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Call it Crazy says

Didn't you get the memo?

maybe... just maybe... I am not making promises here. However, I might be speaking to congress on this topic in the next 12 months. I have a meeting with a housing advocacy group which was recently at a hearing with the Senate on lending and housing.

What I wouldn't give to have just a few minutes against both parties on CSPAN

I would argue this is New Normal, same as Old Normal.

High levels of home ownership were a blip, due to misguided public policy and banker frauds.
The "Home Ownership Society" promulgated by Bush et al, so VERY loudly, just doesn't
make all that much sense. It's trying to force every segment of society into a 60's ideal
which doesn't fit with how we work and live now.

Call it Crazy says

Come on Logan, you've been here long enough. Who cares how many people own houses and that the ownership levels are back to the 1990's. That's NOT important to the economy!

The ONLY thing that matters is that prices and rents are UP!!!

We're in a Housing Recovery!! Didn't you get the memo?

In all seriousness, what does it matter what the homeownership rate is? Is it better for the economy at 69%? 67%?

tatupu70 says

In all seriousness, what does it matter what the homeownership rate is? Is it better for the economy at 69%? 67%?

In dealing with economist, professors and political types, these are there concerns

1. Home ownership rates = forced saved thesis so they want Americans to have the capacity to obtain some wealth in their lifetime

2. New home sales which still has legs to rise = Has more of an economic out put for growth than existing home sales so the concern is now that these low level sales
are coming when rates are 3.75% in year 7 of the economic cycle

It took a while but it finally has got the concern of those on tops since we are well below everyone's estimate in year 7 of the economic cycle

I have pointed out to them that they need to wait to 2020-2024 time frame before making a drastic decisions

maybe... just maybe... I am not making promises here. However, I might be speaking to congress on this topic in the next 12 months. I have a meeting with a housing advocacy group which was recently at a hearing with the Senate on lending and housing.

What I wouldn't give to have just a few minutes against both parties on CSPAN

--------------

What would you hope to accomplish?

errc says

What would you hope to accomplish?

The fact that tight lending has nothing to do with the weakness in housing and we shouldn't try to ease standards that are in place.

10 pages of things that I need to discuss but if you want a idea here is the testimony that recently happened

http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=398862#

Right will harp on too much government and the left not enough... somehow we need to find a workable middle

Logan Mohtashami says

somehow we need to find a workable middle

Better economy with more liveable wages, and more possibilities for jobs outside of NYC/SF/LA where houses are already too expensive for a mortgage buyer. Jeez, why does nobody in gov't get this?? Why is it always just "lower interest rates" and "looser standards".

Philistine says

Better economy with more liveable wages, and more possibilities for jobs outside of NYC/SF/LA where houses are already too expensive for a mortgage buyer. Jeez, why does nobody in gov't get this?? Why is it always just "lower interest rates" and "looser standards".

That will be the main point I will make. Refereeing back to this article a few weeks ago

"All housing analysts, I would surmise, would like to see a more robust housing market. Where we disagree is what should be done to encourage a healthy market. I believe we have a moral obligation as a society to reject attempts to engineer conditions that encourage people to put themselves in economic peril. We did that before, it was a disaster and we must learn from our past mistakes."

"I have to believe that those who are saying lending is too tight are either not aware of the actual requirements and have absolutely no lending experience or have some other agenda that is preventing them from acknowledging the obvious. Gotta wonder. Frankly, I also gotta wonder why we keep listening to them."

http://loganmohtashami.com/2015/04/09/tight-lending-and-other-urban-legends/

The fall of home ownership (from tight lending) is extremely bullish for the housing market

Philistine says

Why is it always just "lower interest rates" and "looser standards".

These solutions do not threaten home prices, which is not a coincidence because the vast majority of donors to political campaigns are homeowners, and homeowners outvote renters in elections by a substantial margin.

Today in Colorado, the state legislature killed a bill that would tighten the overly-permissive lawsuit opportunities for condo owners versus developers. It is said that there are two types of condo developments in CO: those who have been sued, and those who are about to be sued.

I hate developers, but the situation is ridiculous: condo development has simply ceased. One exception is a couple of guys who photograph every step of the construction process.

Trial-lawyer cash probably killed the current bill, but a desire to keep condo sales prices and rents high also helped. Renters get worked over worse in Colorado than M-to-F transsexuals in men's prison.

SFace says

The fall of home ownership (from tight lending) is extremely bullish for the housing market

It's not tight lending, trust me, if it was I would be first person protesting on this topic. Young Americans have a host of reasons why they aren't buying. Wait until 2020-2024 time frame when they're better suited with DTI barometers

9 Brief reasons

To rehash this old story – for those who somehow missed it, the reasons for this weakness revolve around a mixture of inter-related economic, social and political forces some of which include:

1. Delay in marriage (Dual incomes missing)
2. A lack of a strong paying full-time job with security.
3. Older Americans are unable to retire due to lack of savings – they replace younger workers, who have trouble finding jobs.
4. Having enough for a down payment plus closing cost with taxes impounded is a lot for young aspiring home buyers.
5. Renting isn’t considered a bad option anymore from young Americans.
6. Exotic loans that allow would be homeowners to obtain credit without collateral or income verification are removed from the market.
7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.
8. Student loan debt impacted household formation from rising and making it more expensive for first time home buyers to buy.
9. Despite the weak first time buyer market, home prices go up in many markets due to the lack of inventory, keeping home ownership even further out of reach.

