Housing costs less than half compared to 2006

[(former)FormerSanDiegan]

Josh –

I diagree that housing is only cheap because of cheap financing. The ratio of price-to-income or price-to-rent rent are belwo long-term lows… independent of rates.

And, despite low rates, availability of cheap financing really is not pervasive.

I do agree that the other factors you discuss are key: jobs, economy, and rtaxation.

But, I would view jobs as one of the key potential levers that can act as a trigger to allow prices to revert back to norms. … when that happens is anyones guess.

[sdrealtor]

Josh
For prices to drop substantially around here we would need to see high rates…much higher interest rates and the payments would likely be higher than today as prices would most likely not drop by as high a percentage as rates rise by. In that scenario are you personally any more capable of a buyer? Do you have a big pile of cash set aside?

[an]

[quote=sdrealtor]Josh
For prices to drop substantially around here we would need to see high rates…much higher interest rates and the payments would likely be higher than today as prices would most likely not drop by as high a percentage as rates rise by. In that scenario are you personally any more capable of a buyer? Do you have a big pile of cash set aside?[/quote]
Totally agree. Unless you’re an all cash buyer, total cost of purchase (P+I) is more important than just the price.

[scaredyclassic]

Still, no one likes to be called Harry howmuchamonth. What is his opposite? Neil kashkarry?

[UCGal]

[quote=walterwhite]Still, no one likes to be called Harry howmuchamonth. What is his opposite? Neil kashkarry?[/quote]
Love your wordplay, WW.

(for those that didn’t get it – look him up with his name spelled right.)

http://en.wikipedia.org/wiki/Neel_Kashkari

[patientrenter]

[quote=sdrealtor]Correct on price but part of the cost of buying a house is interest charges and including that its half.[/quote]

Interest charges play no part in the cost of buying a house – unless you happen to be unable or unwilling to pay the purchase price with your own money.

Americans have become so used to stratospheric prices for homes, way beyond what they can afford, that they assume financing is an automatic part of the purchase process.

[barnaby33]

For prices to drop substantially from here all we’d need is any one of a number of things to go differently. Not even wrong, just different.

For instance one of the major banks could be forced to divest itself of its foreclosures to raise capital. Flooding the market with inventory seldom raises prices.

Another for instance is the economy worsening at a rapid pace, something I feel is pretty likely. Less buyers, same number of houses, falling prices.

On the interest rate front, I’m guessing as the presidential race heats up Foney and Fraudie are going to come back up. Putting them in run down mode would almost certainly lower prices.

A blow-up of the Euro while nominally good for the dollar would actually probably be good for prices. So see there is something to look forward to.

Back to the intent of the OP, payments! The only reason why prices haven’t fallen more and payments risen is because the govt is subsidizing risk. Almost every person who buys now is gambling that they will be able and willing to keep doing so. Hell I’d buy if I could find something I’d want to live in for ten years that I could afford. However still being in the top 20% of the income bracket and debt free doesn’t seem to get me there. That more than anything else tells me we haven’t seen bottom.

Enjoy your low monthly payment sir, it comes at an evil cost. When the govt is incentivizing you to do something, its usually not a good idea.
Josh

[sdrealtor]

[quote=patientrenter][quote=sdrealtor]Correct on price but part of the cost of buying a house is interest charges and including that its half.[/quote]

Interest charges play no part in the cost of buying a house – unless you happen to be unable or unwilling to pay the purchase price with your own money.

Americans have become so used to stratospheric prices for homes, way beyond what they can afford, that they assume financing is an automatic part of the purchase process.[/quote]

Huhh? Unless you pay cash the financing costs are part of your costs. It is really that simple and most primary homebuyers do not, never have and never will pay cash. You are arguing a loser case.

[patientrenter]

[quote=sdrealtor]…most primary homebuyers do not, never have and never will pay cash….[/quote]

Make that most modern American homebuyers.

