FHA Loans and PUD Rules

[patientrenter]

chrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.

Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?

Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:

1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.

2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.

I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.

[ibjames]

You earn about a half million and your budget is 300k? When you die you can’t take it with you..

[ibjames]

You earn about a half million and your budget is 300k? When you die you can’t take it with you..

[ibjames]

You earn about a half million and your budget is 300k? When you die you can’t take it with you..

[ibjames]

You earn about a half million and your budget is 300k? When you die you can’t take it with you..

[ibjames]

You earn about a half million and your budget is 300k? When you die you can’t take it with you..

[CA renter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

If there was any reason to buy a house right now, this would be the #1 reason.

Here’s where I become very cynical… The PTB (govt, banks and other financial institutions) are trying desperately to convince us that inflation is around the corner. We are hearing it from every corner of the nation, along with the horse-pucky about “green shoots.” When everyone is trying to convince the masses in such a forceful and particular way, I get uncomfortable and start looking for other answers.

If they were truly fearful of inflation, we wouldn’t have the $8,000/$15,000 home-buying incentives from the federal govt, and $10,000 incentives for new houses coming from a BROKE Californian govt.

If inflation were upon us, we would not be seeing a 0-.25% FFR. If we had inflation, we would not be seeing Treasuries (espcially long-term), municipal bonds (especially as so many are broke!), and corporate bonds at such low rates.

If inflation was the biggest risk, the Fed would not be threatening to buy mortgage debt and Treasuries at every turn.

If inflation were upon us, people would be asking for raises, not begging to have reduced hours so they won’t have to be laid-off.

The only concern I have WRT “inflation” is a currency event of some sort. You can certainly look at housing as a hedge — if foreign buyers come here with their strong currencies and essentially buy America from us. But if our currency collapses, other rather drastic things will be going on in our country as well. Prices on imports will scream skyward, leaving less money for people to allocate toward housing costs.

Personally, I’m trying to hedge against a USD collapse by holding a basket of other currencies and foreign sovereign bonds. Not investment advice, and certainly not guaranteed to work out, but these are much more liquid than housing, and have much lower transactions costs.

Still, if you want to look at housing as a hedge against inflation, it would still be wise to be as conservative as possible, and not put all your eggs in one basket. If you were looking at a $200K house (SFH) in an area that has already seen 50% declines, and had 20%+ down, I can assure you that you would have gotten a different response. I apologize if this thread seemed too confrontational. It’s just that some of us are really on edge because of what we are seeing out there.

[CA renter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

If there was any reason to buy a house right now, this would be the #1 reason.

Here’s where I become very cynical… The PTB (govt, banks and other financial institutions) are trying desperately to convince us that inflation is around the corner. We are hearing it from every corner of the nation, along with the horse-pucky about “green shoots.” When everyone is trying to convince the masses in such a forceful and particular way, I get uncomfortable and start looking for other answers.

If they were truly fearful of inflation, we wouldn’t have the $8,000/$15,000 home-buying incentives from the federal govt, and $10,000 incentives for new houses coming from a BROKE Californian govt.

If inflation were upon us, we would not be seeing a 0-.25% FFR. If we had inflation, we would not be seeing Treasuries (espcially long-term), municipal bonds (especially as so many are broke!), and corporate bonds at such low rates.

If inflation was the biggest risk, the Fed would not be threatening to buy mortgage debt and Treasuries at every turn.

If inflation were upon us, people would be asking for raises, not begging to have reduced hours so they won’t have to be laid-off.

The only concern I have WRT “inflation” is a currency event of some sort. You can certainly look at housing as a hedge — if foreign buyers come here with their strong currencies and essentially buy America from us. But if our currency collapses, other rather drastic things will be going on in our country as well. Prices on imports will scream skyward, leaving less money for people to allocate toward housing costs.

Personally, I’m trying to hedge against a USD collapse by holding a basket of other currencies and foreign sovereign bonds. Not investment advice, and certainly not guaranteed to work out, but these are much more liquid than housing, and have much lower transactions costs.

Still, if you want to look at housing as a hedge against inflation, it would still be wise to be as conservative as possible, and not put all your eggs in one basket. If you were looking at a $200K house (SFH) in an area that has already seen 50% declines, and had 20%+ down, I can assure you that you would have gotten a different response. I apologize if this thread seemed too confrontational. It’s just that some of us are really on edge because of what we are seeing out there.

[CA renter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

If there was any reason to buy a house right now, this would be the #1 reason.

Here’s where I become very cynical… The PTB (govt, banks and other financial institutions) are trying desperately to convince us that inflation is around the corner. We are hearing it from every corner of the nation, along with the horse-pucky about “green shoots.” When everyone is trying to convince the masses in such a forceful and particular way, I get uncomfortable and start looking for other answers.

If they were truly fearful of inflation, we wouldn’t have the $8,000/$15,000 home-buying incentives from the federal govt, and $10,000 incentives for new houses coming from a BROKE Californian govt.

If inflation were upon us, we would not be seeing a 0-.25% FFR. If we had inflation, we would not be seeing Treasuries (espcially long-term), municipal bonds (especially as so many are broke!), and corporate bonds at such low rates.

