5% down loans are baaaaaaaaaack….

[Coronita]

Non-FHA 5% down loans are back…
http://money.cnn.com/2013/11/05/real_estate/down-payment-mortgages/index.html?hpt=hp_t2

We’re approach almost full circle now…

My predication is not shortly after….Just wait until they bring back subprime lending again… Then, we can all watch subprime borrowers bid up properties even further (again), only to watch them buy property they can’t afford, and get in trouble (again)….

Rinse and repeat. Over and over and over again…

Hey, what do you expect? A lot of car companies like GM/Chrysler are doing this very game right now..Offering 84-96+ new car loans and getting back into the subprime lending business full throttle How else do you think they are padding their sales numbers?

But I guess this time it’s different. This time people think subprime lending is ok maybe…..

[The-Shoveler]

Unless you see 20/80 no doc loans, then I don’t think we will see a crash as big as the one we just had.
I think you would have to see builders going full tilt for a few years as well.

Personally I think we will see wage inflation finally hitting.

[Coronita]

[quote=The-Shoveler]Unless you see 20/80 no doc loans, then I don’t think we will see a crash as big as the one we just had.
I think you would have to see builders going full tilt for a few years as well.

Personally I think we will see wage inflation finally hitting.[/quote]

I would agree not a big crash. But I do think a lot of people are going to get in trouble again if/when they bring back subprime lending..That might be the entire plan by the banks and the Fed. It’s just one more way they can kick the can down the road to keep the RE prices up there…

[The-Shoveler]

We have not had real wage inflation in almost 20 years,

I am not sure people will know what to expect or how to react when they have to live with what 90% of the rest of the world lives with.

[(former)FormerSanDiegan]

During the previous real estate cycle 5%-down, non-FHA loans were available in the early-to-mid 1990’s.

So it depends what you mean by full circle, but I don’t think loose lending is anywhere close to the mid-2000’s level.

Plenty of additional mechanisms for looser have not been put into play yet.

5% down, full-doc with conservative debt ratios is not necessarily bad by itself. Probably just the first step of 10 towards the next debacle. We have a ways to go.

[SD Realtor]

I would agree with you FSD.

The comment shoveler made about wage inflation is a pipe dream.

People are pretty lucky just to have a job these days.

[The-Shoveler]

Anyone paying attention these days ?

That’s about 20% by 2016

California has become the first state in the nation to commit to raising the minimum wage to $10 per hour, with the increase to take place gradually through the start of 2016, under a bill Democratic Governor Jerry Brown signed into law on Wednesday.

The law raises minimum pay in the most populous U.S. state from its current rate of $8 per hour to $9 by July 2014, and $10 by January 2016, well above the current federal minimum wage of $7.25 an hour.

Following President Obama’s call to raise the minimum wage in his 2013 State of the Union address, Senator Tom Harkin (D-IA), Chair of the Senate Health, Education, Labor and Pensions Committee, and Representative George Miller (D-CA), the top Democrat on the House Workforce Committee, have introduced the Fair Minimum Wage Act of 2013. It would:

Raise the federal minimum wage to $10.10 per hour by 2015, in three steps of 95 cents each.
Adjust the minimum wage to keep pace with the rising cost of living starting in 2016 – a key policy reform known as “indexing,” which ten states are already using to prevent the minimum wage from falling in value each year

[EconProf]

$10 per hour minimum wage.
Yep. That will sure help those minority teenagers get their first job.

[jeff303]

In Washington state, it’s already $9.19.

[The-Shoveler]

Some will argue but I think the effect on the rise of Minimum wage will mostly be on wage earners making 50K and under,

It will just be a little catching up mostly.

but people will freak at first I think.

Heck your costco Hot-dog and soda may even break $1.80.

Actually it’s probably been closer to 30 years since we had a meaningful rise in wages.

Most workers today never saw 7-10% annual rises without promotions like were fairly common before 1990.

[spdrun]

More likely this won’t have as much effect as you think. This is a bid by banks to jump into the former FHA and 3% down Fannie markets if/when housing agency reform happens; it will be a replacement rather than an expansion.

[svelte]

[quote=flu]
Hey, what do you expect? A lot of car companies like GM/Chrysler are doing this very game right now..Offering 84-96+ new car loans and getting back into the subprime lending business full throttle How else do you think they are padding their sales numbers?
[/quote]

December 2012 stats.
Average credit score on new car purchases by make.

Of bottom 10: 4 Japanese, 4 American, 1 Korean, 1 Italian.

Lowest
694 Mitsubishi
704 Suzuki
718 Dodge
721 Kia
723 Scion
726 Nissan
737 Chevrolet
737 Chrysler
737 RAM
741 Fiat

[Midrange 742 to 800 Buick, BMW, Cadillac, Ford, Jeep, Mazda, Mini, Toyota, Subaru, VW]

Highest
801 Lincoln
802 Mercedes
802 Land Rover
810 Porsche
810 Jaguar
810 Infiniti
810 Audi
813 Acura
816 Lexus
818 Volvo

By the way

550-619 = subprime
620-679 = nonprime
680-739 = prime
740+ = superprime

723 = Median credit score for a person in the US in general

[urbanrealtor]

[quote=EconProf]$10 per hour minimum wage.
Yep. That will sure help those minority teenagers get their first job.[/quote]

You want to be snarky but there are always lots of minimum wage jobs.
Even at that price.

