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Will this be worse then the recession in the 80's? - 9/26/2008 8:03:59 PM
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Leslie_JnJs_mom
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I was talking with some friends who thought this could be worse then the recession in the early 80's. Their reasoning was not so much financial but how we are so pampered these days. Back then there were no cell phones computers ipods gourmet coffee houses, none of that really existed. People were used to big gardens and canning due to parents who either remembered the great depression or grandparent who did. My MIL did not have kids until she was in her 30's so DH's parents suffered through the great depression. People were used to not just surviving but thriving on much less then we are. If the ones who are saying this is going to be the worst meltdown we have had are right we may all be put into a position that all the toys we are used to may become luxury items.
To tell you the truth though I am not sure I agree with the people I was talking with that it will happen. I do not want to bury my head in the sand either.
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<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 9:04:47 PM
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Miss Giggles
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From: MI
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I am in a state which is already in a recession and has been for a few years. Turn off the tv, it is all doom and gloom. Yes there are some people struggling but a lot of people are doing ok. It does take some sacrifice and many think that luxuries are necessities now and won't give them up.
So the only thing you can do is try to stick to a budget and do the best you can for your situation.
Loans are going to be hard to come by for a while so do the best you can to preserve your credit or plan ahead to try to pay cash for everything including autos. Mortages are probably going to go back to the strict lending standards that they used in the past. No zero down loans and you'll need excellent credit and a down payment.
Some of this is hyped up due to the election.
< Message edited by Miss Giggles -- 9/26/2008 9:10:57 PM >
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 9:35:22 PM
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Leslie_JnJs_mom
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I have the excellent credit but I do not have a down payment. No one is buying houses here so my place is not even getting looked at. I guess we should have taken the plunge a year ago when we could have gotten the 100% loan and just moved instead of sitting on our thumbs like we did.
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<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 9:56:48 PM
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GregandJenny
Posts: 617
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From: Near Seattle Washington
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quote:
I have the excellent credit but I do not have a down payment. No one is buying houses here so my place is not even getting looked at. I guess we should have taken the plunge a year ago when we could have gotten the 100% loan and just moved instead of sitting on our thumbs like we did.
are you able to save?
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It does not have to be well with my circumstance to be well with my soul!
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 10:26:28 PM
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Leslie_JnJs_mom
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I have a tiny and I mean tiny savings. We do not touch that so when we run out of money we use our credit card. My credit should come out ok as long as things do not get bad enough that I have to break contracts with the cell phone and satellite companies.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 10:52:28 PM
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blessedinnyc
Posts: 1964
Joined: 10/12/2007
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quote:
ORIGINAL: Leslie_JnJs_mom
I was talking with some friends who thought this could be worse then the recession in the early 80's. Their reasoning was not so much financial but how we are so pampered these days. Back then there were no cell phones computers ipods gourmet coffee houses, none of that really existed. People were used to big gardens and canning due to parents who either remembered the great depression or grandparent who did. My MIL did not have kids until she was in her 30's so DH's parents suffered through the great depression. People were used to not just surviving but thriving on much less then we are. If the ones who are saying this is going to be the worst meltdown we have had are right we may all be put into a position that all the toys we are used to may become luxury items.
To tell you the truth though I am not sure I agree with the people I was talking with that it will happen. I do not want to bury my head in the sand either.
This is a great question, and in some ways, it would have been very interesting to have been around back then.
From the economic data, at the very least, I'm seeing a few similarities and a few differences:
Similarities:
1.) Energy costs are high.
2.) There's a trade deficit
3.) We're getting out of an expensive war.
Differences:
1.) The savings rate is lower; consumers have more debt.
2.) Corporations are in better shape; they are more profitable and they have better balance sheets.
3.) Taxes are lower; the federal deficit and debt is higher.
4.) Interest rates, unemployment, and inflation have started off lower.
5.) Productivity is higher.
I think this recession is going to be different in that it's not going to be driven by corporations running into trouble and cutting back; it's going to be about consumers consuming less. Hopefully, this recession will fall disproportionately on imports. That means that workers in China might lose their jobs, but American corporations which are in better shape and will be more inclined to keep productive workers, might need to go through fewer layoffs.
Your stocks might go down; you might lose your house if you can't afford it, but I think you're more likely to keep your job with the way things are currently shaping up.
Just my humble opinion. This is my first recession in the labor pool, and only my second recession where I really understood what was going on beyond "people can't work and spend as much money at the candy store as they used to."
