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New down payment requirements could crash housing again


By golfplan18   Follow   Tue, 26 Mar 2013, 12:22am PDT   1,719 views   30 comments
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http://ochousingnews.com/news/new-down-payment-requirements-could-crash-housing-again?source=Patrick.net

There are many more potential buyers with little or no savings than there are those with hundreds of thousands in cash in the bank. The size of the potential buyer pool rises or falls dramatically with changes in down payment requirements. A high down payment requirement greatly reduces the potential buyer pool whereas a low down payment requirement greatly increases it. This basic fact is why lenders and their lobbyists are working so hard to get down payment requirements lowered or eliminated. Any down payment requirement is an impediment to doing more business. In fact, if down payment requirements were...

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mell   Tue, 26 Mar 2013, 12:41am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 1

Down payments are so last millenium!

CaptainShuddup   Tue, 26 Mar 2013, 12:53am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 2

golfplan18 says

A high down payment requirement greatly reduces the potential buyer pool whereas a low down payment requirement greatly increases it.

Well it's certainly clear, that has not been the case.
The terms for buying a house, have never been easier for the last two years. That is why I've been recommending buying a house, that you could afford, even if it was a few 10's K off the ideal price, you would have liked to have bought at.

While 0 down scams have always been around, this time was different, because the low down payment, also accompanied other favorable conditions, like low interest payments, mortgages that the bank wont be hawking over your shoulder waiting for you to be late on one payment, to raise your interest rate, or take your house when you miss one payment.

In the past those 0 down loans came with adjustable rates, high interest, and clauses in the mortgage, that made it easier for the bank to reclaim the property after you've put a little equity into it.

All of that said, there still hasn't been a lot of takers. Out of people that I personally know. I don't know one single person that has bought a house, since I bought two years ago.

Quigley   Tue, 26 Mar 2013, 1:02am PDT   Share   Quote   Permalink   Like (6)   Dislike     Comment 3

I hate the housing market. I just really do. I can't even find a house to buy. And new construction doesn't exist. Taxes going up, income stagnating, cost of living rising. How much longer until my income overmatch buffer is gone? Might be already gone. I'll have to see what my accountant says. If I owe this year, it might be a good time to plan a California exodus.

iwog   Tue, 26 Mar 2013, 2:11am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 4

These articles about a new crashing housing market are just as stupid is articles saying housing will never go down in 2006.

If you want to see how meaningless the down payment requirement is to a housing bubble/bull, look at Canada and the numerous changes to their lending standards.

Goran_K   Tue, 26 Mar 2013, 2:17am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 5

Mortgage originations are at all-time lows. They haven't been this low since the mid-90s.

iwog   Tue, 26 Mar 2013, 2:24am PDT   Share   Quote   Permalink   Like (1)   Dislike (2)     Comment 6

Goran_K says

Mortgage originations are at all-time lows. They haven't been this low since the mid-90s.

Obviously, but it's not because of lack of demand. Pent up demand for housing right now is near a fever pitch. There simply isn't anything for sale.

edvard2   Tue, 26 Mar 2013, 2:43am PDT   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 7

If this were true the market would have crashed a long time ago. Fact of the matter is that if you want to buy a house these days, you'd pretty much HAVE to have a rather serious down payment, as in 20% or more.

ordertaker   Tue, 26 Mar 2013, 3:02am PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 8

PNC just gave my client a 4% fixed rate with 5% down on a 30 year conventional mortgage and she had a late mortgage payment on her old house in the last 12 months. Even with PMI, her PITI payment is far lower than rent.

Goran_K   Tue, 26 Mar 2013, 3:14am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 9

iwog says

Obviously, but it's not because of lack of demand.

Of course it is (as well as other factors), this trend has been happening for over 5 years now, even during times when inventory wasn't tight.

Stricter lending standards, people unable to qualify at higher price points, and ONLY recently, low inventory have caused mortgages to plummet. Things have hit a bull market recently, but the lack of mortgage originations has been declining at a fast rate for a long time now.

Goran_K   Tue, 26 Mar 2013, 7:34am PDT   Share   Quote   Permalink   Like (3)   Dislike     Comment 10

donjumpsuit says

Those who can't afford a large down payment, or the price of a Single Family home are either renters or must purchase a condo/apt./highrise home. Someone must convince them to give up their SFH dreams, and either contribute to their landlords mortgage, or own a more reasonable dwelling on par with their income.

