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Location: Formerly Pleasanton Ca, now in Marietta Ga
10,345 posts, read 8,561,064 times
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Quote:
Originally Posted by Wile E. Coyote
And, then again, whatever times you are born into you play the cards you are dealt and there is actually no mass conspiracy of an entire generation. The generation before the boomers had it much better and no one sat around blaming them. WTF?
There's something else. If you watched The Big Short, one of the things that contributed to, or actually was the main thing that caused the housing crisis of 2008, was said very simply: There weren't enough people that had the money or the good credit to buy homes to keep the party going. That's why subprime loans came into being in the first place.
You make two mistakes:
1) The root cause of the Great Recession
2) Thinking that subprime loans are a recent phenomenon. Subprime loans have been around for many decades before the Great Recession. I remember them in the 1960s and 1970s and 1980s.
The housing boom of the early 2000s and the subsequent crash was federally driven, and its roots date back to the first Clinton Administration, and specifically to then-Secretary of Housing and Urban Development Henry Cisneros, and the disgraced Roberta Achtenberg, then-Assistant Secretary of HUD for Fair Housing & Equal Opportunity.
During the economic boom of the 1980s, the financial model of families had been flipped on its head. In the old days (1960s and before), dad had a job, and his paycheck paid the mortgage, put food on the table, and clothed all the family members, and some of what was left went into savings for college for the kids, for retirement, for a vacation, etc.
But, during the 80s, the model flipped: in most cases, a house became a family's primary source of wealth, and dad's job existed just to pay the mortgage, and the magic of home appreciation did the rest.
The disgraced Roberta Achtenberg kept seeing family wealth going up due to residential real estate - but only for those who owned their own homes. She was a Social Justice Warrior. In todayspeak, she was as woke as you can be. She feared poor people, and in particular poor people of color (BIPOC) were not part of the home ownership/home equity appreciation bandwagon. Poor people and specifically poor BIPOC people were being left at the station while the prosperity train left with its straight, cisgender white passengers. This was a "wrong" that needed to be "righted," Achtenberg wrote at the time.
Achtenberg, being the Assistant Secretary of HUD for Fair Housing & Equal Opportunity, decided it wasn't fair for mostly white people to be accruing the benefits of home ownership while mostly BIPOC people were not. So she launched a pan-governmental effort to increase home ownership among her constituency (poor people and specifically poor people of color - BIPOC). She coordinated efforts to write additional regulations to twist the arms of banks & mortgage originators to issue more loans to people farther down the economic ladder.
That's how we ended up with Liar Loans, Negative Amortization Loans and the like - ways to justify loans to people who wouldn't normally qualify.
Banks and other mortgage originators responded that they were already issuing mortgages in a color-blind manner to everyone with a pulse who could reasonably be expected to pay back the loan. If they were to issue more, the mortgage originators said, each of those loans they would be forced to issue (forced in the sense of the Federal regulatory apparatus) would have a negative expected value (EV). The only way to do that would be if they could package up these smelly negative EV & sub-prime loans together with loans that had a positive expectation, and sell them off to Wall Street.
The Federal Government acquiesced, and Bear Sterns became the first Wall Street Investment Bank to buy mortgages from lenders, securitize them into MBSs and sell slices of it off to eager investors. Those were the first CDOs. That happened in the waning days of the first Clinton Administration, with the actual sale taking place in January when President Clinton was sworn in for his 2nd term.
Bear Sterns discovered it could make huge fees foisting this government-mandated dreck & detritus off onto unsuspecting investors. So they ramped up production during the 2nd Clinton Administration. They didn't make money on the loans; they made money on the fees.
The rest, as they say, is history. True to everyone's a priori belief, those people far down the economic ladder couldn't pay back the money they had borrowed once a cyclical tightening of the economy ensued. Self-employed saw their incomes drop, and at some point they couldn't afford their mortgage. Lower income people's jobs were not secure, and during the tightening, some lost their jobs or saw reduced hours & paychecks, and couldn't afford to keep up their mortgage payments. Others still saw their home equity value drop and did "strategic defaults." Regardless of the cause, they stiffed their mortgage holders - the people who had purchased the mortgages from the lenders or who had purchased the alphabet soup of CDOs & MBSs and CDSs - pension funds, university endowments, sovereign wealth funds, IRAs, 401ks, aging retirees hoping for a better safe return (home prices always go up, right?)
