WatchI have been searching everyday waiting for an article on the October 4th changes to FHA mortgages which will collapse the housing market and I have yet to see one.
Here is what is happening…
FHA now makes up over half of the home purchase mortgages in the entire country right now.
The new rules effective for all new FHA loans (including Reverse Mortgages) October 4th, 2010 increase the annual MIP (MIP = Mortgage Insurance Premium) from .5% to 1.25%.
Here is how it breaks down:
Old Rules:
$200,000 FHA loan @ 4.5% (current 30 year fixed rate)
Payment = $1,298 ($1,013 PI, $202 TI, $83 MIP)
New Rules:
$200,000 FHA loan @ 4.5%
Payment = $1,423 ($1,013 PI, $202 TI, $208 MIP)
Same house, same mortgage, same rate, same everything and the payment goes up 9% on October 4th.
Housing prices will have to drop an equal amount for the same person to qualify after October 4th.
Add in some terrible housing data regarding foreclosures, inventory, etc., etc. and you have a recipe for another BIG decline… OUCH!
The worst part is, a big drop in October will signal a bigger drop through year end because downward momentum begets downward momentum.
Why isn’t anyone picking up on this huge new change in FHA loans… Where are the bloggers?
Matthew Copley
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Austinhousingbubble says
Patrick, dude, this exchange MUST have a spot on the T-shirt.
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Beverly Hills, CA
I went to school grades 4-12 in La Canada and as you stated, the schools are fantastic. Although the school district is top notch, you are going to be paying at least a 200-300k premium over Glendale, Burbank or any of the other surrounding bedroom communities. Unless you have a bunch of kids going to private school, or are going to send them K-12, I don't know if your math applies, Mark_LA.
Don't get me wrong: I would love to give my kids the education that I was provided by my folks... I just don't think I can pull in $400k a year like they did for the privilege of living in LC.
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Bellingham, WA
iwog says
This is not true.
"Using unique data on real estate transactions, we construct a hedonic price index for Manhattan from 1920 to 1939. The index falls during the recession that followed WWI, rises to a local peak in 1926 and declines again following the collapse of the Florida real estate bubble. It subsequently recovers to reach its highest value in the third quarter 1929 before falling by 66 percent at the end of 1932 and hovering around that value until 1939"
The System in this iteration has thrown a lot more at the market to keep it together than the 1930s, but, oddly, things have moved faster given the greater amount of capital in the system and trading intelligence behind it (the 2008-09 market crash was people trying to front-run GDII).
Our crash has been entirely cushioned by Federal emergency unemployment measures for the past 2 years, these will expire soon. Distressed families have been able to live in their homes w/o paying the mortgage for years, too. Of course, in the past 2 years government debt has expanded $3.5T, $15K per household per year, which is technically enough to live on in this world.
This is not the 1930s. This is Japan -- the problem will be sticky since we've really screwed ourselves just like they did.
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Skokie, IL
iwog says
The 217K house looks like a foreclosure sale.
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All,
Any insight on the Denver, Colorado area market situation? Specifically interested in Highlands Ranch in Douglas County?
Any data on rents vs. price (per this thread) would also be really useful.
Thanks in advance!
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Lafayette, CA
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Troy says
How did Case-Shiller miss a 66% drop and instead replace it with a 10% gain?
This is radically different from both what Case-Shiller reports and the Census data reports. Where are you reading this?
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If you can't cut a check for the house you want and not feel it, don't buy it.
Anyone buying a house for the next 20-60 years might as well put a gun to their head.
The last three years has been in ice cream treat compared to the generation's long horror that awaits us all.
Think basics. Water. Food supply. Household defense.
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San Jose, CA
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bob2356 says
Congrats. I guess that would be somewhere close to Pasadena or Houston. May I ask what % is your property tax? And how much does it cost to insure these rentals in term of percentage? 0.2 or 0.4% of the cost of the home? Thanks.
I was looking at Dallas/Forthworth areas, and property tax was around 3%. I believe there are certain exempt areas where the property tax is really low.
Edit: I would probably fared okay if I bought back then, but I'd rather invest where I live. It's just more comforting since I'm a pretty conservative investor. Based on history, CA has outperformed many other markets in appreciation over the long-term. With that said, getting 7% to 8% cash on cash return with the probability of appreciation over the long-term is much more appealing to me. I have a friend (http://tomwilsonproperties.com/) that has been investing in DFW areas and have done exceptional well. He's been trying to sell me some of his properties just for diversification purposes. Well, different strokes for different folks. How's New Zealand? Are you planning on retire there or coming back to the U.S.? :o)
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So, no plans to fill us in on how much you paid for your rental houses, eh Iwog? Yet you get upset when people say they are skeptical of your claims.
