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“Credit has not been widened or deepened, and there isn’t enough product innovation to offer loans to this generation."
He says the mortgage market needs to be more adaptable and innovative, explaining that historically, housing crashes are followed by new product offers like short-terms ARMs, reset mortgages and subprime mortgages that have fueled the recovery.
Sure, let's start giving out innovative products like subprime, reset and short term ARMs to people that can barely afford them because that worked out so well the last time around.
btw, who the heck is this idiot journalist and how is Fox allowing such rubbish to be published?
ahem tiny homes, not banking loans
sorry you can build a house with less than 20-30k
the problem = housing laws + land permits etc
banks refusing to take a loss.
The product innovation that usually manifests itself in the real estate market, where everybody in the FIRE (Finance,Insurance,Real estate) economy but labor gets paid in % points, ends up being "less is more" marketing to the buyer where smaller Sq. Ft. living spaces accommodates the affordability factor thereby allowing an entry point into home ownership.
Historically, this affordability for the lower economic class has always been the mobile home, condo, foreclosure property, probate property, or fixer uppers on the Real Estate side of affordability and Voo Doo economics on the finance side of affordibility where the buyer ends up paying twice the price of the property bought by the time that the financing is paid off with all the interest is paid up front of the loan in the amortization process and the majority of the debt not getting paid off until after the halfway point of the time period that the debt is resolved.
It's like rungs on a ladder with the pinnacle being a mansion with a view.
Nobody making a commision wants to take a pay cut so the squeeze has always been on labor & materials and putting more financial risk on "other people" in the use of "other prople's money " (OPM) which comes from Wall Street and backed up by Uncle Sam which leads right back to the population at large who pays taxes.
It all revolves around risk and fiduciary duty.
Unfortunately, the people who get paid in % commisions are usually the ones who don't care about risk and fiduciary duty and blatantly display their wealth conspicuously as they go about being the movers and shakers in the FIRE economy.
Last edited by NickofDiamonds; 08-15-2014 at 08:13 AM..
That's a blanket statement that holds true sometimes and doesn't hold true others. Its a lot more complex of an equation than that. Sometimes the delta between homeownership and renting is 0 or negative, in which case its better to own. Also in these comparisons people fail to consider that rent will ALWAYS go up, where a mortgage will never go up.
Usually rent doesn't go up in real (inflation-adjusted) terms over the long haul, so unless inflation is left out of the analysis, that isn't so.
If there is little demand for traditional single family homes or large homes, then the market will adjust. Smaller homes will be built. Or, more apartments will be built.
In many cities, rents are going up much faster than home prices. This is another reason young people don't accumulate wealth. They like to live in cool cities and cool neighborhoods. They can't afford a down payment. But many spend quite a bit on rents. That prevents that from savings up for a down payment. Because more people rent instead of own, rents are high.
The housing market has picked up in many places. I'm not sure that millennials are going to be majority renters. I don't think it says much if people aren't buying in their 20s. That's still a young age.
The risk of renting is that you have a live for today type of lifestyle. You may live nicely but in the long run, the wealth disparity will widen. The people who own will one day pay off their mortgage. Then the difference is going to grow even bigger.
In many areas you can actually build more wealth renting and investing the difference than you can buying a house - but not all areas of course. And to be fair many American households lack the discipline not to simply blow their extra money, and yes, most Americans, but not all, suck at investing.
"Innovative home financing" huh? How about teaching younger people to be financially responsible? How about teaching them to prioritize saving for a home by making choices like driving an older used car instead of that shiny new one that comes with the big car payment and the higher insurance costs?
How about teaching them that to lower their ideas about what their first homes should be? Let's face it, you're not supposed to start off with a $300K McMansion when you're 24 or 25 and fresh out of school. Seems to me that most people today have forgotten about the idea of a "starter" home.
How about teaching them to NOT HAVE KIDS if they DON'T OWN A HOME?? Younger people today seem to have no problem popping out the kids one after another but boy oh boy, saving up for that 20% down payment sure is hard. Hint, hint - it's much easier to save the down payment if you don't have to buy diapers and baby clothes.
Cancel the Netflix and the X-box live subscriptions, give up the $200/$300 iPhones, quit buying those $6 lattes a day (might help you lose a few pounds too, btw), sell that Coach or Kors handbag on eBay and buy a replacement at Walmart, and start SAVING to buy a home. In other words, act like a grownup. How's that for innovation??
Uh, excuse me? Because some people have trouble saving a down payment, therefore no one should have kids while living in rental housing?
And owning a home is required to raise a family? Absolutely not! Millions of Americans raise families in rentals just fine.
And what about people like me who don't want to be in debt and would rather wait until they have the whole thing saved up before they buy?
Instead of "innovative" financing, how about we start building some less costly housing inventory? It is difficult to find newer small homes, very few have been built since the 1960s or so.
I agree. But, there is much less profit for the builders if they aren't building larger places so unless people stop buying large houses and demand smaller (not tiny, mind you, but smaller) houses the builders are going to keep building what people are buying.
I would also love to see more affordable, well built (in other words, with an emphasis on soundproofing), smaller apartments. I'm single and I don't really need more than 700sf as long as there is some storage area. The trouble is, everyone wants to move to Denver and the influx of people are driving the lower income folks out of their apartments, much like what happened in the oil boom towns of ND. I'm sure at some point there will be an equilibrium but in the mean time, there is an imbalance that is really hurting people.
They start out taking huge loans for the "college experience" ignoring their parents' pleas to attend a local college and live at home. They buy those lattes on money borrowed at 6% interest, certain that that B.A. will lead to a $100K/year salary.
Then they graduate, discover their degree in history, English, women's studies, biology, psychology, etc. not nearly as marketable as they'd thought, and find themselves working part-time at Target. So they sign up for more loans to cover graduate school tuition and end up with $60K/year job and $150K in college loans.
Now they got a house payment and no house.
By the time they rent a decent apartment, make car and insurance payments, pay the electric and grocery bill, they are stunned to find they don't have enough left over to take a decent vacation let along save up for a down payment on a house.
You seem to forget that in many areas, the jobs that pay well enough to permit savings for a home purchase simply aren't there.
I am from a formerly manufacturing town in Appalachia which has a median household income of just $30k, median house price of $109k. For most households making $30k, a $109k home is not affordable. At such a low income, absolute essentials like food, gas, and current housing will take up all of your income; your savings rate for a downpayment will be virtually nil. The median income earner is really too poor to afford the median home, even though housing is cheap in absolute terms relative to most places.
The next town over has a median income of about $38k, but a median house price of of about $220k. Again, that's not expensive, if your household makes a normal income, but again, people in this area are very poor and a good wage is $10-$12/hr. The people who ARE buying homes are mostly retirees from wealthy coastal or Midwestern areas.
In many coastal areas where there ARE quality jobs, the demand for housing has pushed prices beyond what even the high wages can afford. Wages are high, but housing prices are higher still.
There are few areas of the country where jobs pay well enough and housing price are affordable enough for most people to buy a home without issue. I rent in a fairly wealthy suburbs of Indianapolis making $50k, median home prices here are $300k, but there are plenty of <$100k homes well within my budget within a half hour of my job.
Student loan debt really doesn't relate to housing prices directly - if anything, fewer people being in the market to purchase a home should have a chilling effect on prices. The lattes are drop in the bucket compared to the gulf of the problem
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