Its 8 bucks an hour now and no shortage of fast food positions.

And its not like CPI (or whichever inflation metric you use) is blowing up.

Its not as stimulative as UI or as inflationary as “pallets of money on the corner” (oh my!) but it does increase aggregate effective demand at the lower end.

Not a particularly bad thing.

Businesses that pay minimum are generally among the most profitable in the aggregate (eg: fast food, discount retail, basic service).

Think of it this way:
How many McDonald’s are going to feel that much?

Having spent many hours reviewing books at a McD’s I strongly doubt it will mean jack or shit.

My 2 bits.

[urbanrealtor]

In response to the original post:

The fundamental problem with your argument here is that it supposes a basic lack of agency.

The previous run up had actual human beings consciously deciding to allow that run up.

I don’t think they perceived the possible outcomes but it didn’t just come like a bolt from the blue.

The housing markets is probably only second to the nuclear fuel market in terms of federal intervention.

The entire demand side of the debt market is run by congress and the entities it supports.

While down payment amounts may reduce (and they aren’t currently), there has been very little move to open up lending to NINJAs and liar loans. That level of poor risk management is what drove the previous bubble and I have not seen a lot of movement towards it. None in fact.

EG:
Last week, 3% conventional loan origination was discontinued.

[Coronita]

[quote=svelte][quote=flu]
Hey, what do you expect? A lot of car companies like GM/Chrysler are doing this very game right now..Offering 84-96+ new car loans and getting back into the subprime lending business full throttle How else do you think they are padding their sales numbers?
[/quote]

December 2012 stats.
Average credit score on new car purchases by make.

Of bottom 10: 4 Japanese, 4 American, 1 Korean, 1 Italian.

Lowest
694 Mitsubishi
704 Suzuki
718 Dodge
721 Kia
723 Scion
726 Nissan
737 Chevrolet
737 Chrysler
737 RAM
741 Fiat

[Midrange 742 to 800 Buick, BMW, Cadillac, Ford, Jeep, Mazda, Mini, Toyota, Subaru, VW]

Highest
801 Lincoln
802 Mercedes
802 Land Rover
810 Porsche
810 Jaguar
810 Infiniti
810 Audi
813 Acura
816 Lexus
818 Volvo

By the way

550-619 = subprime
620-679 = nonprime
680-739 = prime
740+ = superprime

723 = Median credit score for a person in the US in general[/quote]

http://www.huffingtonpost.com/2012/07/20/getting-a-car-loan-now-easier_n_1688983.html

http://www.reuters.com/article/2013/04/03/us-usa-qe3-subprimeauto-special-report-idUSBRE9320ES20130403

http://www.npr.org/blogs/money/2013/08/16/212676401/4-reasons-subprime-loans-are-back-for-cars

http://www.bloomberg.com/news/2013-09-17/subprime-auto-loans-get-larger-as-competition-grows-s-p-says.html

http://www.examiner.com/article/industry-experts-worry-gm-subprime-spree-could-trigger-auto-loan-bubble

“General Motors has the highest auto loan delinquency rate in the industry due to its increasing reliance on subprime customers, a fact some experts fear could lead to a bubble like the one that wrecked the housing market in 2007 and produced the Great Recession of 2008.

At the same time, however, JD Power, one of the auto industry’s most respected forecasters, sees 2013 sales headed to 15.3 million units, the highest level in years.

“High production costs and falling profit-per-car have led auto manufacturers to turn to financing to earn higher profits. Automakers have capitalized on lending by not only loaning money to customers but also packaging and selling those loans to investors in a manner similar to the sale of mortgage-backed securities that created the housing bubble,” according to the Washington Free Beacon’s Bill McMorris.

“The dramatic increase in securitization has coincided with GM’s acquisition of AmeriCredit, one of the nation’s largest subprime auto lenders, which it renamed GM Financial (GMF),” McMorris said.”

http://www.thetruthaboutcars.com/2013/04/qe-is-not-just-a-ship-how-a-new-generation-of-sub-prime-auto-financing-could-cause-another-catastrophe/

“And just like the 2008 mortgage crisis, these sub-prime auto loans are being packaged and sold as AAA rated bonds. As the Los Angeles Times reports, the number of loans packaged and sold as a securities is in the tens of thousands. The thinking goes that even if some of the loans are delinquent, there are plenty more that will make the security safe. And like sub-prime mortgages, the securitized auto loans are being divided up into tranches, with demand for the riskiest tranches being strongest.

Unfortunately for American consumers, the biggest players in sub-prime auto financing have significant ties to domestic auto makers. A report by Reuters names Santander, which is Chrysler’s auto financing outlet, and GM Financial as the two largest sub-prime auto lenders in the United States. Santander alone accounted for 53 percent of all sub-prime financing – and Santander’s expertise in the field was apparently one reason that Chrysler decided to partner with the Spanish bank.

While both Chrysler and GM use Ally Financial for their prime loans (which are issued to qualified buyers), GM has its own seperate sub-prime arm, known as GM Financial. In Q1 2012, some 93 percent of GM Financial’s loans were to sub-prime buyers, up from 87 percent in Q4 2010. During that same period, loans to the least qualified buyers – those with FICO scores under 540, were up 79 percent. GM Financial’s delinquent loans also rose by some $200 million in 2012, to $933 million – higher than Ford Toyota and Honda’s combined delinquencies.

[Author]

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