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Old 03-29-2015, 02:39 PM
 
Location: Land of Free Johnson-Weld-2016
6,474 posts, read 13,425,656 times
Reputation: 6404

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One of the problems I have with the American economy is the fact that everything costs so much. Just for the working/middle class. If you are rich, you can basically afford the things you want easily. If you are poor, you get food, clothing and other needs for free or at subsidized rates.

But for the middle class, it is almost impossible for most people to save all of the money they need to buy a house or even a car. This is not true even in third world countries, where people can and do save money to buy their houses. Albeit the houses may be smaller and less expensive than in the US.

The way Americans can afford these things is by getting really big loans. But if the prices were lower, wouldn't that be better. Why make banks rich by paying 3-4 times the price of the asset over 30 years. If the prices were lower, you could save for 10 years and buy it.

There was a story recently on public radio, where some pundit was defending Fannie Mae and Freddie Mac. He said that it would be catastrophic if housing prices plummeted. Supposedly that is what would happen if these two agencies were done away with. Borrowers would have to meet more stringent lending standards and housing prices would go down. IMO that would be great. Thoughts on this?
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Old 03-29-2015, 02:49 PM
Status: "My eyes are rolled back so far I can see my brain." (set 18 days ago)
 
Location: Here.
13,399 posts, read 11,902,075 times
Reputation: 15729
I agree. Any time the government gets involved in something, they screw it up. Government-backed mortgages are another government-sanctioned means by which the wealthy (investors) can profit from the poor (borrowers).

...all under the disguise of "helping the poor".
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Old 03-29-2015, 02:53 PM
 
Location: Metro Detroit, Michigan
11,920 posts, read 13,270,021 times
Reputation: 12663
LOL, low housing prices are good for some people... But not good for the people who call the shots.
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Old 03-29-2015, 02:56 PM
 
176 posts, read 158,924 times
Reputation: 229
I agree completely. If you're trying to buy a house, do you want to pay more or less for the house? Obviously less. The problem is so many people used the artificial appreciation of their house to borrow against it and spend the money on things they don't need. Vacations, boats, cars...

The government is trying to keep prices from dropping so much because a lot of people would be underwater on their mortgage and walk away. Which would cause a recession or depression and that's not good for getting re-elected!

If you think about it from a potential buyer/saver, you want housing prices to come down so you can avoid as much debt as possible own your house outright quicker (also less property taxes). I wish prices would plumet, it would suck for the economy for a couple years but we would come out much stronger in the other side. We just keep delaying the inevitable which will only make things worse when we can't delay anymore.
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Old 03-29-2015, 03:01 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,457 posts, read 50,717,628 times
Reputation: 28766
Bank greed has nothing to do with housing prices, it's the availability of homes versus the number of people that need them. The higher the loan amount, the
more the bank makes, but that's a side effect. Here, for example, with little crime, great schools, and views of lakes, mountains and water, plus plenty of major job centers nearby, the prices are going up more than 10% per year.
There re still plenty of "affordable" homes, but they are in less desirable areas

There are several solutions for people that can't afford a nice area are:

1. Get the skills for a higher paying job
2. Go in together with family or friends

No one, including the government is likely to convince developers to build small houses on small lots, and give up most of their profit, nor will the government reduce the building code requirements to allow for lower building costs.
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Old 03-29-2015, 09:01 PM
 
Location: Brawndo-Thirst-Mutilator-Nation
15,252 posts, read 15,250,601 times
Reputation: 10981
A LOT of the price-bloat is caused by the Fed.

Take away all of the artificial $$$$ and programs that the Fed uses to jack-up home prices, THEN, the average person could easily afford a decent house.

