patrick.net

FHA is not going anywhere.

FHA isn't going away, but they are going back to the role they had before 2008. 700k FHA loans will be history. The president is already talking about it in that treasury "white paper" they released.

Bring back 10-20% down payments!

I would agree if investors were banned from competing with would-be home-owners.

If buyers have to compete with the mega-wealthy just to find a home, then I think 0% down is A-OK.

I don't see a problem with your scenario as long as investors have to compete with each other for rents.

MillennialFalcon says

I don’t see a problem with your scenario as long as investors have to compete with each other for rents.

renting the single-family housing stock creates rent-slaves. It is a tax the wealthy place on the less wealthy, just for the privilege of having a place to live on this planet. It is wealth-transfer from the less powerful to the more powerful.

And thus land rent is utterly morally abhorrent. That people so blithely defend this massive ongoing economic injustice here is mind-boggling to me. Unless you're just talking your book, then it's perfectly understandable.

Now, if we get a deflationary economy going like the Japanese are stuck with, then today's rent-slaves might win. But the last time we had a deflationary economy was 100+ years ago.

I see rent more like a luxury tax. I have money left over after buying food and fuel, so a portion goes to the landlord. If that wasn't the case, I'd move in with someone and reduce the rent.

MillennialFalcon says

I see rent more like a luxury tax

That would be the case if living were a luxury. Landlords would like to think this so, I guess.

Who appointed them the toll-takers of life itself?

Their take is many hundreds of billions of dollars, all of that severely under-taxed here in California.

This "luxury tax" is the dominant expense in everyone's life.

Some luxury.

Yep, look at Libya. We have it good here. I happily pay the price to live here.

The disorder of Libya's coming to California soon enough. April 1992 was a dry-run, and we're heading right straight back to that ugly dynamic.

We had dotcom and the housing bubble machine to patch things together temporarily, but that's all gone now.

Troy says

The disorder of Libya’s coming to California soon enough. April 1992 was a dry-run, and we’re heading right straight back to that ugly dynamic.
We had dotcom and the housing bubble machine to patch things together temporarily, but that’s all gone now.

Just like carrying around a money bag with a hole in the bottom and nothing handy to plug that hole.

HousingWatcher says

FHA is not going anywhere.

You're probably right, but "as we know it" will go away. They'll raise the DP requirement. And good, it's way too low.

I think it is OK to have low down payment requirements. As long as the debt ratios are low enough. The real problem is when a low down payment + a huge chunk of income going to mortgage payments. The math doesn't work. I think, especially in a place like the Bay Area, lower DP is reasonable for lower cost homes. (700K on the otherhand is ridiculous for FHA)

jaded says

I think it is OK to have low down payment requirements.

Considering the inverse correlation between defaults and amount of DP paid, I don't see how this rationale is justified or formed.

Here's an FHA story in today's NY Times. This woman put $18,000 down on something like a $500K apt. in Harlem. She is also paying off her law school loans. Glad I'm not her right now!

http://www.nytimes.com/2011/02/27/realestate/27hunt.html?hpw

MillennialFalcon says

I see rent more like a luxury tax. I have money left over after buying food and fuel, so a portion goes to the landlord. If that wasn’t the case, I’d move in with someone and reduce the rent.

I like this guy's perspective on renting:

I’m a soothsayer. I took Madame Cleo’s crash course in psychic ability and I know exactly what that NAR shill and the planted callers are going to say.

-Homeownership make communities stronger because people are more invested when they own a home.
(Complete BS, the majority of people who live in urban areas like NYC and SF rent and they seem to love their city. All my friends in SF rent and they love their city and care about it. Everybody in my complex in Studio City takes care of our building. I picked up all the trash in front of my building which I know is weird to the brainwashed considering I’m a renter. I shouldn’t care, right? The pro-homeownership people want us all to live an Ozzie and Harriet life they want us all to conform. And they insult renters by implying we are some sort of drag on society)

-Renting is throwing money away
(Complete BS, 99% of the things we buy we don’t expect to appreciate. We buy things because we get utility from them. Does your shirt appreciate? Does your TV? Does your car? No! But we buy those things because we get utility from them. When people rent, they are not throwing money away. They are paying for a roof over their head. So in some warped people’s minds, paying to have a roof over your head is throwing money away?)

