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Old 04-30-2018, 08:55 PM
 
Location: USA
7,462 posts, read 5,466,923 times
Reputation: 12257

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Quote:
Originally Posted by mhays25 View Post
The 2008 debacle was also due variable-rate terms, and loan values often equal to the full price (zero down) or even above full price. The #1 trigger of the wave of foreclosures was massively-increased payments when the initial rates went away.

Housing prices are mostly above the last peak...but is that true with inflation figured in? What about with development cost figured in? Land prices, construction costs, etc., have risen quite a bit in many places vs. a decade ago.
Yes and no. The ratio of income to housing prices is not as bad as it was back in the Bubble, but it still isn't good. Following are approximate values you can find online.

2006:
Median household income = ~$50,000
Median home price =~$246,000
Ratio = nearly 5 to 1

2017:
Median household income = ~$58,000
Median home price = ~213,000
Ratio = about 3.7 to 1

So, that makes the current situation appear a lot better... except it isn't. The old rule was to never buy a house more than 3 times your gross household income. Yeah, yeah - "today's low mortgage rates let you buy more!" And nobody mentions today's sky-high costs for education and health-care, or today's dismally low job security levels or the lack of guaranteed pension funds.

It's not 2006 all over again but, yes - houses are still too expensive and people are still buying more than they can really afford. But this will burn out with a slow fizzle vs. the huge "bang" in 2008 since the income to price ratio isn't as bad, IMHO.
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Old 04-30-2018, 08:59 PM
 
Location: USA
7,462 posts, read 5,466,923 times
Reputation: 12257
Quote:
Originally Posted by damba View Post
No, YOU are the one who doesn't know what happened.

The low income demographic was not the cause of the crash- that's what Rush Limbaugh told you.
Yep. Too many on the far-right pretend that the housing bubble was only caused by "those low-income people" and "the evil government forcing the sainted banks to make bad loans." Wrong all the way around! No, the problem was everywhere at all income levels, because anybody could "afford" to sign up for some insane loan they could never pay off. Then, those effectively worthless mortgages were bundled together, sliced and diced, and slapped into people's investments and retirement accounts everywhere... all of them rated AAA, of course, right up until the day they blew up. A total, obviously crooked disgrace, and nobody was ever held accountable, despite the silly desire to blame it all on the people who probably had the least global impact vs. the crooked bankers and real estate companies.
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Old 05-01-2018, 01:13 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,128 posts, read 3,426,443 times
Reputation: 5673
Quote:
Originally Posted by damba View Post
No, YOU are the one who doesn't know what happened.

The low income demographic was not the cause of the crash- that's what Rush Limbaugh told you.
I don't listen to rush Limbaugh. Long before many people knew about the truth in what caused the last Great Recession my cousin and I did a lot of research and discussion about it.
The low income demographic was a huge component of the whole process. If you can't understand that then you you shouldn't even be discussing this subject because you need to be educated.
A lot of people defaulted on their loans, not just low income people. But the low income people who should have never qualified to buy anything were indeed a large part of what started it.
How does a janitor making less than 50k a year in the Bay Area qualify to buy not only one house, but multiple ones! Unscrupulous loan agents told them they could afford it which greatly helped. But at some point people have to take some responsibility for themselves and not believe everything someone tells them.

Toxic loans that would never get repaid were bundled into packages with some good loans and sold to many investors on Wall Street. Not just greedy investors, but groups like teachers retirement fund invested in them. Why would anyone buy mortgage backed securities when they were so risky? Because companies like Morningstar gave those funds triple aaa ratings either out of laziness to analyze or just outright lying.
In the end when those funds started to fall Apart because the mortgages were starting to default.
The low income sector who should have never gotten the loans were right there at the top.

There is no doubt shady dealings by banks created this mess, but at the core were subprime loans made to people who couldn't afford them.

You should really do yourself a favor and google the whole subprime mortgage meltdown. That way you won't look like a fool who has no idea what they are talking about saying silly knee jerk statements that I got the wrong story from rush Limbaugh.
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Old 05-01-2018, 01:23 AM
 
Location: Formerly Pleasanton Ca, now in Marietta Ga
4,128 posts, read 3,426,443 times
Reputation: 5673
Quote:
Originally Posted by Rambler123 View Post
Yep. Too many on the far-right pretend that the housing bubble was only caused by "those low-income people" and "the evil government forcing the sainted banks to make bad loans." Wrong all the way around! No, the problem was everywhere at all income levels, because anybody could "afford" to sign up for some insane loan they could never pay off. Then, those effectively worthless mortgages were bundled together, sliced and diced, and slapped into people's investments and retirement accounts everywhere... all of them rated AAA, of course, right up until the day they blew up. A total, obviously crooked disgrace, and nobody was ever held accountable, despite the silly desire to blame it all on the people who probably had the least global impact vs. the crooked bankers and real estate companies.
You have everything right except you are are discounting the role of subprime loans. Many people defaulted on their loans, but it makes sense that the most loans that did so were by those who were lower income and really should never have gotten the loans in the first place.
No doubt they took what was offered to them but the bottom line was they should have never been lined the money to start with. While people in all income levels defaulted, some didn't. You can bet it was people that had enough income to weather the storm and not the low income people.
I mentioned that my cousin and I did a lot of discussion about this when it was happening. He did a Lot of research and educated me on much of it. Trust me he is not on the far right.
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Old 05-01-2018, 08:09 AM
 
3,615 posts, read 2,028,114 times
Reputation: 6305
Quote:
Originally Posted by Rambler123 View Post
Yes and no. The ratio of income to housing prices is not as bad as it was back in the Bubble, but it still isn't good. Following are approximate values you can find online.