If inflation was the biggest risk, the Fed would not be threatening to buy mortgage debt and Treasuries at every turn.

If inflation were upon us, people would be asking for raises, not begging to have reduced hours so they won’t have to be laid-off.

The only concern I have WRT “inflation” is a currency event of some sort. You can certainly look at housing as a hedge — if foreign buyers come here with their strong currencies and essentially buy America from us. But if our currency collapses, other rather drastic things will be going on in our country as well. Prices on imports will scream skyward, leaving less money for people to allocate toward housing costs.

Personally, I’m trying to hedge against a USD collapse by holding a basket of other currencies and foreign sovereign bonds. Not investment advice, and certainly not guaranteed to work out, but these are much more liquid than housing, and have much lower transactions costs.

Still, if you want to look at housing as a hedge against inflation, it would still be wise to be as conservative as possible, and not put all your eggs in one basket. If you were looking at a $200K house (SFH) in an area that has already seen 50% declines, and had 20%+ down, I can assure you that you would have gotten a different response. I apologize if this thread seemed too confrontational. It’s just that some of us are really on edge because of what we are seeing out there.

[CA renter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

If there was any reason to buy a house right now, this would be the #1 reason.

Here’s where I become very cynical… The PTB (govt, banks and other financial institutions) are trying desperately to convince us that inflation is around the corner. We are hearing it from every corner of the nation, along with the horse-pucky about “green shoots.” When everyone is trying to convince the masses in such a forceful and particular way, I get uncomfortable and start looking for other answers.

If they were truly fearful of inflation, we wouldn’t have the $8,000/$15,000 home-buying incentives from the federal govt, and $10,000 incentives for new houses coming from a BROKE Californian govt.

If inflation were upon us, we would not be seeing a 0-.25% FFR. If we had inflation, we would not be seeing Treasuries (espcially long-term), municipal bonds (especially as so many are broke!), and corporate bonds at such low rates.

If inflation was the biggest risk, the Fed would not be threatening to buy mortgage debt and Treasuries at every turn.

If inflation were upon us, people would be asking for raises, not begging to have reduced hours so they won’t have to be laid-off.

The only concern I have WRT “inflation” is a currency event of some sort. You can certainly look at housing as a hedge — if foreign buyers come here with their strong currencies and essentially buy America from us. But if our currency collapses, other rather drastic things will be going on in our country as well. Prices on imports will scream skyward, leaving less money for people to allocate toward housing costs.

Personally, I’m trying to hedge against a USD collapse by holding a basket of other currencies and foreign sovereign bonds. Not investment advice, and certainly not guaranteed to work out, but these are much more liquid than housing, and have much lower transactions costs.

Still, if you want to look at housing as a hedge against inflation, it would still be wise to be as conservative as possible, and not put all your eggs in one basket. If you were looking at a $200K house (SFH) in an area that has already seen 50% declines, and had 20%+ down, I can assure you that you would have gotten a different response. I apologize if this thread seemed too confrontational. It’s just that some of us are really on edge because of what we are seeing out there.

[CA renter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

If there was any reason to buy a house right now, this would be the #1 reason.

Here’s where I become very cynical… The PTB (govt, banks and other financial institutions) are trying desperately to convince us that inflation is around the corner. We are hearing it from every corner of the nation, along with the horse-pucky about “green shoots.” When everyone is trying to convince the masses in such a forceful and particular way, I get uncomfortable and start looking for other answers.

If they were truly fearful of inflation, we wouldn’t have the $8,000/$15,000 home-buying incentives from the federal govt, and $10,000 incentives for new houses coming from a BROKE Californian govt.

If inflation were upon us, we would not be seeing a 0-.25% FFR. If we had inflation, we would not be seeing Treasuries (espcially long-term), municipal bonds (especially as so many are broke!), and corporate bonds at such low rates.

If inflation was the biggest risk, the Fed would not be threatening to buy mortgage debt and Treasuries at every turn.

If inflation were upon us, people would be asking for raises, not begging to have reduced hours so they won’t have to be laid-off.

The only concern I have WRT “inflation” is a currency event of some sort. You can certainly look at housing as a hedge — if foreign buyers come here with their strong currencies and essentially buy America from us. But if our currency collapses, other rather drastic things will be going on in our country as well. Prices on imports will scream skyward, leaving less money for people to allocate toward housing costs.

Personally, I’m trying to hedge against a USD collapse by holding a basket of other currencies and foreign sovereign bonds. Not investment advice, and certainly not guaranteed to work out, but these are much more liquid than housing, and have much lower transactions costs.

Still, if you want to look at housing as a hedge against inflation, it would still be wise to be as conservative as possible, and not put all your eggs in one basket. If you were looking at a $200K house (SFH) in an area that has already seen 50% declines, and had 20%+ down, I can assure you that you would have gotten a different response. I apologize if this thread seemed too confrontational. It’s just that some of us are really on edge because of what we are seeing out there.

[patientrenter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.

Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.

But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?

Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.

So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.

For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136

Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.

[patientrenter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.

Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.

But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?

Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.

So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.

For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136

Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.

[patientrenter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.

Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.

But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?

Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.

So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.

For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136

Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.

[patientrenter]

[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]

Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.

Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.

But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?

Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.

So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.

For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136

Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.

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