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The only thing holding the market up right now is Federal government support. Banks do not want to lend without 20% down. What does that tell you? The government is stepping in to lend to people with only 3-5% down.
That is actually far more than it took to buy a home via subsidized program in recent past so although yes the gov. backing is doing some to prop the market it is something that has existed for many years - the new tax incentives is the prop that most likely will go away and will later have a negative impact as FHA HUD Rural Development won't be going away anytime soon IMO. 2 of my last 4 sales were cash and they were the greater of the 2 $ wise so I think there is more than just gov. $ holding the market together, there is still some people that look at property as something to enjoy, hold, use, and invest their pride into, for many it is not just something to speculate, analyze, critique as if it were a piece of GE or Ford etc. People still buy new cars which arguably could be the biggest guaranteed immediate $ loser in a split second and without complaint people accept it.
That is actually far more than it took to buy a home via subsidized program in recent past so although yes the gov. backing is doing some to prop the market it is something that has existed for many years - the new tax incentives is the prop that most likely will go away and will later have a negative impact as FHA HUD Rural Development won't be going away anytime soon IMO. 2 of my last 4 sales were cash and they were the greater of the 2 $ wise so I think there is more than just gov. $ holding the market together, there is still some people that look at property as something to enjoy, hold, use, and invest their pride into, for many it is not just something to speculate, analyze, critique as if it were a piece of GE or Ford etc. People still buy new cars which arguably could be the biggest guaranteed immediate $ loser in a split second and without complaint people accept it.
The banks are not taking risk these days. Look at the most recent earnings statements from any large financial institution, and you'll see their trading activities made up anywhere from 75-100% of their total quarterly earnings. You'll also see they are still recording losses on loans/autos/credit cards, and they are lending less.
It seems like the government is trying to pussyfoot around the problem.
They are trying to help the banks recapitalize so they don't have to hold up housing, but the banks are choosing to leverage up instead of lending.
But, really, can you blame them? Whatever activity the banks are not taking with respect to lending, the government is. Why should they loan when trading is much more profitable and they still are technically insolvent?
So the measures they took to save disaster are actually discouraging lending, encouraging high levels of risk taking, and forcing the government to intervene more (via QE, MBS purchases, and special lending programs for banks).
My question would be - if the government is not propping up the entire housing market, then who do you see making more loans come mid-March when the current MBS purchase program for the government runs out of cash?
My question would be - if the government is not propping up the entire housing market, then who do you see making more loans come mid-March when the current MBS purchase program for the government runs out of cash?
Like I said the gov. is propping it up - just not entirely IMO.
This whole thing started when jobs started going offshore but everyone said it "WAS FINE" because the stock market would make us all rich! Meanwhile everyone who had lost their job went into developing real estate (or day trading) in one form or another - so the unemployment stats didn't show what was happening though anyone with half a brain could see what was going on.
Over development outstripped demand. Jobs continued to slide. Suddenly you had too much new housing which undermined the prices of preowned housing stock and development ground to a halt throwing a lot of people into the constantly growing unemployment ranks, people start default on payments........
There will always me some areas where housing will be tight and become or remain valuable again. But for much of the midwest and many other areas, unless your going to live in the house "forever" in the old model of having it paid off for your lower income retirement years - financially there will be no reason to own a house - it will be a neutral to epensive life style decision
The Fed and the gov't are on a slippery slope. They are micromanaging the economy. They are keeping interest rates artificially low, hoping that people will buy homes or keep people in their homes. They hope that they can put a plug in the drain of falling home prices.
As the Fed continues to print money, they will inflate away individuals savings. Home prices may appear to stabilize, but in reality, will be worth less.
The government needs to get out of the way and let business/individuals fail. The welfare/entitlement state that they think is the solution will cripple this country.
I watch on HGTV as young couples buy big homes with little downpayment and ask the seller to pay their closing costs. To me, these people have no business buying a house. Back in the "old days" when we were buying our first few homes, we saved until we had 20% down and paid our own closing costs. We could afford the homes. The only exception was an FHA loan, which allowed a smaller downlpayment, but had very tight restrictions.
If couples today bought the size home they could actually afford, we wouldn't be in this mess. No young couples want to buy a "starter home" anymore. They want some big, beautiful place, even though they are only 25 years old.
This whole thing started when jobs started going offshore but everyone said it "WAS FINE" because the stock market would make us all rich! Meanwhile everyone who had lost their job went into developing real estate (or day trading) in one form or another - so the unemployment stats didn't show what was happening though anyone with half a brain could see what was going on.
Over development outstripped demand. Jobs continued to slide. Suddenly you had too much new housing which undermined the prices of preowned housing stock and development ground to a halt throwing a lot of people into the constantly growing unemployment ranks, people start default on payments........
There will always me some areas where housing will be tight and become or remain valuable again. But for much of the midwest and many other areas, unless your going to live in the house "forever" in the old model of having it paid off for your lower income retirement years - financially there will be no reason to own a house - it will be a neutral to epensive life style decision
And the reason jobs were offshored? To make corporations and their CEO's filthy rich. Oh what happened to that....do I hear it? ..........trickle down economics? LOL. I still hear it to this day.......oh small businesses are going to save the day. WRONG! Most small businesses are worthless at producing new high salaried jobs because they themselves don't produce anyting of any value and they don't have the capital to pay people what their worth. Look the bottomline is America's manufacturing has been decimated. We don't produce anything anymore and worse we don't produce hardly anything we consume.....it all comes from China and other countries where you've got people working for pennies a day. Free trade is killing this country and no one wants to talk about it.
What we've seen in America is sad. We've "financialized" our entire economy. If we don't grow it, mine it or build it then we aren't adding "value" to our economy. Everyone has their hand in the next guy's pocket. The boom of pseudoprosperity we've all seen in the last 15-20 years has been propped up on our government's ability to print endless amounts of money.
I'm sick of both republicans and democrats. They've killed our country. They are two sides of the same coin. I could go on and on. But Americans are going to see their pretty little spoiled standard of living shrink considerably...............and we deserve it. We've been living high on the hog for a long time.
I watch on HGTV as young couples buy big homes with little downpayment and ask the seller to pay their closing costs. To me, these people have no business buying a house. Back in the "old days" when we were buying our first few homes, we saved until we had 20% down and paid our own closing costs. We could afford the homes. The only exception was an FHA loan, which allowed a smaller downlpayment, but had very tight restrictions.
If couples today bought the size home they could actually afford, we wouldn't be in this mess. No young couples want to buy a "starter home" anymore. They want some big, beautiful place, even though they are only 25 years old.
Feel free to not generalize about young couples, thanks. My husband and I are 30, buying our first home (2 bed/1 ba, 1300 sq. ft--not a monster), and putting down 35%.
Feel free to not generalize about young couples, thanks. My husband and I are 30, buying our first home (2 bed/1 ba, 1300 sq. ft--not a monster), and putting down 35%.
Feel free to not generalize about young couples, thanks. My husband and I are 30, buying our first home (2 bed/1 ba, 1300 sq. ft--not a monster), and putting down 35%.
Obviously, you are exceptional, but I still think there are many others who buy when they are not prepared.
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Downpayments
