patrick.net

Sniper says

WookieMan says

Are you looking around your house or some other area? While the search itself is most certainly simple, you're not aggregating enough data to come out with any true trend searching on a clerks or recorder of deeds site.

I first looked around at my neighborhood and neighbors, just for the hell of it to see where everybody is at. All the actually deeds and mortgages are recorded, so it's easy to pull them based on name, lot/block, or whatever.

WookieMan says

Also assuming that data is accurate.

It's the hard copy deeds and signed mortgages, they're accurate.

WookieMan says

That's just my one small town and does not represent a trend by any means, anywhere else in the country.

My town is s...

If you live in the SF Bay Area and are dealing with the economic conditions here, morals aren't a priority. They just aren't.

Sniper says

Why do you base everything going on across the country on what's going on in your neighborhood? You seem to think if it's not happening in your backyard, it doesn't happen anywhere.

I wasn't talking about my backyard. These are sales in the metro Chicagoland region that I've had a hand in, in some way without being specific about what I do. These are 90% owner occupied properties as well. Some of them are over the FHA loan limit for sure, so those don't qualify. So I'd say it's 70% that could have easily qualified for an FHA loan (condition and price). There were FHA offers on these for sure, but sellers just don't want to dick with them and they weren't necessarily the best offers.

I work with brokers is about as far as I'll go, and they HATE FHA loans with a passion. I honestly haven't even kept up with what the FHA guidelines are because I see so few of them and brokers avoid them like the plague. They close for sure, but for another 1.5% down, you're into conventional territory without the hassle of a FHA appraisal/inspection which nitpicks some pretty stupid shit just to get a loan.

Also 9 out of 10 times a listing broker will let the FHA offer sit there in hopes they'll get something else. This does translate across the country. So that's I guess why I'm surprised your area has a high percentage of FHA loans. Maybe in different parts of the country they're more prevalent, I'm just not seeing any FHA loans around me since it's nominally more difficult to save up say $4,500 additional on a $300k house and not use an FHA loan and have a much better chance of closing.

All this said, FHA loans aren't necessarily bad. Smart people can use them to their advantage.

Sniper says

It's the hard copy deeds and signed mortgages, they're accurate.

Of course. I think almost any county either has to or has been reporting this stuff for a while. Deeds and mortgage recordings don't necessarily give the full picture of the financing used though is kind of what I was getting at. There can be credits that wouldn't be shown in the mortgage but were used to pay for other things. May not show up as X% of equity, but that's money received that's not accounted for on a deed or mortgage document. The credit can be up to 6% of the purchase price on FHA. So it doesn't lower the loan amount, but does lower the cost of ownership. They could sink the savings back into extra principle payments and easily be at 10% equity in 12 months if they wanted.

Sniper says

Is that the criteria and plans when buying today? Put down the minimum so you can cut and run and fuck the bankers? Sounds like some questionable morals. I guess people in your world aren't buying houses to secure their future and families and have a nice place to live long term. Strange on how things change with different generations.

I wouldn't call it a criteria, people are just aware that there's an out now more then they would have in the past. I'd venture to guess almost everyone knows someone that short sold, foreclosed or did a deed in lieu. These people that went through this process are likely 45 and older, so apparently we're learning from the best. I'm personally not saying it's right or wrong as each situation in those circumstances could have had valid reasons to do what they did, given the economy was fucked, by who other then themselves. Not my place to judge though. People are more aware now is what I was getting at.

And no, people in my world aren't trying secure their future and their families by owning their primary residence. Anyone that talks to me about equity in their primary residence I almost always immediately tell them to put $0 in that column. When your home becomes an investment, you're much more likely to lose in the end thinking you're going to have something there at retirement. Almost ZERO people buy their house and pay it off. Factor in refinances and most people are going to have little equity anyway. Get a house that is cheaper then rent in your area, that you like and understand that you should only plan on getting your principle back, maybe, when you go to sell. Consider the interest and home repair/updates your rent.

I think previous generations have taught others some fallacies about housing and it somehow being an investment. Sure, it's works out in a few cases. But most the time it doesn't. Fact is, if I could buy a $300k house with an FHA loan and if the payment was cheaper then rent in the area, why would you put more down? You're better off in most cases taking the difference of 16.5% on the down payment and investing that elsewhere with much more predictable returns.