It's hard to convince someone to be logical when everything else in their life is telling them to be illogical.

APOCALYPSEFUCKisShostikovitch   Tue, 26 Mar 2013, 7:38am PDT   Share   Quote   Permalink   Like (5)   Dislike (1)     Comment 11

The mortgage finance industry is so criminalized, it should be disbanded as a threat to the national security. If you can't buy cash, fuck you.

Philistine   Tue, 26 Mar 2013, 9:58am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 12

ordertaker says

Even with PMI, her PITI payment is far lower than rent.

LOL, in Vero Beach, FL. Try that shit in southern CA and see how far it gets you.

Philistine   Tue, 26 Mar 2013, 10:02am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 13

donjumpsuit says

at present, a $600k home in San Jose attracts 50 bids.

In the last 12 months, we've seen exactly 3 houses we would have seriously bid on. The funny thing was, as soon as we got home and chewed on it for 24 hours, the houses were already pending status. I guess we are not desperate enough.

With all the pent up demand and reduced inventory, people with measly 20% down payments are not even competitive during the multi-offer scenario that is currently defacto.

ducsingle5313   Tue, 26 Mar 2013, 10:03am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 14

donjumpsuit says

Although both these statements are true, it doesn't hide the fact that at present, a $600k home in San Jose attracts 50 bids.

There are a bunch of people qualified at higher price points, (or in idiots terms, who want to buy a house that is overvalued because it's cheaper to borrow the money).

There seems to be less competition a little higher on the scale at the $800k or more range.

Philistine   Tue, 26 Mar 2013, 10:26am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 15

ducsingle5313 says

There seems to be less competition a little higher on the scale at the $800k or more range

Jumbo conforming at $619-709k (depending on your market) makes a lot of people feel like they can afford a house, even if their 10% DP loan offer isn't going to get them anywhere. The $800k houses I've looked at are neither fowl nor fish: not starter homes and not trophy properties . . . makes you wonder what the market is for such a house.

Goran_K   Wed, 27 Mar 2013, 3:54am PDT   Share   Quote   Permalink   Like   Dislike     Comment 16

Are there people who do 10% down payments on $800,000 homes? That's ridiculous.

ELC   Sat, 30 Mar 2013, 9:57pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 17

Quigley says

And new construction doesn't exist.

Cheap money. Low inventory. Yet no new construction? That's why you should happily rest assured that whoever has bought in the recent past and future is going to get royally screwed. Their loss will be your gain for being patient and smart. You'll have your chance sooner or later.

ELC   Sun, 31 Mar 2013, 2:56am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 18

robertoaribas says

moronic post

Only because deep down you know you're screwed. Builders and the banks know what they're doing. They're not building and banks aren't financing them because they don't want to get caught in a crash. Everyone knows this except investors blinded by greed and rubes who believe what they watch on TV.

ELC   Sun, 31 Mar 2013, 11:11am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 19

robertoaribas says

the cost to build a home like the one I bought for $46K, TODAY, is around $150K... 4/2/ 1 car garage lot... 1500 square feet. In phoenix,

Don't compare a hell hole like Phoenix to the rest of the country. Phoenix actually bottomed out. What happend in Phoenix is what will eventually happen to more desirable areas. We can watch what happens to you to predict what will eventually happen in the land of the living.

APOCALYPSEFUCKisShostikovitch   Sun, 31 Mar 2013, 12:07pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 20

It's never been a better time to squat in an abandoned foreclosure and learn how to kill cannibal neonazis with garden tools.

SoftShell   Sun, 31 Mar 2013, 2:20pm PDT   Share   Quote   Permalink   Like (2)   Dislike     Comment 21

I agree that the value to be had there, and there seems to be overvalued over there.
so buy over here.

dodgerfanjohn   Sun, 31 Mar 2013, 3:17pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 22

The housing market isn't going to crash as long as low inventory levels exist. Criminal enterprise money has to find a home. With the stock market what it is, with smuggling money out of the country dangerous, and with most investment classes being of high risk, that money is getting laundered through the housing market, particularly in large urban centers.

SJ   Sun, 31 Mar 2013, 11:49pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 23

I am SO glad that I gave up hope of ever buying in the RBA. Will save for retirement and place in Florida instead and pay CASH for it.

