patrick.net

What about the Bush tax cuts?

I'm in favor of the 20% down as well.

We just (finally) bought a house and put 22% down. We absolutely refused to bid on anything we couldn't put down 20%. The process in buying a house was hella difficult because every house we got bid on got outrageously overbid by some asshole putting down much less then 20%. It's no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

HousingWatcher says

What about the Bush tax cuts?

Sure, I'd get rid of that too. But you asked what from the budget should be cut. That's on the revenue side.

You haven't held up your end of the bargain here. Please give your explanation for why undue increases in state budgets is justified. And don't say 9/11, because you just sound silly.

cearka says

I’m in favor of the 20% down as well.
The process in buying a house was hella difficult because every house we got bid on got outrageously overbid by some asshole putting down much less then 20%. It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

This is very very true.

BTW, realtards absolutely HATE when you point this out.

I'd like to see 100% cash.

All the "buyers" putting only 20% down are seriously interfering with my housing price discovery.

cearka says

It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

The funny thing, though, is that the housing payment is much higher with only 3.5% down -- $350,000 with 3.5% down is $2000/mo but only $1600/mo at 20%.

Alternatively, the $2000/mo pricepoint would result in home prices moving from $350,000 to $450,000 should the lending regime move from 3.5% down to 20% down.

If you think about it, and agree that home prices are set by how-much-a-month, all downpayments just get tacked onto the purchase price.

The lowest price level -- most affordability -- is set by 0% down!

This doesn't take into account though...that most people putting 3.5% down or whatever take out some "creative" financing that results in lower payments for the first few years, only to have the shit explode in there faces later.

Troy says

cearka says

It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

The funny thing, though, is that the housing payment is much higher with only 3.5% down — $350,000 with 3.5% down is $2000/mo but only $1600/mo at 20%.
Alternatively, the $2000/mo pricepoint would result in home prices moving from $350,000 to $450,000 should the lending regime move from 3.5% down to 20% down.
If you think about it, and agree that home prices are set by how-much-a-month, all downpayments just get tacked onto the purchase price.
The lowest price level — most affordability — is set by 0% down!
“Nessuna soluzione . . . nessun problema!„

Troy says

The lowest price level — most affordability — is set by 0% down!

You're not taking an overall view of risk. Someone who can't save 20% down may not be a good candidate to be a homeowner. So now, you're taking someone who's a marginal buyer at best and increasing the size of their payment. It's lose-lose.

Banks wouldn't do 3.5% loans in non-recourse states without government subsidies. The risks are way too high. A low amount down has thus far shown to be a good indicator of the likelihood of default.

"Please give your explanation for why undue increases in state budgets is justified."

As I said before, there are several reasons:

1. Rising health care costs
2. Illegal immigration costs
3. Education costs
4. Unemployment benefits

HousingWatcher says

1. Rising health care costs
2. Illegal immigration costs
3. Education costs
4. Unemployment benefits

None of those are justify state or local budgets being that far out of balance. Very few states outside California have significant costs from #2. Very few states are facing heavy costs from #1, although they may in 10-15 years. I agree that teacher's unions are causing problems with good education, but the education costs alone aren't bumping budgets out of balance. Unemployment benefits are after the fact -- they happened after the budgets were already out of balance. If it would help, you could pick a specific state -- NY since you seem to favor it.

NY spends $5 billion a year in illegal immigration related expenses. California I bet is double or triple that.

HousingWatcher says

NY spends $5 billion a year in illegal immigration related expenses. California I bet is double or triple that.

I'm calling BS on that -- those costs are never accurate, and almost always assume that undocumented immigrants don't pay taxes, even though many of them do.

Providing a path to documentation would be a net economic benefit to every single state, and these studies never include the net economic benefit that already currently exists.

cearka says

that most people putting 3.5% down or whatever take out some “creative” financing that results in lower payments for the first few years

No, all the suicide loans have been removed from the marketplace thanks to Dodd-Frank.

Teaser-rates and negative-amortization have been banned, and prepayment penalties have been reduced and banned altogether for subprime loans.

Dodd-Frank requires lenders to keep 5% of any risky loans on their books -- ie be in a 5% loss position after the borrower. This aligns the lender's financial interest with that of the borrower's.

corntrollio says

A low amount down has thus far shown to be a good indicator of the likelihood of default.

So has the market falling 50% from peak. This correlation is not a causation.

The market falling 10% from here is going to cause a lot more problems than recent 3.5% borrowers throwing in the towel.