-Homeownership builds wealth
(The most illiquid asset is a house. Now, I’d say the overwhelming majority of people who listen to your show Larry have a monthly housing expense, whether they rent or own. So your house went up $100,000. How do you get that wealth? Refinance or sell. Well you still have a monthly housing expense don’t you? In fact it might have went up if your cashed out. Great source of wealth huh? One that keeps you perpetually in debt to the banks. Are so many people are brainwashed to think this is desirable. Why do you think middle class wages have been stagnant when the mindset that “debt is wealth” is so prevalent in our society? The gov’t and the banks expect us to get “wealth” from our homes, translation, more in debt.

And do you notice the housing shills always leave out the expenses that come with a house? I got a friend who had to pay $25,000 for some sewage issues. Now that’s $25.000 in lost equity. That’s $25,000 a renter never has to pay. And the housing shills will never account costs like those when they do the old “I bought the house for this $200,000 and now it’s worth $250,000”. Yeah but you had to shell out $25,000 so that perceived $50,000 profit is a smokescreen. Wealth can be built in numerously better ways other than a house.)

The NAR doesn’t care about people, they just want their group to make their percentage for doing something worthless than can be done between two adults. They have a monopoly on MLS listings and manipulate data.

klarek says

jaded says

I think it is OK to have low down payment requirements.

Considering the inverse correlation between defaults and amount of DP paid, I don’t see how this rationale is justified or formed.

I think they could do a bit more digging in the data. People who are over-leveraged walk away. People with low down payments and are not owner occupants walk away. People who can afford their payments, where it represents a logical percentage of their income, aren't likely to walk away.

So it sounds like low down payment = defaulter, but digging in, there are a whole lot more signs of a potential default besides a low down payment. The intent of FHA is good, and the program had been pretty successful when the limits were lower. Lowering the housing limits and the debt ratios would likely cure a good number of the problems.

The problem is, a lot of FHA buyers bought way more house than they could afford. And were paying far too much of their income to support their mortgage. Keep the standard multiplier of 3X income and a reasonable debt ratio would be prudent.

PasadenaNative says

right? All my friends in SF rent and they love their city and care about it. Everybody in my complex in Studio City takes care of our building. I picked up all the trash in front of my building which I know is weird to the brainwashed considering I’m a renter. I shouldn’t care, right

When I lived in suburban ghetto LA(AKA SFV) 3/4 of my neighbors couldn't have cared less about monitoring the neighborhood, picking up trash, keeping the place clean. Literally it was a Kitty Genovese story waiting to happen.

I moved to downtown LA a few months ago. My neighbors could not be more wonderful...here in an apartment building mix of professionals, USC students, and a handful of families...I've found the most polite and courteous people I've ever been around. Everyone holds doors, holds elevators, and is so quiet. Its unbelievable really and spans ages from 20 up to about 65 or so. Amazing. And they are all friendly too. If I want to get a beer, I literally just invite whoever I see in the hallway or lobby.

Troy says

MillennialFalcon says

I don’t see a problem with your scenario as long as investors have to compete with each other for rents.

renting the single-family housing stock creates rent-slaves. It is a tax the wealthy place on the less wealthy, just for the privilege of having a place to live on this planet. It is wealth-transfer from the less powerful to the more powerful.
And thus land rent is utterly morally abhorrent. That people so blithely defend this massive ongoing economic injustice here is mind-boggling to me. Unless you’re just talking your book, then it’s perfectly understandable.
Now, if we get a deflationary economy going like the Japanese are stuck with, then today’s rent-slaves might win. But the last time we had a deflationary economy was 100+ years ago.

The history of man kind, kings and fools and revolutions. Few get to own all the land or means of production, and force the rest to work for them. Creating a system where they print the money and the poor work for the money.

