The real question is, does it matter? Last few years just seems to show that those that debt up and borrow get ahead. Responsible people are not rewarded in American society.
@@ihave35cents95 well I’m not affected. My equity has 25.00$ on it, with a credit line of 25,000$. Just thinking about my neighbors who took them and wondering if they’ll survive. If the interest rate is variable, it will be tough. Idk
As a person that waited until Nov 2014 (the best time to buy in the last 60 years) and ditched his beautiful, know-it-all Loan Officer Girlfriend in 2007 due to her losing her mind when I refused to buy a $600,000 home I qualified for (but couldn't actually afford). What made You buy into that Market?
Yes, always something to remember. A heloc loan.uses your home equity as collateral. No paying of mortgage and/or heloc, equals foreclosure. And if your mortgage is with one bank. And heloc at another, well, it gets complicated. As you'll have two banks competing to get their money from you.
I had to borrow against my mortgage because I'm fighting cancer and treatments for a major illness are very expensive! Make sure to get cancer treatments early and often! Cancer sucks!!
HELOC has but one purpose. Emergencies and emergencies only. They aren't there to finance toys or make your life easier when it gets a little tough. Worst case is using a HELOC when you still have a mortgage, it's a surefire way to lose your home if you misuse it. The rate is variable and rates are going up. The storm is brewing.
@@markpitchford7375 Home equity line of credit lets you get the money when you want and spend it on what you want, that's what makes it very dangerous with people who are fiscally irresponsible. But, adding to a house when prices are going down with potential recession ahead of us is also il-advised.
Nice! Good on you 🙂 . We don't have any debt too. But sometimes I feel like it'd be nice to have a credit card for groceries and stuff but it's better to not owe anyone and just wait.
The sad part is when prices do fall most will not be able to take advantage of the drop. The same economy that forces a sale will catch a potential buyer too. That's why it takes years to recover.
@@darrinito I'm in your camp but I'm skeptical as all hell. These people are such fools that they are paying these ridiculous prices. I have never in my life seen the American consumer so stupid and easily manipulated as in the last several years. I'm starting to think I'm the fool and my friends agree. But on the bright side, I absolutely hate the place I live and would not buy here except for maybe a very small condo or townhome. Mostly for the wife and family concerns. Where I want to go the inventory is still low. So, I too will enjoy my cheaper rent and treasuries while I wait.
What happened is that homeowners in California and NY state sold their homes and moved to cheaper states like Nevada, Texas, and Florida which drove up prices.
So true. They sell their trailer home in San Diego for $1.2 million and buy a 4,600sf house in Texas for $700k. This prices local people out of the market where wages are low compared to those prices.
@@carefulconsumer8682 Very true - I live in southern Maine and it’s happening here. Home value has gone from $170,000 in 8/15 to just over $400,000 today. People from Mass/NY/CT discovered that they could work from home during and after Covid, sold their home and bought bigger and better for cheaper up here. It’s making it so much harder for native Mainers to get ahead.
@@Rotund_Panda_Pantssome guy I know bought a house on Penobscot Bay about 2 years ago and it has nearly doubled in value. It’s a very nice location. He’s extremely wealthy though.
@@pinky882 People borrowing against their equity in larger numbers now so Micheal believes that is a sign they're starting to tap out in order to live the way they're accustomed to.
Yup. Being self employed, the bank didn't want to lend me $ for my house in tampa. I offered 50% down and nope. They got back to me a month later and pooped their pants when I said I already paid cash and don't call again
Unfortunately agree completely. Had a client reach out today asking for help on home equity line. I let him know that borrowing to cover things if falling behind is going to escalate the speed you’ll fall further in debt. As a side, the commission on those are so small if someone is pushing it for the commission that’s really sad
It’s just a check cashing scheme. You can’t afford it, we will charge you to the absolute limit, hope you can make it, but take everything if you can’t. Credit cards on steroids.
Those homeowners will all walk away from the homes when their is no more equity,just like they did in 2008,that's why the banks are cutting back on everyone's line of credit as they know what is about to happen.
