Credit Cards and defaulting - what can they do?

[Zeste]

Originally Posted by opiate82

Seriously, I don't see any way out of this for you than working yourself dead for the next 5 years at least.

I totally agree with the "working more" idea, but 5 years to pay off 40k? That seems a little extreme.

[Hachima]

5 years actually seems reasonable. If you figure that 40k of debt right now will actually cost you 60k to pay off because of interest (maybe more?) That averages out to paying $833 a month right now, which seems like a reasonable amount. And of course paying off the high interest debt asap as your budget allows.

edit: Calculators - Debt reduction planner is a nice tool you can use to plug in your actual debts/interest rates and it makes a plan for you to pay it off in the most efficient way for a given time period.

[Lyenae]

Originally Posted by Zeste

I know people say I should walk from the house, but if I can just stay in it, that equity will come back someday and I could end up with a huge down payment on another build.

Houses were the first to plummet with this recession, they will be the last to rise. If and when they do rise, it'll be on inflationary dollars. You need to ask 'why will my houses value rise', and not just assume it will. I wouldn't bet on it. There's a glut of houses on the market, taxes are ridiculously high, America's economy is in the shitter (and will be for at least 4 years ty big government Obama,) and the average American is a spender not a saver.

Houses aren't investments. They are a place to live. Nothing more. You need to wrap your head around that. The housing bubble that just deflated got so ridiculous that college students would buy a house with no money down hoping to get a free place to live, then turning around and selling it at higher values to cover their tuitions. That may have worked for a few that got in @ 2002/2003 and got out in 2006/2007.

The rest got fucked.

[splorge]

Originally Posted by Lyenae

Houses aren't investments. They are a place to live. Nothing more. You need to wrap your head around that. The housing bubble that just deflated got so ridiculous that college students would buy a house with no money down hoping to get a free place to live, then turning around and selling it at higher values to cover their tuitions. That may have worked for a few that got in @ 2002/2003 and got out in 2006/2007.

The rest got fucked.

i wouldnt say all real estate isnt investment. i agree the house you live in shouldnt be considered an investment, but there are quite a few people out there that make quite a lot of money on speculative real estate investments.

[Zeste]

Originally Posted by Lyenae

Houses were the first to plummet with this recession, they will be the last to rise. If and when they do rise, it'll be on inflationary dollars. You need to ask 'why will my houses value rise', and not just assume it will. I wouldn't bet on it.

I didn't buy a house, I built it for raw costs. I know there's all sorts of internet arguments... but come on. Let me say it again:

1. The land I got is in a very nice, established neighborhood that is doing good right now.

2. I was given 30,000 off the price of the land, which is still worth more than what I paid

3. I purchased all my raw materials through my father in-law, who is a huge customer here with the materials people and gave him the "25 year customer" discounts, on top of the "please buy from us" bubble-burst discount they were already giving

4. Labor costs were at a extreme low, and subs were fighting just to get our bids, going as low as they could.

5. I paid no contractor fees or profit. I also had an interest free construction loan from my dad.


Many of the costs of materials, concrete, and labor have already gone up since I finished. My appraisal, in the midst of the real estate wreckage, was still 100k more than I borrowed.


I don't see how it can't go up. Of all the houses built in mid-2008, you could NOT have built it cheaper.

Both sides of my family and my wife's family are very smart, successful builders and real estate businesspeople. I trust in their advice as far as what could happen to my house in 3-5 years.

To say that 5 years from now, a house built in the near pit of cheapness for raw costs and discounts won't go up in value is crazy.

[Lyenae]

Builders are not appraisers, they just produce buildings. As for real estate business people... they are the ones who kept telling everyone that 'house prices will always go up', and stupid shit like 'why throw money away by renting when you can own?'

You still really haven't said why in 3-5 years house prices where you live will go up. Who is going to afford higher mortages? Better yet, who is going to provide those mortages? Are rich people with savings going to move to your town? Are there expanding businesses near you and have employees seeking housing (anything relying on American spending will NOT expand for a few years)? How is employment in your area? Are there people currently renting who are looking to buy at higher prices?

I can't answer those questions for you. You have to answer them. If you can't answer them, or you can't produce a good reason for housing prices going up after answering them, then you need to reconsider your 'investment.'

[TheCutlery]

How would real estate NOT improve over the long term?

