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Housing will slow, then it will stop, then it will drop;
Regardless of what others think, even if subprime lending is over, and there are shortages of houses and there is strong demand for homes, the global economy is facing situations that may Trump the mortgage meltdown that "lead" to the recession. In the Bay Area, there are money making tech companies, then there are venture capital supported companies. Both are slowing. Google's spin off, is not making money. Apple is down nearly 35% over the past 52 weeks. IPO's are delayed. Then there's banking. Negative interest rates mixed with defaults in energy sectors. Then there are the 8 year car loans and college loan collapse. China banks keeping the buying power of their dollar down, money fleeing emerging markets, a 7 year supply of cheap oil sitting on barges looking for a port, and finally the 20 foot wall spanning the south west which will be built in 2018. Foreclosures in LA, ND, AL, LA, TX are growing. The BayArea does not self sustain itself. Speculation has driven up prices where cost to income ratios are beyond 2008. Employment usually drives home prices and China is not buying the RE that it did. This is the first time in a ling time that Gold is up week over week 15%.
What causes a person to default on a home loan? Usually income, but worse, it's when one person sells their home, then another and another, then people fear that values will not increase and sales slow, then homes sit, then homes go into default. Then people dump their homes because they are never going to refinance out of that $350 monthly PMI. This is all due to employment/income. Not all SF homes are paid for by cash, not with a 20% down, nor by investors. Tech can move anywhere in the USA, and it will flee if it needs to. In 2005-2006 there was exuberance, and confidence. Very few economists were predicting the "crash", If so, we only read about it now. The USA Today under every hotel door headlined "housing shortage". The global economy is worse, in 2008 interest rates were 5.75%. Today there is no where they can go. Housing will drop by 2017 and will crash by 2018. People will be pitching in and co-habitating, trimming costs. People will feel a big pinch, and regardless of their industry, Tech, Banking, Manufacturing, Sales, Services, Construction etc. every one will be effected.
Tough, I wish your extrapolations will fulfill your predictions. But I don't think so. It's Different Here. It's Different This Time.
I am afraid your right BACH. Economists who claim to predict the 2008 economic collapse tout the heck out of the 8 ball wisdom prediction in every book they publish. There are very very few web pages that date back to 2005-6. One cannot go back and verify. The things I write about are basically Buying Opportunities for folks who can afford to dollar cost average into their retirement acct. For someone wishing to swoop up a home for 40% less than the current price is a pipe dream. In 2024 it will happen again, when the average US home is at 650K then drops to 480K That same home sells for 275K now. Looks like I will be living in the garage for longer than expected.
Tough, I wish your extrapolations will fulfill your predictions. But I don't think so. It's Different Here. It's Different This Time.
I absolutely agree, and my models are screaming the absolute opposite of Tough's predictions... We likely have seen the last low in the equities market for some time to come if ever, capitol flow seeking ROI and or safety into this country totally contradicts his predictions. From my frame of reference USA is the new bubble and has just started it's journey and it is very likely SF home prices will continue going up due to the general SF environment as a whole and the torrent of that capitol flow drenching this country over the next few yrs anyway. If a person has the ability to buy now would be the time however do it for the home sake only, not because your planning to some how beat the market.
GL with your decisions everybody....
Tough is correct. It might be scary to hear it but it is true. The global economy is crashing US dollar is the only safe place right now so it is giving us a false safe feeling. Google Armstrong Economics, click on his blog and search Real Estate. He says real estate has peaked and will be on a huge decline. The question is whether it will do you any good to have all of your money stuck in your home, or to have a low mortgage you can walk away from when x hits the fan.
There are always people who will say things area great and only going to get greater, and real esate will continue to go up, but it won't and it can't. Bottom line is real estate CAN NOT continue to outpace wages.
Real estate shortage......The shortage is due to a ton of people being underwater. If they list their house for what they need to sell it for, it is priced too high. The shortage is also from people refinancing at such a low rate, they feel they can't get a better deal by moving (and their income is not on the rise) The shortage is also from baby boomers staying in their homes. The aging population used to downsize and move away but this generation is not leaving their homes. There are 70 million boomers people. When they do finally start to die off, the market will be flooded. But that is going to take another 5 years to start trickling in.
The stock market has started it's correction and will continue to drop. It takes a while for that to trickle into the economy, but it does. When companies preform poorly in the stock market, lay offs follow, but it takes about a year. So look at 2017 starting with layoffs. Job losses force people to put their house for sale, but job losses dry up buyers. So houses sit and drop in price. Mortgages become harder to attain.
