patrick.net

Strategist says

I do have an agenda....If home prices go up and home builder stocks go up I will make money. Billions :) :) :)

Builder are only working off a 440K level home sales should grow double digit for them this year but there problem is this

Logan Mohtashami says

Why did she need to wait 6 months, was it because her $$$ wasn't season or was it because she didn't have 2 year job experience

18 months on the job. Full time student before that. They would not use bonus income to qualify unless it was for 2 years. Debt ratios in 40's with bonus.
Disgraceful loan standards. Picky picky picky. :(

Strategist says

They would not use bonus income to qualify unless it was for 2 years.

That's a standard condition 2 year history for bonus from the federal government

Was any of the money gift?

Logan Mohtashami says

Strategist says

They would not use bonus income to qualify unless it was for 2 years.

That's a standard condition 2 year history for bonus from the federal government

Thanks for nothing.

Logan Mohtashami says

Was any of the money gift?

Yes, half. The rest were her own savings. However, her name showed up on another account I have. So technically she had the full 20%+ down payment all in her name, seasoned for a few years. 2 years of PITI would still be in her name after the down payment.
Who is a better risk, Logan? She, or someone with a 3.5% down with a 600 FICO? Is it fair? You tell me?

Strategist says

Who is a better risk, Logan?

Like I have said you're cherry picking a single situation ( To talk about tight lending)
I am talking about the United States of America

Your daughter is a 50% DTI without her bonus, after her 2 year waiting period she would have had the debt to income ratio and she got enough gift money to get to 20%

There is a reason why first time home buyers are trending now for the 3rd year at their lowest level in history.

4. Having enough for a down payment plus closing cost with taxes impounded is a lot for young aspiring home buyers.
(Now she got help from you) Most Americans don't have that luxury

7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.

Those were reasons number 4 and 7 on the top 9 reasons why first time home buyers are so low with rates this low and the tail end of the economic cycle

http://loganmohtashami.com/2014/11/03/demand-from-first-time-home-buyers-hits-21st-century-low/

Call it Crazy says

Strategist says

They would not use bonus income to qualify unless it was for 2 years.

Come on, you know the answer to that. Bonuses are NEVER considered regular income (except with old liar loans) because they are not guaranteed like a salary is.

Stop whining...

Her bonus is guaranteed. It was predetermined by a fixed amount. She got 4 raises, all in the form of bonuses. it's how the company pays everyone.

It looks like Lobbyists for the banks are doing an end run around financial rules designed to disallow the Subprime scheme from occuring again.

http://www.reuters.com/investigates/special-report/usa-bankrules-weakening/

I was shocked to find that MBS's held off the banks P&L are still alive and well.

Looking at Wells Fargo's holdings in securitized loans - where do you think these properties are?

Entitlemented says

Looking at Wells Fargo's holdings in securitized loans - where do you think these properties are?

The one item with majority of all loans now done in America is that

- Income has to be verified
- liquid assets have to be verified

This creates a very strong loan profile and everything will be ok until the next job loss recession and the down turn curve will be a lot less dramatic than the housing bubble crash for obvious reasons

California has a 90% piggy back loan product again but how the debt structure is created it's much different than the 90% loan that were given back during the housing bubble years

Right off the bat the media wanted to label it as a Bubble type of loan. I did a interview with America banker a few months again talking about it.

http://www.americanbanker.com/news/consumer-finance/a-bubble-era-product-thought-extinct-has-reemerged-in-california-1072598-1.html

Logan Mohtashami says

The one item with majority of all loans now done in America is that

- Income has to be verified

- liquid assets have to be verified

This creates a very strong loan profile and everything will be ok until the next job loss recession and the down turn curve will be a lot less dramatic than the housing bubble crash for obvious reasons

An even stronger loan portfolio would be adding asset based loans. Those with large assets and down payments are the most safe. These are move up buyers who would provide the fuel necessary for a full and sustained housing recovery.

Strategist says

These are move up buyers who would provide the fuel necessary for a full and sustained housing recovery.

