patrick.net

Logan Mohtashami says

:-)

Yes, in my opinion, he could use a little mentoring, especially in what I perceive as the highly scrutinized and competitive world of economic/financial reporting.

I admit. I liked the cutesy, naïve, and so darn cheerful point of view.

Logan Mohtashami says

That is first level red flag that I saw in first time home buyers 2 years ago after the Spring Season of 2012.

Yet, prices spiked upwards in 2013.

bubblesitter says

Yet, prices spiked upwards in 2013.

Yes, inventory crisis due the housing bubble bursting causing another 2nd waive of housing inflation that is a distortion to the reality of main street America

Logan Mohtashami says

inventory crisis

....it will continue to be like that until a recession hits, which I think could happen in a year or two. If that happens it remains to be seen if banks will hold the troubled mortgages or foreclose them.

Bond rates would indicate we are in for a recession starting in Sept.

Demand for a mortgage at a 21 first century low

You really have to be a blind person to blame the housing weakness on tight lending standards too

Logan Mohtashami says

Demand for a mortgage at a 21 first century low

So is the inventory(in socal). This is going to help keep the prices flat. Reversal in high cash leveraged buyer psychology or a recession is needed to pull back the prices.

Logan,

How are your mid to high end(800K to 1 mil) buyers feeling about putting a good chunk of cash and getting the rest of as mortgage?

Sir,

From my understanding you may have the cause confused with the effect.

Jobs are not being created due to the continued Ponzi Scheme of the multiple Government house inflation policies and private sector fraudulent loans.

The US is having "peak Malinvestment" now, as so much money has been Malinvested in real estate, superstitious loans, large government oversights, lobbyists for Banks, Freddie, Fannie.

The US has Malinvested $5-7 Trillion dollars on housing, when groups in the signal chain (pipeline) should have been left alone.

I respectfully submit that is the continued Malinvestment that forces all people to spend to much on housing, and that if that was spent on Science, R&D, Manufacturing to the tune of $5-7 Trillion there would be some ROI.

Continued policies to meddle with Housing are exacerbating the Malinvestment problem.

Comments?

Wage Recovery Hobbled By High Housing Prices

- Thinking of the problem in this way may help

Entitlemented says

Science, R&D, Manufacturing to the tune of $5-7 Trillion there would be some ROI.

One of the reasons I didn't believe the economy wouldn't grow at 3% this year was that private investment let a lone public investment would be light. Nothing is going to change that in term of the nominal number you speak off.

bubblesitter says

How are your mid to high end(800K to 1 mil) buyers feeling about putting a good chunk of cash and getting the rest of as mortgage?

This crowd is using the 80/10/10 product to get that price range group. Also, mind this is strong income growth for California as they are making 3 times Median Income

Logan Mohtashami says

making 3 times Median Income

What is the total gross income here? How much is the down payment on a $1 mil home?

bubblesitter says

What is the total gross income here? How much is the down payment on a $1 mil home?

It depends on which buyer, the 1,000,000 purchase I have done so far put 33% down and had 12 months PITI reserves on that loan.

Unless these dual income buyers lose their job they can easily make the payment with already 10%-30% equity into the purchase.

However, the one item I have seen now in that they are paying more than what they originally wanted to pay for a home in terms of total PITI payment.

Whenever you see that in a market place on the move up buyer side of the equation that shows that the buyer capacity is hitting their limits points.

That was always the case

CAR: estimates 68% everyone in California is priced out of the market

My own MI2MP model shows it's more 82%

Logan Mohtashami says

However, the one item I have seen now in that they are paying more than what they originally wanted to pay for a home in terms of total PITI payment.

Whenever you see that in a market place on the move up buyer side of the equation that shows that the buyer capacity is hitting their limits points.

It is amazing that people in top brass are stretching to their limits as well. How long can this go on? Only time will tell.

bubblesitter says

It is amazing that people in top brass are stretching to their limits as well. How long can this go on? Only time will tell.

Well, So Cal home sales were down 15% YOY with higher inventory so we have already hit the point where growth in sales have been impacted. Of course the falling level of total cash buyers is part of this equation as well.

Logan Mohtashami says

However, the one item I have seen now in that they are paying more than what they originally wanted to pay for a home in terms of total PITI payment.

Whenever you see that in a market place on the move up buyer side of the equation that shows that the buyer capacity is hitting their limits points.

This doesn't surprise me. Back in the bubble days, I had co-workers telling me "you should go talk to my [brother/cousin/friend] who's a mortgage broker. You'd be surprised what you'd qualify for on our salary." I'm starting to hear things like that again. The other day someone was telling me that someone who earns X could afford a $1.5M house easily. And I was thinking, "yes, they could *qualify* to get a loan to buy a $1.5M house easily," but whether that's "affordable" is another question entirely because it would strain the budget and make other things like savings, vacation, and other life goals rather difficult to achieve.

corntrollio says

whether that's "affordable" is another question entirely because it would strain the budget and make other things like savings, vacation, and other life goals rather difficult to achieve.

But then you will miss out the equity gains that future generations will hand out to you. Don't you?

Let me give you a good example of what I am seeing

If a buyer has a comfort total mortgage payment of $4000

PITI total payment, principal, interest , taxes and insurance. That is the level that has always been key to me because they know better than a bank.

Now they may qualify for a total payment of $6,500 hitting that 43% DTI which is still good to go. However, comfort payment levels are a better gauge of after tax/expense incomes

They are going above their comfort mortgage payment level, still can qualify but at 4.25%-4.625% range that is very telling

Logan Mohtashami says

If a buyer has a comfort total mortgage payment of $4000

PITI total payment, principal, interest , taxes and insurance. That is the level that has always been key to me because they know better than a bank.

Now they may qualify for a total payment of $6,500 hitting that 43% DTI which is still good to go. However, comfort payment levels are a better gauge of after tax/expense incomes

$6500 at 43% DTI means just over $180K annual income. That is a significant percentage of post-tax income and seems to be stretching quite a bit.

corntrollio says

$180K annual income

$6,500 doesn't correlate to $180,000K a year buyer, that 180K income is 3 times more than the median CA income.

That income bracket is doing well, the problem is we can't produce enough of that type buyer income, hence why sales have fallen here in So Cal

"California home sales and price gains temper in May as buyers confront housing affordability constraints and low inventory"

http://www.car.org/newsstand/newsreleases/2014releases/may2014sales

Negative YoY sales, with higher inventory and rates below 4.5% #DTI #LTI

Heraclitusstudent says

The problem is not low wages.

The problem is ultra high prices.

beg to differ, IMHO its a problem of too high "public" expectations, job skill "mismatch" in the general public, too much credit creation chasing "global" returns