Really? I get endless credit card and line of credit offers from national banks on a weekly basis. I don't take them because we (My wife and I) don't need them. The more I reject them the more offers I get. And some offers are really good deals. It's tempting but they just end up in recycle. We have no mortgage as Florida homeowners. But I do see a major residential real estate correction coming Q1 2024. It will continue through Q2, Q3 and Q4 2024. Don't try and catch a falling knife. Be patient and the deals will be there by Q4 2024 going into Q1 2025 as the REITs unload in places like Florida. This pricing can't be sustained. IMO
HELOCs make me cringe so hard Thanks for reporting on this. My dad works at a bank and has told me that a good amount of people previously approved for a HELOC are now not due to tighter lending. I think soon, the “people with equity can just tap into it and ride it out” statements won’t work fairly soon
Hello Lizzie, u must have seen that house yesterday that ur hubby passed by full of cactus in d frontyard but had seen u walking on the opposite side...listening to Michael makes my day
Really nice looking day there. We have been thinking of taking loan against our house and are just not going to do it. We just changed our spending, paying cc debt as fast as possible. Hopefully our old cars continue to work, prices are out of control!
Exactly how the housing crisis on 08 developed. Interest rates were low then the fed raised them. People doing tons of HELOCs then the variable interest rate went sky hi and all the HELOCs and interest only loan payments went through the roof and values of housing tanked. People just walked away from their house that was worth 100k but they owed 6-700k. The realized they could never pay it back. Exactly what’s developing right now.
Yep! And another repeat is different workers getting big raises. The Fed does not like that because they will spend more, driving inflation up again. Also, the businesses pass on the cost: UPS, GM, and others for example. Those without raises do Helocs and run up credit cards. I am concerned.
True. And the sooner this long, slow, miserable economical disaster ends, the better. It has to occur so we can get out of this mess. And get on with recovery. The person with the largest risk of downfall is always the person who purchased the house at an inflated market price. People talk about how high home prices are. Yet, they are still buying and paying these exuberant inflated prices. 🤦🤦 History tells us this is not the time to buy a house.
Just as it's happened the last time people need these loans to pay their mortgage their car payments and to eat after they've been laid off. The fact that auto repossessions are increasing rapidly means that many of them are out of credit. In sequence the mortgage defaults will probably ramp up soon.
There is only 6 million Heloc loans out there. If you take into account the amount that of people that have stupid amounts of equity in their homes. The only way that these HELOC loans become a problem is if houses drop 20%.
Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money. A trader made over $350k in this recession influenced market.
Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.
So many homeowners are borrowing against their homes to cover huge medical bills otherwise not covered by their insurance. Most people have lost their jobs due partly to the challenging fact they are no longer able to work due to severe illnesses. I am seeing so many homes going up for sale at record high speeds, especially from those who paid off their homes years ago and now their equity is all emptied out. It's a scary, eye opening situation all around.
You and Lizzie make me want to move to California right this minute! Every video warms my heart! Scenery is gorgeous 🌴💯💯💯💯😃! Love the info on CDs. Thanks! ✨✨✨✨✨
The problem with unemployment data is that the number of service level jobs, e.g., fast food, hospitality, etc. are increasing, and that distorts what is going on out there. You notice they never discuss the unemployment numbers for jobs paying $70K+. That is because those are the jobs that are disappearing at this time. It doesn't help the economy when five high-paying jobs are replaced by seven or eight $15/hour jobs.
Michael, glad you have visited different areas in the diverse LA basin. It has been a very nice summer here. While the higher end areas are very expensive, there are [relatively] more affordable cities in LA that are highly liveable. Here are two thoughts: 1. A unique factor in the California housing market is Prop 13 which constrains property tax increases. The reduced tax in turn reduces the supply of houses for sale. On our block there are several homes where the kids have grown and left and now there is one surviving spouse living alone. Without Prop 13, there would be more motivation to sell and downsize which, in turn, increases the supply of houses on the market for young families. 2. Also, in many So Cal communities the builders have shifted to putting up large condo or apartment projects with minimal green space. These projects have nice new units but are much higher density housing than traditional single family homes. Similarly, the older, fading shopping malls with huge parking lots are being converted to mixed use housing and retail hubs (with parking structures).
Yeah, why invest in 1 year CD's when there are money market rates that are slightly less? Long term CD rates are lower. I've been waiting for good 48-60 month rates but not seeing it.
Michael, when you said CDs, not the music; I 😂 LMAO. I spent like 15 grand on music CDs and it was the biggest regret of my life and had I known there would be cheap streaming music services on the horizon; I would’ve spent the $$$ on the other kind of CDs
@@jasonweishaupt1828Wishful thinking in most cases given the inherent risk of using an ARM to finance …too many who think they are much better investors than they really are.