Then, it all collapsed.
But by then, the disgraced Roberta Achtenberg had left the Federal Government. The rest of the country bore the burden of her experiment wherein the Federal Government mandated banks and other mortgage originators extend loans to people who could not be expected to pay them back.
There is a special place in Hell reserved for Roberta Achtenberg.
It is important to remember this history of government intervention in residential housing in an attempt to "right" some perceived "wrong" or to help one category of people at the expense of other categories of people.
Quote:
Originally Posted by rodentraiser
Now we're all looking at house prices and going on and on about supply and demand. Well, guess what? Supply and demand aren't forever.
Incorrect. They are, indeed, forever.
Quote:
Originally Posted by rodentraiser
There are still only so many people who have the good credit scores and have the money to afford homes in this current market. The last time bankers ran out of raw material, they went subprime.
Incorrect.
Quote:
Originally Posted by rodentraiser
What do you think they'll do this time? Because we're almost out of people with good credit scores and money now.
Incorrect.
Quote:
Originally Posted by rodentraiser
If you still believe in supply and demand, there's this. The last time demand ceased, prices didn't just go down on supplies. They crashed and the effect was staggering across the world. It wasn't just that supply went up; jobs were lost, people lost savings and retirement. Just because demand again might cease doesn't mean supply will go down gently this second time. Another crash could be in the offing and people are on the edge far more now than they were during 2008. There is even less job security and savings out there now. So yeah, supply and demand could right itself, but it could right itself by tipping the world on its side again. Who all is prepared for that?
The things you do not know about economics (let alone logical thought processes) would fill volumes.
You make two mistakes:
1) The root cause of the Great Recession
2) Thinking that subprime loans are a recent phenomenon. Subprime loans have been around for many decades before the Great Recession. I remember them in the 1960s and 1970s and 1980s.
+1
I began trying to respond to that poster yesterday by saying that outcome is not the sole determinant of the quality of a decision and then reading the entire post, I gave up.
Your post should be a sticky for this forum: For those attempting to illustrate correlations between the 2008 housing crisis and current housing market conditions, please read first.
That would require going to college which was also going up as much as housing. I made the decision long ago to not go into horrendous debt for a college education and now I'm very glad I never did.
Over the course of 20 years I: worked in a bank and lost my job in 2008 when the bank was bought out, suffered a back injury which led me to applying for disability in 2013, had a basilar tip aneurysm in 2014, and am now retired and own my own land.
What? Did you just think I stayed at McDonald's flipping hamburgers or something?
While I hate to hear of your misfortune, many people do not go through that - in saying that, many of us are one severe medical issue away from your predicament.
That area does, for sure. If you have to import your labor from somewhere else, it will get very very expensive to live there. At some point, you may also cease to have good labor because nobody wants to waste so much time commuting. Then one of two things has to happen:
1. The rich there provide dormitories of some kind for their workers
2. The area's facilities start to decline and people start leaving the area.
Worker dormitories are common overseas. A nice easy to skim look at Shanghai, which is dearer to live in than either of the US coasts.
The commute from elsewhere to Park City is not horrendous, so many people live elsewhere & commute 30-45 minutes.
Vail Corporation, which owns & operates Park City Mountain Resort, built on-site workforce housing for their seasonal employees who operate mountain resort & hotels & restaurants & snowmaking & lifts and whatnot. That definitely helps, especially as many of the seasonal employees are J-1 visa holders from South America. Alterra which owns and operates Deer Valley Resort is likely to build workforce housing as well.
Such comparisons are highly geographically-dependent. Seattle is unusual, in that 50 years ago, it was a backwater. It was as inexpensive of a market as Peoria or Youngstown or Lansing... maybe even less expensive, as these latter three had thriving industries and job-markets. But then Seattle had a remarkable rise, whereas my other examples did not.