If the market falls 10% in two years, 3.5% borrowers will only be 1% underwater -- current regs require 2.5% down, 1% PMI prepay, and ~1.6% principal paydown and 1.15% PMI every year, so all that adds up to 9% after 2 years.

3.5% isn't that big a deal, eh.

corntrollio says

So now, you’re taking someone who’s a marginal buyer at best and increasing the size of their payment.

No, loans are still qualified based on debt-to-income limits. Increasing the down payment to 20% will just result in home prices inflating, resulting in the same monthly payment for the same house, but with 20% down instead of 3.5%.

We should have negative down payments to lower housing prices, LOL.

corntrollio says

I’m calling BS on that — those costs are never accurate, and almost always assume that undocumented immigrants don’t pay taxes, even though many of them do.

Sales taxes on Doritos and Slurpees don't amount to a whole lot.

corntrollio says

Providing a path to documentation would be a net economic benefit to every single state, and these studies never include the net economic benefit that already currently exists.

It will encourage an even larger number of people to come here illegally. That's an ass-backwards way to deal with it, and history has proven that it backfires in the end. It sure makes for a sweet-sounding platitude though, right?

Troy says

The market falling 10% from here is going to cause a lot more problems than recent 3.5% borrowers throwing in the towel.

Well there are risks that are unavoidable, and there are those risks which can be mitigated. Can't help those who are going to lose 10% of their house's value. We absolutely can prevent and mitigate those who are going to buy from being underwater. It's all a matter of degree.

Troy says

Increasing the down payment to 20% will just result in home prices inflating

How does that work exactly? Answer: it doesn't, the opposite is true though.

klarek says

How does that work exactly?

I did the math here already. The 3.5% down payment has a larger principal balance and also the 1.15% PMI cost. This eats up buying power and thus the 3.5% population can't bid as high as the 20% buyers.

The example is the $330,000 property. 20% down is $264,000 principal balance, at 4.3% interest this is a $1300/mo payment. 3.5% buyers would have a $1900/mo payment, which includes the $300/mo PMI and $300 more in P&I -- note the very large difference here -- ceteris paribus 3.5% borrowers can't qualify for as large a loan as 20% borrowers.

Since real estate prices are determined by the monthly payment, for buyers that can only afford a $1300/mo payment the price level will thus be $330,000 in a 20% down regime and $230,000 with 3.5% down ($230,000 with 3.5% down is the same $1300/mo in payments). Requiring a $46,000 down payment increases the price by $100,000!

Now, requiring 20% will tamper the number of buyers temporarily, but this is only a temporary effect as buyers labor those long years sending the rent checks to their landlord, gradually scraping together that 20% down payment.

Which is better for the buyer and the market, 3.5% down on a $230,000 purchase or 20% down on a $330,000 purchase?

It's the same house and same monthly payment.

20% down is just excessive conservatism, and I suspect the ulterior motive here is to keep renters renting.

Yeah, I'm sure it has nothing to do with risk mitigation and everything to do with evil Republicans creating a serfdom society.

The rationale in your argument is truly bizarre, since it negates the severely diminished level of consumer demand at current prices.

Since you aren't considering the aggegate, maybe an example will paint this better for you: A person with substantially high income and a $20,000 DP will go from being able to buy a $571k house to a $100k house.

That will increase prices?

klarek says

A person with substantially high income and a $20,000 DP will go from being able to buy a $571k house to a $100k house.

Substantially high incomes will save the down payment. Your example here is nonsensical.

High down payments are unnecessary as long as housing doesn't fall more than 3% a year. I did the math for you for this too -- PMI is 1.15% and principal paydown starts at 1.6% the first year and increases from there.

After just 2 years a 3.5% borrower has 10% skin in the game, via principal paydown and PMI payments.

since it negates the severely diminished level of consumer demand at current prices.

Demand is demand. It only takes 2 buyers to bid against each other. The 20% regime would knock out demand for a while, but it would come back, and if it doesn't -- eg landlords are forcing their renters to fork over their monthly savings --, then that's another indictment of 20% down.

klarek says

and everything to do with evil Republicans creating a serfdom society.

This has nothing to do with Republicans and everything to do with this serfdom society you speak of.

http://research.stlouisfed.org/fred2/series/USHOWN

If 3.5% down is risky given future price declines, raise the PMI up from 1.15%. That's also a win-win -- the less we spend on housing the better.

Troy says

Substantially high incomes will save the down payment. Your example here is nonsensical.

Your argument is assuming that the person was making the substantially high income for an eternity. Might be a doctor just out of residency.

