RadioBanter - buying stupid in the USA

Dick Chisel wrote:
John S. wrote:
Dick Chisel wrote:
mike maghakian wrote:
over the last few years I have been saying how stupid people have been for
paying crazy prices for homes. I said they would be sorry in the end and it
is starting to happen:

this is from an MSN article on home sales:

I recently sold a house in Rochester Hills," Waquad says. "It was purchased
a year ago by the seller for $615,000 -- a newer house. He changed all the
appliances, the carpets and painted. He never lived in it. He must have
spent at least $20,000 to $30,000 fixing it. We got it for a buyer for
$440,000."

the point is that there are consequences to being a stupid buyer. I am just
trying to get people to think before they throw away money.
dxAce wrote:
All well and good, but it is THEIR money. Not MY money, not YOUR money, but
THEIR money.
All well and good, but paying insane prices for real estate is a
"bubble" and when the bubble bursts (as they all do), the -ENTIRE-
country gets hurt.

How do you figure the entire country will get hurt by real estate
prices slowing down.

First, I sincerely hope it just "slows down", not collapses.

What exactly is a collapse.

Next, it's intuitively obvious and I shouldn't have to explain to you
why a bust is a bad thing for the economy...but on a very simplistic
basis, try this on for size: People buy a large house, too big for their
needs (stupidity, greed or both), the bottom falls out of the real
estate market, the bank repossesses, the stupid/greedy original buyers
now homeless, have to go on welfare, thus driving up taxes for the rest
of us. Just one of hundreds or thousands of possible scenarios why a
bubble bursting is bad for the country in general.

You have avoided telling us exactly how the "entire country" (your
words) will be hurt by a slowdown or even downturn in real estate
prices. Please tell us precisely how the entire country will be hurt.
Remember entire country means just that...each and every person,
business and governmental unit.

Another fairly obvious scenario is that there will be a -lot- of
repossessed houses on the market, causing the real estate market to
stagnate, with related ripple effects (and yes, a -few- will profit from
the misfortune and/or stupidity of others).

To the extent that those who bought with the intent of flippping, yes
there will be some losses taken by purchasers as well as lenders who
have to pop the house. But even if I bought the house 6 months before
the downturn if my intent is to use it as a home then I suffer no loss
and the lender gets his money every month. Many more of the purchases
are for occupancy, not flipping.

Unfortunately though, the
major portion of the people in this country are in debt up to their
eyeballs, have a zero % or negative rate of savings and a major bubble
going bust could push everything over the edge.

What is your source for this information. I've been in banking for the
past 30 years and cannot find a citation that says "a major portion"
presumably at least 50% of homwowners have those kinds of financial
problems. Please give us a specific citation.

The only crowd to get burned in this speculative madness will be those
who got in late.

Sorry, Jack--I don't buy that. Very naive of you. That's like saying a
Ponzi (pyramid) scheme is good for the early but bad for the latecomers.
I believe the Ponzi scam/scheme is ultimately going to be bad for
-everybody-, all the time, every time, early or late.

You need to look up the definitions of ponzi scheme, pyramids, etc
before throwing them around. You look like a fool by using them
inappropriately here.

But to follow up on your statement, how does the homeowner who
purchased early in this housing cycle get burned. All he has to do is
do as others have - continue to use the house as a home and make the
payments.

Those who tired of reading stories about double digit
price increases in real estate and jumped in. Unfortunately those
junior speculators may get their hands burned if they are over extended
and have to sell. And some of the lenders who financed such buying
excess may have to pop the property and be burned on the sale. Most of
us who sat on the sidelines won't be hurt.

True, but still very short-sighted of you; see above. Also true that
"most of you" who are savers won't be hurt. Unfortunately, the "most of
you" that are savers with minimal or no debt are a very, very small
minority. Again, a large portion of this country is in debt up to their
eyeballs and beyond.

Again, where is your citation that a large proportion, presumably a
number well above 50% of the residents of this country are in debt to
unmannageable proportions. Please provide a specific citation. I'm
interested because I've been in banking for over 30 years.

And some of us who are
interested in buying may find some real opportnities.

Absolutely true.

If you get the chance please look up a book written in 1848 by Charles
MacKay. It's been reprinted and quoted numerous times. "Memoirs of
Extraordinary Popular Delusions and the Madness of Crowds" details the
many speculative manias that occured over the centuries prior to 1848
including the well known dutch tulip craze.

Forgive me if I don't look it up but I have read in other places of the
Tulip craze, the "South Seas" bubble, etc.

You are missing the point - speculative manias have happened and will
continue to happen. They happened with real estate over and over and
over. Go back 30 years to the crunch in the 1970's, move forward to
the 1980's, etc. None of those speculative runups are new and in each
and every instance the most of the country survived just fine. It is
instructive in MacKay's book that in each and every of the speculative
manias documented over the centuries those who were greedy late in the
cycle usually got burned the worst. As it will happen with this real
estate cycle.

The tendency of the people
to follow the crowd continues to this day.

Must be why, even today, they are known as "sheeple".

..even maroons in Holland Michigan.

How about the oranges, blues, greens, violets, purples, browns, greys,
pinks, reds. (Hint...use the dictionary).

Hint... please try not to be so cryptic. "Maroon" was a word play on
"moron", not talking about the tulips in Holland nor referring to the
"Tulip craze".

Nothing cryptic about your apparent misunderstanding of how maroon and
moron differ.

(Or doesn't your feeble brain remember how bad the -country- got hurt
when the "dot com" bubble went bust????)

Well, tell us exactly how badly the entire country got hurt by the dot
com speculative mania. Please be precise.

Please do your own research. It has been well written up in ALL the media.

I lived first hand through the dot com experience. Both in banking and
as participant in the dot com business. Please provide a specific
citation that shows the "entire country" and not just a small portion
of it was hurt by the dot com bubble bursting. You appear to be good a
creating sensational statements, but back away quickly when asked to
provide any substantiation for them. WHERE did you get this nonsense.

BY DEFINITION, when a bubble bursts, it is bad for the economy and
therefore bad for a large portion of the populace, especially a populace
like ours that is so very deeply in debt.

The real issue here is why you think a bubble bursting wouldn't hurt the
country.