The reason you lack move up buyers is that if you baseline the data to that (Affordability) index which I have deemed to be outdated and an insult to those who follow data

You need at least 28%-33% equity in a home to sell, pay transaction cost and then put 20% down to move up.

How many Americans in this country have 28%-33% equity.

Even my most wealthy income buyers, those making 200K -400K a year can't put 20% down on a home.

The system is having a hard time moving forward... shocking isn't it.... ;-)

You can bend the mathmatical curve but to think you can break it toward a certain direction without damage to equilibrium of the economic system. Tsk Tsk

Logan Mohtashami says

The reason you lack move up buyers is that if you baseline the data to that (Affordability) index which I have deemed to be outdated and an insult to those who follow data

Then come up with something better. Economists are always looking for better indicators. The indicators you are using are missing key variables, and including too many variables that confuse, and result in "paralysis by analysis"

Logan Mohtashami says

You need at least 28%-33% equity in a home to sell, pay transaction cost and then put 20% down to move up.

How many Americans in this country have 28%-33% equity.

A third of all homes in existence traditionally have been free and clear. Therefore I would estimate most homes have 30% percent equity. You don't come across them because they don't always refinance.

Logan Mohtashami says

Even my most wealthy income buyers, those making 200K -400K a year can't put 20% down on a home.

They could be young professionals. Those with incomes like that are more likely to accumulate assets over time. If they don't, their spending habits are probably the culprits.

Logan Mohtashami says

The system is having a hard time moving forward... shocking isn't it.... ;-)

I'm just shocked they don't fix it, when we have a simple fix. Loosen up the lending. :)

Logan Mohtashami says

You can bend the mathmatical curve but to think you can break it toward a certain direction without damage to equilibrium of the economic system. Tsk Tsk

The equilibrium is already damaged and way off. We have a solution to quickly bring it back to equilibrium. :) :)

Strategist says

Then come up with something better. Economists are always looking for better indicators. The indicators you are using are missing key variables, and including too many variables that confuse, and result in "paralysis by analysis"

I did and I have for years. Look at it this way. Has there been economist, housing pundit, or data tracker that has ever said years ago that we wouldn't have enough qualified home buyers once you X out the crash buyers. How was I so confident this would occur so long. Math, Numbers, Facts and data will always win out in the end, you just need to know what it is and what it will mean

Last December in Dana Point at the BNY Mellon Stock Conference I gave an interview to Bloomberg and showed Wall Street my model

http://loganmohtashami.com/2014/12/04/bloomberg-financial-interview-at-the-bny-mellon-conference-housing-reality/

Here, check this out. I remember this statistic from my college days. It has not changed much.

http://articles.latimes.com/2013/jan/10/business/la-fi-free-and-clear-20130110

Nearly one-third of U.S. homeowners have no mortgage
Those who own homes outright include retirees and a surprisingly high percentage of young adults, real estate website Zillow finds.

Strategist says

A third of all homes in existence traditionally have been free and clear. Therefore I would estimate most homes have 30% percent equity. You don't come across them because they don't always refinance.

Most of them will not refinance or sell, a lot are 2nd homes and investor homes

Strategist says

http://articles.latimes.com/2013/jan/10/business/la-fi-free-and-clear-20130110

Nearly one-third of U.S. homeowners have no mortgage

Those who own homes outright include retirees and a surprisingly high percentage of young adults, real estate website Zillow finds.

Again, most of those are people who are Rich, 2nd homes, investor homes, primary resident homes that don't need to sell and move up. This group will not save the housing market because they're the elite, their economic cycle in terms of buying homes are done

#Demographics

Why I say wait until 2020-2024

Strategist says

They could be young professionals. Those with incomes like that are more likely to accumulate assets over time. If they don't, their spending habits are probably the culprits.

