[quote=bearishgurl]
Lenders are TOTALLY to blame for this mess, on BOTH ends.
Let me ask Piggs this. If you could get $390K++ in cash and free rent for perhaps more than a year, would YOU MIND too much if your FICO score plunged from 720 to 420 for a few years??
In other words, is being paid at least $400K in cash and benefits WORTH the hit to your FICO score?[/quote]
Here, in a nutshell, is the crux of the problem. As long as there are buyers with no skin in the game, they are free to push prices up to whatever amount they can finance (qualified or not, as the case may be), and everyone around them who doesn’t pay attention to what’s driving prices will overpay as well, even if they put 20% down.
You can’t have people with real money/down payments competing with zero-down folks (free call options), especially if the low/no-down buyers represent a significant portion of the buying population. It’s bound to get ugly, no matter what.
Here’s a quote I just ran across the other day that really sums up the situation:
“It is all very well to say that the customers were foolish. But when a system prevails which caters to the folly of too large a proportion of a population, a proportion so large that the destruction of its purchasing power is of concern to every business in the land, then it deserves serious attention.”
BTW, the 3-5% downpayment FHA loans made during these past few years are the next great threat, IMHO. The problem still hasn’t been solved, and the same risks are out there as before. As long as we attempt to make a market by introducing a large number of the most vulnerable buyers, the risks remain too large for those who have something to lose.