Just as I thought. Maybe you could call me some more nasty names and draw everyone's attention away, huh?
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gameisrigged says
I've posted the information many times. I even told you how to search for the threads.
The ONLY possible reason you're still asking for the information is that you're a troll.
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Charlotte, NC
Bap33 says
you might not know San Fran has "rent control" in the form of the government pays rent for anyone making under somethign like $90K plus for bus drviers adn other gov employees making over that. Its graduated so the less you make the more you get free. We are all equal. Some more equal than others. But the most equal are those smart enough to receive the checks from the government. Those dumb enough to work hard have their legs cut off while the lazy folks and the rich folks eat their feet. One firm reason I left SF.
I don't think the rules alone will crash the market. Its a bear market. Plain and simple. Plenty enough other forces to drive it lower. Of course, money printing drives it up in dollar terms but not in inflation-adjusted terms; so, the "crash" is more than being reported probably given the high inflation at the grocery store, tax man, et cetera.
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iwog says
You're playing a game. I can't find that information. It would have been easier for you to post 3 prices than to post several times claiming that you "already posted it". Or even just post a link to those alleged previous posts that contain the prices you paid for the houses. There is absolutely no reason for you to refuse to post those prices. If, as you claim, you "already did", then there is no harm in doing so again. If the information is already on the forum, you wouldn't be giving away anything that we don't already know. Obviously, since you refuse to do this simple thing, and are actually expending MORE effort to avoid doing so than it would take to simply do it, you are hiding something.
I am asking you a simple question. YOU are pretending that you gave the answer when you did not. Which is actually the "troll" like behavior?
That's your prerogative, but then you forfeit your right to be upset when people don't believe your claims of how much profit you are making.
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Lafayette, CA
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Sure it would have been easier, but then you're the foaming at the mouth idiot accusing me of being a liar unless I prove otherwise.
I don't respond well to someone being such a massive prick. If anyone else asks me, I'll link the threads.
With you, I have no incentive.
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E-man says
Actually my properties are in the Rio Grande valley. Last insurance I paid was 938 on the place in Harlingen, but I have wind. Without wind it would be 385. Taxes 1800. My guestimate on value on that property (I'm currently looking at similar properties in the area to buy) 175-200k.
New Zealand is terrific. Greatest place on earth to raise kids. Very high cost of living vs wages, so we live a pretty simple lifestyle. Picnic and hike instead of eating lunch out, that kind of thing. If I get my Italian citizenship (actually if my wife gets hers then I get mine) we're retiring to either Lake Garda Italy or Biarritz France. I would live in the states again, but there's so much out there to explore and life is so short. I'm really considering Dubai/Oman for a while when the kids hit high school (partially because of the huge teenage binge drinking problem in NZ, definitely NOT a problem in Oman). There are great water sports, it's a one hour flight from terrific dirt cheap skiing in Iran (that would be on my kiwi passport not my american one), and a couple hours flying to southern Europe. Learning Arabic would be challenging, although probably no worse than learning to speak kiwi. I've really had a lot of fun living around the world so far.
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iwog says
God, is that ever a crock. Just more deflection and more name-calling. Obviously you have something to hide. And why would you "link the threads"? Why not just tell us how much you paid? That would be easier. I can tell your backup plan, if you ever tire of deflecting, is to post some link, claiming it has the information, but which won't actually be there. It will be deliberately vague, so you can continue making your claims without actually backing anything up.
But call me some more names if that makes you feel good. Doesn't really bother me. It's obvious that you are trying to hide the information.
Funny, wasn't someone apologizing to YOU for OTHER people supposedly being rude? "Massive prick", "troll", "foaming at the mouth", "ass", "idiot" - where are people getting this idea that you aren't one of the rudest people on this forum? Gotta wonder what people are smoking sometimes.
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gameisrigged says
Tell us what it is I'm hiding. I'm curious.
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Monterey, CA
bob2356 says
Nice hearing someone else with goals other than to buy a house on this forum.
My wife and I have a different, but similar dream... we're thinking of doing two more years here in Monterey, CA - then buying a nice yacht. We'd like to see the pacific coast, south America, cruise through the panama canal, sail over to the cayman islands for a year or so, go up the east coast, and see where life goes from then. We've even thought about alaska or Hawaii (transpac)
Some may think it's a little over the top, but it would be one heck of an experience. We have two small children who we'd homeschool a year or two of school and then maybe settle back east...