Trust me it's not there spending habits at all, they have plenty of liquid assets but remember for a 1,000,000 home that is 200K to put down for a home, let a lot the Freddie & Fannie limit is $625,500 in California. Now you can go up to 2 million now with 20% but I mean come on how many people have that kind of liquid assets unless you have stock options

Call it Crazy says

Strategist says

Yet my daughter with 800 FICO, 20% down, debt ratio in the 40's was denied. They said she has to wait 6 months. When I stepped in to help, they wanted my taxes. I could easily have done it without taxes pre bubble. I had to use other means to get her the funds to go ahead with the purchase, which cost me money. :(


How are others in her situation supposed to buy homes, if their families cannot help?

Maybe she doesn't "need" a $450K condo at age 23... Should every first time home buyer get the Mercedes as their first house?

How about she "drives" a clunker until she can carry the costs herself, without daddy's help

You have a point. She would need to go far and drive a lot, making it harder to do an MBA, or live in a not so good neighborhood. :(

Strategist you have drunk way too much Kool Aid.

Strategist says

Who is a better risk, Logan? She, or someone with a 3.5% down with a 600 FICO? Is it fair? You tell me?

wow whine much? Lets see... she has no history of being able to hold a job long term, half the money she has was a gift, her debt ratio seems high (you still havent clarified her debt % as low or high 40's).... I wouldnt loan money to her nor would I loan to the 3.5% down with 600 FICO score. However you prove Logans point, that lending standards are not that strict if loans are given to a 3.5% down with FICO scores of 600..

Call it Crazy says

That's called "paying your dues". Unfortunately, today's youths, want the Mercedes and the iPhone6 right from the get go... They are the "instant" society and won't work their way up the ladder... Sadly, a lot of this mindset is the fault of the parents...

Here is the calculations rounded up.
Purchase price--- $450K
Her share ---------$50K
My source---------$400K
she will pay interest only at 4% = .............$1,333 per month
she will pay Prop tax, Assoc. Mello Roos..$1,100 per month
Total monthly payments.............................$2,433 per month.
2 room mates will cover.............................-$1,800 per month.
Her share.....................................................$643 per month.
She will get the tax write offs, bringing her net cost closer to Zero. After one year she refinances. Pays me back $350K.(50K is gift) Her total payments will remain the same.
The property needs cosmetic work. $10,000 to $ $20,000. She will use a new 16 month interest free credit card, and pay it all off in 1 year.
In the end....she has her own home close to work. Close to her classes. Close to parents. Close to other friends and relatives. Safe neighborhood. Beautiful neighborhood.
Everyone happy. What have I not thought of?

Miike says

Strategist says

Who is a better risk, Logan? She, or someone with a 3.5% down with a 600 FICO? Is it fair? You tell me?

wow whine much? Lets see... she has no history of being able to hold a job long term, half the money she has was a gift, her debt ratio seems high (you still havent clarified her debt % as low or high 40's).... I wouldnt loan money to her nor would I loan to the 3.5% down with 600 FICO score. However you prove Logans point, that lending standards are not that strict if loans are given to a 3.5% down with FICO scores of 600..

I think it was high 40's based on $400K purchase price with 320K loan. We decided to go to $450K as I was gonna help anyway, and she would be able to accommodate another room mate.
She is extremely responsible. Still drives a 2007 Civic I got her when she turned 16.

indigenous says

Strategist you have drunk way too much Kool Aid.

You should see what some of the other posters say and believe here. It will blow your mind.

Strategist says

You should see what some of the other posters say and believe here. It will blow your mind.

Yes, I'm familiar. But this is Orange County you should be aware of the Kool Aid?

So to recap

- GSE VA and FHA loans all have a baseline minium fico score of 620 needed and some can go as low as 560

- Down payments can range between 0%-3.5% today and 0%-5% in the past couple years

- Debt to income ratio can go as high as 43% and also up to 50% on non QM and exception loans

- On top of that housing has the mortgage interest deduction, property tax deduction and capital gain treatment of cap gain free for $250,000K single and 500,000 dual

With all this information which are factually true, you can see why I have and will always go after tht Tight Lending Crowd which almost 99% of them have never worked on a loan in their life

Strategist says

She is extremely responsible. Still drives a 2007 Civic I got her when she turned 16.

