It's a bad time to buy a house in the valley (Phoenix: sales, 2015)

[WSPHXPELON]

Originally Posted by wase4711

only if they give those kind of loans to people who don't have enough regular income/credit history to be a good credit risk..which, in many cases are the exact kinds of people who get those kind of loans

Even if the people getting these loans have decent enough income/credit, the problem lies in the fact that with 0% down, it's just too easy to walk away from the property for any little reason. With nothing invested in the home there is very little incentive to stay in that home if a better opportunity presents itself.

[Zippyman]

Originally Posted by WSPHXPELON

Well, I hate to be the first on this thread to say it - but 0% down is back. All it takes is a FHA loan with 3.5% down in combination with one of the many government programs currently available to assist homebuyers with approximately 5% towards down payment and/or closing costs.

A couple of these programs are: Home in 5, Home Plus and Pathway to Purchase, not to mention the 0% down VA loans and the numerous other government sponsered homebuyer assistance programs that I don't know off the top of my head.

So anyway, with enough people buying with 0% down via govt programs, are we not right back to the same problem we had right before the 2008 crash?!

No, because the people who tanked the market here were specuvestors, buying 10 homes with zero down & reverse-amortizing mortgages - people with "great credit" and no money. FHA buyers get to buy *one* house to live in, and they have to show the income & ability to pay. FHA buyers had nothing at all to do with the crash.

[ScottsdaleMark]

Originally Posted by Zippyman

No, because the people who tanked the market here were specuvestors, buying 10 homes with zero down & reverse-amortizing mortgages - people with "great credit" and no money. FHA buyers get to buy *one* house to live in, and they have to show the income & ability to pay. FHA buyers had nothing at all to do with the crash.

Good posts, Zippy.

WSPHX, don't get discouraged, the economy is strong, all indications are that the housing market is just fine and that's my personal conviction as well. Maybe it's discouraging to have missed the market bottom, but at least we're not at the top of a market cycle, either. I think we're in the "middle" of the upswing of the market cycle, and it is my hope that the length and duration of this upswing will mitigate the harshness of the eventual cyclical downturn, although that is still beyond the horizon, so no one really yet knows.

If you go apply for a mortgage sometime, you will be amazed how much paperwork you have to do post-crash and how much documentation you'll need to supply the bank even if you're a fantastic candidate with tons of resources. It is not easy to get a loan, and I can only imagine how much MORE paperwork and effort getting a government (VA/FHA) loan involves.

[ElleTea]

Originally Posted by WSPHXPELON

Even if the people getting these loans have decent enough income/credit, the problem lies in the fact that with 0% down, it's just too easy to walk away from the property for any little reason. With nothing invested in the home there is very little incentive to stay in that home if a better opportunity presents itself.

I can't believe that people would walk away from a house easier just because they have a smaller down payment. How much you put up front wouldn't be a factor for me, that's for sure. I would feel just as invested in a purchase with 0% down as with 50% down.

Those that walked away from their homes during the crash likely did so because they were upside down, in foreclosure, or otherwise couldn't make the payments. How much you have invested doesn't change the parameters on an already dire situation. There are consequences for walking away like destroyed credit and possible lawsuits to collect.

[jimj]

Originally Posted by man4857

I don't really understand how can anyone buy a home with 3% down. That's ridiculous. I thought that was one of the biggest lessons of 2008.. apparently no one has learned?

Either you:
1) Find a cheaper place, or
2) Rent and continue to save until you have 20%

I bought with 3% down even though I could have paid the 20% without issue. The reason was I bought in 2010 at the bottom of the crash (didn't know it was the bottom at the time) and wasn't absolutely sure it'd ever come back and so didn't want to risk a bunch of capitol on something that could continue to fall or fail completely.
I was and have been told since 2013 (when the new rules on PMI were introduced) that if I decided to go FHA (for a second home deal) that PMI was forever instead of being tied to 78% LTV and PMI costs were higher so I just stuck with conventional financing.

[jimj]

Originally Posted by man4857

The reason the conventional loan requires 20% down is to show that you have a steady income stream, high enough income stream, and saving habits... Which is what it takes to own property: commitment.

3% doesn't really require much commitment and yeah everyone has their own reasons, but there are limits of when it's reasonable or not. 3% is just absurd. Hell why not 0% then?

Sure! USDA loan and you're off and running at 0%...

[KurtAZ]

Yeah I was talking to an investment friend of mine...one of their largest sellers STILL is packaging up 10 or so houses for sale for a lump sum to an investor.

