U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 12-25-2008, 08:48 PM
 
Location: NJ
2,212 posts, read 6,464,726 times
Reputation: 2177

Advertisements

Quote:
Originally Posted by neil0311 View Post
Maybe in places like California or NY where home prices were completely divorced from any reality. A broken down shack on a postage stamp in parts of CA were going for close to a million in 2005.

However, in places where there was a limited or no bubble, home owners are losing real equity and wealth, and some homes are undervalued due to foreclosures and the downward pressure on prices. While I understand the forces creating this fact, we should not be devising ways of hastening or increasing that decline. That doesn't solve our problem and only increases deflationary pressures as people hold off buying, expecting a lower price if they wait. We need a floor under prices.
While I am glad you acknowledge overpriced areas and realize that some areas were not so bubblicious, homes can't be undervalued, just priced below previous levels.

I don't agree to a floor under prices either - price fixing never works, it just means nobody will buy.
Reply With Quote Quick reply to this message

 
Old 12-27-2008, 06:18 AM
 
3,763 posts, read 10,999,185 times
Reputation: 6760
The trouble is when you talk about driving down prices in the "long-term" - what are you talking about - 20/30 years? Because in cities that have areas with decling house values (not due to this crisis, but previously due to changing demographics) - that's what happened. People who could not stand to live in the area any more got out early. As prices dropped, remaining people became "trapped" in the area - not able to move because they would not be able to buy another house somewhere else with how little their current house was now worth. They also couldn't necessarily afford to fix up their current house anymore. As the owners died off, their kids would sell the houses for nothing... and the other original residents would become even more trapped.

Eventually after 20 or 30 or even 40 years of this, new blood would come back to the area and buy houses cheap and maybe the area would rebound.

But its not going to be something that happens in 2 years. And in the mean time - all you're doing is creating a bunch of ghettos.

Anyone who's lived near the old industrial centers in the NE and Midwest has watched this process happening over the last 40-50 years. It is a slow, sad process. Not a happy revolt for homeowners.

And the median home price has already dropped below 200K. They announced more than a week ago that it was back to $189K (approx).

So - that still means you need to ear about $65K a year to buy that median house. A little above the median wage in this country.

Maybe the truth is not everyone can own a house. Maybe people will have to pick between houses and other things (like travel) in the future.

Maybe prices will drop more.

But once the economy picks up in a few years (if that long) - materials will still have a fixed cost. Labor will still have a somewhat fixed cost. So building a house will still have a somewhat fixed cost. Pre-built (already owned homes) usually sell for less than new construction, but not usually 90% less.

So if the economy is healthy, home prices should be staying stable, or very modestly growing - unless something is specifically effecting one geographic area (loss of jobs due to plant closure, environmental toxicity, systemic gang violence, etc...)

Wanting the bottom to drop out under home prices, really isn't good for anyone - because for every family you "empower" to buy - you'll be completely destroying another (or several others as family fortunes are often linked) -- a zero sum game of destruction.
Reply With Quote Quick reply to this message
 
Old 12-27-2008, 08:18 AM
 
96 posts, read 232,150 times
Reputation: 142
I totally agree with OP. The last thing we need now is to continue to enable people who have no business owning a house. Back in the 60's and 70's a person put down 20% and bought a house no more than 3x their gross income using a fixed rate mortgage. Growing up I remember listening to my parents and their friends all talk about scrimping and saving to get the down payment money and having enough common sense to put aside 3 to 6 months savings in case of job loss or illness. This wasn't unusual just plain common sense! How we ever got away from this as a society is beyond me. I own my house outright through a lot of hard work and sacrifice, its not just the mortgage but insurance, property taxes, maintenance, etc. Some people simply will never be able to afford a house and are better off renting. There is no shame in that I did it for many years.
We need a reality check as a nation, when you have people making 50k thinking they can afford a 400k house there is something seriously wrong with our country.
Reply With Quote Quick reply to this message
 
Old 12-27-2008, 08:54 AM
 
Location: Marietta, GA
7,862 posts, read 15,218,406 times
Reputation: 3576
Quote:
Originally Posted by AnthonyB View Post
I don't agree to a floor under prices either - price fixing never works, it just means nobody will buy.
I never mentioned "price fixing" or anything artificial. We need to find a floor under prices to stabilize the market and getting foreclosures under control is a great first step. That's tied into employment, credit, and other larger factors.

Home prices falling create negative consumer sentiment and destroy personal worth, and in some cases prevent refinancing to lower rates due to negative equity or low equity.
Reply With Quote Quick reply to this message
 
Old 12-27-2008, 12:12 PM
 
Location: Los Angeles Area
3,306 posts, read 3,561,515 times
Reputation: 592
Lending standards are going to naturally get tighter. Creating some arbitrary standards isn't going to do anything though. In most of California (even consider pre-bubble prices) you couldn't buy much for under $100k.

50% down for a mortgage of $500k? Why?