Either way, life is short... there is more to life than real estate....
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Bellingham, WA
^ http://www.amazon.com/Sell-Up-Sail-Bill-Cooper/dp/1574092197
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Monterey, CA
Troy says
Yeah, pretty much... I've gotten tired of the corporate world, tired of the eight to five job.... Money is great, have a great position, cash in the bank - we could pay cash for a small place in most of the country... But the thought of buying a place and essentially calling it quits seems like such a drain on life.. As in, i now have a house which means im stuck... No moving.. This is it.
Wifey and i looked at boats today with the kiddos and had a nice time. I know they a maintenance pigs, but they can take you around the world and back and let you experience more than if you live in a subdivision. It's a risk, but buy a big ol sailboat, plan the trip and save up enough cash for a few years and enjoy life. It's easy to get caught up in 401k plans, insurance, houses etc..... But i have sorta had enough and just want to live. Not strap myself to a gzillion year mortgage and car payments. On the flip side, i want to be a responsible husband and father, but im not even 30 and have plenty of time to buy "stuff" such as a house, or items "required" by society so that you have a "happy/successful" life.
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Bellingham, WA
Home schooling is very cool. I'd do it if I had kids. Home schoolers in the bay area get together for the socialization side of things.
I'm fascinated by boats in that they substantially break free from the historical land title regime BS. The ocean is still free land, in the economic sense.
Maintenance is the one thing that scares me, as does not being a sailor and not understanding the performance envelope of sailing craft.
If I had my way I'd like to see a hydrogen-solar power plant w/ battery backup. Boats need to carry ballast so a ton or two of batteries isn't a big deal for them.
Maritime piracy is also an issue I guess. With all these considerations I think finding a doomstead up in the mountains somewhere is a better idea. This one:
http://www.zillow.com/homedetails/19425-Tollhouse-Rd-Clovis-CA-93619/18642958_zpid/
is waay too close to a main highway but otherwise very nice.
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Josh -- I think you've got the right idea...
"To be truly challenging, a voyage, like a life, must rest on a firm foundation of financial unrest. Otherwise you are doomed to a routine traverse, the kind known to yachtsmen, who play with their boats at sea - "cruising," it is called. Voyaging belongs to seamen, and to the wanderers of the world who cannot, or will not, fit in. If you are contemplating a voyage and you have the means, abandon the venture until your fortunes change. Only then will you know what the sea is all about.”
Sterling Hayden
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joshuatrio says
Go for it. I met a great British couple doing a 5 year sail around the world on a 43 footer with their 2 children age 8 and 10 who ducked in here for a couple days to avoid some really bad weather. We had them over for dinner and it sounded like a real adventure, some good, some bad. They were home schooling on board with the aid of marine radio and satellite internet. They had a web page of the trip but I have mislaid it. Too bad. They spent the first year in the Med to build up experience.
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Monterey, CA
Troy says
From my understanding, maintenance isn't to bad. If you buy a decent boat, in good condition, most sailors have told me that you can live pretty comfortably on a nice sized boat for around $1,000/mo (maintenance, food, utilities etc...). I'm not sure if they were including a boat payment or not - but we won't be financing.
Maritime piracy does exist, but it's primarily around Africa (which we have no desire to visit) - and what we have in N/S. America isn't enough of a deterrent to keep us from going - you take risks getting in your car every day don't you? Get the latest flu vaccination? Lol - just saying, there are tons of things we can worry about if we want to....
I've lately been annoyed by all the taxes we have... So I also figure that if I don't work and don't own land, I can avoid most of the big ones. Granted, I'm sure there are taxes/fees with registering/maintaining a vessel, but it's probably a lot less.... Maybe someone can chime in on this, as I haven't done a lot of research on this. Shoot, maybe we'll even permanently end up in some other country (who knows?)
I like the doomstead idea - or a large plot of land - but I really don't want to be a tin foiler. Plus, living in the middle of nowhere would get boring after a while - especially for the kiddos. Who knows if we'll have hyper inflation, massive deflation, if gold will go to the moon, if we'll have another major war etc... That's part of the other thing, sitting at a desk, or working a typical 8-5 job, you have time to think about these things - hoping that what you have in the bank doesn't evaporate if the gubbermint hands out another 100 trillion or so. We all get so caught up with buying real estate at the right time, or wondering if rates will go lower - I really don't want to think, worry, or ponder what's going on in our country economically anymore. It just seems like such a waste of life. I figure we'll sail around N/S America for a coupe years, enjoy life, and maybe settle after then. But I'm tired of getting caught up in all the routine garbage.
bob2356 says
We start sailing lessons in a couple months; will probably purchase something small (assuming we enjoy it), and in about 2 years, get something much larger... probably in the 42 foot range.