Manipulating the housing market and mortgage markets gives the Fedgov a lot more power and control over the Sheeple!
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Old 03-29-2015, 09:17 PM
 
Location: The Triad (NC)
26,894 posts, read 57,997,675 times
Reputation: 29341
Quote:
Originally Posted by kinkytoes View Post
One of the problems I have with the American economy is the fact that everything costs so much. Thoughts on this?
Start with the Big One:
Median house prices should reflect median household income...
this used to range in the 2:1 to 3:1 range; 2.5:1 being very common.
Things worked better for all when this was so.
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Old 03-29-2015, 09:20 PM
 
12,404 posts, read 9,221,478 times
Reputation: 8868
Quote:
Originally Posted by kinkytoes View Post
One of the problems I have with the American economy is the fact that everything costs so much. Just for the working/middle class. If you are rich, you can basically afford the things you want easily. If you are poor, you get food, clothing and other needs for free or at subsidized rates.

But for the middle class, it is almost impossible for most people to save all of the money they need to buy a house or even a car. This is not true even in third world countries, where people can and do save money to buy their houses. Albeit the houses may be smaller and less expensive than in the US.

The way Americans can afford these things is by getting really big loans. But if the prices were lower, wouldn't that be better. Why make banks rich by paying 3-4 times the price of the asset over 30 years. If the prices were lower, you could save for 10 years and buy it.

There was a story recently on public radio, where some pundit was defending Fannie Mae and Freddie Mac. He said that it would be catastrophic if housing prices plummeted. Supposedly that is what would happen if these two agencies were done away with. Borrowers would have to meet more stringent lending standards and housing prices would go down. IMO that would be great. Thoughts on this?
This is simply not true. Unless you're a real estate agent or sales rep or similar, you don't need a new car right away. You can buy something old and cheap and save your would-be car payments until you can pay cash for the new(er) car.
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Old 03-29-2015, 09:41 PM
 
16,533 posts, read 17,592,629 times
Reputation: 23670
Quote:
Originally Posted by ncole1 View Post
This is simply not true. Unless you're a real estate agent or sales rep or similar, you don't need a new car right away. You can buy something old and cheap and save your would-be car payments until you can pay cash for the new(er) car.

Most houses for sale are "used". Shouldn't prices go down? New construction couldn't begin to have enough supply.
I was getting into the market but I'm in a holding pattern right now. I think prices are going to start coming down in the next year or two. Unless they start doing stupid loans again

Wanna hear something totally crazy. Driving to a friends house wife wanted to see these models. 820-850k starting price. 2-2300 sq ft. In Garden Grove area. I looked at these houses. Looked great until you really started to see the quality was lacking. Builder grade everything. Bottom of the barrel. Houses weren't worth anywhere near 500k much less 850k
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Old 03-29-2015, 10:36 PM
 
Location: Earth, a nice neighborhood in the Milky Way
2,375 posts, read 1,439,742 times
Reputation: 995
Quote:
Originally Posted by Hemlock140 View Post
Bank greed has nothing to do with housing prices, it's the availability of homes versus the number of people that need them. The higher the loan amount, the
more the bank makes, but that's a side effect. Here, for example, with little crime, great schools, and views of lakes, mountains and water, plus plenty of major job centers nearby, the prices are going up more than 10% per year.
There re still plenty of "affordable" homes, but they are in less desirable areas
I respectfully disagree.

You can bet that every time some politician threatens to end the mortgage interest deduction, banks dial up their local lobbyist. Tax policies which subsidize home purchases made through debt are in essence a pass through subsidy to banks. If such tax policies did not exist, even fewer people would be able to afford prices as they are, and demand would drop. Prices would follow. The same goes for interest rates. Once they go up, prices will face extraordinary pressure.

Price increases of >10%/year are unsustainable. Watch out below.

Quote:
Originally Posted by Hemlock140 View Post
There are several solutions for people that can't afford a nice area are:

1. Get the skills for a higher paying job
2. Go in together with family or friends

No one, including the government is likely to convince developers to build small houses on small lots, and give up most of their profit, nor will the government reduce the building code requirements to allow for lower building costs.
Plan 1:
To get the skills for a higher paying job, that generally means college. So, go into debt, to get that high paying job, to go into even more debt to overpay for the house. And pray that the days when companies held onto people for life come back. Good plan!

Plan 2:
This is a good way to find out just how psychotic you, your family, and your friends are.

(of course I don't mean you personally!)
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