[patientrenter]

[quote=ybitz]Aye…why are prices still so high relative to people’s incomes, despite the high foreclosure rates?[/quote]

Because the money used to pay for the houses doesn’t come from the buyers – it’s “monopoly money” from lenders like the FHA. If buyers had to put up most, or even a good portion, of the money to buy a house, prices would plummet to levels that were comfortably supportable.

[patientrenter]

[quote=ybitz]Aye…why are prices still so high relative to people’s incomes, despite the high foreclosure rates?[/quote]

Because the money used to pay for the houses doesn’t come from the buyers – it’s “monopoly money” from lenders like the FHA. If buyers had to put up most, or even a good portion, of the money to buy a house, prices would plummet to levels that were comfortably supportable.

[patientrenter]

[quote=ybitz]Aye…why are prices still so high relative to people’s incomes, despite the high foreclosure rates?[/quote]

Because the money used to pay for the houses doesn’t come from the buyers – it’s “monopoly money” from lenders like the FHA. If buyers had to put up most, or even a good portion, of the money to buy a house, prices would plummet to levels that were comfortably supportable.

[patientrenter]

[quote=ybitz]Aye…why are prices still so high relative to people’s incomes, despite the high foreclosure rates?[/quote]

Because the money used to pay for the houses doesn’t come from the buyers – it’s “monopoly money” from lenders like the FHA. If buyers had to put up most, or even a good portion, of the money to buy a house, prices would plummet to levels that were comfortably supportable.

[patientrenter]

Shame is dead. Indeed. When choices had to be made on how to manage through this latest recession, moral hazard was weighed against pain avoidance. Remember when moral hazard was a live issue? That’s long gone. Everyone decided we needed to “save our economy”, aka “hit the restart button”. This is what happens when you make that choice.

[patientrenter]

Shame is dead. Indeed. When choices had to be made on how to manage through this latest recession, moral hazard was weighed against pain avoidance. Remember when moral hazard was a live issue? That’s long gone. Everyone decided we needed to “save our economy”, aka “hit the restart button”. This is what happens when you make that choice.

[patientrenter]

Shame is dead. Indeed. When choices had to be made on how to manage through this latest recession, moral hazard was weighed against pain avoidance. Remember when moral hazard was a live issue? That’s long gone. Everyone decided we needed to “save our economy”, aka “hit the restart button”. This is what happens when you make that choice.

[patientrenter]

Shame is dead. Indeed. When choices had to be made on how to manage through this latest recession, moral hazard was weighed against pain avoidance. Remember when moral hazard was a live issue? That’s long gone. Everyone decided we needed to “save our economy”, aka “hit the restart button”. This is what happens when you make that choice.

[patientrenter]

Shame is dead. Indeed. When choices had to be made on how to manage through this latest recession, moral hazard was weighed against pain avoidance. Remember when moral hazard was a live issue? That’s long gone. Everyone decided we needed to “save our economy”, aka “hit the restart button”. This is what happens when you make that choice.

[patientrenter]

[quote=Bob][quote=patientrenter]I think you’re seeing a tug of war going on here between the conflicting inner selves of the piggs. Selfishly, we all know that buying a house with little or none of your own money (e.g. FHA deals) is almost certainly a great deal.[/quote]

The reason I oppose most FHA loans isn’t because they are a great deal…its because they are a RISKY deal. Particulary at a time when unemployment is rising. In my opinion, its irresponsible for the Feds to be backing these types of loans when we are in the middle of a foreclosure crisis when they know full well that the default rate on FHA’s is much higher than conventional loans.

I have nothing against the person who started this thread, but lets suppose he/she purchases a home for $450K with 5% down. There’s a real possibility that by the end of the year this person will have a property that’s only worth $400K, yet will be forking out big monthly payments on a house that has depreciated in value. Is it still a great deal then ? This person will be just another statistic on the verge of a potential foreclosure if his/her income decreases for whatever reason.

