I said. When a realtor or a broker talk, run.

[kamuelakea]

Re: Mortgage Mayhem

When you buy a home using a mortgage broker, you become a homedebtor, not a home owner. You either rent money from the bank or you rent a home from the landlord.

The best financial decision is to do which ever one is cheaper.

Home ownership purchases stability and does force people who are incapable of saving to save but home buying and home owning is a terrible investment.

[68-eldo]

Re: Mortgage Mayhem

When you buy a home using a mortgage broker, you become a homedebtor, not a home owner. You either rent money from the bank or you rent a home from the landlord.

The best financial decision is to do which ever one is cheaper.

Home ownership purchases stability and does force people who are incapable of saving to save but home buying and home owning is a terrible investment.

As I approached the time when I would be out on my own my mother made a statement that I remember to this day. She said “When you rent a home all you are doing is paying someone else’s mortgage for them”.

You can rent a home for 30 years and it still belongs to the landlord and you will still pay rent long after the mortgage is paid off. Or you can buy a home and at the end of 30 years you will own the home and stop paying when the mortgage is paid off.

I bought this house in 1980. IIRC my mortgage payment was in the $700 a month range. Today my mortgage is nearing the point where I can pay it off with cash from my bank account. My payments are in the mid $800s. The increase was because of the real estate taxes and insurance premiums the mortgage company pays on my behalf. If I was to rent this house it would most likely cost me somewhere in the $3000+ range.

It sure looks to me like over a 30 year span buying a house was a far better investment then renting.

But if you don’t plan on being around in 30 years and don’t want to pass the equity on to an heir then by all means rent. A lot of people make money on renters.

[GeckoGeek]

Re: Mortgage Mayhem

He has studied house prices in the U.S. from 1890.

His conclusion: Home prices have risen at the rate of inflation plus 0.4%. Yep that's whopping 0.4% per year for you having to pay for all improvements, all property taxes and insurance. Not a very good investment when compared to the stock market which has beat inflation over the long run.

Fact is home prices will ultimately return to prices determined by income. Median home price in Hawaii has always been from 3 to 5 times median household income. You do the math.

We can talk about the stock market as a whole, we can talk about a specific sector such as tech stocks, and we can talk about individual stocks. Depending on which one we're talking about, we can get different answers.

The same goes for "the housing market". We can talk about the market in the US as a whole, we can talk about one area (like Hawaii), or we can talk about one property.

Hawaii is a unique situation. Unlike the mainland where people are free to move out further to find lower cost housing, in Hawaii there is no place to move to. There is also a rather limited amount of housing. As a result, in Hawaii, supply and demand rules. The prices rise until the number of people who can afford the housing matches the number of units available. The only way prices are going down is some net drop in income or some mass movement away from Hawaii.

[kamuelakea]

Re: Mortgage Mayhem

As I approached the time when I would be out on my own my mother made a statement that I remember to this day. She said “When you rent a home all you are doing is paying someone else’s mortgage for them”.

It sure looks to me like over a 30 year span buying a house was a far better investment then renting.

Your mother got you to purchase stability. But you may not have made the best financial decision. I agree that your mom is probably giving good advice for most people since most people are incapable of saving. Any extra money at the end of the month is beer money, smoke money or vegas money.

If you were able to pay 1000 less per month for 30 years. That amount is not unreasonable in Hawaii today since renting a single family home is at least 1000 less. Remember, when you rent, no new roof, no plumbing or electric bills, no property taxes etc etc.

If you invested the 1000 in the stock market and added 1000 per month. After 30 years you would have 1,183,677 in the bank. Plenty of equity to pass on and an income of about 50,000 per year if invested in conservative bonds.

Again, I know this is hard for most people, but housing values increase by barely over the rate of inflation. If your home value rises by the rate of inflation, you have earned nothing. You are simply treading water.

But it is better than losing money and that is why home ownership is good for most people. Not because it is a good investment but because it forces weaker people (financially) to at least end up establishing shelter for themselves.

[Nords]

Re: Mortgage Mayhem

I'm am sure you are one of the few honest mortgage borkers oh I mean brokers out their but this statement is either terribly ignorant or dishonest.

This is interesting. Usually it's the consumer whose seemingly straightforward questions make the sales guy defensive and insulting. (I'm recalling all the times I've seen this in threads started by financial advisors & annuity salesmen.) This time it's a customer who's using terms like "borkers" and the mortgage broker is actually coming off as a pretty reasonable human being.

Maybe we could keep the insulting terms out of this thread so that I can learn more about the mortgage business from someone who seems to have a balanced view of it.

