2008 Financial Thread

[Tyrone Bigguns]

You ain't seen nothing yet. It will be at least another year of this.

I agree Ty.

On average, I would expect home prices to tumble at least another 5-10% before the housing market truly corrects itself. The supply of available homes is only going to continue to grow...and the credit crunch means there are fewer and fewer people buying.

And that is at the heart of the matter. There were people in houses who couldn't afford them to begin with. There were valid reasons that prior to 5 years ago you couldn't get a no money down home. This had to end badly.

I am really glad I backed out of buying my first home in 2005 for $200,000. That same home now is worth $180,000 and I would have used an ARM loan to get it. I'm still renting a house, waiting for the right time to buy one with a 30 year fixed.

Smart move. Same one i made.

Sometimes having that sound Wisco background...30 year fixed, etc. stops us from making a ton of money in risky areas...but, it also prevents catastrophic mistakes.

[Scott Campbell]

I think RG recommends a 15 year fixed. I know I do. You used to get a half a point discount on the interest rate, and if you can't qualify for the higher payments, its a pretty good indicator that you might be in over your head on the 30 year.

[Freak Out]

Always get the 15 year fixed if you can afford it. If you start with a 30 fixed or an ARM as soon as you can refinance do so to a 15 year. Before you know it your home is paid for.
The market in Alaska is still solid...nothing is really coming down in price enough to make any big moves buying up income property or such...but I'm heading south this Thursday and will be looking everywhere I go for some deals.

[Kiwon]

There were valid reasons that prior to 5 years ago you couldn't get a no money down home. This had to end badly.

Yeah, but just think how much the late-night infomercial industry would have suffered.

[Freak Out]

Wasn't the head of Bear Stearns just saying 4 or 5 days ago that everything was groovy and that they had a good cushion to make it through these tough times? Sounds like another Enron story.

[GoPackGo]

I think RG recommends a 15 year fixed. I know I do. You used to get a half a point discount on the interest rate, and if you can't qualify for the higher payments, its a pretty good indicator that you might be in over your head on the 30 year.

Do you know of any books or websites that support this financial strategy?

[MJZiggy]

I'm pretty sure you can find it in Motley Fool. The idea is that not only are you paying it off in 15 years as opposed to 30, the sheer number of dollars that you put into interest payments is cut WAY way down. My ex always said that we'd take the 30 and pay it like a 15, figuring that way if you hit a financial snag, you weren't forced to make the higher payment, but somehow he never got around to paying the 30 like a 15 (which sucks because we'd have a lot of money if he had).

[Scott Campbell]

I think RG recommends a 15 year fixed. I know I do. You used to get a half a point discount on the interest rate, and if you can't qualify for the higher payments, its a pretty good indicator that you might be in over your head on the 30 year.

Do you know of any books or websites that support this financial strategy?

My first personal finance book - Wealth Without Risk - Charles Givens. Much of it is getting pretty dated.

[LL2]

I'm pretty sure you can find it in Motley Fool.

I love the Motley Fool. I subscribe to a couple of their newsletters. I've been a fan for years.

I've read Wealth Without Risk years ago...you want a classic...try The Richest Man in Babylon.

[oregonpackfan]

Always get the 15 year fixed if you can afford it. If you start with a 30 fixed or an ARM as soon as you can refinance do so to a 15 year. Before you know it your home is paid for.

Consumer advocates Clark Howard and Dave Ramsey also favor getting a 15 year fixed if you can afford it.

About 5 and 1/2 years ago, we went from a 30 yr. fixed mortgage at 7.0% to a 15 yrd fixed mortgage at 5.0%. Our monthly payments went up just $34!

In the long run, we are saving thousands of dollars.

[Partial]

Always get the 15 year fixed if you can afford it. If you start with a 30 fixed or an ARM as soon as you can refinance do so to a 15 year. Before you know it your home is paid for.

Consumer advocates Clark Howard and Dave Ramsey also favor getting a 15 year fixed if you can afford it.

About 5 and 1/2 years ago, we went from a 30 yr. fixed mortgage at 7.0% to a 15 yrd fixed mortgage at 5.0%. Our monthly payments went up just $34!

In the long run, we are saving thousands of dollars.

Wow! Yeah, you guys are probably saving a lot of money!!!

[LL2]

Wasn't the head of Bear Stearns just saying 4 or 5 days ago that everything was groovy and that they had a good cushion to make it through these tough times? Sounds like another Enron story.

Looks like Enron for these folks!

http://money.cnn.com/galleries/2008/fortune/0803/gallery.bear_big_losers.fortune/index.html

[The Leaper]

Wasn't the head of Bear Stearns just saying 4 or 5 days ago that everything was groovy and that they had a good cushion to make it through these tough times? Sounds like another Enron story.

Not really. Most Enron investors were the little guys. Enron was a massive corporation with a lot of regular employees with stock options they were counting on for retirement/education/whatnot. The big wigs bailed before the ship sank and pocketed their cash, but the little guys all went down with the ship.

Bear Stearns did not do anything illegal...they simply accepted too much risk based on the housing market and got burned.

[Tyrone Bigguns]

Catch Cramer last week.

"Don't be an idiot. Don't sell Bear."

My god, has anybody lost more money than this guy? Funny thing, i use to read his columns and think he was pretty smart. Now, i just think he is a talking head.

[Joemailman]

He actually said "Don't take your money out of Bear". He says he was responding to a question of whether people should pull their money out of Bear accounts, not whether they should sell Bear stock.