Once again, my advice would be to find a home that is affordable at a much lower price range that reduces the financial risk. [/quote]

Bob, it’s a great deal in the same way getting a free at-the-money call option on a stock is a great deal. Certainly the call could expire worthless, or it could pay off nicely. But the fact that it gives you most of the upside, and little of the downside, means it has a lot of value even when it was first given. More simply, consider a stock. It could produce a lot of income for your over your holding period, or it could produce very little, possibly even zero. Just because it might produce zero doesn’t mean it’s not a good deal to be given a stock for free, or almost free.

This confusion reminds me of the whole employee stock option scam. What was a good idea in moderation became a scam to defraud stockholders, because the accounting failed to recognize that giving someone an option was an immediate transfer of real value to them, separate from what happened to it after the grant.

[patientrenter]

[quote=Bob][quote=patientrenter]I think you’re seeing a tug of war going on here between the conflicting inner selves of the piggs. Selfishly, we all know that buying a house with little or none of your own money (e.g. FHA deals) is almost certainly a great deal.[/quote]

The reason I oppose most FHA loans isn’t because they are a great deal…its because they are a RISKY deal. Particulary at a time when unemployment is rising. In my opinion, its irresponsible for the Feds to be backing these types of loans when we are in the middle of a foreclosure crisis when they know full well that the default rate on FHA’s is much higher than conventional loans.

I have nothing against the person who started this thread, but lets suppose he/she purchases a home for $450K with 5% down. There’s a real possibility that by the end of the year this person will have a property that’s only worth $400K, yet will be forking out big monthly payments on a house that has depreciated in value. Is it still a great deal then ? This person will be just another statistic on the verge of a potential foreclosure if his/her income decreases for whatever reason.

Once again, my advice would be to find a home that is affordable at a much lower price range that reduces the financial risk. [/quote]

Bob, it’s a great deal in the same way getting a free at-the-money call option on a stock is a great deal. Certainly the call could expire worthless, or it could pay off nicely. But the fact that it gives you most of the upside, and little of the downside, means it has a lot of value even when it was first given. More simply, consider a stock. It could produce a lot of income for your over your holding period, or it could produce very little, possibly even zero. Just because it might produce zero doesn’t mean it’s not a good deal to be given a stock for free, or almost free.

This confusion reminds me of the whole employee stock option scam. What was a good idea in moderation became a scam to defraud stockholders, because the accounting failed to recognize that giving someone an option was an immediate transfer of real value to them, separate from what happened to it after the grant.

[patientrenter]

[quote=Bob][quote=patientrenter]I think you’re seeing a tug of war going on here between the conflicting inner selves of the piggs. Selfishly, we all know that buying a house with little or none of your own money (e.g. FHA deals) is almost certainly a great deal.[/quote]

The reason I oppose most FHA loans isn’t because they are a great deal…its because they are a RISKY deal. Particulary at a time when unemployment is rising. In my opinion, its irresponsible for the Feds to be backing these types of loans when we are in the middle of a foreclosure crisis when they know full well that the default rate on FHA’s is much higher than conventional loans.

I have nothing against the person who started this thread, but lets suppose he/she purchases a home for $450K with 5% down. There’s a real possibility that by the end of the year this person will have a property that’s only worth $400K, yet will be forking out big monthly payments on a house that has depreciated in value. Is it still a great deal then ? This person will be just another statistic on the verge of a potential foreclosure if his/her income decreases for whatever reason.

Once again, my advice would be to find a home that is affordable at a much lower price range that reduces the financial risk. [/quote]

Bob, it’s a great deal in the same way getting a free at-the-money call option on a stock is a great deal. Certainly the call could expire worthless, or it could pay off nicely. But the fact that it gives you most of the upside, and little of the downside, means it has a lot of value even when it was first given. More simply, consider a stock. It could produce a lot of income for your over your holding period, or it could produce very little, possibly even zero. Just because it might produce zero doesn’t mean it’s not a good deal to be given a stock for free, or almost free.