The price of materials goes up
The price of labor goes up

My parents built their house for 43k in 1981. Nowadays, it's probably upper end 100's, maybe low 200's. They paid it off 10 years ago. That's not an investment? Even 10 years ago, before the boom, it was still probably worth 100k. Could you invest the money better and see better returns doing something else? Maybe. But it's not like it's losing money or anything.

[GrobbeeTrull2.0]

It's not an investment when APOCALYPSE COMES!

[Hachima]

Depending on how close Zeste's house is to the national parks, it might make a good vacation rental property. It might be a good investment in that sense for the short term.

It would take a lot of commitment to move out/get it set up/maintain etc.
It could have the potential to pay the rent for another place, and make some extra money at the same time though. I'm sure there are some rental management places in the area that could consult with too.

[Lyenae]

Originally Posted by TheCutlery

How would real estate NOT improve over the long term?

Unless there are changes to supply/demand on the market, houses really don't gain any intrinsic value over time. Any value you think you gain after deducting property taxes/maintanence is a product of inflation. Houses gained value from 2001-2006 because of ridiculously easy to get credit.

I asked the OP why is living in his area/house going to be more desirable in the coming years. Demand is going to be down because banks aren't giving out loans as easily, the American economy right now is being held together by glue, and the average American is in debt. When demand is low, and American's are sweating from defaults on mortages, there's no fucking way home prices in the US are going up. In other countries, sure.

Outside of a few select areas in the US, no.

[Zeste]

Originally Posted by Lyenae

Builders are not appraisers, they just produce buildings.

What about the "appraisers" who appraised my home and the others near me? I live in a large subdivison that was just raw desert 2 years ago, and now has maybe 60 homes, with new ones being built every week. So I don't really get your point here. My house is already worth more than I owe as is.

As for real estate business people... they are the ones who kept telling everyone that 'house prices will always go up', and stupid shit like 'why throw money away by renting when you can own?'

Yes I am sure that most realtors are pretty dumb. My information and advice on housing is coming from some pretty secure and accomplished sources, so I'll just take their info over yours.

You still really haven't said why in 3-5 years house prices where you live will go up.

Who is going to afford higher mortages?
- People who didn't strangle themselves trying to flip homes 3-4 years ago and aren't totally broke. Where I live, it's mostly pretty well off business owners and entrepreneurs who still are making money and doing business.

Better yet, who is going to provide those mortages?
- Banks. How the fuck should I know. There's been 5 houses built on my block, with footings being dug right now for 3 more, and plans to finish out 10 more on the street in the next few months. The builders here are working 7 days a week and finishing the homes in around 45 days. I know you can say that shit isn't happening, but I drive past no fewer than 5 homes that were just BUILT and SOLD in the last 3 months, and then all the rest that are being built and under contract. And these aren't just little cookie cutter houses, they're quarter-acre lots with nice homes, full landscaping, stonework, multiple garages, each one is different.




Are rich people with savings going to move to your town?
- That is the majority of our new home purchasers, yes. Our city is a very large retirement and "getaway" community for well-off people. This is where the Californians with money come to retire or just relocate away from the crowds. I live within walking distance of several mid-high range golf courses, and our city also has probably 3 ultra-high end golf courses with homes from 800k to 2mil. So when you ask about "rich people", then yes, they are moving here. In fact, they are some of the ONLY people moving here since they can come and live (compared to califorina) relatively cheap in a retiree golfer and national park hikers heaven.


Are there expanding businesses near you and have employees seeking housing?
- I have no idea. My house and my neighborhood are well beyond the price range of people who just got a job and are looking for housing. I barley qualified with the CC&R's, most the homes here are much, much larger and more expensive. There are a few companies building cookie-cutter homes in the 150k range, and they're selling. Don't know what to tell you.

I do live next to a 6th grade center, and they are going to finish out the schools here with an elementary school and middle/high school, maybe less than a half a mile from my house. Brand new schools in a brand new, nice, neighborhood.

How is employment in your area?
- I have no idea. It's not like our city has homeless or unemployment lines, it's a city of 50,000 people, most of whom are rich retired golfers and business owners.

Are there people currently renting who are looking to buy at higher prices?
- I am not ever sure what this means. Are you trying to imply that people who are renting won't want to cut their throats to pay a mortgage at a much higher price? Where are you typing this from? I live in Utah. What do you expect people to do instead of seek out the pride of owning a home? Take their six wives out for a milkshake? Or go to the non-existent bars or nightclubs? Maybe all the frugal Mormons have insulated alot of our small city from the "cut throat" world of the coasts, but your depiction of America and your assessment of my personal housing situation is just way off.