So we have four alternatives: cheap markets that stayed cheap (Midwest), expensive markets that stayed expensive (Manhattan), cheap markets that became expensive (Seattle), and expensive markets that declined (maybe Cleveland? these admittedly are rare). Outcomes will be different, depending on which of the four, happens to be our target market.
The point I was trying to make was how much over inflation current homes cost. No one can deny they're overpriced.
And I'm not sure that cheap markets stayed cheap. In 1965, my parents bought a house in the Midwest for $15,000. I could go check to see what houses are selling for in that neighborhood today, but why bother? It's a lead cinch bet those houses are priced way over what they should cost compared to inflation.
Quote:
I continue to marvel, at how many people - who are, come to think of it, relatively young - have $1M or $2M readily available in cash, ready to pounce. These are not professional athletes or top-tier actors or hedge fund administrators. They look quite normal, when encountered at local open-houses. But they continue to bid against each other, for properties that aren't all that delectable or ideally located... probably because the better properties, are even more expensive than $2M.
Simply put, America has masses of the mass-affluent, who continue to be interested in buying a house. Until the supply of these mass-affluent is exhausted, or until some vast plethora of new housing is built, it's hard to see how the market would substantially shift.
Um, there's a lot of money out there, but not too many people have access to it.
"Joe Blow sold refrigerators. He charged $200 a fridge. There were about 10 homes a year that bought fridges from him, people making $40,000 a year. Then one day America happened. Inflation went wild, people got greedy, money became more concentrated among the 1% than at any other time since the 20s. The other families now only made $13,000 a year. They could not now afford a fridge. But one family showed up with an income of $280,000 a year.
Joe Blow raises the price of fridges to $1000 each. The one family whose income is $390,000 a year buys a fridge. Joe Blow is making 5 times what he made before on his fridges, but he is still in the hole for that year by $2000 because one, and only one, family can afford a fridge."
OK, so this is silly but it shows what happens when inequality of wealth is distributed in society the way it is now. All you have to do is look at any chart on how wealth is distributed in this country to know that there really is a limit to who holds the money. Those people are not going to be buying multiples of items to make up for the ones other people can no longer afford.
Quote:
Originally Posted by ddeemo
What a bunch of BS - a single data point means little but in 1973 the average house cost $35.5K which is $195K now - 50% higher than that number. Seattle was relatively low cost back then. In 1963 the average house was $18K which is about $177K today. The median house in 2015 was $179K, about half your number and not much different than years ago. Also interest rates were mostly higher and houses were much smaller in the past.
Who gets economic information from a movie? The issue in 2008 was not about not enough people with the money, it was about relaxed regulations. We are not close to being "out of people with good credit scores".
You really do not understand economics if you think supply and demand do not control the market. Housing is limited / constricted - you can't really get rid of excess supply other than pulling it off the market and it takes more than a year to make significantly more supply to meet increased demand. So supply and demand curves reflect that reality - limited supply with lots of demand drives up prices while lots of supply with limited demand drives down prices until the market can fix supply issues.
The COVID CARES act put a pause on foreclosures, increased benefits for those unemployed, increased flexibility for obtaining new loans and made work from home the new norm so the market was impacted driving down availability and driving up demand. Also the Biden admin just changed regulations to make people with poor credit more competitive in getting loans. I guess they learned nothing from the issues in 2008.
Today is not close to 2008 in a lot of ways - one of the big issues in 2008 was variable rate mortgages, affordable loans quickly became unaffordable when interest rates rose significantly. That along with the fact that Fannie Mae and Freddie Mac are now under federal supervision, not as able to take risks in pursuit of profits that they took in 2006-8. Prices are also off the peak they were in 2022 as interest rates drive down prices.
I bet you could find that single data point all across the country, though. You don't have to take Seattle as a starting point. Go on. Pick another city, anywhere, and I bet you'd find the same scenario.
So what I want to know is why the average house today is not $177K today? But instead is somewhere between $250 and $700K. And that includes the small houses that were built then. Those smaller homes are just as overpriced as the larger ones. If houses today aren't 177K, as they should be, then isn't that right there proof that houses are overpriced and out of reach for the majority of people?