SoftShell   Mon, 1 Apr 2013, 12:01am PDT   Share   Quote   Permalink   Like   Dislike     Comment 24

and you know this how?
From behind bars?

dodgerfanjohn says

The housing market isn't going to crash as long as low inventory levels exist. Criminal enterprise money has to find a home. With the stock market what it is, with smuggling money out of the country dangerous, and with most investment classes being of high risk, that money is getting laundered through the housing market, particularly in large urban centers.

Goran_K   Tue, 9 Apr 2013, 4:28am PDT   Share   Quote   Permalink   Like   Dislike     Comment 25

I don't know if dodgerfan is behind bars, but laundering money through real estate has always been a big problem for RE transactions. There's a reason you have to give statements from the bank on personal accounts when you apply for a mortgage.

Not only does it show proof of funds, but it also shows transaction history. I've heard now that some banks are requiring up to 6 months+ of statements from foreign buyers looking for a loan.

APOCALYPSEFUCKisShostikovitch   Tue, 9 Apr 2013, 5:53am PDT   Share   Quote   Permalink   Like (1)   Dislike     Comment 26

Goran_K says

There's a reason you have to give statements from the bank on personal accounts when you apply for a mortgage.

And there is a reason originators and brokers simply lie about them. Name one borrower that's gone to jail for using RE transactions for laundering money?

Mobi   Tue, 9 Apr 2013, 3:33pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 27

edvard2 says

If this were true the market would have crashed a long time ago. Fact of the
matter is that if you want to buy a house these days, you'd pretty much HAVE to
have a rather serious down payment, as in 20% or more.

ordertaker says

PNC just gave my client a 4% fixed rate with 5% down on a 30 year
conventional mortgage and she had a late mortgage payment on her old house in
the last 12 months. Even with PMI, her PITI payment is far lower than rent.

Just bought a house. No, you don't need 20% down. You will get loan for 5% down with decent credit from most banks. The problems are:

1. Even 5% down is a lot for many new home buyers.

2. A lot of people bought houses 2002-2007. The buyer pool simply becomes smaller.

Goran_K   Tue, 9 Apr 2013, 3:39pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 28

Some get caught, like this Chindian from HK who got a 100 year sentence for attempting to launder the money:
http://www.nytimes.com/2013/04/09/business/global/money-laundering-law-in-hong-kong-doesnt-catch-the-chiefs.html?_r=0

But your point stands, a LOT of launderers don't get caught, because when it comes down to it, there are too many people who benefit from these fraudulent transactions. I mean, if the mortgage company itself really has no incentive (or resources) to do a thorough investigation into where funds have come from, then I don't see an end to this crime.

APOCALYPSEFUCKisShostikovitch   Tue, 9 Apr 2013, 8:04pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 29

Goran_K says

Some get caught, like this Chindian from HK who got a 100 year sentence for attempting to launder the money:

http://www.nytimes.com/2013/04/09/business/global/money-laundering-law-in-hong-kong-doesnt-catch-the-chiefs.html?_r=0

But your point stands, a LOT of launderers don't get caught, because when it comes down to it, there are too many people who benefit from these fraudulent transactions. I mean, if the mortgage company itself really has no incentive (or resources) to do a thorough investigation into where funds have come from, then I don't see an end to this crime.

This guy is a typical mule and there are millions of them. Mule herders are the fastest growing criminal employment today and it's not what I asked. Name one person who has been bagged for laundering money through RE, anywhere but particularly the states. There ain't none in the US because the whole industry is criminalized.

Goran_K   Wed, 10 Apr 2013, 1:59am PDT   Share   Quote   Permalink   Like   Dislike     Comment 30

APOCALYPSEFUCK is Shostakovich says

Name one person who has been bagged for laundering money through RE, anywhere but particularly the states. There ain't none in the US because the whole industry is criminalized.

I agree with you APOCALYPSE. There is a huge criminal element investing into U.S real estate right now, particularly from asia (it's also happening in Vancouver). I won't say no one gets caught, because people do get caught even under current guidelines:

http://www.post-gazette.com/stories/local/region/federal-charges-broaden-in-real-estate-fraud-and-money-laundering-case-681042/

They could be potentially on the hook for $1,000,000 they allegedly laundered through real estate. There are plenty of other cases where people get caught. Yes, not everyone gets caught, and yes there are lots of criminals in real estate.

I'm not sure how to fix it besides requiring people to prove deposits were legit for up to 5 years in time.

Most underwriters or escrow people who check these things don't have the slightest clue of how forensic accounting works.

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