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patientrenter
Participant[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]
Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.
Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.
But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.
So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.
For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136
Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.
Participant[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]
Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.
Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.
But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.
So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.
For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136
Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.
Participant[quote=chrisp]Again point taken. What is everyone’s thought on inflation though? Is that an additional incentive to get in now?[/quote]
Let’s suppose that a law was passed tomorrow that made it legal for you (and everyone else) to take the money in your neighbors’ bank accounts. To make it a bit more realistic, assume that any money taken this way went immediately into the taker’s bank account, but the deduction from the neighbor’s bank account didn’t occur until a year or two down the road.
Then should I advise you (or anyone else) to take as much as possible, while the going is good? Or to stay away until things are more sensible and sustainable? My tendency is to advise others to stay away.
But let’s assume for a moment that you didn’t care about that side of things. (Everyone is doing it, it’s legal, it’s good for me, so it’s alright….)
Then what should you do? How can you extract the most from the system for your own benefit?Well, in the case of the current housing market, the FHA is offering 3% money down loans. It’s a huge giveway. If prices go up, you can pocket the gains. If prices go down, you can walk away with a tiny loss.
So what are the chances that you will have a gain, or a loss? Your chances are better if you buy at prices that reflect that we are no longer at the peak, and are now heading for the bottom of the RE cycle. At the bottom of the last downturn, prices were about 20% (that’s right, 20%) of where they were at the peak. Adjusted for inflation, maybe 30%. This last peak was greater than any in recorded history. (See some of Shiller’s excellent and respectable work.) No one knows the exact price level at the next bottom, but it’s pretty clear that $600-700K for a modest condo is nowhere near the bottom. I’d say you have very little appreciation to look forward to in the near future. Being able to putg down the FHA minimum, allowing you to walk away with almost no loss, is a huge gift to you from the taxpayers.
For a one-chart summary of some of Shiller’s work on home prices, see http://www.itulip.com/forums/showthread.php?t=2136
Oh, inflation? Calculate the number of years of inflation you’d need at 7% (or even 10%) for home prices to increase back to today’s levels from what they could go down to if they simply return to their inflation-adjusted value in 2000. The last bottom of the SD market was 1996, so for fun try that too.
Participantchrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.
Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?
Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:
1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.
2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.
I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.
Participantchrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.
Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?
Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:
1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.
2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.
I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.
Participantchrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.
Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?
Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:
1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.
2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.
I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.
Participantchrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.
Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?
Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:
1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.
2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.
I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.
Participantchrisp, the TARP money is $700 billion. I wouldn’t call that chump change myself, but it isn’t anywhere close to the total extra money the govt has pumped into housing in the last 2 years.
Did you know that, starting in 2007, the FHLB system (with implicit guarantees from the govt) has put trillions into banks to lend on homes? That Fannie Mae and Freddie (whose private status is a fig leaf) have done the same? That the FDIC has guaranteed hundreds of billions of dollars of new loans for banks to lend out for housing? That the Fed has purchased in the neighborhood of a trillion dollars of trashed home loan securities from banks at way over market to keep the banks lending with abandon?
Almost every loan against housing in the last 2 years has been made only because the US taxpayer has arranged to pay the losses. If only private investment dollars had been available, with no govt intervention, very few home loans would have been made until:
1. Down payments had increased to cover most possible losses after the biggest home price bubble in recorded history. In 2007, right at the peak of the bubble, that would have meant minimum down payments of around 50%.
2. Home prices had decreased to levels supported by long term traditional affordability standards. After that had occurred, minimum downpayments could have come down to around 20%.
I have many relatives in Europe. They used to always rib me about the cowboy capitalist economy of the USA. I’d laugh, but I remember in late 2007 describing to one of them how 70-90% of the money going into US housing was from the government, on terms that no truly private lender would give. We were more socialist than the Europeans, in this one respect. He loves to argue, but he knew enough finance to see that what I was saying was correct. It’s even more true today. I don’t object to the socialism in itself, but the distortions and penalties created by these nutty govt home price policies, on a personal and macroeconomic level, are enormous.
Participant[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
Participant[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
Participant[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
Participant[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
Participant[quote=Scarlett]It would have been nice to see more pertinent answers to the OP, not biting his head off.
I don’t think people should be bitter and overanalyze why and what is the OP buying. His family is probably young and if one of them is lawyer or doctor recently minted, they wouldn’t have had time to save money for 20% of those ridiculously inflated prices. They probably are to be commended they don’t have other debts. If he is a doctor or lawyer ( I am using these here as examples only) and his income is almost guaranteed to increase substantially in the near future, why not buy now?. I would too in his shoes. He has 20% of the 2001-2002 price, but only 10% of the 2005-current price. whose fault is the prices are overinflated? Anyhow, that’s why you pay PMI if you have less than 20% down. It’s extra insurance. If it makes sense for him regarding debt-to-income ratio and comparing with rent I say go for it.
And, no, he is not only paying the dowpayment 60K for housing, he will pay every month 3500-4000 at least in PITI unless he defaults immediately. And if his income will increase he will be able to afford it easily.[/quote]
And there you can see laid out very clearly why we have arrived at the situation we are in.
Why should a nice, decent person have to wait to get something? If they say they are about to earn a lot of money, why make them wait a few years while they prove it?
It’s OK to allow low downpayments (of less than 20% or so, let’s say) because private mortgage insurers can cover the possible losses. Yes, private mortgage insurers can collect $20 billion over 10-15 years of a home price cycle, and then cover the trillion dollars of losses in the inevitable downturn. We all know that taxpayers have paid, and will be paying the difference. You just can’t insure against losses this big without insisting that the home owners come up with lots of their own money.
“Whose fault is it that prices are inflated?” A lot of people are at fault. Lenders are at fault for allowing (true buyer-funded) downpayments of less than 20%. Buyers are at fault for looking only at the home price a lender will qualify them for, and for buying with less than 20% down. Just because it’s not this prospective first-time home buyer’s fault for creating a market with inflated prices doesn’t mean that they should make all the same mistakes that created that market. Then they would share full responsibility for making home prices too high.
Participant[quote=Nor-LA-SD-guy]On the Low to mid range homes I think we have entered a classic wall of worry situation.
I have never been a high end home type of guy to tell the truth so would not know what goes on at that level or why anyone would spend 1 Mil+ on a home.
But I guess it is nice to be at the beach etc… but if I can get there in 15 minutes to half hour and put my toes in the sand I figure I can afford the AC as well.[/quote]
Agree, NO-LA-SD-guy. My sweet spot is about 2 miles inland.
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