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RE: Will this be worse then the recession in the 80's? - 9/26/2008 11:03:04 PM
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blessedinnyc
Posts: 1964
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quote:
ORIGINAL: Leslie_JnJs_mom
I have the excellent credit but I do not have a down payment. No one is buying houses here so my place is not even getting looked at. I guess we should have taken the plunge a year ago when we could have gotten the 100% loan and just moved instead of sitting on our thumbs like we did.
_____________________________
<------- Jessica and I had so much fun with grandma!
Leslie,
Beyond the mortgage payment, you've also got property taxes, maintenance, and myriad other expenses. Most financial planners say its wise to put at least 10% down on a mortgage, and in this market, I'd recommend to shoot for 20%.
A decent measure for figuring out how much it's going to cost to own a home is to take the mortgage payment and multiply by 1.5. If you can spend six months and save that much every month (minus rent), then maybe you're ready for the mortgage (assuming you can put 10% down.) If you have to struggle at it- if you find at any time that you would be losing sleep if you had a mortgage- you should hold off. Also, you shouldn't need to rely on mortgage interest deductions to be able to afford your house. The deduction might factor into whether renting or buying is better, but a mortgage is a serious commitment. You shouldn't get into one until you're sure you can make all the payments on time.
How is your retirement savings going? Are you able to save 10% of your income?
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RE: Will this be worse then the recession in the 80's? - 9/27/2008 10:18:19 AM
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GregandJenny
Posts: 617
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From: Near Seattle Washington
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quote:
I have a tiny and I mean tiny savings. We do not touch that so when we run out of money we use our credit card. My credit should come out ok as long as things do not get bad enough that I have to break contracts with the cell phone and satellite companies.
Then why are you trying to buy a home? I don't wanna sound down or mean and personal, but this kinda thing is what got us into the mess were in. Just because you can get a loan doesnt mean you can afford it.
G
_____________________________
It does not have to be well with my circumstance to be well with my soul!
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RE: Will this be worse then the recession in the 80's? - 9/27/2008 6:44:25 PM
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Leslie_JnJs_mom
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I already own a home
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<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/27/2008 9:16:40 PM
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relady
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From: Greater St. Louis Metro
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quote:
I already own a home Are you down by Springfield? How is the market down there? Have you put your home on the market, I can't remember?
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RE: Will this be worse then the recession in the 80's? - 9/27/2008 11:51:24 PM
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Leslie_JnJs_mom
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Yeah I am about 50 miles from Springfield. My husband got a job in Springfield 2 years ago. We thought we would just sell our home and move. Nope the only houses around here that are selling are pieces of junk that sell for next to nothing that a couple of guys buy for another rental. My home is nice enough that they are not intrested in it since they cannot talk me down to 10,000 for it. There are a lot of houses that are very nice that has been on the market for as long as mine has. We thought a month or so ago that perhaps we could just move and have an income property as well but that was after the banks quit no down to move in.
People who want to move but do not have a lot of free cash did not cause this. People who bought homes they could not afford after the teaser extra low intrest rate ran out caused this. I guess they never thought that gee once my intrest goes up to 8% or higher because of my lousy credit I will loose my house. That is not my problem. I pay my bills and I do not buy things I cannot afford. My excellent credit rating backs me up on that.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 12:28:34 AM
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stamper_ben
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There was a recession in the 80's? I musta missed it while working and paying down the mortgage.
I agree with the statement made already, this is being majorly hyped up with this being an election year.
As has been said, "the only thing we have to fear is fear itself."
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We will be known as His by the love we show one another.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 9:44:50 AM
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relady
Posts: 1279
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From: Greater St. Louis Metro
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quote:
I guess they never thought that gee once my intrest goes up to 8% or higher because of my lousy credit I will loose my house. What they were told, and what they believed, was that they would be able to re-finance into something fixed before their ARM re-set because their house would appreciate and their credit would improve so they could get a better deal at that time. This is from banks offering and people taking loans that were questionable and from very very lax underwriting standards on those loans. If you had a pulse for the last 5 years they were throwing money at you.
You are right that people like you did NOT cause this mess. You might need to just sit tight for a little while, maybe take your home off the market for a few months. See what happens after the election - things are always slower right before elections - and then maybe try it again in the spring. I don't look for the credit market to loosen up much, but you just never know. At this point it's toss up what's gonna happen.
Keep your chin up. Things WILL turn around, it's just a matter of time.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 11:12:18 AM
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csl7037
Posts: 1639
Joined: 3/24/2008
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quote:
ORIGINAL: blessedinnyc
Leslie,
Beyond the mortgage payment, you've also got property taxes, maintenance, and myriad other expenses. Most financial planners say its wise to put at least 10% down on a mortgage, and in this market, I'd recommend to shoot for 20%.