Home prices have risen at the rate of inflation plus 0.4%. Yep that's whopping 0.4% per year for you having to pay for all improvements, all property taxes and insurance. Not a very good investment when compared to the stock market which has beat inflation over the long run.

Your numbers are correct but you're not addressing the leverage issue.

If I walk into a brokerage and show the stockbroker a few pay stubs & tax returns, and then propose buying $500K of Alexander & Baldwin stock for nothing down with a promise to pay for it over the next 30 years, I don't think they're going to go for it (even though they're on a commission). Yet somehow I can persuade a mortgage broker to give me a "nothing down!" loan for a depreciating pile of construction materials on land whose value rises at about the rate of inflation.

I think a good reason to own land/homes is that little investors like us can acquire ownership at a very low down payment (admittedly with high leverage) and wait for the price to rise. If we can handle the carrying costs then the sale can bring profits far in excess of the actual investment. It's difficult to achieve the same leverage with stocks, especially since their value is so much more volatile than most land/homes.

Hang out a sign saying "Cheap stocks on margin!" and everyone runs away fast. Hang out a sign saying "Cheap homes with cheap loans!" and customers will line up. Each investment has advantages & disadvantages, and having either one go bad can put its owner in bankruptcy court. I'm a homeowner, landlord, and stock investor and I wouldn't put all of my investments only into one of these assets.

Median home price in Hawaii has always been from 3 to 5 times median household income. You do the math.

One number has averaged a range of multiples of another type of average.

Yet individual home values have gone far outside those averages, and in both directions. Some homes have been tremendous investments and others have been horrible mistakes. And depending on what time periods you're looking at, they've been both.

We bought a Waipio Gentry home in 1989 and its value was killed a few years later when, among other reasons, Waikele's new homes came on the market. Its value subsequently soared when Central Oahu Regional Park was built. Median home prices were 3-5x median household income the entire time, but if I'd had to sell during the first few years then I'd've been one unhappy camper-- and even more miserable when I saw how values recovered.

The math can be a lot more complicated than it looks. Schiller does make it look easy, though.

How would your military family with the ARM you talked them into in 1993 feel in 1998 about your financial advice???

Hey, we were one of those families.

Most military families rent when their tours are so short but an ARM can make buying a lot cheaper than renting. (Admittedly at the risk of having the home value drop and wipe out your equity.) We bought because we expected to stay beyond a three-year tour and expected to build some equity (boy were we wrong-- for the first 10 years anyway). The ARM saved us a lot of money and when mortgage rates moved in our favor, we refinanced to a fixed rate.

When we were unexpectedly relocated to San Diego it wasn't much fun making payments on that fixed-rate mortgage, despite having decent tenants. But now that home values have skyrocketed to the other end of that range of median values it's a lot more fun being a homeowner.

During those periods I never cursed my mortgage broker. I may have blamed myself for making bad decisions (or for making decent decisions at bad times) but I'm the guy who signed all those papers claiming to understand that I knew what I was getting into. And at 18 years since we bought the house we've been happy with the results.

Like I said. When a realtor or a broker talk, run.

I think the information can be good or bad, as well as the credibility of the person giving it. Telling us to run away from all of them, good or bad, doesn't do much for the credibility of the person giving that advice...

[kamuelakea]

Re: Mortgage Mayhem

Hawaii is a unique situation. Unlike the mainland where people are free to move out further to find lower cost housing, in Hawaii there is no place to move to. There is also a rather limited amount of housing. As a result, in Hawaii, supply and demand rules.

Hawaii is not terribly unique. Economic fundmentals rule everywhere. However, you are absolutely correct, it's always supply and demand.

The only thing unique about Hawaii is that there are ethnic groups that believe only Hawaii can provide them with the ethnic environment they want to live in. There are no other Plantation Asian or Native Hawaiian communities in the United States. Therefore, these groups are willing to pay more for their homes. They do it by working 2 jobs, living with multiple families etc. We all know this.

In the US as whole, median home prices have always been around 3 times median income. In Hawaii and other "desirable" or high demand locations, a median home value has always been 3 to 5 times median income. THIS IS HE ONLY DIFFERENCE between Hawaii and anywhere else. Homes are more expensive in Hawaii and always have been and always will be.

However, current median home price is 665,000. That is closer to 10 times median income.

That is a bubble. That bubble will pop. When it does, anyone who bought in the last few years will be hurtin.

Remember supply and demand is more complicated with homes because people don't pay cash. Most people use monopoly money provided by the government. The government has been dumping money into the system like never before allowing people to overpay for homes all over the country including Hawaii.