Here we go again (Low low down payment)

[spdrun]

If you think about it, it wasn’t such a hot year for NY-area real estate. Nor SFBA property. 😉

[an]

[quote=spdrun]If you think about it, it wasn’t such a hot year for NY-area real estate. Nor SFBA property. ;)[/quote]Who cares about NY or SF? All I care about is SD.

[spdrun]

You’d probably have made quite a mint picking up property from some half-bankrupt SFBA dot-commer who lost his shirt, underwear, and pants in 2001 🙂

[outtamojo]

[quote=flu]Told ya this would happen…eventually

3% Down from Fannie and Freddie!!!

http://www.marketwatch.com/story/fannie-freddie-detail-3-down-payment-mortgage-program-2014-12-08?siteid=yhoof2

When strong buyers have been exhausted, the strategy is obviously to make more loans more readily available to everyone else. So they can pick up where strong buyers left off.

My prediction? In some of the less than stellar areas..Get ready for the next run up in prices. More buyers in the buyer pool.. Hope you folks have a lot of cheap real estate you picked up over the past few years….Enjoy the ride.. 🙂

Don’t worry.. I’m sure subprime lending will be coming back in the future at some point too.[/quote]

Less than stellar areas are going to be helped a lot by lower gasoline prices also.

[spdrun]

Not so fast — it will take a while to even save for 3% down, considering that many people in “less stellar” areas are living day to day. And have credit card debt to pay down before a bank will even look at them.

It has been calculated that the lowering in gas prices will only save the average American $600 per year. Doesn’t buy much house, especially if interest rates rise.

Bonus points if SUVs and less efficient cars turn into status symbols again, thus nullifying any possible saving for the average schmoe.

[outtamojo]

Personal bias: less than stellar= far flung. My bad.

[Coronita]

Looking selfishly at Mira Mesa and College Area condo submarkets, I think until we get a slightly looser lending standards for more people, prices are going to remain sort of stuck where they are right now….

In MM, I haven’t seen many 1/1 condo’s break through the $200k mark. Maybe 1 or 2 of them, and those that did were doing FHA or VA if I recall. Prices seem to be stuck in that $180k range….

[FlyerInHi]

The program requires borrowers to be first time buyers, undergo credit counseling and pay PMI. Plus there’s income verification as usual. Not exactly lax.

[CA renter]

[quote=AN][quote=spdrun]Housing is shaky as it is. A generalized slowdown affects general confidence and put the brakes on it.

It sure wasn’t growing much around 2001-2. Last time, housing affected everything else. This time, it might be the other way around.[/quote]
But it didn’t crash. It wasn’t event flat. So, why did you pick 2001? I wouldn’t mind if today is like 2001.[/quote]

Actually, home sales and prices did decline when the stock market bubble burst, but the Fed was quick to manipulate rates and restart a new bubble in housing. Housing prices were already getting overvalued in 2001. I think spdrun chose 2001 because that was the bursting of the bubble just prior to the 2007/2008 bursting of the credit/housing bubble. We still have a credit bubble because of all the manipulations, IMHO, it’s just a matter of which assets are most affected by the surplus credit.

Federal Debt as a Percentage of GDP:

http://research.stlouisfed.org/fred2/graph/?id=GFDEGDQ188S,GFDGDPA188S,FYOIGDA188S,

Margin debt:

https://images.search.yahoo.com/images/view;_ylt=AwrTcXj0xodULbgAzXuJzbkF;_ylu=X3oDMTIzYWU2MzNxBHNlYwNzcgRzbGsDaW1nBG9pZAM5YWI4MWQ0ZWRmMDVjZDkyMzg0N2ZhY2VlZmM1NTg3OARncG9zAzEwBGl0A2Jpbmc-?.origin=&back=https%3A%2F%2Fimages.search.yahoo.com%2Fyhs%2Fsearch%3F_adv_prop%3Dimage%26va%3Dmargin%2Bdebt%2Bchart%2B2014%26fr%3Dyhs-mozilla-001%26hsimp%3Dyhs-001%26hspart%3Dmozilla%26tab%3Dorganic%26ri%3D10&w=908&h=662&imgurl=www.pgm-blog.com%2Fwp-content%2Fuploads%2F2014%2F01%2FNYSE-margin-debt-SPX-since-1995.gif&rurl=http%3A%2F%2Fbeforeitsnews.com%2Fgold-and-precious-metals%2F2014%2F01%2Fhighlights-of-the-week-of-january-6-2014-2571672.html&size=73.9KB&name=Highlights+of+the+week+of+January+6%2C+%3Cb%3E2014%3C%2Fb%3E&p=margin+debt+chart+2014&oid=9ab81d4edf05cd923847faceefc55878&fr2=&fr=yhs-mozilla-001&tt=Highlights+of+the+week+of+January+6%2C+%3Cb%3E2014%3C%2Fb%3E&b=0&ni=200&no=10&ts=&tab=organic&sigr=13f5akt84&sigb=14m3ogd6r&sigi=12fcicua4&sigt=11g74vdib&sign=11g74vdib&.crumb=gZ2U63/s4yQ&fr=yhs-mozilla-001&hsimp=yhs-001&hspart=mozilla

Credit Market Instruments:

http://research.stlouisfed.org/fred2/series/TCMDO/

[bobby]

[quote=spdrun]If you think about it, it wasn’t such a hot year for NY-area real estate. Nor SFBA property. ;)[/quote]

SFBA went CRAZY this year. It was 10-30% 1 year gain in most areas.
I bought a primary residence but now looking for a rental. It had been insane. Holding off until things turn downward a little (hopefully)

http://www.mercurynews.com/business/ci_26514018/august-slowdown-hits-bay-area-housing-market

[CA renter]

[quote=bobby][quote=spdrun]If you think about it, it wasn’t such a hot year for NY-area real estate. Nor SFBA property. ;)[/quote]

SFBA went CRAZY this year. It was 10-30% 1 year gain in most areas.
I bought a primary residence but now looking for a rental. It had been insane. Holding off until things turn downward a little (hopefully)

http://www.mercurynews.com/business/ci_26514018/august-slowdown-hits-bay-area-housing-market%5B/quote%5D

I think he meant in ~2001, when the .com/stock market crashed.