[WSPHXPELON]

Originally Posted by ScottsdaleMark

WSPHX, don't get discouraged, the economy is strong, all indications are that the housing market is just fine and that's my personal conviction as well. Maybe it's discouraging to have missed the market bottom, but at least we're not at the top of a market cycle, either. I think we're in the "middle" of the upswing of the market cycle, and it is my hope that the length and duration of this upswing will mitigate the harshness of the eventual cyclical downturn, although that is still beyond the horizon, so no one really yet knows.

Thanks for your post and for everyone else here who took the time to comment. And to clarify a little - I'm not exactly "discouraged", and I actually didn't miss the last crash. I bought my home for my family and I in cash in 2010 for $59k, that same home is now worth about $160k, so I did pretty well.

What I am doing now is considering buying a second home as an investment with a "buy/hold/rent" strategy, with long term appreciation also in mind. I did so well with my last home I really don't want to be one of the dummies that buys at the top for this transaction. I don't want to make my investment purchase now only to find out that with a little more patience and waiting a few years I could end up sending my kids to Harvard instead of GCC and we could end up retiring in Beverly Hills instead of Maryvale. Haha so yeah, that last sentence was a joke, but the truth is I don't want to be to hasty to make an investment when I really should just wait.

Thanks again for everyone's input.

[jimj]

Originally Posted by WSPHXPELON

Thanks for your post and for everyone else here who took the time to comment. And to clarify a little - I'm not exactly "discouraged", and I actually didn't miss the last crash. I bought my home for my family and I in cash in 2010 for $59k, that same home is now worth about $160k, so I did pretty well.

What I am doing now is considering buying a second home as an investment with a "buy/hold/rent" strategy, with long term appreciation also in mind. I did so well with my last home I really don't want to be one of the dummies that buys at the top for this transaction. I don't want to make my investment purchase now only to find out that with a little more patience and waiting a few years I could end up sending my kids to Harvard instead of GCC and we could end up retiring in Beverly Hills instead of Maryvale. Haha so yeah, that last sentence was a joke, but the truth is I don't want to be to hasty to make an investment when I really should just wait.

Thanks again for everyone's input.

We're in the same basic position as you and are waffling on cashing out our profits while they are there and looking for something else or holding for another couple of years for a possible further gain. It's a tough choice right now, that's for sure! Problem is, as ours rise so do the ones we'd be looking at so it can be a wash unless you build or go for a fixer.

Given the rise in new construction I don't see a house that's currently going for <$300k going anywhere near $400k or higher anytime in the next 10 years. There's just too much available land. Now if water restrictions go into effect and permits are restricted then maybe...
On the other side, I do have a friend who's parents bought their house in Scottsdale 15 years or so ago for $150k and just sold it for 4 million to a developer so I guess it can happen. Man I wish we were "best friends"or better yet brothers!...

[ShampooBanana]

Originally Posted by WSPHXPELON

Well, I hate to be the first on this thread to say it - but 0% down is back. All it takes is a FHA loan with 3.5% down in combination with one of the many government programs currently available to assist homebuyers with approximately 5% towards down payment and/or closing costs.

A couple of these programs are: Home in 5, Home Plus and Pathway to Purchase, not to mention the 0% down VA loans and the numerous other government sponsored homebuyer assistance programs that I don't know off the top of my head.

So anyway, with enough people buying with 0% down via govt programs, are we not right back to the same problem we had right before the 2008 crash?!

No, we are not back to where we were before because the ability to qualify for those programs is much more limited. Banks are doing much stricter underwriting, verifying all sources of income, credit history, employment checks, etc, before they will even think of extending a loan to anyone. The problem before was that banks/lenders were not doing that and were extending these loans and programs to anyone with little verification based on the supposition that "Hey! The economy is great! Real estates prices will never fall!". Of course until they did and everything tanked.

Note that a lot of that stricter underwriting is the direct result of mandatory controls put in place in the Dodd-Frank Act (which now Trump and Reps are targeting to repeal). Specifically it was part of Title XIV of that act, the Mortgage Reform and Anti-Predatory Lending Act which established the Bureau of Consumer Financial Protection, which focuses on standardizing data collection for underwriting and imposes obligations on mortgage originators to only lend to borrowers who are likely to repay their loans.

If/when Dodd-Frank is repealed then I could see predatory lending coming back in the not too distant future unless certain other protections are put in place.