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patientrenter
Participant[quote=EconProf]……housing values must stop falling for a real recovery to take hold.[/quote]
This is total nonsense.
Our economic problem is not that homes are too affordable.
Our economic problem is that too much of domestic US demand goes abroad, turning into Chinese jobs and income. If we had a lower trade deficit, we wouldn’t have such an enormous flow of foreign savings landing on our shores, inflating bubble after bubble.
Either China (and other persistent net exporters) must increase their US imports, or we need to reduce their exports to us.
Yes, I am perfectly aware of the Smoot-Hawley Act and its impacts. Nevertheless, we have a structural problem that must be solved, and inflating asset bubbles isn’t a solution.
November 7, 2011 at 5:22 PM in reply to: HUD to Roll Out Emergency Loan Program for Unemployed “Homeowners” by Year-End #732410Participant[quote=SK in CV]…..If the cost of employer paid unemployment insurance went away, you would not get a raise.[/quote]
SK, you understand basic economics, right? Imagine that supply and demand chart that you were shown on the first day you were introduced to economics. Now imagine that the ‘good’ is labor, and that the demand for labor is shifted up, because the total cost of labor has been reduced. Will pay (the price of labor) go up or down?
In competitive markets, this is what happens. Although we have notable examples of con-competitive markets (bankers and CEOs), most markets in the US are reasonably competitive.
Don’t try to make ideology out of everything. Sometimes the facts are just the facts.
Participant[quote=AN]…..What’s interesting is, we’re spending ~$10k/student while other countries average around ~$7k. So spending more probably won’t fix this problem.[/quote]
That was obvious all along, AN. We have horrible problems in large segments of our education system and, more generally, in how we raise some of our children.
In the US, education is run by a combination of teachers’ unions and politicians. No one should be surprised that the result is unfavorable to many children, yet comes at enormous cost to taxpayers.
South Korea and Finland were highlighted in the program as the highest-achieving countries, with opposite techniques for getting there. South Korea relied on rote drilling for massive amounts of time. Finland relied on uniformly high quality teachers in a homogeneous society with virtually no poverty. In both, education and teachers were treated with the utmost respect, comparable to doctors here in the US.
We won’t solve our education problems here in the US. Why? Because we are a heterogeneous society, complacent about vast segments of the population living in poverty and ignorance, and we respect doctors a lot more than teachers.
November 6, 2011 at 2:01 PM in reply to: Buying again, 2 years after Short Sale – questions for you pros #732337Participant[quote=SellingMyHome]
……Why put 20% down? When I run the rent vs buy calculator at NYTimes, the higher deposit makes it better to rent, assuming a 6% or higher ROI, which long-term is doable.Why not put the 3.5% down? The next house I buy will be my last, if nothing changes with jobs, health, etc. Aren’t interest rates so low now that it makes sense?
I know a lot of people here wish that folks never could have bought with zero or little down, as it allowed many people to walk away with no loss.
I’m really still a little (a lot in some of your eyes) clueless as to why a higher down payment is a better thing for me.[/quote]
Savers and taxpayers are paying for this ability to put down 3.5% instead of a minimum of 20%. This example shows that it’s not necessary to allow downpayments of less than 20%. We are simply allowing people to milk “the system”. For those of us who pay for the system, this is just theft, authorized by Congress, and executed by the Federal Reserve and Treasury.
November 5, 2011 at 10:58 PM in reply to: HUD to Roll Out Emergency Loan Program for Unemployed “Homeowners” by Year-End #732315Participant[quote=SK in CV]…..And unemployment no more comes out of your salary than your employer’s rent does. Or software licenses for your company computer. Your employer pays those things in order to have employees. A salary burden just like unemployment taxes. And neither is it paid in on your behalf…..[/quote]
We (at my company) have to reduce employee pay by the cost of mandatory contributions. Everyone else I know does the same. It’s not a political plot, it’s just straightforward economics. All this splitting of contributions between employees and employers is just for show, to make the amounts feel smaller.
I don’t begrudge having my net pay reduced for these transfer payments to others. I am amused how people fall for the not-very-subtle sleight of hand involved.
November 5, 2011 at 5:13 PM in reply to: Buying again, 2 years after Short Sale – questions for you pros #732301Participant[quote=bearishgurl] ….The crooked agents handling “short sales” are the ones who are profiting from them and causing (in collusion with greedy sellers who don’t deserve anything) the closing prices of these properties to plummet (on the record) whilst at the same time their undeserving client often miraculously walks away from the sale with even MORE cash in their pockets.
Go figure. It’s par for the course ….[/quote]
I am sure there are some honest agents, honest sellers, and mortgage servicers. How many? Well, not 100%. The US is neither the most corrupt country in the world, nor the most pristine. We’ve probably come down a few rungs since Greenspan and then Bernanke decided to pump in enough money to cover all the normal consequences of large-scale financial shenanigans.