I didn't just see the movie. I read the book, plus a few more. Did you?
No, this is not 2008. It's shaping up to be something worse. If it can be done bending rules and regulations, it will be done. And all we need are a few politicians and influential bankers to ramrod through their ideas (sound familiar?) and many of those protections and supervisions will go straight out the window.
Quote:
Originally Posted by aslowdodge
Here’s the thing. Some of the examples you mentioned are pretty low percentage of them happening.
The car accident is something someone might say it’s not worth the risk to get in a car. But all life is a risk as soon as you are born. All you can do is mitigate your risk as much as possible, otherwise you might as well be dead.
You made plans and so far things are working. The point is you had a plan and took action. Maybe it doesn’t go exactly as you planned, but you make adjustments. WhAt if you never bought the property at all , where would you be?
Everything is a risk and not 100%, but research and planning increase you odds of being successful rather than lucky.
In any case I wish you luck and I hope you finish out your project.
Thanks, and I'm hoping the same.
Quote:
Originally Posted by moguldreamer
You make two mistakes:
1) The root cause of the Great Recession
2) Thinking that subprime loans are a recent phenomenon. Subprime loans have been around for many decades before the Great Recession. I remember them in the 1960s and 1970s and 1980s.
The housing boom of the early 2000s and the subsequent crash was federally driven, and its roots date back to the first Clinton Administration, and specifically to then-Secretary of Housing and Urban Development Henry Cisneros, and the disgraced Roberta Achtenberg, then-Assistant Secretary of HUD for Fair Housing & Equal Opportunity.
During the economic boom of the 1980s, the financial model of families had been flipped on its head. In the old days (1960s and before), dad had a job, and his paycheck paid the mortgage, put food on the table, and clothed all the family members, and some of what was left went into savings for college for the kids, for retirement, for a vacation, etc.
But, during the 80s, the model flipped: in most cases, a house became a family's primary source of wealth, and dad's job existed just to pay the mortgage, and the magic of home appreciation did the rest.
The disgraced Roberta Achtenberg kept seeing family wealth going up due to residential real estate - but only for those who owned their own homes. She was a Social Justice Warrior. In todayspeak, she was as woke as you can be. She feared poor people, and in particular poor people of color (BIPOC) were not part of the home ownership/home equity appreciation bandwagon. Poor people and specifically poor BIPOC people were being left at the station while the prosperity train left with its straight, cisgender white passengers. This was a "wrong" that needed to be "righted," Achtenberg wrote at the time.
Achtenberg, being the Assistant Secretary of HUD for Fair Housing & Equal Opportunity, decided it wasn't fair for mostly white people to be accruing the benefits of home ownership while mostly BIPOC people were not. So she launched a pan-governmental effort to increase home ownership among her constituency (poor people and specifically poor people of color - BIPOC). She coordinated efforts to write additional regulations to twist the arms of banks & mortgage originators to issue more loans to people farther down the economic ladder.
That's how we ended up with Liar Loans, Negative Amortization Loans and the like - ways to justify loans to people who wouldn't normally qualify.
Banks and other mortgage originators responded that they were already issuing mortgages in a color-blind manner to everyone with a pulse who could reasonably be expected to pay back the loan. If they were to issue more, the mortgage originators said, each of those loans they would be forced to issue (forced in the sense of the Federal regulatory apparatus) would have a negative expected value (EV). The only way to do that would be if they could package up these smelly negative EV & sub-prime loans together with loans that had a positive expectation, and sell them off to Wall Street.
The Federal Government acquiesced, and Bear Sterns became the first Wall Street Investment Bank to buy mortgages from lenders, securitize them into MBSs and sell slices of it off to eager investors. Those were the first CDOs. That happened in the waning days of the first Clinton Administration, with the actual sale taking place in January when President Clinton was sworn in for his 2nd term.
Bear Sterns discovered it could make huge fees foisting this government-mandated dreck & detritus off onto unsuspecting investors. So they ramped up production during the 2nd Clinton Administration. They didn't make money on the loans; they made money on the fees.