2006:
Median household income = ~$50,000
Median home price =~$246,000
Ratio = nearly 5 to 1

2017:
Median household income = ~$58,000
Median home price = ~213,000
Ratio = about 3.7 to 1

So, that makes the current situation appear a lot better... except it isn't. The old rule was to never buy a house more than 3 times your gross household income. Yeah, yeah - "today's low mortgage rates let you buy more!" And nobody mentions today's sky-high costs for education and health-care, or today's dismally low job security levels or the lack of guaranteed pension funds.

It's not 2006 all over again but, yes - houses are still too expensive and people are still buying more than they can really afford. But this will burn out with a slow fizzle vs. the huge "bang" in 2008 since the income to price ratio isn't as bad, IMHO.
Its all local... our median house price is 411k for a sfh and our median household income is $68k with a 5% state income tax.
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Old 05-01-2018, 09:39 AM
 
Location: Tennessee
21,110 posts, read 15,410,586 times
Reputation: 23992
Quote:
Originally Posted by MrRational View Post
Until they need a LUMP OF CASH to do a major and even expected expensive repair
like the HVAC equipment or a new shingle & gutter job. They won't have it.

And because they're already up to their eyeballs they won't qualify for a repair loan.
At that point they're going back to the well. No one else will/can give them that $5 to $10,000.
I went with a 5% down conventional. My condo was just a nose under $70,000. The PITI is about $550/month.

I make a little over $60,000 annually. I live in a small town in Tennessee. I didn't want to go much above $120,000 as I don't know how long I'll be in there. My condo was built by a well-known local builder, and similar units built by that builder in similar areas rent for $900-$1,000/month.

I used to live in Indiana, and rented there. The AC could barely keep the unit in the low 70s during the summer. I griped and complained, but it was never repaired properly or replaced. There is no guarantee a landlord will do a noncritical repair, and they most likely will not do it to a standard an owner-occupant would do in their own home.
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Old 05-01-2018, 10:38 AM
 
Location: The Triad (NC)
26,927 posts, read 58,138,086 times
Reputation: 29424
Quote:
Originally Posted by Serious Conversation View Post
My condo was just a nose under $70,000.
I make a little over $60,000 annually.
These numbers and the conservative ratio of income to price they represent... are all that matters.
---

That same $60,000 @ a responsible 2.5:1 gets you into a $150,000 property.
Less the same 5% (low) comes out to a $142,000 mortgage.
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Old 05-01-2018, 11:03 AM
 
528 posts, read 375,621 times
Reputation: 486
Quote:
Originally Posted by Serious Conversation View Post
I went with a 5% down conventional. My condo was just a nose under $70,000. The PITI is about $550/month.

I make a little over $60,000 annually. I live in a small town in Tennessee.
That is awesome. No way I could do this in the north east unless I bought a mobile home.

lol.
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Old 05-01-2018, 11:27 AM
 
1,046 posts, read 715,760 times
Reputation: 2000
Banks were pressured to lend to anyone able to sign their names. Builders, appraisers, and realtors got greedy and in on it, too. But the main issue was people taking out loans with no emergency savings, bad credit, no money down, etc.
If you don’t have the brains to do the math and understuwhat you can afford, then you do not deserve a mortgage; which is the opposite of what the government was telling folks.
Blame goes all the way around.
The worst part is that is slowly and discreetly happening again.
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Old 05-01-2018, 11:30 AM
 
728 posts, read 576,117 times
Reputation: 822
Quote:
Originally Posted by aslowdodge View Post
I don't listen to rush Limbaugh. Long before many people knew about the truth in what caused the last Great Recession my cousin and I did a lot of research and discussion about it.
The low income demographic was a huge component of the whole process. If you can't understand that then you you shouldn't even be discussing this subject because you need to be educated.
A lot of people defaulted on their loans, not just low income people. But the low income people who should have never qualified to buy anything were indeed a large part of what started it.
How does a janitor making less than 50k a year in the Bay Area qualify to buy not only one house, but multiple ones! Unscrupulous loan agents told them they could afford it which greatly helped. But at some point people have to take some responsibility for themselves and not believe everything someone tells them.

Toxic loans that would never get repaid were bundled into packages with some good loans and sold to many investors on Wall Street. Not just greedy investors, but groups like teachers retirement fund invested in them. Why would anyone buy mortgage backed securities when they were so risky? Because companies like Morningstar gave those funds triple aaa ratings either out of laziness to analyze or just outright lying.
In the end when those funds started to fall Apart because the mortgages were starting to default.
The low income sector who should have never gotten the loans were right there at the top.

There is no doubt shady dealings by banks created this mess, but at the core were subprime loans made to people who couldn't afford them.

You should really do yourself a favor and google the whole subprime mortgage meltdown. That way you won't look like a fool who has no idea what they are talking about saying silly knee jerk statements that I got the wrong story from rush Limbaugh.
Actually you are potentially way off

https://qz.com/1064061/house-flipper...w-study-shows/

It was the wealthier flippers that triggered it, not the subprime borrowers. In this chart you can clearly see the top 50% ranked by credit worthiness were the ones who caused the spike, not the bottom 25% subprime folks whose default rate remained mostly constant.

Attached Thumbnails
Mortgages -- They'll Never Let That Happen Again...-a288d0ee-9f98-4c04-961b-fbee65c00c3a.jpeg  
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