Who's more at fault for this, the people who "know" the party's over anyways, or the banks who are writing these HELOCs? I asked my BIL about this(since he has experience in banking) and his assumption is that the reason banks keep writing these loans is because they are scared to be the catalyst. If they stop writing, that's when the music stops, the party abruptly ends and EVERYONE will race to the door as fast as possible and they don't want to he the one who turns off the music.
This is why the federal govt bailed out the banks over and over again. So they can keep writing loans and not be the reason for a collapse. Velocity of money
Daily watcher. Definitely appreciate the thoughts and assessments you provide. The laid back approach is also a plus. By the way, you need to include that wife of yours more often. You would be hitting 250K subscribers in no time! Have fun in the People's Republic of California!
If we'd all cut back and put the breaks on getting loans and buying houses and anything we don't need, there'd be a crash and everything would make corrections.
@@mmmd3429 foreign and company investments in real estate are already down. Blackrock, State Street and Vanguard have 80% control over the S&P. Their manipulation and maneuvering is propping it up right now. None of the current factors holding up our economy are sustainable long term.
@mmm Foreign investment is a bit of a farce if you break it down to the very basic level. The foreign investment comes from countries that expect the USA to just say “ok”. We can literally just terminate any Chinese, Russian, middle eastern debt by saying no. “You can’t make me pay”. Investment requires an ability to enforce. At any given time the USA can just say the USA owes China nothing, they have no recourse. It is literally gambling. Foreign investors own as much of the USA as the USA says they can, when they can, how they can. Companies are in a similar boat. Abortion was allowed in all 50 states, basically for any reason, until SCOTUS said no. The US government can kind of do whatever it wants and by extension, so can the people of the USA. It makes the rest of the world uncomfortable and Americans to an extent, but we’ve been running humanity for about 100 years. There is no way for any foreign entity or company to enforce anything we don’t let them.
The only time I used a HELOC loan was to help raise the money to buy a second investment property without having to get a mortgage. This line of credit against another house was fixed rate for the house I was buying. It has worked out well. That was at another time and given the market today, I would not do it. I have some plain old savings accounts doing 5% right now. Excellent deal really. DO NOT GO TO COMPTON...
Save your house money. Put it in a CD to earn you more house money. When prices come down more, you'll have additional money to put down on your house.
Mike love this report on HELOC. I just hope and pray there is a major financial meltdown and a housing correction so the hard-working family don’t have to continue standing on the sideline
People have to understand a correction is the only thing that’s going to save their city . All the new police officers , fire fighters , postal workers , school teachers ,social security , county jail workers workers can’t afford a decent living . Once the older people leave it’s going to be a sad time . What’s the answer get a second or third job
You are absolutely correct about value. When I spend my money I am looking for value. Most of these homes that are for sell don't match up value wise in my opinion. You want 250k-400k but you purchased the property 8 years ago for 150k and did no updates? " Oh the market dictates " Someone else can be the fool.
HELOCs are for short term borrowing. With a variable rate with rates increasing as fast as they are, it's not a good move unless is a short term thing and you pay it back ASAP. If you need to pull out equity, and don't want to refinance, it makes more sense to do a Home Equity Loan with a fixed rate. We've lived through record low interest rates for over a decade. Party is over, you're gonna have to pay to borrow.
You should come to San Diego. La Jolla has some breathtaking walking trails. Also great restaurants with beautiful ocean scenery. Good content as usual
WOW 😮 Michael! 100,K Subscribers is just around the corner 🎉🎉🎉🎉🎉 You’re doing an awesome job. Thank you for sharing so much great content. Blessings, Carlos ✝️🙏❤️😊🇺🇸
Noticed similar recently when just trying to see what current rates are. Every web site I clicked on had a mortgage application link. Gave me the same feeling Michael is describing.
I've gotten several emails and letters from my mortgage lender talking about to give them a call to see how I could get up to 50K from a HELOC. I usually reply with a big F U. Just the thought of owing against my home gives me anxiety.
The mainstream mindset of “Tapping equity” is that it’s a good thing. Like selling some stock to raise capital. It’s just the opposite. Society needs to retire the “Tapping equity” term and replace it with “Borrowing to your eyeballs.”