We'll do most of our sailing in the Monterey/San Francisco Bay, do what we can to prepare, and bail.
Thanks for the encouragement. Makes me feel less crazy. It would be a cool experience, something that most people don't just up and do. I don't want to be on my death bed one day thinking that all I did was go to work every day - from 8 to 5 - count my pennies in the bank, and hope that I can one day comfortably retire and play golf everyday...
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The boat I mentioned is the Pagos. Here's an article about them from Ocean Navigator.
http://www.oceannavigator.com/content/sue-and-adrian-payne-have-only-been-voyaging-short-time-they226128153ve-long-considered-safe
They were doing a blog of some kind but I think it as just for family since I don't see it.
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Lafayette, CA
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joshuatrio says
Where are you taking lessons?
I take sailboats out from Modern Sailing club in Sausalito every month or so. It's a neat club that lets you rent 30' to 45' boats and also has instructional classes all the time.
I found that belonging to a club and renting for a few hundred dollars is far more economical than financing a $200,000 boat. The only drawback of course is that you're probably not going to be able to steal a club boat and sail to South America if everything goes to hell, but I think the odds of that are pretty low right now.
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Monterey, CA
iwog says
We're looking at the club in Monterey or Moss Landing. I know the one in Monterey has boats ranging in size, plus they offer different levels of instruction. My co-worker actually recommended that we take a trip to Sausalito - funny you should say that.
Yeah, I'd rather pay a few hundred a month to rent a boat - to gain experience, but also to make sure that we like it before committing to ownership.
You can pick up 38-54 footer for well under 100 grand. Boat prices are tanking with the economy, as they should. Cheap credit during the housing bubble almost doubled the prices of boats across the board. I'm not interested in financing - like I said, I'm against carrying debt. Paying interest on a boat just seems ridiculous, I've seen people mortgage a boat for 30 years. They must be financial wizards.
http://sfbay.craigslist.org/nby/boa/1963390651.html - this looks like a pretty good deal, but when you start getting into boats this size, everything gets that much more expensive, which is why I'll probably settle around a 40 footer or so.
I'm not worried about the economy going to hell, nor am I looking for some way to bug out if things head south. I'm looking for an alternative experience/lifestyle for my family than the typical 8-5 job, mortgage your life, finance everything, keep up with the joneses etc....
I'm not interested in the stock market anymore, 401k plans, or about gold going up or down - I bought some back in 2008 per your recommendation (thank you), but trying to time things, or cash out, just to make more/have more seems pointless when life eventually ends. I'd rather go out saying that I had a good life experience, than having a lot of money. Can't take a U-Haul to your funeral.
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I like your philosophy about life. I hope it serves you well.
I go back and forth about buying a large sailboat. That looks like a really nice racer you linked but it's not the type of boat you'd trust random club members to take out safely.
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Bellingham, WA
Mortgage Interest On Your Motor Home or Boat May Be Tax Deductible
A home is defined by the IRS as “a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”
This means the interest you pay on a loan to acquire a motor home or boat that meets the criteria above may be tax deductible.
http://moneyover55.about.com/od/taxtips/a/mortgageinterest.htm
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Monterey, CA
Troy says
I understand that - but it's still cheaper in the long run to just pay in cash than to carry a mortgage.
Guess you could argue all the variables such as interest rates, inflation etc... but those are all unknowns. To me, it's not worth stressing over. If you can't pay for it upfront, in full, you can't afford it.... either that, or you haven't saved enough.
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Redwood City, CA
I personally like the proverb "A greedy person will never be rich".
I would highly really recommend testing out the sailling life before jumping in with a life changing plan like that! Just like everyone recommends renting in a city before buying there. The concept is the same. Verify before buying! Ensure there aren't any huge gotchas. A 2 hour commute might seem enjoyable for the first week because the giant home you've got more than makes up for it, but most people will just die under those circumstances after a very short period of time.
While it seems glamorous and most of us would be envious, I could see being stuck on a boat with a significant other and two children as being challenging after awhile. Especially considering 40 feet isn't a huge distance to put between everyone! A little alone time is generally necessary for most people!
Btw Iwog, I hope you didn't take my comments on the other thread you found as offputting! I always enjoy your input!
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Redwood City, CA
@Troy
If his plan is to travel around the the Americas, and not necessarily living in the US, it might be cheaper to offshore his money and setup residency in say Costa Rica. At which point you've got around an 80K allowance per year of tax free income.
