patrick.net

Okay, so I went back and drilled down a bit more and found out from Equifax report that the average mortgage was actually $236,000 in 94040, I guess that is per person so a couple would have a joint mortgage of $472,000?

Still a little low I think, as most houses are on the market for +/- $1m

"How is it flawed? It shows that there is nothing to worry about.

Be happy! "

But I want every one to have huge mortgages, that means they're F'ed borrowers and are going to have to unload their houses and drop the comps.

Okay, so I went back and drilled down a bit more and found out from Equifax report that the average mortgage was actually $236,000 in 94040, I guess that is per person so a couple would have a joint mortgage of $472,000?

That's a bit mean isn't it?

Actually I guess it is better for us if they don't have huge mortgages, it might mean they're more flexible on the prices as they will still get out of the game with some equity, even if it's not as much.

Robert Coté Says:

Silent Spring. Summer Bummer. Fall Maul. Winter of Our Discontent.

That's sweet. You should trademark this stuff. RE Boston, promptly after Labor Day, there are already 10 new listings (20% increase). I think the ebb in numbers of listings people observed over the last few weeks will quickly be reversed and more.

The Financial Times yesterday had an article about a study on US consumer and mortgage debt. Total mortgage equity measured by total outstanding debts against that equity (Primary mortgages, 2nds, HELOCS) is over 60%. The numbers, including the average family total consumer debt, does count everything, not each instrument separately.

I think people are forgetting just how big the population is, and how much of that population rents (1 in 3 nationally, higher in higher cost areas implying higher mortgage debts). Also, the total average consumer debt per family isn't really so interesting or informative -- especially since people tend to look at that number in the context of their own wealth&income. What is more telling is the percent of debt versus income + wealth per average family.

That is, since so many people are on the lower end of the income distribution, they normally have lower absolute consumer debt, but that debt is a dramatically higher percentage of their income + wealth.

I believe the Equifax numbers are fine. They just need to be taken for what they are.

You know, I have no idea how they calculate their figures, but I wonder how much it skews their credit scores?

Above should read: Total home equity measured by...

On average, Americans have over 60% equity in their homes.

I have several cards with $0 balance and one “loan” with $14.95. Perhaps “averaging” can dramatically reduce the number?

Yes. If a lake's average depth is only 3 feet, does this mean a f@cked swimmer in the deepest part of it cannot drown?

but I wonder how much it skews their credit scores?

None. The data isn't skewed at all (at least not substantially). They just apply it to the ratios to produce proper credit scores.

Yes. If a lake’s average depth is only 3 feet, does this mean a f@cked swimmer in the deepest part of it cannot drown?

Classic! :lol:

Yes. If a lake’s average depth is only 3 feet, does this mean a f@cked swimmer in the deepest part of it cannot drown?

Yes, but if we take average depth to average swimmer's height (and assume normal distributions), we can get a reasonable estimation of how many people are "drownable".

You can drown in 3 inches, if can't get your face out of the water!

Btw, thread graphic courtesy of HARM-X Industries, Ltd.

The bulls (NAR, CAR and their mouthpieces) have no clue as to how to describe the situation.

Has anyone else read the NAR vomit from today?

"Realtors Expect Home Prices to Fall"
http://tinyurl.com/fhzw9

This year sales are slowing, homes are plentiful and sellers are negotiating," Lereah said. "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."

Where do they come up with a TEMPORARY dip in prices? Is that like how prices "temporarily" climbed at 20%/year over the past 5 years, completely out of whack with historical norms?

Actually, I think I've figured out the NAR's strategy for dealing with the downturn:

The forecasts are slightly below the group's projections from a month ago.
Compared with the group's forecasts at the beginning of the year, the expected declines in existing-home sales and housing starts for 2006 are about twice what was expected, and the expected drop in new-home sales for 2006 is about three times as severe.

They will continue to predict mild declines (the press will go along with them), and in retrospect, there will be a footnote saying how the NAR's forecasts were way rosier than reality. Let's keep feeding the masses happy juice while Rome burns.