So long as the down payment is large enough to buffer the lender from loss if the borrower defaults that is all that matters. Historically that has proven to be around 20%, requiring 50% would be pretty outlandish.
Reply With Quote Quick reply to this message
 
Old 12-27-2008, 01:40 PM
 
48,509 posts, read 86,254,134 times
Reputation: 18106
OPver time housiong will reach its owen naturl bottom in all areas.In some areas there wil always be a premium for building in certian areas . But there ius a invenory to cost of building that at some point will really bring in the investors in many areas.By the time many buyers recognise the bottom investors will have bought most of the real bargains.
Reply With Quote Quick reply to this message
 
Old 12-27-2008, 06:40 PM
 
298 posts, read 650,421 times
Reputation: 176
Quote:
Originally Posted by neil0311 View Post
I never mentioned "price fixing" or anything artificial. We need to find a floor under prices to stabilize the market and getting foreclosures under control is a great first step. That's tied into employment, credit, and other larger factors.

Home prices falling create negative consumer sentiment and destroy personal worth, and in some cases prevent refinancing to lower rates due to negative equity or low equity.
If you want to set a floor under prices so that they don't fall as much you are advocating a price fix.
Reply With Quote Quick reply to this message
 
Old 12-31-2008, 09:19 AM
 
Location: Heartland Florida
9,324 posts, read 24,283,776 times
Reputation: 4927
Quote:
Originally Posted by f_m View Post
This would also drive down property taxes, which is what the government wouldn't want to see.
This is the important point. The lower your lease to the Government, the more of the property is yours. In some areas a homestead exemption exists and if property value goes below it no tax will be owed. Personally I cannot see any downsides to median property being 3x median income or less. Ideal situation would be 20% down, 3X income principal, 10% or higher interest rate. Few could buy so prices would drop, reducing taxes and increasing affordability. The only losers would be real estate speculators, who deserve to lose anyway.
Reply With Quote Quick reply to this message
 
Old 12-31-2008, 09:31 AM
 
Location: The Hall of Justice
25,906 posts, read 37,529,442 times
Reputation: 42575
Quote:
Originally Posted by unseengundam View Post
I think it is absolutely bad idea loosening mortgage restriction. In fact, I think we highly tighten up with income rations, higher down payments, type of loans, etc. The result of this would force homes price to become more affordable. Here my idea about mortgages:

Require 33% debt to income Ratio

Down payment in CASH (no piggyback loans). Here what I think down payment should be depending on price of the house:

Less than 100K - 10% down payment (include FHA/VA)
100k+ to 200k - 20 % down payment
200k+ - 300k - 30 % down payment
300k+ - 400k - 40 % down payment
500k+ - 50 % down payment

FHA and VA (HUD) - Should be capped at 200k loan for ALL across the US. Furthermore, the down payment should be raised to 10%.

Next requirement, is borrower MUST have 3 months of emergency cash (liquid) reverse after down payment and closing cost are down. This will ensure if they lose job they can keep on paying for awhile at least.

ARMs should be eliminated and Fixed loans should be allowed.


What these policies should do is guarantee people can actually afford the house they buying. Especially on the higher priced housing. People won't go around defaulting on their houses like they are doing now.

It will drive down all the overpriced housing. I believe this should lower median house price to under 200K all across the USA; Since it will be harder to buy house over 200k due higher down payment. This exactly what need to happen, houses need to affordable and people who actually pay the mortgage should be able to buy the houses!
You're being unnecessarily strict. We just bought our first house, one in the high 300Ks. We have decent incomes, cash in the bank, no major debt, and good payment histories for the past few years. Our credit scores were not great, due to a mess from years before, but they had improved a lot, and all our recent stuff (2-3 years) was fine. We qualified for an FHA loan and put 3% down plus some closing costs. We live within our means and maintain low credit card debt, have 401Ks, and keep money in the bank. We're in our mid-30s and have three children. There's no way we could save up $150K (approximately 40% of our home loan) in any reasonable time frame. Saving $10K a year means we'd buy our house when we're FIFTY. Who wants a 30-year loan at 50?

We live near our jobs and make good money. We could live somewhere much cheaper and have a hellish commute, or move even farther away and not have the jobs we do. (We tried that in Colorado Springs several years ago, because housing was cheaper there, and wound up broker than we've ever been because we couldn't find good jobs. Hence the mess we've been cleaning up since.)

We can afford our house and live relatively modestly. We've never owned a new car, don't have a lot of brand-name stuff, don't go on vacations, etc. My husband was laid off a couple months after we bought the house and was out of work for two months, and we were fine without borrowing money from anyone. Obviously it CAN work.
Reply With Quote Quick reply to this message
 
Old 12-31-2008, 09:31 AM
 
Location: Marietta, GA
7,862 posts, read 15,218,406 times
Reputation: 3576
Quote:
Originally Posted by HSVbulldawg View Post
If you want to set a floor under prices so that they don't fall as much you are advocating a price fix.
No...it means doing the things that create the environment where home prices stop falling and level off. Prices have been falling partially due to the downward pressures of foreclosures and general deflationary tendencies, as people short sell, fire sell, and wait to buy for a lower price tomorrow.

Getting these factors under control will help to stabilize prices.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6. The time now is 12:04 PM.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top