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

The Model is this

1. Rent
2. Date
3. Mate
4. Marry

and these to show case the view even more that it isn't tight lending

Would-be home purchasers are unable, to qualify for a mortgage due to the following factors:

• They lack adequate monthly income. A lot of the jobs created, post-recession, are low paying jobs that don’t provide adequate income to support a mortgage payment. More liberal lending standards will not correct this.

• They lack liquid assets. The down payment (even just 3% for some loans) and closing cost for a home purchase exceeds many American’s available liquid assets.

• There is no financial bubble. The formal definition of a financial bubble is an economic cycle characterized by a surge in asset prices above the fundamental value of the asset. The housing bubble created excess demand based on poor lending standards. When the bubble popped, that excess demand disappeared. Not all the demand was fake in that cycle, however. In fact a good portion of it was real. It would be a drastic mistake to attempt to manipulate lending standards in an effort to recreate that extra fake demand. If historically low interest rates cannot generate home ownership demand, then we need to accept that a percentage of our adult population is simply not in a financial position to take on mortgage debt.

• Demographics are not favorable in this cycle, but in time they will be. Household formation has been very soft. People are staying single or getting married older. This translates into lower housing ownership demand as most people will wait to marry before considering a home purchase. Fewer dual income households so fewer households that can afford a mortgage payment. These factors have driven strong demand in the rental market

Still think tight lending is preventing a housing recovery? A quick review of the requirements for some of mortgage loans available may surprise you.

No money for a down payment? Is zero down too tight?

VA (Veterans Administration) loans require no down payment, a minimum FICO score of 620 and allow up to 60% debt to income ratio. I don’t think anyone could call this tight.

Poor credit score? Is a FICO score of 560 too high? FHA (Federal Housing Authority) loans require a FICO score of 560 to 620. (Scores of 650 are considered “fair and below 600 are considered poor or high risk). Other requirements include at least 3.5% down, and a maximum debt to income ratio of 43%. In some cases they will accept up to 50% debt to income ratio.

High debt to income ratio? Is 50% debt to income ratio too stringent? GSE (Government Sponsored Enterprise) loans allow for 43% to up to 50% debt to income ratio in geographical areas where housing is particularly expensive. A minimum FICO score of 620 and a 3 % down payment is also required.

Other common requirements for these loans are a history of the same line of work for the past 2 years, 4 weeks of consecutive pay stubs to verify income, most recent W2, and most recent 2 months bank statements.

Home loans are available and home loans are being made. Over 4 million purchase home loans were given to Americans in 2014 and thankfully those were largely to folks who have the financial capacity to own the debt the home ownership.

I agree with SFAce. The lower the percentage of Americans who own homes, the more bullish for long term housing market.

Do incomes and prices matter anymore?

Serious question

YesYNot says

I agree with SFAce. The lower the percentage of Americans who own homes, the more bullish for long term housing market.

I have been hearing that thesis for years... "Pent Up Demand Thesis" it was part of the Housing Is In Nirvana Thesis of 2013 which was now on record one of the worst academic calls in housing this century.

It was an economic assumption theory based on a model that worked in previous cycles not this one

To have 21st century low in mortgage demand in 2014 when
- American population rose by over 40 million
- Working Americans grew over 17 million

Then add the lowest rate curve post WWII

There are rules in the game of demand.

Thesis number since 2010 was simple, we simply won't have enough qualified home buyers to have a real recover

Now in 2015

H.O. rates are at historic lows

Mortgage demand is scrapping of a 21st century low set last year in year 6 of the economic cycle

If Cash buyers weren't 16% now above historic norms, 2015 housing demand would be at the Great Recessions Lows

..... Yes, I have heard for many years "Pent up Demand thesis" going back to 2010 as well.... Time has not be kind to those who believe in an economic assumption theory.

Come 2020-2024 things should be different but I do commend the housing heads for finally admitting what they should have years ago

“Weak home sales are ‘much more of an income problem than a credit problem,’ said David Blitzer of S&P Dow Jones Indices. #housing #NAR”

‘I don’t think there is a housing shortage…It’s strictly a matter of low demand, said’ “NAHB Chief Economist Crowe: #housing #NAR @NAHBhome”

This was real reason why housing demand was soft

https://www.o9O_FDLPdgA&t=10m35s

You can bend the mathematical curve for sure, but you can't break it

errc says

Do incomes and prices matter anymore?

Serious question

Yes, it always matter, this is main reason why housing demand from main street has been soft, but the rental demand for housing has been very strong, and household formation is finally taking off, yes they're renting but this is a plus for housing down the line

Looking at 1.5 million for Q1 2015, that's a legit rise even if the numbers might be volatile and not 100% accurate it's still a positive move. A reason why rental demand has 10 years in it