Troy says

After just 2 years a 3.5% borrower has 10% skin in the game, via principal paydown and PMI payments.

It takes SIX years to pay down 10% of the principal. Two years puts the owner only a hair above 3% principal paid off. That along with their 3.5% down payment is hardly enough to cover the cost of selling the house, assuming prices are the same.

PMI payments aren't "skin in the game" any more than car insurance is a contributor to my auto loan.

Troy says

Demand is demand. It only takes 2 buyers to bid against each other.

You're seeing the aggregate here. A pool of buyers will effectively be limited in what they can purchase since they don't meet the DP threshold. So it's not going to be the 3.5% versus the 20% on the same house. The 3.5% guy will be making an offer on a much cheaper house. The 20% guy has less competition, and the house he was going to purchase has to lower its price to attract a buyer since so many of those people whose incomes can afford the house are now well below the DP threshold.

This is basic supply and demand. The way you're pegging this is as if you assume everybody has $200k in their bank account, and can pay whatever DP percentage is required. Perhaps you should look at the personal savings rate in this country. It's been hovering around zero for quite some time now.

Troy says

If 3.5% down is risky given future price declines, raise the PMI up from 1.15%. That’s also a win-win — the less we spend on housing the better.

You wouldn't even need PMI were these people to put a significant down payment on the house. It's a complete waste of money to have them plow their earnings into PMI when it could be going into their principal or down payment.

It's just a way of ushering people into the market earlier than they should jump in. They're pawns, really naive pawns whose willingness to purchase is exploited by abysmally low DP requirements while raping them with insurance fees for years which would have been much better put into savings and hence into the principal of the house, thus limiting their risk factor.

klarek says

Your argument is assuming that the person was making the substantially high income for an eternity. Might be a doctor just out of residency.

Um, yes, I assume stable household incomes. So do lenders, obviously.

It takes SIX years to pay down 10% of the principal.

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that's 19.4% "skin in the game" in just 6 years. Almost there to that magical 20% zone of safety!

PMI payments aren’t “skin in the game” any more than car insurance is a contributor to my auto loan.

Sure they are. PMI perfectly offsets any losses the lender will take on the property. Hell, maybe we ought to make PMI a set-aside account and just apply it to the principal if & when there's enough equity to hit 80% LTV.

The 20% guy has less competition

You are overly attached to this demand destruction of high down-payments.

I argue this would be a temporary thing and establishing a 20% regime would not result in long-term demand destruction, it would just delay entry, forcing millions of families to pay their LL's mortgage payments for years, all unnecessarily, while also raising the price level since "affordability" rises more than linearly with every dollar of down payment.

It’s a complete waste of money to have them plow their earnings into PMI when it could be going into their principal or down payment.

Better to 1.15% PMI than to being a rent-slave to their landlord.

This is obvious, no?

would have been much better put into savings and hence into the principal of the house

LOL. Putting savings into principal? Talk about risk! Look, either the market is tanking from here or it isn't.

If it is, then buying with 3.5% or 20% is a total waste of money.

If it isn't, then 3.5% is perfectly safe. The numbers say borrowers will have 19.4% principal paydown + PMI payments in just 6 years.

Troy says

Um, yes, I assume stable household incomes. So do lenders, obviously.

Stable in their terms is what, like six months? A year? Don't know anybody that makes enough money to save up $100k in that time period.

Troy says

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that’s 19.4% “skin in the game” in just 6 years. Almost there to that magical 20% zone of safety!

What in the world makes you think that all the PMI is going into the principal?

Troy says

You are overly attached to this demand destruction of high down-payments.

No, I am just overly stating an economic must-know fundamental: supply and demand. You're completely dismissing this in your theory, which is why it's b.s.

Troy says

I argue this would be a temporary thing and establishing a 20% regime would not result in long-term demand destruction, it would just delay entry, forcing millions of families to pay their LL’s mortgage payments for years, all unnecessarily, while also raising the price level since “affordability” rises more than linearly with every dollar of down payment.

No offense, but that's really dumb. Do you think that if we lived in a world of 20% down, then the next morning it went to 3.5% down, people would be going out and buying cheaper houses? That prices will fall?

Troy says

Better to 1.15% PMI than to being a rent-slave to their landlord.

This is obvious, no?

No, it's not. It's part of the bullshit "renting is throwing money away" crap I and others have heard ad nauseum for years. If you're going to use this as a basis for your argument, then this discussion is effectively over.

