Comments on: Jim Cramer Says “Plow Over the Inland Empire” We Have Too Many Homes

By: Morgan Brown

Morgan Brown — Fri, 03 Aug 2007 04:03:20 +0000

Thanks for the link Rhonda. I would probably advise any Seattle home owner that had fair credit (and even good credit) who are in short-term loans such as HELOCs, pay option loans, 2 and 3-year ARMs that they should take advantage of their healthy real estate market to get in to a more stable long-term loan that will protect them from the potential of payment shock as soon as possible.

I would use the lessons of bubble cities and homeowners trapped in exploding ARMs with no equity as solid reasons to choose a more sustainable loan to ride out the current market correction.

By: Rhonda Porter

Rhonda Porter — Thu, 02 Aug 2007 21:16:30 +0000

Morgan, I just came across some stats showing Seattle with the highest appreciation over other major US cities. Question is…how long will it last?

http://www.therealestatebloggers.com/2007/08/02/top-20-real-estate-markets-home-value-changes-over-past-year/

By: Rhonda Porter

Rhonda Porter — Wed, 01 Aug 2007 16:07:04 +0000

Hi Morgan,
I don’t think Seattle will escape this without any bruises, I do think we’ll fair better than other areas. Our values are still strong in the Seattle-Bellevue areas due to stong employment (Microsoft, Boeing, etc.).

In fact, Forbes just published that Seattle is one of the best places to flip houses right now…I could puke! Articles like that just bring all the Carlton Sheet (sp.) junkies out of the woodwork.

Plus, Seattle has always lagged behind other major cities. We have been slower to appreciate (until recently) and I think we’ll be slower to react (value wise) to this market as well.

I believe outlying areas from Seattle, where there are more subprime loans, will be hit harder. Consumers who do not take action to improve their credit will suffer the most if they don’t contact their Mortgage Professional to get help at least 6 months before their ARM adjust (to assure their credit is where it needs to be with the tougher underwriting guidelines).

By: Morgan Brown

Morgan Brown — Wed, 01 Aug 2007 06:23:19 +0000

Rhonda – Do you think Seattle is different from the other parts of the country due to regional factors or do you think its just lagging the rest of the market?

By: Morgan Brown

Morgan Brown — Wed, 01 Aug 2007 06:21:34 +0000

TheChief – I think it has been thoroughly fleshed out over at the LA Land blog at the LA Times that he was not role playing. There isn’t any video evidence to support that claim. And if you watch the recent Cramer videos it really backs up the idea that this is what he believes – housing/mortgage is a terrible bet right now.

By: Shenandoah » You have just got to watch this…

Shenandoah » You have just got to watch this… — Tue, 31 Jul 2007 22:00:47 +0000

[...] Jimmy “where did my pretty bubble go” Cramer let’s it ripÂ [...]

By: Good to Go Pile . . . « Trading for the Masses

Good to Go Pile . . . « Trading for the Masses — Tue, 31 Jul 2007 19:51:16 +0000

[...] Cramer Says â??Plow Over the Inland Empireâ?? We Have Too Many [...]

By: TheChief

TheChief — Tue, 31 Jul 2007 18:01:24 +0000

So Cramer is just role playing here? This isn’t what he really believes? Is it really amazing then?

By: Morgan Brown

Morgan Brown — Tue, 31 Jul 2007 17:48:51 +0000

Part of the reason Cramer is on TV is because he’s sensational – he has to say something like that to get everyone’s attention. I do think he raises a couple of good points:

1. Inventory is glutted is in the IE and other parts of the country where speculative building took place. There is going to be a severe price correction in these areas. Builders can’t hold out for better prices and need to move the property.

2. The 2/28’s are going to be a big problem. Especially the ones where the LTVs were 90% and higher. These are going to reset and there will not be room to refinance them out of the new payments. Some of these payments can be 3 x their current teaser-rate payment.

3. There is no difference between subprime and prime when your housing payment triples and you can’t get out of the house.

I think those are very important points to consider for home owners with high LTV mortgages.

By: Morgan Brown

Morgan Brown — Tue, 31 Jul 2007 17:04:35 +0000

Tike – I agree 100% of 2/28 that don’t pay will default