A decent measure for figuring out how much it's going to cost to own a home is to take the mortgage payment and multiply by 1.5. If you can spend six months and save that much every month (minus rent), then maybe you're ready for the mortgage (assuming you can put 10% down.) If you have to struggle at it- if you find at any time that you would be losing sleep if you had a mortgage- you should hold off. Also, you shouldn't need to rely on mortgage interest deductions to be able to afford your house. The deduction might factor into whether renting or buying is better, but a mortgage is a serious commitment. You shouldn't get into one until you're sure you can make all the payments on time.
How is your retirement savings going? Are you able to save 10% of your income?
blessedinnyc, very few people are smart enough to take this excellent advice. Just for an example...we put 50% down on our house right before the big boom in our area. What we bought it for in 2001, we could've sold it for DOUBLE about two years ago. Right now, if we really had to sell, we could get 150% of what we bought it for, I'm sure. At least I've not seen anything comparable in our area offered for less than that - but, in reality, nothing seems to be moving at all. But even with our fantastic equity, I would also caution people - our taxes, utilities and everything else has gone up and up and up! That's how it goes and people need to take these things into consideration. Even with equity dwindling (even thought what we saw things selling for two years ago was obviously an anomally and we never considered it real equity), these other costs are still going up! I'd never consider putting less than 20% down now. It's just not smart.
And speaking to Leslie's situation (as she clarified), I'd never risk sitting on two mortgages! That's just too scarey, especially the way things are right now!! I'm a big "follower" of Dave Ramsey and respect his opinion so much having done things the wrong way (by conventional wisdom) for so long - he'd say "Don't do it!"
My neighbors built a house on "spec" and finished it about a year ago. It's sat with a for sale sign in the yard so long that now they've moved into it because it's smaller and the upkeep is less and now the house next to me has sat with a for sale sign for about four months - and they've not had half a dozen people total even walk through it! It's discouraging! Seriously pinching pennies, they're able to afford both mortgages for now at least. Their plan was to sell the "spec home" and then to buy a little townhome and then sell the "big" house. They're older and want to downsize. If that plan had worked, they'd have been pretty secure for the rest of their lives, probably. Now I just don't know. This is just not a time to be overextended and taking risks.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 11:17:39 AM
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Leslie_JnJs_mom
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We decided a couple weeks ago to let the contract with the Realtor expire. Our ARM loan re adjusted and knocked off 100 dollars a month off our mortgage. We live in a small town that has very affordable houses. There was a 4 bedroom house down the street that was on the market for 22,000. Our home was listed at 30,000 but I was willing to go down to 27,000. That would have still given me a great down payment for a new house but it is not going to happen I guess.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 11:21:29 AM
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csl7037
Posts: 1639
Joined: 3/24/2008
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quote:
ORIGINAL: Leslie_JnJs_mom
We decided a couple weeks ago to let the contract with the Realtor expire. Our ARM loan re adjusted and knocked off 100 dollars a month off our mortgage. We live in a small town that has very affordable houses. There was a 4 bedroom house down the street that was on the market for 22,000. Our home was listed at 30,000 but I was willing to go down to 27,000. That would have still given me a great down payment for a new house but it is not going to happen I guess.
$22,000 - DOLLARS? How is that possible? I couldn't find anything near here, even now, less than $122K! Wow.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 12:01:09 PM
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Leslie_JnJs_mom
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Yeah it is not expensive to live here but it would be a different story in Springfield. We would have to upgrade to about a 70,000 dollar house which would add 3 to 4 hundred to a mortgage payment. But we pay several hundren in gas every month and it adds 2 hours every day to my husbands work day. So it would even out.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 12:24:01 PM
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relady
Posts: 1279
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From: Greater St. Louis Metro
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Lesley, just look at it as a temporary setback. Sit through the winter and reassess next spring - actually, around Feb or March. Are you happy with your Realtor? If not, I could probably find a good referral for you. Or even if you just need a second opinion. I know you are probably feeling really pinched with all the gas expense, but try to be patient and this too shall pass.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 12:38:55 PM
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Leslie_JnJs_mom
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Thanks, My SIL is a realtor so she referred us through some nationwide real estate network. I cannot remember what it was called now but they had some pretty strict standards. They marketed it as both a great full time home or vacation home since it is within 10 minutes to a lake. All I can do is shrug and say it is not Gods timing for us to move yet. Perhaps later on I can do an owner finance. Sad though I really wanted This house.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 2:02:06 PM
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blessedinnyc
Posts: 1964
Joined: 10/12/2007
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quote:
ORIGINAL: Leslie_JnJs_mom
Yeah it is not expensive to live here but it would be a different story in Springfield. We would have to upgrade to about a 70,000 dollar house which would add 3 to 4 hundred to a mortgage payment. But we pay several hundren in gas every month and it adds 2 hours every day to my husbands work day. So it would even out.
