Is this the beginning of the end for the housing "recovery"? (mortgage, purchase)
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Putting less down is less risk for the buyer.
If you put 20% down and it drops 20% then you're SOL and that money is gone.
You're missing the in-between pieces:
1) How much of your total assets that 20% down (and subsequent gain in equity) represents.
2) Market fluctuations happen... the risk is in the job & income disappearing.
At retirement... that equity shouldn't exceed 20% of your total assets.
At 30... it's about impossible for it not to.
So we're creating a separate and disadvantaged class of consumer when it comes to the purchase of primary residential services. Is that what you intend to see?
You suggested rules for job location security which is not reasonable. If you choose to work in a profession that often requires moving you have chosen to have more risk in housing.
You're missing the in-between pieces:
1) How much of your total assets that 20% down (and subsequent gain in equity) represents.
2) Market fluctuations happen... the risk is in the job & income disappearing.
At retirement... that equity shouldn't exceed 20% of your total assets.
At 30... it's about impossible for it not to.
Not to mention the impacts of a forclosure or short sale to your finances in said scenario.
You suggested rules for job location security which is not reasonable. If you choose to work in a profession that often requires moving you have chosen to have more risk in housing.
Interesting. It's their fault their jobs are volatile too. Please link me those land of milk n honey jobs that you can bank on staying put for 30 years (that pay enough to afford said home of course).
I'm being facetious of course. Your premise is a non-starter. Homesteading is a MYTH in this country. Which is why home-loanership is a losing proposition for the majority. Job nomadism rules the economic environment for those who don't wish to rely on welfare. The fact remains that nomadism mostly ends them up in some form of forced landlorship until they can unload, or they take the hit at sale.
As a military member, I have no intention in purchasing a home that's not going to appreciate squat in 4 years anyways, in a location that is as temporary as ice on concrete in Texas. That lost cash on every buy/sell transaction over 20 years pays for all the premiums paid on rent, leaves me with a lot of cash in the bank, and I still provided a roof over the family's head. People should just admit they like throwing anchor over emotional valuations of "ownership" and stop pretending their job situation affords them said mythical buy-compatible long term homesteading.
Interesting. It's their fault their jobs are volatile too. Please link me those land of milk n honey jobs that you can bank on staying put for 30 years (that pay enough to afford said home of course).
I'm being facetious of course. Your premise is a non-starter. Homesteading is a MYTH in this country. Which is why home-loanership is a losing proposition for the majority. Job nomadism rules the economic environment for those who don't wish to rely on welfare. The fact remains that nomadism mostly ends them up in some form of forced landlorship until they can unload, or they take the hit at sale.
As a military member, I have no intention in purchasing a home that's not going to appreciate squat in 4 years anyways, in a location that is as temporary as ice on concrete in Texas. That lost cash on every buy/sell transaction over 20 years pays for all the premiums paid on rent, leaves me with a lot of cash in the bank, and I still provided a roof over the family's head. People should just admit they like throwing anchor over emotional valuations of "ownership" and stop pretending their job situation affords them said mythical buy-compatible long term homesteading.
It's a bad plan for someone like yourself. It is not for people who are on steady career fields or have the ability to not be impacted much if their hime value goes down.
Once upon a time median home prices were rarely more than 3X median income.
This 2.5:1 or 3:1 ratio USED TO BE the definition of a healthy market.
(that ratio is still the definition of healthy personal budget)
The financing aspect (interest, points, etc) was discussed separately.
What's changed though is that the prices have been allowed to rise so high
that even decent incomes are inadequate to buy in far too many markets.
Similar has happened with automobile prices.
As a consequence people have sort of given up on the idea of ever actually owning.
They seem resigned to the idea of perpetually making payments...
but never actually getting to the stage of owning before they trade in and start over.
On that basis absolute price really doesn't matter... only the payment amount.
This isn't good for anyone except the lenders and the salesmen.
What we have had from 1981 on is wages largely flat adjusted for inflation and economic growth coming from ever more debt. Supply side economics. Instead of paying taxes the rich loaned the money they use to pay in taxes to the government with the expectation of getting it back with interest. That is an over simplification. They used the carry trade to do the loaning on margine and got many times their money back with interest. And they loaned the workers more money rather than giving them raises. Again on margin. They also got the baby boomers to save for retirement in the stock market so they would have plenty of allies to have protection from public backlash at what they were doing.
You suggested rules for job location security which is not reasonable.
Because your theories imply that they exist in the simple interests of equity.
Quote:
Originally Posted by Gatornation
If you choose to work in a profession that often requires moving you have chosen to have more risk in housing.
Risk that has just lately been put there by people other than those in such careers and positions. These are updates that preclude the long-term view that you demanded absent either the sorts of laws or the sorts of discrimination I have suggested. You appear to be leaning toward the discrimination. When asked whether you intended the creation of a separate and disadvantaged class of consumer in the matter of purchasing primary residential services, you should have simply said "Yes."
Because your theories imply that they exist in the simple interests of equity.
Risk that has just lately been put there by people other than those in such careers and positions. These are updates that preclude the long-term view that you demanded absent either the sorts of laws or the sorts of discrimination I have suggested. You appear to be leaning toward the discrimination. When asked whether you intended the creation of a separate and disadvantaged class of consumer in the matter of purchasing primary residential services, you should have simply said "Yes."
With your logic you could conclude there is a disadvantage consumer in about every type of purchase one could make. That does not mean in enacting laws to prevent it is a solution. I don't want to work on weekends so I pick a job where I do not have to. Your suggestion would be to close stores on weekends so everyone could benefit like I do?
What happens to these numbers if the 100% debt financing you supposed here is replaced by 50% debt financing? Can you answer that question on your own or do I actually need to walk you through the dramatic effect it has on short-term cash flow? Why did your model assume 100% debt financing to begin with? Do you feel that it is a common level? Do you endorse such a level?
Quote:
Originally Posted by oaktonite
Making the smallest down-payment you can and taking the longest available maturity will minimize your costs, allowing you to put the difference to other and potentially more productive and profitable purposes.
Since you just invited someone else to show his work, I will ask you to do the same regarding these two posts about cash flow by an "actual economist" who insinuates that he is among "the brightest minds of the last four centuries."
You were going to give a numerical example showing how a 50% down payment increased short-term cash flow, but seem to have been distracted.
Thanks . . .
Last edited by Hamish Forbes; 07-12-2013 at 08:28 AM..
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