The rest, as they say, is history. True to everyone's a priori belief, those people far down the economic ladder couldn't pay back the money they had borrowed once a cyclical tightening of the economy ensued. Self-employed saw their incomes drop, and at some point they couldn't afford their mortgage. Lower income people's jobs were not secure, and during the tightening, some lost their jobs or saw reduced hours & paychecks, and couldn't afford to keep up their mortgage payments. Others still saw their home equity value drop and did "strategic defaults." Regardless of the cause, they stiffed their mortgage holders - the people who had purchased the mortgages from the lenders or who had purchased the alphabet soup of CDOs & MBSs and CDSs - pension funds, university endowments, sovereign wealth funds, IRAs, 401ks, aging retirees hoping for a better safe return (home prices always go up, right?)
Then, it all collapsed.
But by then, the disgraced Roberta Achtenberg had left the Federal Government. The rest of the country bore the burden of her experiment wherein the Federal Government mandated banks and other mortgage originators extend loans to people who could not be expected to pay them back.
There is a special place in Hell reserved for Roberta Achtenberg.
It is important to remember this history of government intervention in residential housing in an attempt to "right" some perceived "wrong" or to help one category of people at the expense of other categories of people.
The things you do not know about economics (let alone logical thought processes) would fill volumes.
Maybe so. I didn't make money on the housing collapse, like people smarter than me did. How much did you make foreseeing that collapse and were you warning us about it beforehand?
What you forget in your above they-had-it-coming-to-them story is the fact that even people who had nothing to do with subprime loans lost their homes, along with their jobs and their pensions. People who qualified and got a non-subprime loan and were doing everything right, working and paying off their mortgages, got caught up in the mess. It wasn't these people who had unstable jobs. Once the crisis hit, people in the stablest jobs in the country were finding themselves laid off or fired.
The housing mess would probably have gone unnoticed IF it had only happened to those people who took out or offered subprime loans or got greedy with them. But it didn't. And what's worrying is it could happen again. That's all I'm saying. Seeing people be so complacent about it isn't a good thing, especially since no one will be essentially protected, no matter how far removed they are from the crisis.
Homelessness used to be something people thought would only affect the homeless. Until tents got set up in every city on every street. Low wages and losing employees because of it wasn't supposed to affect anyone - until lack of service workers determined how long you stood in line.
Just because people have their own homes today doesn't mean they shouldn't be worried because millions more people can't afford to buy one. If something goes down, it'll affect all of us, not just the people on the bottom. So we should all be concerned.
I'm well aware that we had subprime loans decades before. When I worked for BofA, I was the one who had to stamp the customer cards with the new interest rates every time they went up. I saw rates as high as 22%. It's why I turned down a 4% adjustable rate for a regular fixed rate mortgage of 6% when I bought my house in 2003. I was sure enough pressured to take that adjustable rate though.
I'm not going through my old posts, but I think I posted APR when I meant adjustable rate mortgages. APR of course, means annual prime rate. That is totally different from adjustable rate mortgage and I hope I didn't confuse people with it. It's just been a long two weeks and I'm showing it.
Quote:
Originally Posted by Serious Conversation
While I hate to hear of your misfortune, many people do not go through that - in saying that, many of us are one severe medical issue away from your predicament.
Well, as the majority of bankruptcies are because of medical debt, I think you're right. And just to add this cheery thought, most people with health insurance don't know there's often a cap on what their insurance companies will pay out. It could be a cap at a million dollars, which is fine, unless you're paying for cancer treatments which can run well over a million dollars. Then it's not so fine.
The point I was trying to make was how much over inflation current homes cost. No one can deny they're overpriced.
Incorrect.
First, I suspect you don't mean "cost" in the first sentence; I suspect you mean "price." They are different concepts in Econ 101.
Speaking of Econ 101, each day there are real estate transactions between willing buyers and willing sellers, and that price is by definition the right price. Each day there also are buyers who would like to purchase a home if only it were priced lower, and sellers who would like to sell a home if only they could command a higher price. Those non transactions are a big "so what." They are evidence that scarce resources are being allocated correctly by the price system.