Deflation would be great, it's hard to get that considering that as soon as we are getting into deflation government uses all it's might to stop deflation in order to protect the wealthy "investors".

dodgerfanjohn says

PasadenaNative says

right? All my friends in SF rent and they love their city and care about it. Everybody in my complex in Studio City takes care of our building. I picked up all the trash in front of my building which I know is weird to the brainwashed considering I’m a renter. I shouldn’t care, right

When I lived in suburban ghetto LA(AKA SFV) 3/4 of my neighbors couldn’t have cared less about monitoring the neighborhood, picking up trash, keeping the place clean. Literally it was a Kitty Genovese story waiting to happen.
I moved to downtown LA a few months ago. My neighbors could not be more wonderful…here in an apartment building mix of professionals, USC students, and a handful of families…I’ve found the most polite and courteous people I’ve ever been around. Everyone holds doors, holds elevators, and is so quiet. Its unbelievable really and spans ages from 20 up to about 65 or so. Amazing. And they are all friendly too. If I want to get a beer, I literally just invite whoever I see in the hallway or lobby.

+1. I live in a condo complex about 3 blocks from the ocean. More than 60% of the units are tennant-occupied. Most of the owners live up north about 20 blocks, in a very upscale residential neighborhood about the same distance from the ocean. Everyone here is fantastic. Quiet, polite, says hi and asks about your day. Ages are from 20's (college kids) to the elderly parents of my own unit owner and landlord, who live in one of the corner penthouses facing the beach. (sure it's not quite the same as an apt with one single landlord)

Now, as for this: "renting the single-family housing stock creates rent-slaves. It is a tax the wealthy place on the less wealthy, just for the privilege of having a place to live on this planet. It is wealth-transfer from the less powerful to the more powerful"

I think this is nonsense. The elevator is quirky and needs repairs once every few months. The technician is out here often. Do I pay a cent for this? No, it's just fixed quickly. When the awnings on the balcony get ripped to shreds by the tropical storms...does my rent go up? No, someone is sent to replace it. Quickly and efficiently. The roof has leaked a few times during heavy Nor'easter dowpours. What did I have to pay to fix that? Zilch. I called the landlord, who said, "Yeah, the property manager already called me to alert us and informed me it's being fixed today." Indeed it was fixed that afternoon. Not by me, and not out of my pocket. I can't tell you how wonderful it is to get to live in a place for a reasonable price and any time something goes wrong I just make a call and it's fixed, no questions asked, no money out of pocket. "Slave"? I don't think so.

And unlike a homeowner who occupies the property, my landlord is not at liberty to decide when they want to fix things. They cannot leave the awning shredded and flapping in the wind for 4 months while they spend their money on other things. They MUST fix it, under the terms of the lease. They are not able to escape this fiduciary responsibility to maintain the property. (slave-like?)

Renting a property is like leasing a car with no money down. There are so few real drawbacks. Sure, you can't modify it to your liking whenever you want, as you cant put rims and spoilers and fog lamps on a leased car whenever you want, but can you seriously argue that getting to take possession of a brand new vehicle, with no money down and the same mo payment as you'd have if you bought it and financed it anyway, and then in 3 years get to hand it back to the dealer (right about the time that major repairs would be hitting you squarely in the wallet for the first time as an owner) and abjucate all responsibility for the vehicle, and get to take possession of a brand new vehicle and start all over again, is a BAD thing?

This is exactly what me and my fiance did in December. We walked into the Honda dealer and got her a 2011 CRV. They asked us for $1,500-$2,000 down and $479 a month. I said, "No, I want that deal you advertised on your website." (they played dumb, so I pulled up the webpage on my phone for them) and said, "I want this: No money down, $329 a month for 36 months". The guy said the best he could do with no money down was $349. Deal.

Are you telling me that was a stupid decision? And that I'd be much better off having bought it outright? Hogwash. We'll put nothing into repairs on that car, pay the same mo payment whether we rent or own, and at the end we just walk and get her a brand new car.

This is what renting is equivalent too. Sure, homes could appreciate and getting that equity (which is far smaller than people think once you deduct realwhore commission and home upkeep costs during the period of ownership) is something that a car lease doesn't provide, but there are enormous benefits to NOT having the responsibilities that come with ownership. There are many aspects of ownership that can be seen as "slavery", especially when you're a landlord. (Marketing, processing payments/bookkeeping, mandatory upkeep expenses, taxes, condo fees, cleaning, maintenance/repalcement of appliances)

Ownership can have it's priveledges, but they are mainly intangible (sense of pride/self-fulfillment, peace of mind, ability to express individuality when modifying the property, sense of "home") and people who think that owners themselves are not slaves as well (to the government via taxes, to the banks via interest-bearing mortgage loans, to the condo association who collects dues with little ROI to the owner) are kidding themselves.