WatchOne of the most glarring contributors to the real estate crash in the USA was individuals having a lack of equity in the homes that they were buying.
Why is this being allowed (actually promoted) again today via FHA programs? Any progress in addressing the real estate crisis is only being slowed with allowing more undividuals with little to no equity become homeowners again. Absurd.
And don't even get me started on how easy it is to qualify for an FHA loan.
If 25-50% equity in your home was mandatory BEFORE that first monthly payment was even allowed to be made, we would not have a real estate bubble.
BayArea
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Fifty Percent downpayments or FUCK YOU, America!
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Los Angeles, CA
The Federal Reserve/US GOV mandate is full employment.
This means most of the country will be pushing papers for loans, flipping RE, inspecting RE, Fixing up RE, renting out RE, getting commission on sale of RE and or loans.
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BayArea says
Sure,without it USA will come to grinding halt - as pocky said above - keeps the engine running.
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PockyClipsNow says
Now I see the light.
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BayArea says
For the 2010 elections the National Association of Realtors PAC was the largest PAC in the country ranked by campaign contributions to candidates. The American Bankers Association, Carpenters & Joiners Union, and National Association of Home Builders are also top 20 PACs.
http://www.opensecrets.org/pacs/toppacs.php?Type=C&cycle=201
Being a Senator pays $174,000 a year. The average successful Senate campaign costs $10,000,000 or about $1,666,666 year which is nearly 10 times that figure. Since American congress critters aren't that wealthy some one else needs to cover the difference and is going to appreciate a little quid pro quo. House sales people take their favors in forms like keeping conforming loan limits up and downpayments low so more GSE money flows into the housing market which keeps sales prices and commissions up.
This stuff is pretty simple - just follow the money.
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Got to keep the Ponzi going.... plus the execs at the FHA want their bonuses.
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bmwman91's website
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Why?
Because I want it noooooowwwww!!!
Why do you hate America?
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Pleasanton, CA
The average family should be able to own a home and raise kids without worrying about where they are going to live. Constantly being uprooted from ones home is upsetting, especially for kids. A house should be a place to live, not a means to make money. If you are truly interested in bringing the price of housing down, then you will be against investors purchasing homes for profit. Otherwise you are just like greedy wall street, looking to horde resources for your own selfish pleasure.
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I agree with Carolyn.
And now it seems like all the foreclosures are being swooped up by investors to use as rentals, never even really coming to market. The situation is only getting worse. I am poised to buy (non FHA) with a great down payment and perfect credit, but the shady business fills me with dread.
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bmwman91 says
Reminds me of the TV ad "It's my money and I want it NOW". It ran during the height of the housing bananza. So American it makes me sick to be included in that group. If it is your money then you wouldn't need a 3rd party to loan it to you.
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RentingForHalfTheCost says
I thought you were younger. Anyway, this is the way to post that comment:
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If all these government programs like FHA were ended today, house prices would generally fall to a level where the people they supposedly help could afford to buy them without the FHA.
In any case I think real estate speculators should be severly limited by law. Maybe completely bar them from buying in areas of limited supply. It's time they did some real work for a change.
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Zakrajshek says
Talking about eliminating NAR? wall street? It is going to happen in 100 years.
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Chico, CA
No, it's not going to happen, but that doesn't mean it shouldn't.
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Zakrajshek says
Are you surprised that slavery was abolished from USA?
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Chico, CA
Oh, I misread your comment. I thought it said "it's not going to happen for a 100 years." You said, "it is going to happen in100 years." Why should it take that long? What the hell does "do your math" mean?
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Zakrajshek says
Haha. It means "do your match" - pick up your calculator and make sure if buying a house makes sense or renting the same makes sense. :)
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Zakrajshek says
Yup, but who's going to be the adult and put a stop to the game?
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Auntiegrav says
I dont' know if it's called "being an adult". The only way out of this mess is a SLOWLY taking away all the incentives... mortgage interest deduction.. SLOWLY phased out.. FHA slowly phased out... ect..
It's a bitter pill to swallow and transition period of no FHA and higher than 20% down payment requirements would be catastrophic for a generation.
That's the real reason it will continue to exist. Let's pretend no FHA loans were available starting tomorrow and everyone needed a 30% down payment to buy a home.
We would have an epic stalemate and lack of inventory that would make the current market look like a smorgasbord.
Anyone that bought a home in the past 10 years would probably be forced to stay put for the life of the loan, or strategically default.
Baby Boomers who own outright could sell.. But most wouldn't. They would just die in place.
The inventory that would be released would be heavily discounted, but no investors would be interested in buying because the conditions to ever resell the home would be questionable at best.
Your average American wouldn't have a job, so they wouldn't be able to buy a home. Unemployment would rise to 50% or greater...
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BoomAndBustCycle says
Maybe. But I guess that would also be what I would call "being the adult" in the matter. Whether fast or slow, someone has to make a decision for once that is based on some real "shoulds" that relate to future resources, rather than letting the decisions be made by numbers on a spreadsheet and HOPING that the Invisible Hand Job will keep the balls in the air (perpetually increasing resources because of Demand magic).
At some point, it all falls down, and whether it falls down by degrees or whole hog is just a matter of luck and timing. I don't think (based on past history of our culture) that anyone will be allowed to make decisions that even hint at a ghost of slowing down the economy.
Any real adult would ask whether we should be making decisions based on the economy, or on useful purposes and let the economists go play in a corner with their invisible friend, the 'free' market.
Anyone who thinks America believes in free markets should read about Teddy Roosevelt's Chinese Exclusion policy. Nothing has really changed since then except the racism is more covert now.
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BoomAndBustCycle says
Your 'average' American is flipping toxic burgers to pay for a car to drive to a job flipping toxic burgers. 50% unemployment would probably be too low when you think about how much of the activity is really unnecessary in this country. Less than 2% produce all of the food, we already have a glut of housing, and there are enough clothes at the myriad of thrift stores to keep 4 countries warm. MOST of the people driving to jobs to buy cars to drive to the mall to buy clothes to drive to the mall could just as well stay home and play with their Wii or work together to clean up their neighborhoods and build stuff that makes some sense to future generations. People don't need jobs. They need food, clothing, shelter and a sense of purpose that doesn't belong to the local chemical factory. They used to get them by working together and forming communities that carved a life out of the world (before there was ever such a thing as a 'job'). Somewhere along the line, these programs like FHA and others have taken the industriousness of people and turned it into a commodity to be 'managed' by a few extractive overlords. We can't exactly blame the overlords, either, because they just fill in a gap created when people demand life to be convenient. Marketers are all too willing to tell us the ways we can buy that convenience and corporations will make it 'efficient'. "Efficiency is the straightest road to Hell." - JHKunstler
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FHA just needs to be abolished, or drastically changed. There's no reason why someone would need a $729,000 starter home in today's market, or heck, any market.
If FHA had a conforming limit of $300,000, and a maximum back end ratio of 30%, I think that ALONE would save many people from over spending on a home.
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Disband the FHA!