Quote:
Originally Posted by rodentraiser
And I'm not sure that cheap markets stayed cheap. In 1965, my parents bought a house in the Midwest for $15,000. I could go check to see what houses are selling for in that neighborhood today, but why bother? It's a lead cinch bet those houses are priced way over what they should cost compared to inflation.
Irrelevant - and at the same time incorrect.
The rest of your post is mostly misplaced emotion.
Quote:
Originally Posted by rodentraiser
OK, so this is silly but it shows what happens when inequality of wealth is distributed in society the way it is now.
Inequality of wealth is a good thing. It provides incentives for people who want more to contribute tremendous value to society and thereby earn a lot of money. That's wonderful.
Quote:
Originally Posted by rodentraiser
So what I want to know is why the average house today is not $177K today?
It is clear that no matter how many times we explain it to you, we cannot understand it for you. You must understand it on your own.
Quote:
Originally Posted by rodentraiser
No, this is not 2008. It's shaping up to be something worse.
Incorrect.
Quote:
Originally Posted by rodentraiser
What you forget in your above they-had-it-coming-to-them story is the fact that even people who had nothing to do with subprime loans lost their homes, along with their jobs and their pensions.
Incorrect; I am fully aware of the pain and suffering inflicted on all of us by our government.
Quote:
Originally Posted by rodentraiser
Homelessness used to be something people thought would only affect the homeless.
Inventory is the lowest of any June on record. If that's not a shortage I don't know what is.
It's b.s. there is no way to increase the supply. It's called build. We have apparently, as a country forgotten how to build anything other than apps.
Build where?
In my part of town, there are maybe half a dozen pieces of empty land. Half of them are on a floodplain and are unbuildable. 2 of them are zoned for commercial and construction is already under way on commercial facilities. One of them is zoned for residential and already has a housing development on the way (presales have started).
Pray tell, where exactly are builders to build? You can't build on land that doesn't exist.
Inequality of wealth is a good thing. It provides incentives for people who want more to contribute tremendous value to society and thereby earn a lot of money. That's wonderful.
I wouldn't argue that it's "good". But if inequality were really so rampant, only a small number of people would be able to afford houses in the hotter markets. While in some cases, multiple houses go to one buyer, broadly that's not the case. There are plenty of mass-affluent people, to sustain today's prices, at the rate of one-person-one-house.
What instead seems to be happening, is that persons who are really stretching to buy a house, who'd logically be better off renting and investing their money in the stock market, nevertheless are so enamored of the American concept of private residential real estate ownership, that they choose to engage in the current market, even if it's contrary to their best interest.
Quote:
Originally Posted by moguldreamer
I am fully aware of the pain and suffering inflicted on all of us by our government.
There's plenty of blame to go around. The public sector, for all of its manifest faults, is hardly the only one that's blameworthy.
I wouldn't argue that it's "good". But if inequality were really so rampant, only a small number of people would be able to afford houses in the hotter markets. While in some cases, multiple houses go to one buyer, broadly that's not the case. There are plenty of mass-affluent people, to sustain today's prices, at the rate of one-person-one-house.
What instead seems to be happening, is that persons who are really stretching to buy a house, who'd logically be better off renting and investing their money in the stock market, nevertheless are so enamored of the American concept of private residential real estate ownership, that they choose to engage in the current market, even if it's contrary to their best interest.
There's plenty of blame to go around. The public sector, for all of its manifest faults, is hardly the only one that's blameworthy.
To me, the issue is that initial jump from renter to property owner, or from a lower market to a better one.
I'm likely to clear $60k-$70k from the sale of my home. That seems like a lot of money, but all of that is going to roll into a downpayment on the next place, at a much higher interest rate than my current mortgage, and fighting against higher property prices. I'm still going to be out far more monthly for an "even trade," moving between two similar COL areas, than if I do nothing at all.
The issue is how much "dead money" I tie up. I can do nothing at all - there's nothing forcing me to move. If it's $300/month of "dead money" with higher rates and higher prices, I can take that. I can't handle under $1,000/month after taxes to move.
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