Now is the very best time to sell, worse time to buy in my opinion. But yes, you do have to live somewhere and renting in the bay area is a catch 22. Thankfully, I am in the Boston area where it isn't cheap, but nothing like SF.
Trust me, everyone wants to own a home when it feels like it is hard to get one, but everyone wants to unload them when they are easy to get. Anyone feeling frustrated with the market, wait a year or two more. You can thank me later! And anyone reading all of these comments is on here because deep down, they know something is wrong with the RE cycle or they wouldn't have found this thread. Be a contrarian, don't follow the herd. Liquidate and wait.
Tough is correct.
Now that is some funny shit.... lol Because you say he is right?... lol Sorry Thatsaid just because you say it
don't make Tough right or yourself.... It just don't work that way my friend....US dollar is the only safe place right
Exactly, and it's looking for a ROI and it isn't in the metals.That money is not going to stay in dollar
and will be saturating our markets on every level creating opportunity and the rich will get richer while
the laymen sit on the sidelines.Armstrong Economics
Is theory which does have bases as do many of the theories we read about today. Patnet. lol
I do respect lots of the theory as to what "can" happen. however I know in the end I am responsible
to look deeper and have my own opinions and theory to weigh against theirs. Some or all those conditions
have measure of possibility. But when? Today, tomorrow, next week, next year and etc., WHEN?.....
No one knows, what, when or where and that is a indisputable fact.Bottom line is real estate CAN NOT continue to outpace wages
"Markets can remain irrational longer than you can remain solvent" Yep, both ways up and down...
Real estate shortage
True, but there is a market and under the current situation it absolutely can go up. Maybe not so much
in median and low markets but high end the sky is the limit and will carry the rest enough to keep the market
alive. What you need to look at is when/if the high end market turns over.
Buy to own a home not for bragging rights of buying at the low, that trade is gone. Now if you are buying
as a trader in the markets the absolute majority will fair badly because they neither know when to buy or
sell at the optimum times RE is a market like any other emotion will be the main trigger instead of applicable
market theory and knowledge making the decision....The stock market has started it's correction
Actually the market has corrected and has issued 2 confirmations it's broke the 2 mo. range. Typically
some retest for sellers will take place before it's move up. The market has been hedged and the bets
have been placed and now most everyone is sitting on the side lines waiting to see the outcome. The
majority are frozen and won't make a trade any direction at this point and the money they are sitting on
for the most part is waiting to buy not sell. Most of their capitol will be locked up in their hedge and belief
in a crash coming any minute due to bias-confirmation not what is actually happening on the global
landscape. Think globally, trade locally.....Now is the very best time to sell
Not if it's your home or your trade in the markets. The general public has nearly zero concept of how
to beat any market much less compete with the competition that make their living making money with RE.
That's just a true fact of life.Trust me,
Not a chance, and your theory which seems to be parts of all the gurus theory will be tested.
Pull a coin out of your pocket and flip it remembering there are 2 sides not 1
I would like to mention another very sneaky and little noticed trick by apparently the US banks regarding the tax deduction on mortgage interest. I didn't realize this until I moved from the US to Canada and bought a house there. With a market only 10% in size compared to the US, you would imagine the Canadian banks can offer only much worse interest rates than the US. I was therefore surprised that I was able to get rates at least 30% better than the US rates. The 30% is a magic number, because with this, it make the REAL cost to the consumer of borrowing on a home mortgage SAME for both US and Canada (Canada does not have mortgage interest tax write-off). To a US consumer, there is NO REAL advantage in the tax write-off in the US tax system! You pay roughly the SAME out-of-pocket. So where does the money go? The banks, of course! The government is NOT subsidizing the home buyer with the tax write-off. It is instead encouraging the banks to raise their mortgage rates to 30% higher than the Canadian rate while making the home buyer feel as if they gained something with the write-off, whereas actually the government tax subsidy REALLY goes to the banks. It is like allowing the banks to jack up the price of a car by 30% higher than a Canadian car, then telling the car buyer "Don't worry, the Fed will reimburse you 30% of the car cost". So who got the 30% jacked-up price? The banks of course! With whose money? The FED's, or, YOU who pay the tax, of course!
I am impressed with the ingenuity of the Bank Lobby! It is no less impressive than the sub-prime lending. I was fooled all these years until I went to Canada.
cost to the consumer of borrowing on a home mortgage SAME for both US and Canada (Canada does not have mortgage interest tax write-off). To a US consumer, there is NO REAL advantage in the tax write-off in the US tax system! You pay roughly the SAME out-of-pocket. So where does the money go? The banks, of course!
@ERBear this is very interesting.
I don't believe this. It's basically saying there is no competition in mortgage lending, which seems hard to believe.