Holy crud! I think I'm moving to your neck of the woods. One of my coworkers just bought a studio apartment for $450K.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 5:38:57 PM
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relady
Posts: 1279
Joined: 4/11/2005
From: Greater St. Louis Metro
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quote:
Holy crud! I think I'm moving to your neck of the woods. One of my coworkers just bought a studio apartment for $450K. LOL. That's the difference between living in the city and livin in the country.
Lesley, that little house has a really cute kitchen. Is it on a slab or does it have a basement? That house up here in STL would sell, even now, for at least $90-$100K.
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RE: Will this be worse then the recession in the 80's? - 9/28/2008 9:15:10 PM
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Leslie_JnJs_mom
Posts: 898
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It is just a slab. With all the limestone here there are not a lot of basements.
That is a wonderful kitchen huh! The huge plus is that it is a 4 bed 1 1/2 bath. The kitchen and living room are not any bigger then I have now but I am not moving for space but for travel distance for work.
_____________________________
<------- Jessica and I had so much fun with grandma!
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RE: Will this be worse then the recession in the 80's? - 9/29/2008 11:25:58 AM
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kernsfamily
Posts: 1358
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quote:
I am in a state which is already in a recession and has been for a few years. Turn off the tv, it is all doom and gloom. Yes there are some people struggling but a lot of people are doing ok. It does take some sacrifice and many think that luxuries are necessities now and won't give them up.
My thought....
It depends on where you live...that will determine how bad it will get.
If you live in a state like Michigan (my homestate!), which has been in a "down" economy" for what seems like YEARS, and the state/local politicans there are SO beholden to certain "special interest groups", which REPEL job growth and business development, then, yes...they will be worse off than others...
THEN, there are other states, with "below average" unemployment....they have an ABOVE average local/state economy, due to state/local politicians doing ALL they can to encourage business growth and job growth, and making it an attractive place to do business....well, then, those states will fare well....and prosper....even in the "downturns" in the cycles of the economy like we're seeing now....
quote:
Some of this is hyped up due to the election.
absolutely...
_____________________________
Proud dad of 3 great girls....Erin, Emilie and Elise
Blessed to have all of them in a "totally awesome" public elementary school!
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RE: Will this be worse then the recession in the 80's? - 9/29/2008 11:30:25 AM
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kernsfamily
Posts: 1358
Joined: 4/26/2006
From: Dallas (originally Detroit)
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quote:
ORIGINAL: Leslie_JnJs_mom
We decided a couple weeks ago to let the contract with the Realtor expire. Our ARM loan re adjusted and knocked off 100 dollars a month off our mortgage. We live in a small town that has very affordable houses. There was a 4 bedroom house down the street that was on the market for 22,000. Our home was listed at 30,000 but I was willing to go down to 27,000. That would have still given me a great down payment for a new house but it is not going to happen I guess.
Homes listed for 22? 30? 27? WHAT????
are these homes in good condition? good neighborhoods? what's wrong?
even in this "down market", finding a GOOD house anywhere near us for less than 200K is hard....
_____________________________
Proud dad of 3 great girls....Erin, Emilie and Elise
Blessed to have all of them in a "totally awesome" public elementary school!
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RE: Will this be worse then the recession in the 80's? - 9/30/2008 1:54:33 PM
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Leslie_JnJs_mom
Posts: 898
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I cant show you the real estate listing since a landlord bought the house but yes houses in my town sell that cheap. The catch is that we are about 50 miles from a decent size city. It is your average small town with older houses. The neighbors are a mix of people all over board in terms of good and bad. The man and his wife across from me was the sheriff for 4 years, my neighbor is the mayor but 3/4 of a block down the road is a troubled girl who is always dating some drug dealer. 2 blocks down the road some woman noisily kicked her husband out. We thought they were having a yard sale but that turned out to be all his stuff she threw out in the yard. The pricey property comes with land. There is this house on 100 something acres that they want 220,000 for. Yikes!
_____________________________
<------- Jessica and I had so much fun with grandma!
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