People need to realize it’s not enough to just break even and be able to pay your bills. You need to have $$$ left over to put in an emergency fund and need to have some $$$ to put towards retirement. We as a society have to change our relationship with credit and debt because past generations were so cautious about that kind of thing. Debt was the absolute plague; the older generation remembers a time when credit cards were rare( like the early 80s), ppl put stuff on layaway at a department store; when ppl had to put 10 to 20 percent down on a car or a house and credit wasn’t so easy to come by. They knew how to live within their means and the US did just fine. We need to get back to fundamentals, saving and living within our means
Everyone is so used to having everything now, hardly anyone ‘saves up’ for something. Very different mindset that’s been encouraged. Buy now pay whenever.
Early 80's??? I bought my first house in early 1998. I didn't have more than 10 percent to put down toward the equity and my lender made sure I paid a hefty price for the potential liability that they considered me to be - in the form of Private Mortgage Insurance (PMI) and a mandated escrow account assuring that my property taxes were paid up front every month. Within 5 years it was the high water mark of no doc, no money down, NO EMPLOYMENT VERIFICATION lending! The underwriters deserve an enormous amount of blame for what came next, but nobody in their mid -late 30's (as I was then) should be excused for trying to pretend that they had no grasp of convention and no grasp of what had been expected of even their older brothers and sisters - never mind their parents! It's easy to fault the banks for distorting our consumer culture - but the ethos of the amoral house flipper was always there too - waiting to be unleashed. And even people like me - who had always paid their bills on time - suddenly had their ununsed HELOC loans revoked as part of the subsequent collective punishment pullback. The banks no longer even cared about differentiating their good customers from their bad ones. That's the day that they lost me forever to a credit union.
Another great video Mike. 😮 Alot of people just don't have the money to buy or spend. Looking at your video. There are some really nice places to walk in California. You guys be safe on your vacation. 😮6: 19 pm
@@SomeUserNameBlahBlah that are also financed and underwater. The people are doing the ole .gov extend and pretend with helocs. Gonna be wild as 2025 starts
The people that use their homes like atm's and refi every few years so they can travel, buy new cars, boats, living above their means... Its only a matter of time before it catches up. Each refi resets payments to almost all interest again!
@@tomswierszczyk1162 Yes..realtor said " buy more than you can afford, it's the American way, then re-fi, the more you buy the more it will appreciate." Didn't spend any re-fi money on luxuries, just hanging on to what could not afford in first place. No blame to realtor.. my decision. Buy with head not heart... Didn't vote for Obama but he gave us almost $500,000 lower principal balance mod! Tax payers expense, our govt is crazy
@@polskigirl8547 far worse than 2008. The government and the FED won't have the options they had back in 2008. They have basically burned all their bridges. We're not talking recession we're talking global depression from which some will never fully recover.
Just like in '08, people did this same thing. When it goes bust, they are upside down on home value. And still owe on their loans. If they would try to sell at that point, the property could not transfer because they would not have enough money from the sell of their home to cover their mortgage and heloc loans. Personal story, a neighbor had a mortgage and equity loan on their home in 2008. He passed away that year and his son was to inherit his house. He owed $278,000 between the two loans. After the bust his home appraised at $138,750. His son walked away from that inheritance. And the home went to the banks. He had his loans at two different banks. And they both wanted their money. That house sat empty from 2008-2019. At that point it was sold as a rehab/needs TLC for $285,000 with a new roof.
Michael, hoping you can put out more content focused on the Miami/surrounding area and when you feel things may be more appealing, or just shifts you notice once you return to FL. Thanks for your quality content
Should make a video about new credit cards that use people's home as security, it's new to me. I got 8 offers from company called Aven Visa. Of course i wouldn't have such, but how many people will lose their homes?
I think the ease of credit that has defined American life for the last 4 decades is about to disappear. I think most CCs in the future will be secured, credit limits will be lower, you won’t get approved for a card unless you have a 700 credit score or higher. There will be algorithms that detect risky credit behavior among borrowers. Maybe if you just pay the minimum but keep running up the card they will freeze your credit without warning. I also think monthly minimum payments will rise from the current 2 percent to anywhere between 5 and 15 percent in the future. I think this next crisis will change our relationship with credit forever
@@bigtom1948 There is a thing in Florida called homestead. So credit card companies cant take your home, BUT this company use the house as the collateral, so they get around the law. It should be illegal. people would not qualify for a HELOC are easily approved for credit cards especially when they have lot of equity. It's a form of predatory lending
@@russellseilhamer4552 No offense but I think you look at wrong direction. To start with American life the last 4 decade is declining, while credit is more available. Credit is the modern form of slavery where banks can lend you money and they take yours without effort. You think they care about you or society? USA is 4% of world population but 35% of consumer market. Within a decade or maximum 2 you will have UBI and with it extra credit for those poor people. Also PPP will drop, but that is a different topic
Ironically, I was just thinking about doing a CD ladder. Maybe like some three months /six months/ 12 months/ two years. That way if you need the money you can always get it out or just roll it over.