ERBear,
This is misleading! Canadians can't get a 30 year mortgage. They are all basically on 5/1 ARMs -- which we also have available to us in the US for that same cheap rate. Who is crazy enough to go get a 5/1 ARM when interest rates can only go up? A whole country of Canadians, that's who!
From 2017 - 2022 prices in SF will fall, just as they will fall all over the world. The Tech companies will no longer be able to employ the vast number of employees they have because the world population will no longer be able to afford the hi tech equipment being offered. Hence, the unemployed will have to sell for 40-60% less than their property was valued at when they purchased it, or if they prefer, they can go into foreclosure.
will no longer be able to afford the hi tech equipment being offered.
alternatively, we/they keep printing, and the game goes on another decade.
is the main pain-point -- penalty -- of printing, and we're back to 1980s prices now.
we're no longer in the 1800s when people had to dig certain metal ores out of the ground to expand the money supply.
there's no reason to suffer through recessions any more, other than to purge the economy of speculative risk takers.
problem is recessions take out everyone in the end.
JBAT: I was talking about my first hand experience and I stand by it. I bought a house in Canada in 2011 and was looking for refinance deals in the US at the same time. I got a low rate in Canada that was unheard of in the US. That was that. No need to discuss.
Let me add another piece of input: A recent study found that Canadian percentage home ownership has surpassed the US number, DESPITE the lack of government tax write-off on mortgage interest.
JBAT: I was talking about my first hand experience and I stand by it. I bought a house in Canada in 2011 and was looking for refinance deals in the US at the same time. I got a low rate in Canada that was unheard of in the US. That was that. No need to discuss.
TATUPU70: I fail to follow your logic.
Lower rates in Canada are not because of the lack of a mortgage deduction
[url=http:/
are you looking
@Patrick, a junk/spam flag for comments would help. You have one for threads, but not comments.
ok, now there should be a spam link by comments for established users. only the newest users would not see it.
please do not abuse it. if you mark things as spam simply because you don't like the thought or the user, i'll remove your spam commenting privilege.
Hello. We're considering buying a home in Orange County in he $1.3-1.5MM range. Do you still think its a bad time to buy?
Interested parties should contact the company via email for more information: Lender E -mail: (redacted)
Name of creditor: Paul Anderson
Fill the application form below:
Sweet! Can I give you my social security # too?
when did orange county start accepting candy as currency?
Hello. We're considering buying a home in Orange County in he $1.3-1.5MM range. Do you still think its a bad time to buy?
Hello. We're considering buying a home in Orange County in he $1.3-1.5MM range. Do you still think its a bad time to buy?
"home" If you have the means to buy a home buy.... Home/house prices are going up slow but steady with a mix of inflation and a strong
$$$. What some may not take into acct. is that the strong $$$ that is very likely to get a lot stronger is providing a discount in many things
and even though we see prices going up with such things as groceries, houses and ect. they are at a discount due to the strong $$$.
I think it will be a big mistake waiting for a market crash and lower house price over the next couple of years and when real inflation hits
on a weaker $$ what do you suppose is going to happen to your equity? Increase in your homes equity due to it will take more dollars to
buy your house not less like the environment is now. The bear forecasters simply have it wrong in that in the US the risk/off for anything
more then short term you will be on the wrong side of money flow..The world is looking for safe money and ROI and here is the only place
they will find it in the majority due to our having the largest and diverse markets in the world. My advice is don't try and beat the housing
market follow the global flow of money. If you don't you will be forfeiting the discounted prices you are seeing now.....
I used to read patrick.net back in 2011 and this "hard hitting" analysis scared me from buying a house. Housing prices have doubled since then.
This website has been calling the market a bubble for years. Is it really a bubble if the prices never come down?
Hello,
Should investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news - a Nevada $800,000 home was sold at auction to investors for $6,000 - this sounds like highway robbery.
Thank you.
Hello,
Could investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news, a Nevada HOA foreclosed on an $800,000 home over a $6,000 lien. Investors snagged it at auction for around $6000. Doesn't this sound like highway robbery - shouldn't investors be paying the cancellation of debt on the $800,000 mortgage?
Thank you.
Hello,
Could investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news, a Nevada HOA foreclosed on an $800,000 home over a $6,000 lien. Investors snagged it at auction for around $6000. Doesn't this sound like highway robbery - shouldn't investors be paying the cancellation of debt on the $800,000 mortgage?
Thank you.