November 5, 2011 at 3:17 PM in reply to: HUD to Roll Out Emergency Loan Program for Unemployed “Homeowners” by Year-End #732298Participant[quote=GH]More loans are not the answer to bad loans. This is another failed initiative which attempts to addresses the problem without addressing the underlying causes of the problem.[/quote]
Truth
November 5, 2011 at 3:15 PM in reply to: Buying again, 2 years after Short Sale – questions for you pros #732297Participant[quote=SD Realtor] …..the seller is a poster child for why we should not have 0 down loans, or for that matter FHA loans. Forcing buyers to come up with equity (in my opinion at least 20%) would lead to a much more stable market….[/quote]
I nominate Adam for Treasury Secretary. And would you please kick Geithner’s ass on his way out, and hit Bernanke hard every time he buys a MBS including loans with less than 20% down?
Participant[quote=briansd1]…..
Except that houses have become bigger and more luxurious in the last 40 years…..[/quote]Most young second generation Californians, if they were trying just to buy the land their parents’ first home sits on, at the same age at which their parents bought that house, would have to pay a price that is a higher multiple of their incomes than their parents paid. Prices of homes have gone up faster than typical incomes over the last 40 years.
Participant[quote=Allan from Fallbrook]….So, in truth, there really isn’t (for them) a “capitalist risk” at all, is there? There is just a rigged game, played by those in Big Money and their paid for politicians (GOP and Dem)….[/quote]
Spot-on, Allan.
Can anyone tell the difference in how the Goldman Sachses of the world are being treated under Rubin/Greenspan/Paulson versus under Summers/Geithner/Bernanke?
These guys just switch the name plates on the doors as they rotate teams from Manhattan to Washington DC and back.
Participant[quote=Diego Mamani]I don’t think this is a win-win policy, as some have said. For one, it will create upward pressure for house prices, so that less and less Americans will be able to afford houses…..[/quote]
That’s right.
At the heart of this is yet another government effort to prevent home prices going down – and thereby becoming more affordable for Americans. All the other arguments are smoke being blown to distract from this very simple price boosting goal.
Would American society work better over the long term if homes were cheaper, or more expensive? Sure, if you already have a home, or you are part of the financial industry, you personally will “get yours” if home prices are kept high. But, ultimately, homes are a consumer good. Like any consumer good, we are better off if we can get more for less, not vice versa. Only if we assume that we can re-sell our home in the future for far more than we paid for it does that consumer good logic stumble. But assuming that home prices can continue to outpace incomes forever is assuming that a Ponzi scheme can continue forever. Home prices are a much higher multiple of the average young person’s pay than they were 40 years ago. We can’t sustain that home price pattern in the future, at least not with any fairness to the next generation of Americans.
November 3, 2011 at 2:59 AM in reply to: Buying again, 2 years after Short Sale – questions for you pros #732108Participant[quote=jstoesz]
……..It is that irrational exuberance that is so stupid…that housing will make you money. And sadly this view point did not die in CA with the last bust. Only productive assets should make you money.[/quote]
Well said. Except that the US population has become addicted to the dream that they will ultimately (when they eventually sell) get paid to sit on a couch in their home, as long as they arrange to pay a monthly mortgage instead of monthly rent.
Clearly, only productive assets should be expected to boost one’s income over the long run. One’s own house is not a productive asset in this sense. A good education is, as are great work tools, etc, but not one’s own home (unless you are renting out part of it).
So how do Americans deal with the economic unsustainability of this dream of getting paid to sit on a couch? Well, we arrange for government intervention to make it true. We transfer wealth from taxpayers and savers to homeowners. That’s what the Congress, Federal Reserve and the US Treasury have made their number 1 priority. We have government financing for 90% of home purchases, and vast printing of new currency to prevent home prices coming all the way back down to their open market economic levels. We provide one-way tickets to buyers, with the ability to walk away when prices go down, as the OP did here, or keep the gains if prices go up. All this gets paid for by someone – ultimately taxpayers and savers.
Participant[quote=CA renter]
…FWIW, I think the Federal Reserve is the #1 culprit behind the “pension crisis,” and the “financial crisis.” Their policies — of not restraining markets that have clearly taken on far too much risk…and then “stimulating” (via artificially suppressed interest rates) when bubbles burst — have made it nearly impossible to accurately assess risks and invest in a responsible way. Investors are basically *forced* to take on too much risk during the low interest and/or bubble years, and are led to believe that the Fed will cover them tracks when things fail……[/quote]
I think that is fair. While there are many problems with our system that could bear fixing, none are as critical as the role of the Fed. Greenspan and Bernanke did all they could to inflate unsustainable asset bubbles. Bernanke backstopped all the bailouts. By aiming to prevent the consequences of economic and financial mistakes flowing to the protagonists, he has removed accountability from our financial and economic system. The Fed allowed the current top-heavy distribution of wealth, and the concentration of power amongst a Wall Street-Washington DC axis of the elite, to continue.
Participant[quote=hslinger] ….Can I borrow your time machine?[/quote]
Sure. It just needs an anti-gravity drive right now, so bring a spare one of those 🙂
As for the analogy with rent, well that’s the difference between renting and buying. Renting is paying a little every month, for the use of the property every month. Buying is paying everything up front for all future use of the property.
Financing is the process of borrowing money to make buying feel a little closer to renting. Modern Americans, especially in the worst bubble zones where prices have become unaffordable, have come to rely so heavily on financing that they think that buying is the same as financed buying.
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