She is probably very responsible, but its all about the numbers and in your daughters case, the numbers dont add up yet...

Logan,

how is the OC market? Id love to hear what you have to say. Id also love to hear your current predictions for the rest of the year.

Miike says

Logan,

how is the OC market? Id love to hear what you have to say. Id also love to hear your current predictions for the rest of the year.

Prices are up. sales are at the lowest point in 7 years in So Cal. Cash buyers are falling in volume but still big enough to give a cushion demand buyer.

My folks have put up their home up for sale for roughly 2,000,000 since Feb 9th, only one offer.

Neighbor across the street sold their home in 11 days for 2.5 million.

Enough demand to keep things moving along, low enough inventory to get prices moving higher, but considering that rates have been low all year long it's been a slow market place in relationship to that factor. I believe the YoY action is down -0.04%

Considering the low bar set last year with So Cal sales, so far it's been very sluggish

Last year after the spring season I did notice how a lot upper end income buyers were paying more for a home that they would like too but still good enough to get a loan

My buyers profile has been very diverse this year

- Boomerang
- Move up's
- First time buyer looking but nothing really going on there
- 2nd home buyers (Palm Spring)

Big down payment year so far
65% down
35% down
20% down
This was different than last year where the range was 5%-15% down

http://loganmohtashami.com/2014/05/16/bloomberg-financial-interview-on-health-of-the-housing-market-2014/

With applications showing 8 & 12 % year over year growth, the next existing home sales report should be positive and showing some decent YoY growth because it was a struggle last year during this time. The comps get a lot harder during the 2nd half of the year. However, YoY growth nationally early on will happen

@Strategist

You haven't thought of how to teach your daughter to fend for herself if Daddy's not around.

Can you imagine how much her roommates will resent her in the current finance picture that you laid out? That makes her a double mooch-- first, off of you, then off of them.

Not a flattering picture.

She is responsible because she is still driving the last gift you gave her? That's your evidence. Wow.

lahossain says

You haven't thought of how to teach your daughter to fend for herself if Daddy's not around.

Can you imagine how much her roommates will resent her in the current finance picture that you laid out? That makes her a double mooch-- first, off of you, then off of them.

Not a flattering picture.

Helping children is a parents job. Renting for fair rent is acceptable.

Logan Mohtashami says

I thought you fellers went to work on the weekend, like Phil Dunphy.

Call it Crazy says

Strategist says

Helping children is a parents job.

Buuzzzzzz... WRONG!!!!

Preparing your children to be responsible adults who can stand on their own two feet is the parents job!

Yeah...little brats have been mooching on us since day one. Damn freeloaders.
Wait till I foreclose on her. That'll teach her.

indigenous says

I thought you fellers went to work on the weekend, like Phil Dunphy.

We are always working, but Joe Friday, Just the Facts Ma'am

Speaking of which I used his character in an article years ago fighting against the tight lending myth against CNBC, this one was really fun to write, but if you don't know the character you wouldn't get the sentence structure tone

Diana Olick: Just a Few Questions, Ma’am

http://loganmohtashami.com/2012/03/30/diana-olick-just-a-few-questions-maam/

indigenous says

Ok I misunderstood the meaning of Friday. Of course his dead pan questioning is a classic, the copper clapper caper e.g.

Good article.

https://www.youtube.com/embed/CFb7HfZ40NI

Logan Mohtashami says

We are always working, but Joe Friday, Just the Facts Ma'am

I hope you make a lot of money. Things are about to boom, just wait and see.

indigenous says

Oh My God!
I thought it was Pepsi.

Strategist says

Things are about to boom, just wait and see.

I make money but there is no boom!
Actually, I am in the running for top 40 under the age of 40 for housing in America for different reasons. People always ask me how are you having your best years now and not the housing bubble years.

Answer is simple.

None of my own clients ever did sup prime purchase loans and only 1 client did a option arm in 2003 and that was an extreme high income net worth buyer