I can't answer those questions for you. You have to answer them. If you can't answer them, or you can't produce a good reason for housing prices going up after answering them, then you need to reconsider your 'investment.'

Hey look, 'investment' is in quotes. I can't tell if you're just a dick or really just giving me the "hard line" of modern real estate.

I didn't "invest" in a house. I built a custom home because that is where and how I wanted to live, where I want to raise my kids. I built a house because I had the opportunity to do it at the time for pennies when everyone was spending dollars. And that's not 2005 dollars... are you saying that shit wasn't fucked up in June of 2008? You act like I built a 1500 sqft house for a million dollars in 2004 with plans to flip it, and now it's only worth 150k.

I don't really get where you're coming from. But what the fuck do I know, I'm the retard who started this thread, so /shrug.

[Zeste]

Originally Posted by Lyenae

there's no fucking way home prices in the US are going up. In other countries, sure.

Outside of a few select areas in the US, no.

Also - what timeframe are you working on? I'm planning on trying to sell the house in maybe, 6 years? I know you don't know the house or the neighborhood or the city, but I'm pretty sure that, barring the worst case scenario of a complete collapse of our nation, my house is gonna be worth more than what I spent on wood.

[Campari]

Originally Posted by Zeste

Also - what timeframe are you working on? I'm planning on trying to sell the house in maybe, 6 years? I know you don't know the house or the neighborhood or the city, but I'm pretty sure that, barring the worst case scenario of a complete collapse of our nation, my house is gonna be worth more than what I spent on wood.

Not taking anyone's "side" on this whole debate, but obviously your house is going to be worth more a decade down the road from when you built it. Most of that is largely due to inflation though (which I think is ~4% now?). Just because the number you sell it for is higher than the number you paid for it doesn't mean you made a profit. Who knows though, your house may very well have gone up in value (beyond the rate of inflation) by the time you sell it; I'm pretty sure no one on the board besides you knows very much about the house & area so you're really the only qualified person to make that call.

[Eomer]

(which I think is ~4% now?)

Inflation is around 1% right now, I believe. Using the standard commonly accepted version, anyway. And it has been pretty low for awhile, which is typically the case during recessions. Where it goes in the next couple years is anyone's guess, but it's safe to assume with all the stimulus and low interest rates that it'll bounce up with any recovery.

This is where Lyenae chimes in that inflation is actually 10%+ according to Austrian School economists.

But long term, real estate tends to slightly outpace inflation, whether that's residential or commercial real estate. Otherwise why would there be dozens, if not hundreds, or large real estate investment funds, trusts and the like? Damn near every pension fund invests a significant amount of it's money in real estate, because it's a very safe long term investment in most cases (of course right now there's a lot of problems, with sky scrapers auctioning for a fraction of what they were bought for only a couple years ago). So not only is your investment (slowly) growing over time in "real" dollars, you're also deriving a regular income from renting/leasing the properties.

I agree that the average person shouldn't be trying to play the real estate market or considering their own home to be an investment, because we get retarded housing booms like we just experienced and all the lovely afterbirth that comes with it. But there's a reason real estate agents for example all typically own several rental properties etc; they're a sound investment if you know what you're doing and aren't making retarded decisions and leveraging the shit out of yourself on the hope that real estate will maintain double digit growth rates in perpetuity.

[Campari]

Originally Posted by Eomer

Inflation is around 1% right now, I believe. Using the standard commonly accepted version, anyway.

And.. that's what I get for looking at 2008 data.

Still though in 2008 it was 3.8% and it has been above 3% since 2005 with the exception of 2007 where it was 2.8.

Originally Posted by Eomer

Otherwise why would there be dozens, if not hundreds, or large real estate investment funds, trusts and the like?

I think the problem with this is that these companies are obviously dealing with a much higher quantity of transactions than a single person. Yes real estate generally goes up in value and is typically a safe investment, so as a company making thousands of transactions every year you are generally going to come out ahead, despite however many of those transactions end up costing you money. It's the same as the law of large numbers in statistics. Trying to apply that logic to a single person or family though that only has 1 or maybe 2 properties doesn't really work, because there is absolutely no guarantee of profit.