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Monterey, CA
pkennedy says
Like I said earlier, we plan on taking lessons, joining a sailing club here really soon... if we like it, buy a smaller vessel and see how it goes for the next two years, before jumping up to a 40 footer or so, and taking the plunge to abandon our current lifestyle. It's a two year timeframe.
Things get tight on a boat - I'm sure. But there are plenty of ports, coves, marinas, places to anchor and tender to shore to do land based activities. Plenty of places to stop - there is really no hurry to jump from port to port - enjoy it, take the time to appreciate different cultures. My wife and I both dive and surf... We love the ocean.
Anyhow, breaking up the monotony of life for a few years is what we'd like to do. I've got a handful (majority of friends) in their late 20's who have financially leveraged themselves for the next 40 years. All have new homes, brand new cars, and plenty of plastic to finance the rest of their lives. I'd trade all the mcmansions, cars and toys for great life experiences - rather than wondering if I can make the next payment.
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Monterey, CA
shrekgrinch - you do realize you could have consolidated all 6 of your posts down to 1 post right?
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Where are you taking lessons?
For those of you you who didn't marry as well as the duck, I recommend the Cal Sailing Club. It's a co-op that costs just $75 for 3 months. An easy (and cheap) way to get up to speed before shelling out the cash for 30 foot boats. They have an intensive one week course that allows you to quickly get out on the water without supervision.
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there is a very good looking bay-ready vessel for sale in Merced. A cabin cruiser type that is on a 3 axle trailer (tag style I think - not 5th wheel)) and is sized for delta / bay type use. Not a lake boat. I'd say it was a good 20' long, 10' wide and at least 15 feet from bottom to top. A big boat. The window has $14K wrote on it in grease marker. I bet a guy with $12K and a one-ton truck could take it away.
If you want more ifo, just ask. Patrick can email me. If you buy it, a $100 finders fee should be donated to Patrick.Net by you.
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Monterey, CA
EBGuy says
I'll look into that - thanks for the heads up.
Bap33 says
It's gotta have sails. I want the gas bill as little as possible.
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Bellingham, WA
joshuatrio says
LOL, even as a landlubber I know power-cruising burns 1-2 MPG. Trying to make the 2000+ mile passage to Hawaii is difficult on a cruiser!
This is why I'm waiting for a better power loop.
Plus I want a submersible too, so I can park at a nice anchorage and not be hassled by anyone.
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pkennedy says
Actually it's 91,500 for 2010. Which would bring up the point that if joshuatrio is going to have income while sailing around the America's it would be smart to set up a foreign residency as a base of operations first to be able to take advantage of this.
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Monterey, CA
Troy says
Lol - I don't know about MPG, but I believe it's GPH (gallons per hour) when referring to boats :) I know a decent size cruiser burns around 20-30 + GPH and I may be being conservative... I wonder sometimes how people afford the gas in some of these monsters... Either way, if you plan on sailing and are in no rush, you can avoid most of the fuel bill.
bob2356 says
No, I don't plan on having income when we decide to take our "trip". We'll be living straight off of savings. I may do side/contract work if I really need money, but I really think we'll be ok. We're not rich by any means, but we're probably one of the most conservative couple you'd ever meet - we budget every item, have no debt, my wife coupons galore ... if we don't have the cash, or if it's not in the budget, we don't get it. Period.
Getting off track - sorry - (actually I've hijacked the thread.. lol) ... I don't care about tax shelters, making a lot of cash, nor do I want to worry about investments. I don't have a 401k plan or retirement, my children's college fund is in PM's and the rest is cash. I don't believe in the stock market, or any of those interest earning funds (IRA's, CD's) etc... My parents can't stand that I don't invest like they do - they think I'm foolish (and I may very well be), but almost every member in my family is upside by almost 100k on real estate they bought in the past 2 years. I'm the only renter. lol. I'm also the only member in my family without a car payment :)
If we asked everyone how much money they'd need to be happy, the answer would always be "not enough." If you said a million bucks, and I gave you a million bucks - give it a month or two and that wouldn't seem like a lot anymore.
Not really sure where I'm going with this so i'll stop here :)
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San Jose, CA
Hey guys, hate to resurrect this thread that got way off topic, but I'm new and can't make new threads.
Please see my post here: http://patrick.net/forum/?p=237330
I ask the question: Were 100% of past sales at this brand new condo FHA financed? Can we get a definitive answer? If true, that would be ridiculous and this condo can become a poster-child for all that is wrong with FHA.