People nowadays have to be so mobile due to job insecurity that owning is a liability. Prices are still too high, especially if people have to have a decent sized down payment. I hate it when the industry lobbies for self serving stuff then promotes it as being "good for the economy," or "good for you." Any benefit of their lobbying is incidental, but usually the result of industry lobbying is the public getting shafted.

klarek says

corntrollio says

Providing a path to documentation would be a net economic benefit to every single state, and these studies never include the net economic benefit that already currently exists.

It will encourage an even larger number of people to come here illegally. That’s an ass-backwards way to deal with it, and history has proven that it backfires in the end. It sure makes for a sweet-sounding platitude though, right?

Only if you don't understand economics.

Even the Cato Institute says that legalization would add $180B to GDP over 10 years:
http://washingtonindependent.com/55152/cato-institute-finds-180-billion-benefit-to-legalizing-illegal-immigrants

Other studies have found an even greater benefit by an order of magnitude, making Cato's estimate a lowball:

http://www.americanprogress.org/issues/2010/01/raising_the_floor.html

According to this study, a path to legalization would raise GDP by $1.5 TRILLION over 10 years. A guest worker program would raise GDP by $792 billion over 10 years.

In contrast, mass deportations would lower GDP by $2.6 TRILLION.

What you're missing is that the U.S. economy did well when we allowed more immigration. Certainly it would make sense to have more skilled workers here and more people with advanced degrees.

klarek says

corntrollio says

I’m calling BS on that — those costs are never accurate, and almost always assume that undocumented immigrants don’t pay taxes, even though many of them do.

Sales taxes on Doritos and Slurpees don’t amount to a whole lot.

Sure, undocumented immigrants do pay a ton in sales tax, but they often also pay property tax, income tax, and payroll tax. One of my friends who is an immigration lawyer has had multiple clients with tax returns going back more than 10 years -- sometimes you need to add them to your immigration applications. This phenomenon is well documented.

In addition, a path to legal status generally requires paying a big fine and making absolutely sure that all back taxes are paid, which would be a huge boost to our revenues in and of itself.

"Certainly it would make sense to have more skilled workers here and more people with advanced degrees."

Why do we need more peope with advanced degress when there are tens of thousands of people with advanced degrees unemployed or flipping burgers?

In Pennsylvania alone, there are 15,000 unemployed skilled workers:

http://articles.philly.com/2010-09-30/business/24977870_1_unemployed-engineers-college-education-unemployment

And FYI: We already have a system in place that allows workers with advanced degrees to come to the U.S. IT is called the H1-B, which is basically a criminal enterprise that allows companies to fire US workers and replace them with cheap foreign labor.

Troy says

No, loans are still qualified based on debt-to-income limits. Increasing the down payment to 20% will just result in home prices inflating, resulting in the same monthly payment for the same house, but with 20% down instead of 3.5%.

Not true. If anything, raising down payments LOWERS housing prices because fewer people can meet the down payment requirement. It only takes a quick look at the current bust to show this. Basically, the opposite of everything you have said with respect to 3.5% down is true. It's nice to have opinions, but the facts say differently.

Troy says

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that’s 19.4% “skin in the game” in just 6 years. Almost there to that magical 20% zone of safety!

What is this magical math where you include PMI as "skin in the game"? That makes no sense. You've said this at least twice in this thread, and it's still not true. You don't understand the concept of insurance.

Troy says

Better to 1.15% PMI than to being a rent-slave to their landlord.

Yeah, okay, you don't have anything substantive to say. This is nonsensical, as are your other arguments.

klarek says

What in the world makes you think that all the PMI is going into the principal?

that's not my argument. What I'm saying is PMI is going to offset any losses to the lender due to falling home prices.

After 3 years of payments the lender will have 4.45% of PMI banked. This is equivalent to the loan having 4.45% less LTV when looking at loss scenarios upon borrower default.

This is obvious no? PMI is just another form of "skin in the game" from the buyer that protects lenders from default losses.

You’re completely dismissing this in your theory, which is why it’s b.s.

I'm not dismissing demand, I'm saying demand is already so stupendously immense that temporarily winnowing down the public with high down payment requirements is still going to have more able-buyer demand than supply of houses can fulfill.

There are 140 properties on the market in Milpitas and 68,000 people living there. 60 in 93901 and maybe 60,000 who would like to buy there if they could afford it.

That's a dire undersupply of housing.

All buyers bid against each other, and while 20% down will remove a big chunk of the buying public immediately, over time the able-buyer public will grow to today's level as more people save up for the down payment.