I'd bet good money that 90% of people that buy a $200k house with an FHA loan versus 20% down conventional, invest the 16.5% down payment ($33k) difference in index following funds, will end up with more money in the end all other things being equal (jobs, income, etc). Do this for 30 years until the house is paid off. FHA buyer will almost always end up ahead investing that $33k in stocks versus sitting in their house. And they still got the same house! You can write off the MI and the extra interest on your taxes, so the difference in payments isn't that far off either. Consider it a margin loan payment that you're getting for really, really cheap.

My long rant aside. You're likely right that if there are more FHA borrowers out there, it's likely to do with the fact that they can't save up the down payment or have poor credit. But just because FHA is used (which I'm personally not seeing a whole lot of) doesn't give the full picture. Even in lowly IL, the buyer profile is extremely solid for the most part as far as finances and down payment go.

How much good money would you like to bet? I would bet that 99% of people taking FHA don't have 40k for a 200k house so the idea of them putting it the stock market is just fantasy. That's why they are taking FHA in the first place. I notice you skipped PMI in your calculations. As well as what percentage of people buying a 200k house are actually using MID ( not many). How about income tax on investments? Want to compare interest paid on a 30 year vs 15 year?

Your analysis lacks a lot of factors.

BayArea says

Given that there is no subprime lending crisis like there was over a decade ago

I still see lenders for ARM and zero down mortgages. So there are still people gambling against future equity they may, or may not ever get.

BayArea says

Because I know the realtors personally who sold the houses. Got it Bob? Still amazing?

Sure right How many realtors do you know personally and how much time do you spend discussing each of their sales? Uh huh. How many did you say plenty was again? Out of how many?

Bay Area is turning into a shithole.

Traffic, crime, terrible service everywhere, dirty bathrooms in public parks, drugs, angry Neighbour’s, tired overworked overmortgaded people, expensive daycares.

It’s only a question of time people will realize that it’s just not worth paying lifelong for huge mortgage, slave and hustle for it and than die. I see most of my friends living like this and slowly getting tired of it.

Life too short for it. You won’t take it with you. Smart are leaving already.

bob2356 says

Your analysis lacks a lot of factors.

Nope. They're all there, just jumbled up. I'll try to clarify.

WookieMan says

My long rant aside. You're likely right that if there are more FHA borrowers out there, it's likely to do with the fact that they can't save up the down payment or have poor credit

Clearly I understand MOST FHA buyers don't have the funds to throw 20% at a property.

WookieMan says

All this said, FHA loans aren't necessarily bad. Smart people can use them to their advantage.

WookieMan says

I'd bet good money that 90% of people that buy a $200k house with an FHA loan versus 20% down conventional, invest the 16.5% down payment ($33k) difference in index following funds, will end up with more money in the end all other things being equal (jobs, income, etc). Do this for 30 years until the house is paid off. FHA buyer will almost always end up ahead investing that $33k in stocks versus sitting in their house. And they still got the same house!

I may not have originally put everything in proper order in the comment. I got ranting, but I don't think what I'm stating in the last quote is incorrect by any stretch. There's a reason there's a LOAN LIMIT on FHA loans. Rich people could use them to their advantage. If anyone thinks it's about poor people (loan limits), get real. The median family income is 50 something thousand. How the fuck are they even saving up $3,500 plus closing costs on a $100k house. It's not happening. My $200k example makes perfect sense and makes even more sense as the loan value goes up.

My argument was that I'm not seeing that many FHA loans (if any) in my anecdotal experience (which is likely more then most) in my metropolitan region. I was never arguing most FHA borrowers could put 20% down (they can't). Most should just pony up the extra 1.5% (total 5%) to get rid of the dumb ass appraisal "inspection" that is looking for missing hand rails, window screens and drain covers.

That said, if you're near the max loan amount ($625k-ish in high COLA's) AND could technically afford or have 20% down, FHA has it's advantages at only 3.5% down versus 20%. You're borrowing the rest of the down payment, but can diversify it into stocks outside of your home. Hell, you could hold the remaining 16.5% in cash and wait for the right opportunity. You would have to sell or refinance the house to recapture that 16.5% additional down back. That's assuming the value of your house doesn't go down. I'll take liquid cash, not tied up in my primary house 9 out of 10 times.

I don't know, I guess let's play it out, $25k tied up in my house and I get to keep the other $105k and invest as I see fit in much more liquid assets on a $625k FHA loan. Or throw close to $130k into a house to slightly lower a payment for someone at that price point? The cost to finance that $105k is roughly $550/mo (with PMI). You're still paying down principle and this big a loan is almost certainly using the MID unless this person makes zero money somehow and pays next to nothing in property taxes. So you're getting to keep your $105k at probably closer to $350-$400/mo. That's cheap borrowing costs.

