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Non-issue. Nobody saves for a down payment in lieu for a college eduation. Hell I wish they all did that, you're better off saddling debt you can't afford while gaining a roof over your head and be dischargable than saddling a debt that leaves you working a secretary McJob for negative cashflow and can't be discharged. Furthermore, nobody saves for a college eduation to begin with, so that's another non-existent opportunity cost in our current social tendencies. As to the irrational hoarding mentality, it has no possible context in a society of negative net savers. You speak as if people saved anything to begin with. there;s no risk of turning into a nation of irrational savers when everybody has to leverage to attain the material acquisition the rest of the economy expects them to incur just to substantiate the ponzi scheme. Imagine what would happen to prices and affordabilty if nobody counted on nor had access to grandma's favor! Let alone uncle obama's favor. More people could afford a home and less McMansions would exist. I'm happy with that. But no, we treat home ownership (even post-2008 debacle) as an entitlement and we rationalize its subsidy. On the one hand the boomers need the ponzi inflated for a little while longer, on the other hand we have Gen Y and beyond that doesn;t know what to do with itself upon the recognition that they are the first generation to be worse off than their parents and are scared ch$tless as to what a downsized America looks like. Irrational hoarding mentality...what a FIRE economy cheerleader gem...
The last few years aside, mortgage debt is relatively low risk compared to other forms of debt. It is not good policy to encourage people to take out riskier debt in place of less risky debt in order to minimize risk. It's illogical.
You're very stuck in a mindset of over-valued property, which is understandable. Unlike the 100% financing issues we saw related to the seller's market of a few years ago, there is very little risk here. Since we're talking about first time home-buyers, we're talking about relatively low priced houses that are currently at rock-bottom prices, and even if they have no other resources to devote to a down payment, they still start with an $8,000 equity position. Significant depreciation of house prices at that level is unlikely. Even in a worse-case-scenario a bank is going to be likelier than not to recover their money.
Fair enough. But on a macro-level it is almost certain that housing prices have hit bottom or close to it
Really? What analysis shows that prices have hit bottom? All of the recent data shows that price drops are steady or accelerating for the majority of the nation. That fact makes this plan a bad idea - by giving people houses with no money down, you're just setting up the next wave of ruthless defaults as those buyers realize that they owe more than their house is worth. Since they put nothing down, they don't lose much by walking away.
Sure, not every buyer will do so, but the results of the last few times things like this were tried gives a pretty strong indication that the results will be bad.
Not everyone who can't afford a down payment is some lowlife loser that's irresponsible. It's just like those people who work jobs that pay measly salaries and they are able to afford a $200/week motel room to live in but don't have the lump sum needed for first/last/security/broker fee to move into an apartment. Their $800 a month motel payment could just as easily be a rent payment. What's blocking entry is the lack of a large lump to get them in.
I think if this $8k is able to be used as a down payment, it might just be enough to get some people into a home that they can readily pay for. It's up to lenders to scrutinize the financial situation of the borrowers and act accordingly.
The tax credit is still there... what they announced and then pulled was the availability at closing. You can claim the credit on your 2009 taxes, or refile for 2008 (ask an accountant for advice on this).
Not everyone who can't afford a down payment is some lowlife loser that's irresponsible.
No one's saying that. What the data shows, though, it that on the whole people who put less money down are more likely to default on their loans. That overall trend means that the people providing funding for a scheme like this (in this particular case, the taxpayers) have reasonable worries that they are going to be on the hook to clean up the mess if the trend plays out as it did the last time this approach was used.
It doesn't say anything bad about any particular buyer who would use this plan. But at a macro level funding loans which are known to be more risky isn't good use of taxpayer money.
Not everyone who can't afford a down payment is some lowlife loser that's irresponsible. It's just like those people who work jobs that pay measly salaries and they are able to afford a $200/week motel room to live in but don't have the lump sum needed for first/last/security/broker fee to move into an apartment. Their $800 a month motel payment could just as easily be a rent payment. What's blocking entry is the lack of a large lump to get them in.
I think if this $8k is able to be used as a down payment, it might just be enough to get some people into a home that they can readily pay for. It's up to lenders to scrutinize the financial situation of the borrowers and act accordingly.
Actually, these ppl that are otherwise renters, would be able to own a home being they are responsible. They are buying homes that are inexpensive. Actually, the mortgage is probably less than what rent cost. For example, when my DH and I bought our first home at age 20, it was $58K. We had to borrow the downpayment from my grandmother. Our payments were $392 a month with tax and insurance included. Had we been renting, we'd be paying at least $600-$700 a month. This allowed us to pay the extra to my grandmother to pay her off. We never missed a payment and we were able to own a home instead of throwing money away to rent. We are both glad we did it. We sold the house 10 years later for $84K.
Bottom line, there are responsible ppl out there that can do it. If you don't go over your means and manage your money correctly, you can do it. I'm living proof.
Fair enough. But on a macro-level it is almost certain that housing prices have hit bottom or close to it, and since this policy is one that is being implemented on a macro-level (it is being implemented by the Federal government) that is the appropriate level at which to have this discussion.
So actually, your comment is not really fair at all! It is neither misleading or unhelpful do discuss the overall price level as part of this discussion.
What data supports this claim?
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