Use access key #2 to skip to page content.

Minnesota Money Mistakes

Recs

14

May 05, 2009 – Comments (3)

Pretty good article in the WSJ today about subprime in rural Minnesota.

Some scary stories, like this one:

Robert Sundberg first refinanced his two-bedroom home here in 1999, when he had just $2,000 remaining on his mortgage. "I wish I had never done it," the retired manufacturing worker says. "I just went and refinanced too much."

Mr. Sundberg refinanced his home twice since then, once to pay medical bills and then two years ago to pay off car loans. The Sundbergs purchased their home for $24,000 in 1987. They owe $98,000 on the property, which is scheduled for a foreclosure auction on Thursday.

Here's my question for ya: How much of the last decade's consumer spending growth is simply this kind of reckless over-leveraging? And how much of that is going to come back?

Where's the baseline for your companies going forward, and are you paying the right price now?

Sj

3 Comments – Post Your Own

#1) On May 05, 2009 at 9:05 AM, alstry (35.88) wrote:

Once you truly appreciate your question....you will understand Alstrynomics.

Report this comment
#2) On May 05, 2009 at 9:52 AM, dbjella (< 20) wrote:

Sj -

Here's my question for ya: How much of the last decade's consumer spending growth is simply this kind of reckless over-leveraging? And how much of that is going to come back?

Those are great questions!  I struggle with the same type of question.  Outstide of people who own their own homes or rent, most people are upside down in their mortgage.  My questions are how many of these people are there and what is the incentive for them to continue paying?

I have a friend who "had" to buy a nice home when they had a  liveable home already.  Since they were DINKs (double income no kids) they thought they could rent their existing home and buy a new one with the low rates in 2004.  Today, they are short selling both of them.  She lost her job, the renter moved out and new renters want cheaper rent.  They have told me that a short sale lasting affect on their credit score is not as bad as foreclosure.  I wonder how banks report homes in the short sale period? 

Alstry, remember you can't blog in June.

Report this comment
#3) On May 06, 2009 at 11:21 AM, saunafool (98.86) wrote:

Yeah, nice.

They bought their home for $34,000 and lost it when they owed $147,000 (or were they the ones who ran their debt up to $225,000)? That's hard to do.

I always looked at a couple of our friends in California. They took money out of their house a couple times from 2001 to 2006. Ended up being about $200,000 more in spending just from additional debt.

That's about $3300 of spending every month for 5 years!

Can you imagine how much stuff you can buy with that kind of additional spending?

A lot.

The scary thing about this article is that it says that kind of spending was going on all over the country. Not really surprising, but still, that's a lot of spending from a lot of people who really didn't have the money.

Yeah, I know, it's Alstrynomics.

Report this comment

Featured Broker Partners


Advertisement