The end result will just be the same demand we have now, but with home prices 50% higher.

The math on this is obvious, which is why you ignore it.

Stable in their terms is what, like six months? A year? Don’t know anybody that makes enough money to save up $100k in that time period.

At this point I'm really lost at WTF you're trying to say here.

Your original:

A person with substantially high income and a $20,000 DP will go from being able to buy a $571k house to a $100k house.

was attempting to argue that down payments are fixed in time, even for people with "substantially high incomes".

I was pointing out that people with high incomes will not have a fixed DP but this will increase to match whatever the pricepoint the market sets for the housing this buying segment wishes to buy.

And as down payments go up, so do home prices. There's a feedback loop there, and it's more than dollar-for-dollar, and the feedback will only end when borrower DTI limits are reached.

Do you think that if we lived in a world of 20% down, then the next morning it went to 3.5% down, people would be going out and buying cheaper houses? That prices will fall?

Loans and thus the price level is determined by borrower DTI ratio. There would be more able-buyers with the change to lower DP requirements, but over time prices will lock to match what borrowers can afford to borrow.

The housing market is of course highly path-dependent and the bumrush of buyers with 5-20% DP saved up would result in the market moving up to accommodate these buyers, but after they're gone the market would have to adjust to the new reality of PMI and higher P&I, which reduce buying power and thus the general price level.

Of course, we don't live in a 20% DP world now so this is just a theoretical discussion. However, something similar to this did happen in the 1990-2005 period, as the rise of 80/15 and 80/20 lending occurred.

It’s part of the bullshit “renting is throwing money away” crap I and others have heard ad nauseum for years.

ah, I touched a nerve and hurt your fee-fees.

The bottom line is that landlords -- especially those who own SFHs -- are in fact parasitical scum leechfucks latched onto the productive members of our society.

Surely you cannot disagree with this?

The math on this is also impossible to deny. In the other thread we've got new LLs declaiming their financial genius by roping renters paying $1650/mo into their $200,000 properties with $1100 PITIs they've just bought.

THAT is the ugly reality that this horrendous, economy-destroying 1.15% pa PMI fee is competing with.

Like I said, an able buyer should have been able to pick up that $200,000 property with a $5000 DP, $2000 PMI pre-payment, and $200/mo in PMI, not some rich specuvestor latched onto the earnings of somebody else now.

corntrollio says

raising down payments LOWERS housing prices because fewer people can meet the down payment requirement. It only takes a quick look at the current bust to show this.

The current bust was entirely caused by NINJA/SISA negative-am / pay-option / teaser-rate interest-only loans boosting affordability by roping borrowers who couldn't repay the fully amortization without continued home value appreciation.

These were the things the industry did 2000-2006 to make the new 80/20 regime more affordable to people. Temporarily.

corntrollio says

You’ve said this at least twice in this thread, and it’s still not true. You don’t understand the concept of insurance.

And you don't seem to understand the lender will receive these PMI payments to apply against default loss. They are perfectly equivalent to a DP from the lender's perspective, assuming their underwriting risk model is accurate.

Troy says

And you don’t seem to understand the lender will receive these PMI payments to apply against default loss. They are perfectly equivalent to a DP from the lender’s perspective, assuming their underwriting risk model is accurate.

No, they aren't equivalent. When you sell the property, you don't get anything back for paying PMI.

You're confusing several different concepts and trying to turn it into a coherent argument, but it's not quite working. We get it, you hate landlords; but your ideas on increasing homeownership make no sense and require government subsidies to sustain.

corntrollio says

When you sell the property, you don’t get anything back for paying PMI.

PMI protects the lender should he find himself having to sell the property at a loss, so the lender does in fact get something back for the borrower having paid PMI.

If the risk is modelled correctly then the 1.15% pa PMI rate corresponds to the estimated risk of loss over the length of the loan (ignoring vested returns on unallocated premiums for the moment).

but your ideas on increasing homeownership make no sense and require government subsidies to sustain.

3.5% makes perfect sense to make housing more accessible to more people. I wonder how you can find yourself arguing against this.

The real question is risk to the GSEs -- and thus the taxpayer -- should the borrowers default.

I demonstrated that after 6 years the lender --and thus the taxpayer is protected by 19.4% principal paydown and accumulated PMI premium contribution from the buyer. This is substantial.

Plus the 1.15% PMI has the salutary effect of actually making home prices more affordable by limiting how much people can borrow due to 1.15% counting against DTI limits.