my banker conveniently didnt disclose over the phone it would cost $280 to open the heloc until I was sitting in the chair in the bank. bait and switch commission
Problem with CD's is that you have to claim the interest made on the funds you put in. Just get more of the worthless cash that is currently being used. Who wants to pay more in TAXES?
This coming home crisis is different from 2008-2011. The reason is today homes are overpriced. Once price continued to drop, then the problem will be in banks hands. Thank you Michael.
Those two ladies were staring at you like you were the weirdest thing they've seen all day! 😂 They have to be tourists on their first day visiting. They are gonna see way weirder stuff there than a guy carrying a phone on a stick talking to himself 😂😂😂
Actually, I'm paying off the last bit and cancelling the home owners insurance. I'll never take out another loan even when I downsize. I'm done with debt and banks. :)
We haven't had debt in over 20 years. We paid off our former home in our mid 40s. We only had our mortgage. We sold that home and built another with cash. We buy cars We use cash.
@@sharoncrawford7192 This was my first and last mortgage. Paid off 14 years early. I've paid cash for everything all my life. If it wasn't for mom's injury and hospital stuff it would never have happened. Never a hospital or nursing home again either.
If you have a helic and fall behind on your first loan the heloc lender may decide to bring your first loan current and foreclosure on you! Watch out people! 3 months late and then you get notice to pay the whole thing off or they take your home! How do people sleep after they spend their heloc proceeds?
The other reason why HELOCs are becoming more popular is the increase in interest rates. In recent years, rising home prices meant that people could refinance their homes, take some needed money out, and have a lower or even payment. Now, with higher interest rates refinancing the entire home means paying higher interest across all of the principal. A HELOC is only paying the higher interest on the amount of money you spend against the HELOC>
Excellent point on CDs Michael. I have been buying them with each rate increase. Here's a little statistical information to prove your point is valid. P/E ratio in the stock market is basically a prediction on how long it would take your money to double on a given stock. Of course this isn't guaranteed because management has a way of spending beyond it's means to make sure they get fat paychecks and bonuses. For the sake of argument let's pretend for a minute that management is benevolent and not self serving. The current average P/E of the S&P 500 is 25.51. That means earnings "could" double your money in 25.51 years. Now lets take a 5% guaranteed, insured CD. Using the rule of 72 (72/5=14.4) The rule of 72 is a pretty accurate way of determining how long it would take to double your money based on the interest rate paid if you allow the money to compound. Right now CDs look almost twice as good as stocks on a return basis and the risk is minimal compared to the Wall Street casino.
@@tomswierszczyk1162 P/E is the price to earnings ratio. 72/5=14.4 That's how many years it would take to double your money. The S&P is currently trading at a P/E of over 25. That means it would take 25 years to double your money. Yes there are obviously other variables and a stock could double in a year. It could also get cut in half in a week. What's your definition of P/E? I'd love to hear it. Speak up.
I'm glad you went to Santa Barbara and Corona Del Mar. That was my suggestion before you went there. You passed right in front of the home I grew up in when you were walking to the beach in CDM. The only other place I would suggest to go visit would be Morro Bay. That place is nice.
You could also buy longer term bonds and if they cut interest rates the price of those bonds could go up, so you can sell them for a capital gain that ends up being more than the total coupon payments over the duration of that bond. They can be considered risk free stocks cause they can be traded like stocks, only on thing if you have a loss make sure you hold them until maturity and don't sell them for a loss unless very necessary cause you will get the face value back if you hold them to maturity.
I left Los Angeles in 2021 and Santa Monica used to have a lot of homeless, especially as you went south and it turned into Venice Beach. I remember before I left, they "cleaned" a lot of it up but at one point it was awful. Obviously I haven't lived there since then so it looks like it's not as bad as it used to be but it WAS bad.
