[(former)FormerSanDiegan]

I set foot in San Diego in 1993 in the 25-34 year age bracket with 20K in student loan debt and 10K in credit card debt. At that time unemployment as about 8% and home prices only went down.
I am pretty sure the homeownership rate for my demographic had decreased and was probably at a 10-year low.

These were negative factors, but not necessarily indicative of whether it was a good time to purchase real estate or not. We ended up buying a house in 1996 and it turned out fine (actually better than fine).

By definition these types of indicators are typically at their worst in the bottom of a cycle.

[(former)FormerSanDiegan]

[quote=markmax33]

[quote=EconProf]
Relating all this to the housing price booms of the late 1970s, late 1980s, and late 1990s, those investors who jumped in and bought in mid-decade made out very well. It is interesting how the price decline or leveling out happened at roughly the first half of the following decade. Timing is everything.[/quote]

exactly the problem, a few lucky people got massively rich and everyone else lost their retirements, homes, jobs, etc. It is a rigged system with no predictability owned by a group of small wealthy men. This rigged system is bad for 95% of the people.[/quote]

Let’s use some simple logic here.
If x% got massively rich, then everone else consists of 100% – x%.

Suppose 2% of the people got massively rich, then according to your statement the remaining 98% must have lost their retirements, homes, jobs, etc.

I may have the numbers wrong (i just guessed), but I would be interested in seeing the data that indicate the actual percentages.
Can you cite a source ?

Thanks in advance,
FSD

P.S. – Maybe the trick is in the etc. (if we assume etc is stuff like losing their TV remote, or their wallet, keys, glasses, or perhaps lose their way I guess it could be correct)

[(former)FormerSanDiegan]

[quote=walterwhite]Name ONE 19th c economist who is still alive. ONE! All humans fail.

Why should money be permanent. Perhaps it was meant to be in flux.[/quote]

😮

I nominate this for post of the week.

[(former)FormerSanDiegan]

[quote=flu]
..There’s never been an Asian NFL coach in history…[/quote]

Norman Chow is Asian. He was a coach in the NFL

First Asian Coach in the Super Bowl: 2007
http://tinyurl.com/2csfd6

I think you meant “head coach”

[(former)FormerSanDiegan]

So if 2009 and earlier FHA loans defaulted at 9.1 %, what is the likelihood that loans made in 2012 and later, at this new, higher limit and at lower prices, lower rates (and further along in the real estate and economic cycle) will exceed that and current default rates ?

[(former)FormerSanDiegan]

[quote=bearishgurl]
Amount of MIP deposited (assuming all pymts are timely made):

by 13th month of ownership = $17,587.64
by 25th month of ownership = $22,403.96
by 37th month of ownership = $27,220.28

Is this enough cash to protect HUD (another acronym for “gubment”) if this borrower should default in these first three critical years??

[/quote]

It depends on the default rate…

If the default rate is 10%, that’s 175K per foreclosure through month 13 and 275K per foreclosure through month 37.

If the 3-year default rate is 10%, I don;t think HUD would lose much on that 730K loan. (asusming prices don’tall more than 10%).

In fact if they can charge these rates and get a 10% default rate in a market where prices are flat, they will make money hand over fist (and make up for the losses they are currently suffering on previous loans where the rates they set were too low).

[(former)FormerSanDiegan]

[quote=bearishgurl]IMO, current MIP is a VERY high price to pay for “assumability.”

Acc to some on this board . . . ahem . . . “assumability” means nothing because a buyer who wishes to assume today must jump thru all the same hoops as a buyer qualifying straight away for a new mortgage.

Rich, do you know what the “assumption fee” is on FHA loans?[/quote]

Whether the MIP is a high price to pay depends on future interest rates. I agree that $400 per month on $700K is a lot to pay to assume a 4% rate in a 4% rate environment (~today’s rates)

BUT, what if rates go up to 7%. At that point $400 per month is a good deal to get a 4% interest rate.

[(former)FormerSanDiegan]

[quote=gandalf]
Do I think public employee compensation needs reform? Yes.

AFTER financial industry executives go to jail for running a fraud scheme, gambling away money that wasn’t theirs and tanking the U.S. economy. [/quote]

Won’t that cost us even more taxpayer monmey to house all these criminals? plus, then we’d have to pay for the the additional public employees whose pensions would then be invested in the firms of the next generation of future criminals we would then need to incarcerate. Vicious cycle.

[(former)FormerSanDiegan]

[quote=walterwhite]practically no one buys a house in calif. You get a longterm rental with an option to terminate the lease at any time, at which point you may walk away with your security deposit/down payment and any appreciation minus fees….or zero dollars, whichever is greater.

At the end of the really long term rental , as a bonus, if you live, you get to keep the dump.

Isn’t that what homeownership really is?[/quote]

Exactly !

[(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.

[(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.

[(former)FormerSanDiegan]

[quote=barnaby33]So you are all comparing current pricing to peak insanity with loan products that aren’t available anymore and almost zero wage growth yet 15% cost of living inflation(using other posters number, not my own). Wow there is some VERY fuzzy math going on here. I’m lucky in that I’ve gotten a 3% raise each of the last two years. Most people who have a job, haven’t.

Anywho, congrats on finding that payment that is half what it was at peak! What was your name? I thought I heard Harry Howmuchamonth.

Josh[/quote]

Josh –

There is nothing fuzzy about this. Housing is the cheapest it has been on a relative basis by almost any fundamental metric (price to income, price to rent, payment to income and payment to rent ratios) since maybe the 1960s.

If you look at those fundamentals it reminds me of 2004, when clearly things had swung too far in terms of fundamentals. But, momentum was still up, psychology was still too positivs, and the economy was still creating jobs at a reasonable pace. So, we had to wait another year or two for some spark to set off the reversion to the mean.

Well, here we are in 2012 (almost) with price ratios that are well-below long-term averages, momentum is negative as is sentiment and the economy is not creating enough jobs. Very few can see a price ratio reversion to the long-term mean. There is no obvious mechanism to spark that reversion and the vast majority do not expect it.

This is the exact time when those that are contrarian should position or protect themselves against that reversion. It may not happen for another year or two, but it will happen.

[(former)FormerSanDiegan]

[quote=patientrenter][quote=ninaprincess]This house, sold for $630,000 and now sold for $400,000.[/quote]

Maybe I am not as good at math as I thought, but 400/630 is 63.5%. So the house is now 36.5% cheaper than before. If you can’t afford to buy the house, you can get financing, and the financing may have dropped in cost as well. However, the house price is down by 36.5%, not over 50%.[/quote]

Here is a clue:

1. Compute the total cost over 30 years for buying the 630K house in 2006. Call that A.

2. Compute the total cost over 30 years for buying that same house for 400K in 2011. Call that B.

3. Divide B by A, then multiply by 100.

[(former)FormerSanDiegan]

I would conjecture that a flat tax will not happen, so the ramifications thereof are a moot point.

[(former)FormerSanDiegan]

This is not an isolated incident, per Rich’s year-end 2010 plots (example and link below)… Note that monthly payment to rent ratio was less than 1 at the end of 2010. Rents have risen, prices are flat and interest rates jhave dropped, so this is still the case.

[img_assist|nid=15489|title=Rich Toscano plot|desc=|link=node|align=left|width=436|height=336]

Shambling Towards Affordability: Year-End 2010 Edition

Also, note that payment-to-income ratios are well below half what they were at the peak.

Buy houses now. They are underpriced !

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