We get it, you hate landlords;

Doesn't everyone?

Troy says

3.5% makes perfect sense to make housing more accessible to more people. I wonder how you can find yourself arguing against this.

Not everyone is an ideal candidate to buy housing. I mentioned at least 7 types of people in another thread, and there are others I didn't list. In addition, not everyone is a good risk for the bank or is in the financial situation to buy. In some municipalities, renting is cheaper than buying. Also, some people are better at saving their money, than having a mortgage to function as forced savings.

I actually don't think we should make housing more accessible. We haven't seen any great societal benefits from it here in the U.S. from Bush's so-called "Ownership Society." Other countries have varying degrees of homeownership, and it's not like there is one ideal rate.

corntrollio says

Other countries have varying degrees of homeownership, and it’s not like there is one ideal rate.

Frankly, I don't care about the ownership rate, I care about LLs profiting from their monopoly ownership in land.

This is a VERY zero-sum relationship and wealth transfer from the poor to the rich.

Here, let me repeat myself from a week ago:

"i’d be all for max 80% LTV if, and ONLY if, non-owner-occupied SFH and condos had a confiscatory rent tax.

"Anything less just pushes supply away from families and to the parasitical specuvestors that are already nearly monopolizing the market in many segments and areas."

Troy says

Anything less just pushes supply away from families and to the parasitical specuvestors that are already nearly monopolizing the market in many segments and areas.

We should probably agree to disagree at this point, but as I stated before, there are several categories for which landlords create a market. That's a good thing.

I'm not sure how true landlords, as opposed to specuvestors (which only really exist in a bubble scenario), are parasitic. They provide a necessary service in many cases. The rental market and the buying market are two sides of the same coin in many markets, although that may not be true in the Bay Area where the rent vs. buy calculation is out of whack.

What I find parasitic is realtors and mortgage brokers and other rent-seekers that accompany home buying process.

corntrollio says

What I find parasitic is realtors and mortgage brokers and other rent-seekers that accompany home buying process.

parasites everywhere, yes.

landlording start parasitic in the way renters pay the LL's mortgage, and this relationship becomes more parasitic as wages inflate rents past the fixed cost of ownership the LL enjoys, as historically has been the case.

If the LL only charged for the tenant's wear & tear and various capital costs on the property, there would be no parasitical relationship here.

Removing Prop 13 protections on rental property would go some way to fixing things, but the bottom line is that there's a lot of downside for the alleged sunny benefits that landlording brings to the housing market.

The LL's alleged "necessary service" is fulfilling a need largely of their own creation, the reduced supply of housing and the tightly-bound pricing relationship between area home prices and the capitalized value of area rents.

Without abnormal bubble inflation, the specuvestor nature of LLing takes longer to achieve, but historically rents & land values have doubled every 15 years so chances are new investors today will be enjoying wonderfully rapacious profit margins not too much farther down the road.

This is how the richer have gotten richer and the poorer have gotten nowhere. To try to blow sunshine about this very wealth transfer dynamic is disgusting.

But very much par for the course on online discussions about the economic imbalances we face today.

Troy says

PMI protects the lender should he find himself having to sell the property at a loss, so the lender does in fact get something back for the borrower having paid PMI.

If the risk is modelled correctly then the 1.15% pa PMI rate corresponds to the estimated risk of loss over the length of the loan (ignoring vested returns on unallocated premiums for the moment).

I have an even better idea. How about that borrower not go into default AT ALL? As in, their money goes into their principal balance BEFORE they start making payments, thus there will be no need for PMI, they won't lose their house, there won't be losses to mitigate, etc.

That's a lot better for everybody.

Troy says

Frankly, I don’t care about the ownership rate, I care about LLs profiting from their monopoly ownership in land.

Home ownership rate is somewhere around 66% in this country. That's not a monopoly, dumbass, and it's a much higher rate than other western countries which have less disparity between their rich and poor.

Troy says

If the LL only charged for the tenant’s wear & tear and various capital costs on the property, there would be no parasitical relationship here.

That's stupid. You're basically saying that the LL should take all the risk, eat all the losses, and never make up for them with profits. You don't understand how investment works. Somebody puts money and time into [something] expecting a return. And it's a long-term investment, not some scumbag hedge fund shorting type of operation.

Also, typical of your complete ignorance of economics, rents tied to the minimum ownership costs would create a price ceiling on rents. You know what happens when you artificially keep prices down? There demand outweighs the supply and there's a massive shortage. It's what happened when we tried capping gas prices, and it's 100% destructive.