It is sad that a practice – financing – designed to allow some people to temporarily stretch beyond their means to buy a home has become so ingrained that modern Americans think it’s normal. If home prices were not inflated by a host of government interventions, and the practice of home financing were not subsidized in any way by the government, home prices would drop to a level at which many buyers could actually pay for the homes. By “pay”, I mean handing over one’s own real money… you know, the stuff you have in the bank, that’s not borrowed temporarily from someone else.

I agree, paying real money for homes at real prices is now an alien concept to most Americans. Home financing makes Wall Street – and existing homeowners and real estate agents – so rich that they have completely integrated it into our system and culture.

When China finally becomes a country with a normal level of saving, the glut of global savings will dry up. When that happens, a lot of the extra financing we take for granted today will shrink. Until then, we live in a world of inflated asset prices, held there by a wall of money from Chinese savers, mostly loaned to US institutions (like the govt) that then funnel it to the US asset markets.

[outtamojo]

[quote=patientrenter][quote=sdrealtor]…most primary homebuyers do not, never have and never will pay cash….[/quote]

Make that most modern American homebuyers.

It is sad that a practice – financing – designed to allow some people to temporarily stretch beyond their means to buy a home has become so ingrained that modern Americans think it’s normal. If home prices were not inflated by a host of government interventions, and the practice of home financing were not subsidized in any way by the government, home prices would drop to a level at which many buyers could actually pay for the homes. By “pay”, I mean handing over one’s own real money… you know, the stuff you have in the bank, that’s not borrowed temporarily from someone else.

I agree, paying real money for homes at real prices is now an alien concept to most Americans. Home financing makes Wall Street – and existing homeowners and real estate agents – so rich that they have completely integrated it into our system and culture.

When China finally becomes a country with a normal level of saving, the glut of global savings will dry up. When that happens, a lot of the extra financing we take for granted today will shrink. Until then, we live in a world of inflated asset prices, held there by a wall of money from Chinese savers, mostly loaned to US institutions (like the govt) that then funnel it to the US asset markets.[/quote]

I read this and immediately thought of this somewhat racist and sexist piece (Tongue-in-cheek, of course)
http://tntstocks.blogspot.com/2011/10/where-white-man-went-wrong.html

[equalizer]

Josh,

For San Diego, the rents have been somewhat stable over the last few housing crashes. For many condos, it is breakeven to purchase or rent, minus the 20%, but with banks paying 0% it sure it enticing for many to lock in fixed 30 year payment. If inflation continues, rents will not go down unless unemployment keeps going up with the accelerated decimation of the middle class.

2,000 people a day may think about leaving San Diego (reference to pithy “2,000 people a day are moving to FL” catchhrase, circa 2005 ), but not that many do. Canadians and other foreigners with money are purchasing some places here.

Even a Republican President would not dare to upset the entrenched housing subsidies.

[scaredyclassic]

governments don’t like rapid changes.

it’s socially disruptive.

[hslinger]

[quote=patientrenter][quote=sdrealtor]…most primary homebuyers do not, never have and never will pay cash….[/quote]

Make that most modern American homebuyers.[/quote]Are you making a case for returning to the financial systems of the 1920’s and earlier? Can I borrow your time machine?

[sdrealtor]

It seems to me that the house my parents bought 50 years had a mortgage as did all of our neighbors. Would that be Modern home buyers also?

[(former)FormerSanDiegan]

[quote=patientrenter][quote=sdrealtor]Correct on price but part of the cost of buying a house is interest charges and including that its half.[/quote]

Interest charges play no part in the cost of buying a house – unless you happen to be unable or unwilling to pay the purchase price with your own money.

Americans have become so used to stratospheric prices for homes, way beyond what they can afford, that they assume financing is an automatic part of the purchase process.[/quote]

Do people pay for a lifetime of rent in a lump sum ? No, we pay as we go in N-months-at-a-time payment plans based on future earnings.

Buying a house with borrowed money is not that much different, just a different set of risks in the short/long term.

[Author]

Posts