What home prices would be without the bubble

[Raybyrnes]

Rich,

It seems like you are simply describing housing as a bond yield calculation.

[Raybyrnes]

Rich,

It seems like you are simply describing housing as a bond yield calculation.

[Raybyrnes]

Rich,

It seems like you are simply describing housing as a bond yield calculation.

[denverite]

gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.

Banks and other traditional lenders were used only as a last resort, though it surely did happen.

Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.

My, albeit biased, conclusion is that the thrust of the article remains intact.

[denverite]

gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.

Banks and other traditional lenders were used only as a last resort, though it surely did happen.

Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.

My, albeit biased, conclusion is that the thrust of the article remains intact.

[denverite]

gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.

Banks and other traditional lenders were used only as a last resort, though it surely did happen.

Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.

My, albeit biased, conclusion is that the thrust of the article remains intact.

[denverite]

gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.

Banks and other traditional lenders were used only as a last resort, though it surely did happen.

Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.

My, albeit biased, conclusion is that the thrust of the article remains intact.

[denverite]

gdox believes that the late 70’s had unusually high mortgage rates, and that this had the effect of reducing home prices ( and therefore, the income multiplier). At that time I lived in SD and sold some properties. It is true that properties took a while to move, but not true that housing prices declined to any significant extent. The reason: creative financing. If an owner actually wished to sell, they became the lender (at reasonable interest rates typically around 7-8 percent). There were many such alternatives promoted by the real estate industry to keep the cash flow going. “Creative Fincancing” was truly a huge buzzword at the time.

Banks and other traditional lenders were used only as a last resort, though it surely did happen.

Also, one merely needs to look at historical price data (OFHEO) to understand that there was not a significant price decline at the time.

My, albeit biased, conclusion is that the thrust of the article remains intact.

[jpinpb]

I would just like to add that it wasn’t merely the low interest rates which caused the housing price to increase. I believe it is the direct correlation between the low monthly payment on the teaser rate that allowed people to buy more expensive homes they otherwise would not

The price increase is tied directly to the low teaser monthly payment. Some of those initial teaser rates allowed the mortgage payment to be just slightly higher than what rents would be.

All shortsighted, of course. No one thought about when the rate adjusted, or cared. They were going to flip or take money out or whatever.

There will be more people in the rental market as they get evicted from their foreclosed homes. Therefore, the vacancies will be low. I think the rents will increase because of the mere demand. Predatory renting, so to speak. People will stretch their budget for a while. But ultimately, it can only go so high compared to incomes.

My two cents.

[jpinpb]

I would just like to add that it wasn’t merely the low interest rates which caused the housing price to increase. I believe it is the direct correlation between the low monthly payment on the teaser rate that allowed people to buy more expensive homes they otherwise would not

The price increase is tied directly to the low teaser monthly payment. Some of those initial teaser rates allowed the mortgage payment to be just slightly higher than what rents would be.

All shortsighted, of course. No one thought about when the rate adjusted, or cared. They were going to flip or take money out or whatever.

There will be more people in the rental market as they get evicted from their foreclosed homes. Therefore, the vacancies will be low. I think the rents will increase because of the mere demand. Predatory renting, so to speak. People will stretch their budget for a while. But ultimately, it can only go so high compared to incomes.

My two cents.

[jpinpb]

I would just like to add that it wasn’t merely the low interest rates which caused the housing price to increase. I believe it is the direct correlation between the low monthly payment on the teaser rate that allowed people to buy more expensive homes they otherwise would not

The price increase is tied directly to the low teaser monthly payment. Some of those initial teaser rates allowed the mortgage payment to be just slightly higher than what rents would be.

All shortsighted, of course. No one thought about when the rate adjusted, or cared. They were going to flip or take money out or whatever.

There will be more people in the rental market as they get evicted from their foreclosed homes. Therefore, the vacancies will be low. I think the rents will increase because of the mere demand. Predatory renting, so to speak. People will stretch their budget for a while. But ultimately, it can only go so high compared to incomes.

My two cents.

[jpinpb]

I would just like to add that it wasn’t merely the low interest rates which caused the housing price to increase. I believe it is the direct correlation between the low monthly payment on the teaser rate that allowed people to buy more expensive homes they otherwise would not

The price increase is tied directly to the low teaser monthly payment. Some of those initial teaser rates allowed the mortgage payment to be just slightly higher than what rents would be.

All shortsighted, of course. No one thought about when the rate adjusted, or cared. They were going to flip or take money out or whatever.

There will be more people in the rental market as they get evicted from their foreclosed homes. Therefore, the vacancies will be low. I think the rents will increase because of the mere demand. Predatory renting, so to speak. People will stretch their budget for a while. But ultimately, it can only go so high compared to incomes.

My two cents.

[jpinpb]

I would just like to add that it wasn’t merely the low interest rates which caused the housing price to increase. I believe it is the direct correlation between the low monthly payment on the teaser rate that allowed people to buy more expensive homes they otherwise would not

The price increase is tied directly to the low teaser monthly payment. Some of those initial teaser rates allowed the mortgage payment to be just slightly higher than what rents would be.

All shortsighted, of course. No one thought about when the rate adjusted, or cared. They were going to flip or take money out or whatever.

There will be more people in the rental market as they get evicted from their foreclosed homes. Therefore, the vacancies will be low. I think the rents will increase because of the mere demand. Predatory renting, so to speak. People will stretch their budget for a while. But ultimately, it can only go so high compared to incomes.

My two cents.

[patientlywaiting]

I’m in agreement with jpinpb. The low teaser rates is what got people to say: “I can buy that house for just about the same as my rent. Plus I can resell and get rich.”

Bank were qualifying borrowers based on the teaser rate. Big mistake.

[patientlywaiting]

I’m in agreement with jpinpb. The low teaser rates is what got people to say: “I can buy that house for just about the same as my rent. Plus I can resell and get rich.”

Bank were qualifying borrowers based on the teaser rate. Big mistake.

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