Friday, October 19, 2012

The law of deminishing returns.

It must have been over the summer I was talking to my direct neighbor to the left. The one with the Turkeys on his roof. He was trying to convince me the economy was getting better because his wife was coming home every day in tears. You see, she works at a mortgage company. I interpreted his comment as - how can she be working so hard if things aren't getting better? She is plugging a 12 to 14 hour day. Day in and day out.

I basically told him that people are doing more with less.

Fast forward to yesterday and the turkeys. I figured it was a good time to pick his brain. Because of his wife's career choice. How long does it take to get a refi through these days? Which I didn't get an answer to because I cover a lot of ground when I talk to people. We got distracted on something else. He did scoff though, which enforced my belief that these people are working a lot harder because of that.

Also, I put this guy in the crowd that has done "multiple" refinances since the recession started. I guess this is a "thing" because I have two direct neighbors who have been following this trend. However, the neighbor to the left told me the last time they tried to refi, her own company would not refi them. They had to go somewhere else.

This is the other thing he told me that I found fascinating. He said they had taken all the equity out and was putting "somewhere" else. He said - you could be dead tomorrow. To which I agreed. But I also countered - you might live much longer than you think.

After a while, I found out where "somewhere else" was. It was in a new Suburban. At 500 bucks a month. They still make out ahead per month, but now they have exactly no equity. When he told me this, a light bulb popped on and I realised why all my dem neighbors wound up with new cars right after the recession hit. At the time I was all shades of confused. They seemed to be working less, not more. They all seemed to pop up with them all at the same time.

One thing I've been feeling lately is that while this past four years I've been shoveling any cash I can find to shore up my balance sheet, these people have been fucking off and continuing to live life as if another downturn wasn't going to happen. These people now are left with no backup plan. You should never take equity out of your house unless you get laid off and need a bridge loan to get through that.

Now these people are unable to refi any more. Which means, the stuff they buy will cave.

This guy also told me that I will probably never be able to refi my rental. Positive equity. Perfect credit score. Forget it. Because I'm an evil landlord. They are only doing owner occupied houses. Period. That doesn't scream at all like we hate business.

1 comment:

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