If fate says you'll drown, you'll drown even with no water! (Perhaps in a bowl of pea soup)

Another bubblicious report from the WSJ (subscription needed):

http://tinyurl.com/mytu9

Housing Slowdown Takes Its Toll

Economists Say Selling Prices May Stagnate,
Or Decline, in 2007 as Cool Down Continues
By PHIL IZZO
September 7, 2006

Economists believe cooling in the housing market to extend into next year and many forecasters in the latest WSJ.com survey predict no change -- or an outright decline -- in home prices next year.

Twenty-five of the 48 economists who answered the survey's question about housing predicted no change or a decline in a closely watched gauge of nationwide home prices during 2007. The average prediction for next year was for an increase of 0.43%, lifted by five economists who forecast gains of 5% or more.

(Much more follows this).

*******

There's even mention of the possibility of breaching the hallowed OFHEO annual housing price index, which hasn't fallen YoY since 1975...

I especially like, "The average prediction for next year was for an increase of 0.43%, lifted by five economists who forecast gains of 5% or more." I wonder if those 5 economists would be, David Learah, Leslie Appleton-Young, David Wluka, etc etc.

My apologies if someone has already posted this, but... wow!
Scroll down to "Reported Attacked!" link.

http://www.foxnews.com/oreilly/

*Granite slab provided by:

DinOR McMansion Reclamation Services, a proud sponsor of Patrick.net

Even if average depth is 3 ft. per HARM’s example, AND average swimmer’s height is 5 ft… then 100% are “drownable” if the max depth is 10 feet and the scope of the “drownability” study is lake-wide.

Only with a very very high alpha.

Only with a very very high alpha.

Not if the FSs (f@cked swimmers) believe that the lake bottom only goes up!

CNBC on in the background, and they are just hammering housing, and not just homebuilders stocks, but now all residential real estate in general. Some of these reports are coming across from MSNBC, so it's not all just market-geek targeted.

Not if the FSs (f@cked swimmers) believe that the lake bottom only goes up!

:) True, but then that wouldn't be a very "normal" distribution, but more of a bubble-shaped one.

HARM,

Yeah, that was the infantile meltdown in San Diego. What was really weird was that the wife "Rosa" kept shouting "Get that f@cking camera out of my face" (but kept PERFORMING for it!). Did you check out that "walk" when she was going back to get a gun? Hubba hubba.

The reporter seemed to be hamming it up as well. The big fellow that had run-ins w/Mr. Scumbag earlier had him pretty much under control but the reporter continued to flail away on the ground. He also seemed to have just the right interval in his "conversation" w/Rosa (Mrs. Scumbag) to set her off! Nice job Rosa. Now everyone in the country with a TV knows you're a foul mouthed skank.

True, but then that wouldn’t be a very “normal” distribution, but more of a bubble-shaped one.

LOL!

RC,

Yea, short covers is my guess for homebuilders today. I heard the book to value statement. That guy was an idiot. Book values for homebuilders don't work like other companies, because of their large land options positions. A lot of book value can disappear quickly for these concerns.

You know what bugs me about CNBC? Those talking head women have to be the result of some sinister eugenics experiment. They are strangely mesmerizing (which is why I sit askew to the TV when working from home).

"A comfortable mortgage for a HaHa is still less than $500,000."

I fully disagree with that. I think the percent of your salary that can be directed toward housing increases with higher salaries. I'm paying 40% of my income for a 30-yr FRM. I am not uncomfortable and it isn't difficult because the other 60% is more than I used to live on when I paid $1495 in rent. We still eat out at least once a week, and we're still saving money.

The standard 28% of income toward housing only holds true for those struggling with lower than "Ha Ha" incomes.

The standard 28% of income toward housing only holds true for those struggling with lower than “Ha Ha” incomes.

I disagree. Housing costs ought to be regressive. I do not see Bill Gates spending billions on McColonies.

28% gross is still quite a lot considering that many people spend less than half of that on rent. (Yeah, I know about the tax deduction, but still)

We still eat out at least once a week, and we’re still saving money.

Perhaps I should cook more. But I find eating out being slightly cheaper.

