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Eugene
Participanthow many San Diegans can afford the monthly carrying costs associated with a 15 year home loan? Most couldn’t afford to purchase a home here with a fixed 30 year loan and turned to the IO and higher risk alternatives. So how could they now pay essentially 2x their monthly mortgage on a 15 year loan?
Monthly payment on a 15 year fixed loan is only 40% or so higher than on a 30 year loan.
ParticipantGold is past $850 …
ParticipantGold is past $850 …
ParticipantGold is past $850 …
ParticipantGold is past $850 …
ParticipantGold is past $850 …
ParticipantI doubt the consequences will be allocated appropriately. Some of these ridiculous mortgages were sold to hedge funds and in that case the risk is likely to be allocated appropriately.
At this point, his first mortgage is toast, so hedge funds and pension funds will take a hit regardless.
If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).
Can’t you buy a house with intention of converting your existing house into rental?
it will be difficult to get another loan when he is already cash flow limited
The original post says that the buyer qualifies for the loan full doc. It’s not incredibly hard to do that. His current monthly payment could be as low as $3000 (he has an Option ARM) and, if he brings 80k in cash, he can get a conforming mortgage on the second house for $2500/month. Add taxes, insurance, etc. and he could be qualified with as little as $150K annual income.
ParticipantI doubt the consequences will be allocated appropriately. Some of these ridiculous mortgages were sold to hedge funds and in that case the risk is likely to be allocated appropriately.
At this point, his first mortgage is toast, so hedge funds and pension funds will take a hit regardless.
If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).
Can’t you buy a house with intention of converting your existing house into rental?
it will be difficult to get another loan when he is already cash flow limited
The original post says that the buyer qualifies for the loan full doc. It’s not incredibly hard to do that. His current monthly payment could be as low as $3000 (he has an Option ARM) and, if he brings 80k in cash, he can get a conforming mortgage on the second house for $2500/month. Add taxes, insurance, etc. and he could be qualified with as little as $150K annual income.
ParticipantI doubt the consequences will be allocated appropriately. Some of these ridiculous mortgages were sold to hedge funds and in that case the risk is likely to be allocated appropriately.
At this point, his first mortgage is toast, so hedge funds and pension funds will take a hit regardless.
If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).
Can’t you buy a house with intention of converting your existing house into rental?
it will be difficult to get another loan when he is already cash flow limited
The original post says that the buyer qualifies for the loan full doc. It’s not incredibly hard to do that. His current monthly payment could be as low as $3000 (he has an Option ARM) and, if he brings 80k in cash, he can get a conforming mortgage on the second house for $2500/month. Add taxes, insurance, etc. and he could be qualified with as little as $150K annual income.
ParticipantI doubt the consequences will be allocated appropriately. Some of these ridiculous mortgages were sold to hedge funds and in that case the risk is likely to be allocated appropriately.
At this point, his first mortgage is toast, so hedge funds and pension funds will take a hit regardless.
If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).
Can’t you buy a house with intention of converting your existing house into rental?
it will be difficult to get another loan when he is already cash flow limited
The original post says that the buyer qualifies for the loan full doc. It’s not incredibly hard to do that. His current monthly payment could be as low as $3000 (he has an Option ARM) and, if he brings 80k in cash, he can get a conforming mortgage on the second house for $2500/month. Add taxes, insurance, etc. and he could be qualified with as little as $150K annual income.
ParticipantI doubt the consequences will be allocated appropriately. Some of these ridiculous mortgages were sold to hedge funds and in that case the risk is likely to be allocated appropriately.
At this point, his first mortgage is toast, so hedge funds and pension funds will take a hit regardless.
If the guy is already has a house, the next purchase has to show as a Non-Occupied status (can’t be in both at the same time).
Can’t you buy a house with intention of converting your existing house into rental?
it will be difficult to get another loan when he is already cash flow limited
The original post says that the buyer qualifies for the loan full doc. It’s not incredibly hard to do that. His current monthly payment could be as low as $3000 (he has an Option ARM) and, if he brings 80k in cash, he can get a conforming mortgage on the second house for $2500/month. Add taxes, insurance, etc. and he could be qualified with as little as $150K annual income.
December 31, 2007 at 10:02 PM in reply to: Shiller: US could likely to fall into deflationary spiral ala Japan #127091ParticipantI don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).
The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.
Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)
All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.
Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.
Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.
And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?
Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.
December 31, 2007 at 10:02 PM in reply to: Shiller: US could likely to fall into deflationary spiral ala Japan #127252ParticipantI don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).
The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.
Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)
All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.
Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.
Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.
And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?
Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.
December 31, 2007 at 10:02 PM in reply to: Shiller: US could likely to fall into deflationary spiral ala Japan #127261ParticipantI don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).
The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.
Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)
All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.
Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.
Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.
And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?
Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.
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