You can easily hit $400/mo on $105,000 invested in other more liquid assets. You should easily be able to beat it in index funds over the life of a 30 year loan. And that's just it, my scenario isn't realistic for most people, but it doesn't make what I'm saying invalid. A wealthier person, that's good with money, is much better having a higher house payment and putting the rest of that down payment into other investments. If you're good with money, have solid employment stability, I'm not sure how anyone could disagree with this idea.

Strategist says

Just imagine.....four 800 sq ft cabin like homes in a heavily forested 1 acre lot

Have you considered building tree houses? I noticed they tend to have very high occupancy rates over there, and change premium prices. And, it makes sense why - a tree house sounds awesome for the family Hawaii vacation.

Where did you get your occupancy rate + price data? I started looking at airbnb / vrbo calendars, but worry about mistaking owner occupied / maintenance days for occupancy. I just stumbled upon airdna.co, which looks pretty awesome, but I haven't forked out the dough for it yet.

Ironworker says

Bay Area is turning into a shithole.

Traffic, crime, terrible service everywhere, dirty bathrooms in public parks, drugs, angry Neighbour’s, tired overworked overmortgaded people, expensive daycares.

It’s only a question of time people will realize that it’s just not worth paying lifelong for huge mortgage, slave and hustle for it and than die. I see most of my friends living like this and slowly getting tired of it.

Life too short for it. You won’t take it with you. Smart are leaving already.

Agreed. You can still live decently on the outskirts by ocean beach but most of inner SF literally has turned to shit. Only a matter of time.

FortWayne says

We really should not allow foreign money to own American land.

Australia and Canada allow foreign ownership, but have been raising the surcharge on foreign purchases, up to 20% now in Canada I think.

That's not a bad idea. Discourages the Chinese speculators/launderers (lol, there must be a good "Chinese laundry" pun in there") and also provides revenue.

just_passing_through says

Given my 8 month experience leasing out a condo on Maui

Glad to hear it's still going well for you, I remember you mentioned that condo a while back.

What's your typical visitor length of stay? Like, 1 week? I'm trying to gauge how many times a month I'd have to clean and prep the place. Like Strategist, I'm leaning towards the Big Island because it's so cheap over there and it puts me at ease getting my feet wet with less $ at stake.

Patrick says

FortWayne says

We really should not allow foreign money to own American land.

Australia and Canada allow foreign ownership, but have been raising the surcharge on foreign purchases, up to 20% now in Canada I think.

That's not a bad idea. Discourages the Chinese speculators/launderers (lol, there must be a good "Chinese laundry" pun in there") and also provides revenue.

Agreed instead of raising taxes on the citizens, levy a foreigner non-resident surcharge.

Another interesting idea: the Chinese property market is wobbly, having been overheated for so long. When it goes down, the Chinese speculators in US, Aussie, and Canadian property may get wiped out and stop buying here, or sell.

Or perhaps it could go the other way for a while, as powerful Chinese panic and do whatever they can to buy foreign assets out of the control of their government.

Stagnation

We've come full circle. I was on this site a loooooonnngggg time ago, as in back in around 2006-2007 or thereabouts. The crash came, I lost my job for 4 months, got a job ( finally ) and watched the market. A few unexpected and annoying things happened:

1: Foreclosures got bought up by investors quickly meaning the bottom of the housing market was kept elevated
2: Prices fell, but gradually
3: People were scared of buying and homes around us sat unsold for 6+ months or more.
4: And then at some point in say- 2010-11 interest rates fell
5: We bought at that time. The house we bought was about 45% of what it had been at the height of the boom

We are now right back to where we were 10 years ago. Prices are now unsustainably high.
I suspect we're in for a recession in one year or less. As such that will be the trigger for housing prices to stagnate and fall.

Wash, rinse, repeat...

I'm also inclined to think that the buzz of the tax cut and optimism will wear off, and we will be left with a recession with a housing correction. There would obviously be a stock market correction preceding the housing correction, so anybody who remains long in stocks with no cash reserves will not be able to benefit from the low house prices, because they would have to sell stocks at a low point to do so.

I don't think the tax cut has anything to do with it. The market is simply at its peak and due to a natural correction.

FNWGMOBDVZXDNW says

correction preceding the housing correction

Why is it "obvious" that corrections will happen in this particular order and not in reversed like the last time around?

Jsns

BayArea says

Given that there is no subprime lending crisis like there was over a decade ago

Maybe you missed this article, from two years ago

https://www.zerohedge.com/news/2016-06-15/subprime-mortgage-back-its-2008-all-over-again