[an]

[quote=CA renter][quote=AN][quote=spdrun]Housing is shaky as it is. A generalized slowdown affects general confidence and put the brakes on it.

It sure wasn’t growing much around 2001-2. Last time, housing affected everything else. This time, it might be the other way around.[/quote]
But it didn’t crash. It wasn’t event flat. So, why did you pick 2001? I wouldn’t mind if today is like 2001.[/quote]

Actually, home sales and prices did decline when the stock market bubble burst, but the Fed was quick to manipulate rates and restart a new bubble in housing. Housing prices were already getting overvalued in 2001. I think spdrun chose 2001 because that was the bursting of the bubble just prior to the 2007/2008 bursting of the credit/housing bubble. We still have a credit bubble because of all the manipulations, IMHO, it’s just a matter of which assets are most affected by the surplus credit.

Federal Debt as a Percentage of GDP:

http://research.stlouisfed.org/fred2/graph/?id=GFDEGDQ188S,GFDGDPA188S,FYOIGDA188S,

Margin debt:

https://images.search.yahoo.com/images/view;_ylt=AwrTcXj0xodULbgAzXuJzbkF;_ylu=X3oDMTIzYWU2MzNxBHNlYwNzcgRzbGsDaW1nBG9pZAM5YWI4MWQ0ZWRmMDVjZDkyMzg0N2ZhY2VlZmM1NTg3OARncG9zAzEwBGl0A2Jpbmc-?.origin=&back=https%3A%2F%2Fimages.search.yahoo.com%2Fyhs%2Fsearch%3F_adv_prop%3Dimage%26va%3Dmargin%2Bdebt%2Bchart%2B2014%26fr%3Dyhs-mozilla-001%26hsimp%3Dyhs-001%26hspart%3Dmozilla%26tab%3Dorganic%26ri%3D10&w=908&h=662&imgurl=www.pgm-blog.com%2Fwp-content%2Fuploads%2F2014%2F01%2FNYSE-margin-debt-SPX-since-1995.gif&rurl=http%3A%2F%2Fbeforeitsnews.com%2Fgold-and-precious-metals%2F2014%2F01%2Fhighlights-of-the-week-of-january-6-2014-2571672.html&size=73.9KB&name=Highlights+of+the+week+of+January+6%2C+%3Cb%3E2014%3C%2Fb%3E&p=margin+debt+chart+2014&oid=9ab81d4edf05cd923847faceefc55878&fr2=&fr=yhs-mozilla-001&tt=Highlights+of+the+week+of+January+6%2C+%3Cb%3E2014%3C%2Fb%3E&b=0&ni=200&no=10&ts=&tab=organic&sigr=13f5akt84&sigb=14m3ogd6r&sigi=12fcicua4&sigt=11g74vdib&sign=11g74vdib&.crumb=gZ2U63/s4yQ&fr=yhs-mozilla-001&hsimp=yhs-001&hspart=mozilla

Credit Market Instruments:

http://research.stlouisfed.org/fred2/series/TCMDO/%5B/quote%5D
RE in SD did not crash in 2001. It crashed in 2006-2008. That’s the fact.

[CA renter]

It didn’t crash because they unleashed the toxic mortgages when things started to slow down as a result of the recession.

————–

Residential Fixed Investment (RFI):

“Residential Construction
Real RFI typically turns down about 11 months
before the business cycle peak, as rising interest
rates (Figure 2) slow the pace of housing starts and
new home sales. In similar fashion, the growth of
real RFI was weakening significantly prior to the
2001 recession. Hence, one potential cause of the
2001 recession may have been a shock to the resi-
dential housing sector. Table 4 shows that forecasters
generally were surprised by the magnitude of the
decline in housing construction in 2000. By the
fourth quarter of 2000, the cumulative forecast error
for real RFI was a little more than 4 percentage
points.
The unexpected decline in housing investment
prior to the March 2001 business cycle peak may
have resulted from rising interest rates. Conventional
mortgage interest rates rose from about 6.75 percent
in December 1998 to about 8.5 percent in April 2000;
over the same period, the 12-month percent change
in the core PCE chain-type price index rose only
from 1.6 percent to 1.9 percent. The rise in nominal
and real interest rates corresponded with a more
restrictive monetary policy: From June 1999 to May
2000, the FOMC increased its intended federal funds
target from 4.75 percent to 6.50 percent.
17”

[page 31 of this report]

https://research.stlouisfed.org/publications/review/03/09/Kliesen.pdf

[CA renter]

Here, Krugman notes what Paul McCulley was saying in 2002 (I had always enjoyed reading McCulley’s stuff back then…one of the few honest, astute economists at the time, along with Stephen Roach, who is also mentioned in this article):

“The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Judging by Mr. Greenspan’s remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman’s crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.”

[an]

[quote=CA renter]It didn’t crash because they unleashed the toxic mortgages when things started to slow down as a result of the recession.[/quote]It doesn’t matter why it didn’t crash. My point was, it didn’t crash.

[Author]

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