Not highway robbery. It was the banks who failed to pay the HOA fees. If the bank had done the right thing, it would have not lost the house. I wrote a satire about it on my personal blog at Talkmarkets: http://www.talkmarkets.com/contributor/gary-anderson/blog/humorsatire/nevada-supreme-court-forces-us-bank-ceo-to-bend-over-and-take-it-in-the-shorts?post=70873&uid=4798
Even though this article was not one of my 48 approved articles at Talkmarkets, it still managed to accumulate almost 1000 views.
You guys are talking about a very very narrow case. This only applies to a few thousand houses/condos in Nevada. When the Nevada legislature wrote the HOA super priority law it was poorly worded and actually inadvertently (obviously not the intent of the legislature) allowed an HOA foreclosure to extinguish any other loans. The next session of the legislature (Nevada only meets every 2 years) fixed the wording. So yes investors who bought in that narrow window can theoretically extinguish all other loans, but it still hasn't happened 2 years after the statute was rewritten. The issue is still being fought hard in the courts, the current battle is if the wording of the statute was constitutional. No one has gotten quiet title on any of these properties to date.
If the courts should happen rule in favour in the investors all the way down the line some day there is no legal basis for tax liability for the investors. The auction by the HOA extinguished the loan, the investors bought at the value of the tax auction. There is no debt forgiveness involved. A foreclosure doesn't forgive the debt, the bank can still pursue you.
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Can I give you my SSN too? Maybe after I apply I can also let you give me a swift kick to the nuts.
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Don't bother Rajan. Lots of dumb people on this site, just not dumb enough to fall for your scam.
We live in the Bay Area. Our rent is constantly going up. We are now looking to buy. We can only afford about $465k. Our mortgage will go up because of the size home we need however if we continue to rent the IRS continues to screw us in taxes every year. Talk about being trapped. We rent we pay a lot on taxes. We buy we pay more in mortgage. What do we do? I think buying now is our only hope.
We live in the Bay Area. Our rent is constantly going up. We are now looking to buy. We can only afford about $465k. Our mortgage will go up because of the size home we need however if we continue to rent the IRS continues to screw us in taxes every year. Talk about being trapped. We rent we pay a lot on taxes. We buy we pay more in mortgage. What do we do? I think buying now is our only hope.
You buy and prevent your monthly housing payments from going up.
Interest rates are 3%. If your home appreciates 3%+ you are getting paid to own a home.
Interest rates are 3%. If your home appreciates 3%+ you are getting paid to own a home.
and if your home depreciates 3%.....
What do we do?
use a calculator!
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
do not fall into the trap of assuming unrealistic appreciation.
Last time you posted this, million dollar homes in the bay area went on a tear to becoming 1.5 to 2 million dollar homes....
***NEVADA STEALS HOMES****
Please DO NOT buy in NEVADA HOMEOWNERS' ASSOCIATION. Many states (like NEVADA) engage in THEFT/DEPRIVED DUE PROCESS by using SUPER-PRIORITY LIENS to FRAUDULENTLY FORECLOSE on homes.
f you want to defend your home from ILLEGAL FORECLOSURE in NEVADA, you must go through EXPENSIVE FORCED ARBITRATION.
If you cannot afford arbitration, you will lose your home. Not legal advice, so, please discuss first with an attorney. AVOID HOAs at all costs! Good luck.
Patrick,
I haven't really been on here since the crash of the last bubble. You called it, everyone here called it...
But, here we are again and it's worse this time!
Since the last time I posted I've gotten married. I have had a promotion or two and my income has increased somewhat. I still live in Oakland and I'm still renting the same apartment I rented as when I was active here. Yes, he moved in with me. We live in a small one-bedroom apartment by the Lake in Oakland. I've watched rents become completely insane since the crash and during the inflation of this bubble. At least during the last bubble, rents weren't so bad. Now rents are insane!!!
We couldn't afford to move to anything nicer in our own neighborhood. If we had to move, we wouldn't be living anywhere near where we are now. I've lived in the same building for the last 14 years. My rent is just above $1000/ mo..Yes, I know! It's insanely low by today's standards. The Rent Adjustment Ordinance has allowed me to remain where I am without breaking me financially. However, the building is 103 years old and the apartment is falling apart around us. And no, they don't want to do repairs because, yes, they would like us out of there so they could charge someone else at least $1800+/ mo even without renovating much to live there. So when we ask for repairs it takes FOREVER for them to fix something and it requires a lot of back and forth with the Property Manager.
Yes, we've been able to save some. But, he doesn't make a great income. My income is OK. Our household income is more than the median income for Oakland. And, there is no way we could afford to buy anything that wouldn't be an absolute hell hole even in the worst neighborhood in Oakland.