This confusion reminds me of the whole employee stock option scam. What was a good idea in moderation became a scam to defraud stockholders, because the accounting failed to recognize that giving someone an option was an immediate transfer of real value to them, separate from what happened to it after the grant.

[patientrenter]

[quote=Bob][quote=patientrenter]I think you’re seeing a tug of war going on here between the conflicting inner selves of the piggs. Selfishly, we all know that buying a house with little or none of your own money (e.g. FHA deals) is almost certainly a great deal.[/quote]

The reason I oppose most FHA loans isn’t because they are a great deal…its because they are a RISKY deal. Particulary at a time when unemployment is rising. In my opinion, its irresponsible for the Feds to be backing these types of loans when we are in the middle of a foreclosure crisis when they know full well that the default rate on FHA’s is much higher than conventional loans.

I have nothing against the person who started this thread, but lets suppose he/she purchases a home for $450K with 5% down. There’s a real possibility that by the end of the year this person will have a property that’s only worth $400K, yet will be forking out big monthly payments on a house that has depreciated in value. Is it still a great deal then ? This person will be just another statistic on the verge of a potential foreclosure if his/her income decreases for whatever reason.

Once again, my advice would be to find a home that is affordable at a much lower price range that reduces the financial risk. [/quote]

Bob, it’s a great deal in the same way getting a free at-the-money call option on a stock is a great deal. Certainly the call could expire worthless, or it could pay off nicely. But the fact that it gives you most of the upside, and little of the downside, means it has a lot of value even when it was first given. More simply, consider a stock. It could produce a lot of income for your over your holding period, or it could produce very little, possibly even zero. Just because it might produce zero doesn’t mean it’s not a good deal to be given a stock for free, or almost free.

This confusion reminds me of the whole employee stock option scam. What was a good idea in moderation became a scam to defraud stockholders, because the accounting failed to recognize that giving someone an option was an immediate transfer of real value to them, separate from what happened to it after the grant.

[patientrenter]

[quote=Bob][quote=patientrenter]I think you’re seeing a tug of war going on here between the conflicting inner selves of the piggs. Selfishly, we all know that buying a house with little or none of your own money (e.g. FHA deals) is almost certainly a great deal.[/quote]

The reason I oppose most FHA loans isn’t because they are a great deal…its because they are a RISKY deal. Particulary at a time when unemployment is rising. In my opinion, its irresponsible for the Feds to be backing these types of loans when we are in the middle of a foreclosure crisis when they know full well that the default rate on FHA’s is much higher than conventional loans.

I have nothing against the person who started this thread, but lets suppose he/she purchases a home for $450K with 5% down. There’s a real possibility that by the end of the year this person will have a property that’s only worth $400K, yet will be forking out big monthly payments on a house that has depreciated in value. Is it still a great deal then ? This person will be just another statistic on the verge of a potential foreclosure if his/her income decreases for whatever reason.

Once again, my advice would be to find a home that is affordable at a much lower price range that reduces the financial risk. [/quote]

Bob, it’s a great deal in the same way getting a free at-the-money call option on a stock is a great deal. Certainly the call could expire worthless, or it could pay off nicely. But the fact that it gives you most of the upside, and little of the downside, means it has a lot of value even when it was first given. More simply, consider a stock. It could produce a lot of income for your over your holding period, or it could produce very little, possibly even zero. Just because it might produce zero doesn’t mean it’s not a good deal to be given a stock for free, or almost free.

This confusion reminds me of the whole employee stock option scam. What was a good idea in moderation became a scam to defraud stockholders, because the accounting failed to recognize that giving someone an option was an immediate transfer of real value to them, separate from what happened to it after the grant.

[patientrenter]

i kinda like most people on this board, paramount. but it is true that one answer to the question “where did all the money go?” is people who sold at the peak (and bought much lower). and there are quite a few of those here.

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