You can drown in 3 inches, if can’t get your face out of the water!

Or if one is standing upside down in eight inches of water.

Both excellent points.

If fate says you’ll drown, you’ll drown even with no water! (Perhaps in a bowl of pea soup).

Leave it to Peter P to find a way to combine Predeterminism and food. :-)

You're both right.

In general, for career-trackers, it is often fine to take on significantly more than .28 AGI in PITI, because salary can be expected to rise much faster than inflation (yes, even during stagnant wage growth periods...people get paid more as they gain experience, especially in early work years).

Then, as salary rises, often PITI will fall well below .28. Eventually, a trade up will again put people above .28. In this case, people who've managed their careers well will be in the "summer of their career", and can again expect salary rises to accelerate a while as they climb into real management. And again, PTII will fall below .28.

Where people get into trouble is when they're too optimistic about their salaries, and/or when they take on too much variable rate mortgage debt. This tried and true formula only works for fixed rates, even for shorter term holding periods.

Randy, you are right.

However, I do not recommend spending more than 50% after-tax on shelter in any case. Life should not center around the house.

Chris Says:

September 7th, 2006 at 11:57 am
Holy cow! Santa Clara with a 33% hit?

Where did you get this from? A friend of mine is looking at houses and the realtors are now telling her that oh, they'll only go down 10%

I told her to wait until next Summer, but I think it's real hard waiting when some nice houses are coming on the market and are reduced 10% from previous levels.

I was hoping I could find some more data to indicate or that predicts a bigger drop in prices in Mountain View area.

Peter P,

I don't want to get into the middle of this thing but isn't it possible that maybe buyer's willingness to adjudicate ever greater portions of their income toward housing costs are part of the problem?

Isn't it further possible that lenders gauging that willingness saw more "jumbo" loans? It's probably a little late to "stick to our guns" and draw the line at .28 but I hope mainstream Americans see this for what it is, the battle for "wallet share"? Isn't this where much of "Consumers Gone WILD" has come from?

I don’t want to get into the middle of this thing but isn’t it possible that maybe buyer’s willingness to adjudicate ever greater portions of their income toward housing costs are part of the problem?

Spending more in housing is not the biggest problem. However, many people do so only because they think of housing as an investment. This is the problem.

(I am sure I have been spending more than the "guidelines" on food.)

A friend of mine is looking at houses and the realtors are now telling her that oh, they’ll only go down 10%

I told her to wait until next Summer, but I think it’s real hard waiting when some nice houses are coming on the market and are reduced 10% from previous levels.

Claire, let me respond to this with a quote from the legendary studly Robert Coté:

"Just like it took the stupidest buyers at the top, at the start of the decline the stupidest buyers will get the first deals. We need to run out of stupid buyers yet again before the deals reveal."

"spending more than the "guidelines" on food" LOL!

O.K, point taken. I wasn't trying to make the very personal choice of how much one spends on their personal residence a corporate (or State) decision. At some point though, when the house you intend to buy vastly exceeds any imaginable need, then it has definitely crossed the line into "investment" or business decision.

When underwriting guidlelines actually made the distinction between primary res. and "inv. property" more down payment was required. When realtors (TM) and MB's raised no objections whatsoever it seems to me that the lines got blurred.

DinOR,

People could devote 99% of their income towards whatever they want and spend less on everything else. If they did spend 50%+ on housing, that probably means they're spending less on vacations and restaurants and movies, so you can optimize your personal expenditures to take advantage of less crowded entertainment and eating venues.

In the long run, housing should fall, when people realize they can't afford to retire or visit the dentist unless they get rid of the McMansion albotross.

"can't afford to retire or visit the dentist" Funny!

I suppose the reason I've tread lightly here is b/c we have been through much of this before and I'd prefer to steer clear of those "values" arguments.

If I inherited a cool mil. I doubt seriously a dime would find it's way into RE. That's just me. Many would decide to go ahead and get the home they want cash out right. That's fine too. Clearly though at some point balance and common sense has to enter in the equation if only to keep the lights on and "body and soul together".