We would like to find a better place that isn't so old and run down. We would like to own something eventually, one day. We also don't want to live too far away from our jobs. Both of us have a 10-15 minute commute. I have never had such a short commute in my life. The time I save is invaluable to me, to us.
The thing is, I keep reading here and elsewhere that I shouldn't expect housing costs to decrease until the Baby Boomers finally start to die off. That means that we will have to wait until at least 2020-2024 to even think about moving if we want to find something that we could actually afford while saving for our retirement. We are both 46 and tomorrow is our 3rd Anniversary (and yes, we are in a same-sex marriage, we were the second couple in Alameda County to get married after the stay was lifted on June 28, 2013).
Now, as you can probably tell, I don't just move at the drop of a hat. I'm also very lucky since my husband is not wanting to move at all. He loves the neighborhood and he doesn't mind having a small place. It's just us and we aren't planning on having children for the foreseeable future. So, I have no pressure to be forced into a decision that will ensnare us in a giant mortgage. I would like to have better quality housing. That's me. He's fine with staying. However, I know my landlord. He will not fix our apartment up until after we are long gone. And he will continue delaying needed repairs as long as he can get away with it. After 14 years, I'm getting tired of the game.
Do I really have to wait until we are 50-54+ years old to be able to afford something better? Is it really worth waiting that long? You and others around here seemed to think that we would have somewhat affordable housing around here after the last crash. The thing is that it's only become more unaffordable, even for two middle-aged men with a decent household income. What happened after the crash is that rents are now extremely unaffordable and owning is beyond our reach too.
Yes, I do see that our savings is growing nicely, as well it should with our housing costs so low. And there is something to be said for that since we really do need our money to be invested wisely so that we will be able to retire at some point. However, I'm getting restless and tired of the waiting game.
Yes, I could move out of the area. But the thing is that my mother and brother moved here back in 2009 and they both live in Oakland now (from Chicago Area). I don't want to leave them here now that we all live within 1 mile of each other. My mother has a sweet deal on her apartment due to being a Property Manager there with very light duties. My brother is finally in a board and care situation that meets his needs (after too many moves to count and way too many train wrecks).
So, I am feeling kind of stuck due to the cheap rent we pay in comparison to the newer arrivals to my neighborhood who moved here to flee insanely ridiculous housing costs in San Francisco. I'm not exactly in a hurry and yet, I'm thinking we are 4-8+ years away from being able to move into any other situation close to where we live now that makes any financial sense.
I'm just feeling like rationality will never return to housing in the Bay Area. What we face here is nothing short of a housing crisis. I work with homeless individuals and those who have low income. These people are being hurt the most by the economic and financial craziness taking place all around us. Greed runs rampant here and I don't see any signs of it abating any time soon.
Do you really think we are going to see some rationality return to the Bay Area housing market ever? I'm not entirely convinced that it will ever make sense for me to own a place here in Oakland. And I can let go of that if I could afford the rent on a better place somewhere down the line. I don't have to own to be happy. I would like better quality housing that won't prevent us from being able to retire one day though.
***NEVADA STEALS HOMES****
Please DO NOT buy in NEVADA HOMEOWNERS' ASSOCIATION. Many states (like NEVADA) engage in THEFT/DEPRIVED DUE PROCESS by using SUPER-PRIORITY LIENS to FRAUDULENTLY FORECLOSE on homes.
f you want to defend your home from ILLEGAL FORECLOSURE in NEVADA, you must go through EXPENSIVE FORCED ARBITRATION.
If you cannot afford arbitration, you will lose your home. Not legal advice, so, please discuss first with an attorney. AVOID HOAs at all costs! Good luck.
Just pay your damn bill, and you won't be foreclosed.
Do you really think we are going to see some rationality return to the Bay Area housing market ever?
I think it's you who is irrational.
You make above median income, but can barely afford $1,000 per month in rent. How the hell are you gonna afford to buy a home in the BA? It's only a matter of time before you end up paying market rent. Living at someone else's expense is free loading, and does not last for ever.
As for the bubble.....just because YOU think prices are high, does not make it a bubble. Wake up. If anything, prices in the BA are set to jumping the next few years. And yes, this time it really is different.
Get real. The only way you can afford a home is to move far away from the BA. Hope you can digest constructive criticism.
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On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.
The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:
annual rent / purchase price = 3% means do not buy, prices are too high
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy, prices are reasonable
So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.
Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.
The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.
It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.
The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.
As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get
paid back.
And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.
It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.
This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.
The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.
The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.
It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the Realtor® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.
From The Herald:
"We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."
House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.
The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.
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The Housing Trap
You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.
115 pages, $12.50Kindle version available