patrick.net

You're full of it Housing Watcher. I work for a large city government. Even after numerous audits, the waste is sinful.

My division used to have 255 employees. We currently do the exact same amount of work with only 185 employees and less overtime. Most other government entities are exactly the same.

If tax income falls, services will only decline a little bit...most def not in proportion.

E-man says

Rememer that your local government, schools, hospitals, fire department, police department and city hall, just to name a few, need your tax dollar. Lower home prices would mean lower property taxes and less revenue for them.

This is extremely deflationary for the local, state and overall economy. The best bet/hope is for home prices to stay stagnant for a long period of time.

Some of you don’t know what you’re asking for. Be careful what you wish for :)

Stop being so naive. Home prices have always tracked with household income. Property taxes track with home values. Had there never been a housing bubble, local govts would in fact have collected LESS TAX REVENUE.

God damn, get a clue.

corntrollio says

This is a bogus concern. Those same city departments did just fine when home prices were much lower. When property tax revenues went up, they increased their spending to match, instead of saving money for a rainy day. I don’t have that much sympathy for that, especially when you consider the insane pensions and benefits that public sector employees receive.

Public sector employees usually get raises even during recessions. Cry me a river.

This. Like homeowners during the bubble, tax collectors enjoyed substantially higher returns than they ought to have had. If they saved the money, which most didn't, then they'll actually have scored from the event and are entitled to all the revenue they collected. If they pissed the money away and are now raising the taxed $/value multiples to cover their "losses", then their local constituents need to hold them accountable for their bad budget management (much like somebody extracting all their equity, spending it, and not having a plan for paying off their mortgage or heloc).

So these concerns about property tax revenues can be filed in the "don't give a fuck" folder.

HousingWatcher says

They did fine because at the time people had JOBS and were paying income tax. Today they don’t have jobs. So there goes the income tax revenue. And that revenue msut be made up, so cities are raising property taxes.

I think you need to take an econ or public finance course. Local municipalities for the most part make their money from RE and sales taxes, NOT from income tax.

HousingWatcher says

That’s because they had no choice but to increase spending.

That's b.s. When a city or county increases spending by 50% over just six years due to nothing more than a flood of revenue from overvalued housing, with no plan for cutting it's budget to match a reversion of home values (and revenue), that's utterly irresponsible.

HousingWatcher says

That’s because they had no choice but to increase spending. First, there is Medicaid, which costs states billions of dollars and its costs only go up every year. Plus, we have a growing population so services must be increased to accomodate it. More cops. More teachers, etc. Plus there was a little thing called 9/11 that forced cities like NYC to spend billions in anti terrorism expenses.

Not true. Municipal budgets went up more in the last several years than warranted due to either GDP per head or inflation. 9/11 had nothing to do with it and is just a red herring you're throwing out there.

E-man says

Rememer that your local government, schools, hospitals, fire department, police department and city hall, just to name a few, need your tax dollar. Be careful what you wish for.

Yeah I am wishing for pension != salary and free health care for life for them while my SS is on the line. They are most inefficient bunch on the planet.

"Local municipalities for the most part make their money from RE and sales taxes, NOT from income tax."

Wanna bet? Come to NYC. The city has their own income tax that you pay IN ADDITION to the state and federal income tax.

Plus, when fewer people have jobs and cut back on their spending, what do you think happens to the amout of revenue that the sales tax brings in?

HousingWatcher says

Wanna bet? Come to NYC. The city has their own income tax that you pay IN ADDITION to the state and federal income tax.

Yeah, and banksters are making record profits, so city coffers should be doing quite well.

Municipal revenue is also slightly different in California because of Prop 13. Property tax revenue is quite low, so municipalities are much more dependent on sales taxes and grants from the state (which is broke).

But none of that negates the fact that state and local governments have increased budgets by amounts not warranted by GDP per head or inflation in recent years instead of making rainy day funds. The bubble made them flush with cash, and they spent it. They are exactly like overleveraged homeowners, as someone said. Now it's time to short-sell them.

HousingWatcher says

“Local municipalities for the most part make their money from RE and sales taxes, NOT from income tax.”

Wanna bet? Come to NYC. The city has their own income tax that you pay IN ADDITION to the state and federal income tax.

Yes, I do wanna bet. More money comes from property taxes.

I see you ignored my point above that these govt pissed away the excesses brought by the housing bubble, and now they have to revert their spending amounts to account for the reality which is that housing prices can't double or triple in a decade, nor can their operating budget.

klarek says

Home prices have always tracked with household income. Property taxes track with home values. Had there never been a housing bubble, local govts would in fact have collected LESS TAX REVENUE.

Add to that govt inflated future forecasted household incomes due to tech stock and real estate bubbles increasing spending.
As you correctly stated, had the state dismissed both as abnormal in the short run and ran ops more conservatively there would not be mess as we today.

dodgerfanjohn says

My division used to have 255 employees. We currently do the exact same amount of work with only 185 employees and less overtime. Most other government entities are exactly the same.

Many government jobs basically involve being glorified paper-pushers that could easily be automated through an online process. Government has huge numbers of clerical workers that could be eliminated by technology.

The government jobs that require human-power still usually have some waste, as dodgerfanjohn pointed out. Many government jobs are restricted by work rules that discourage productivity, and many are overstaffed for other reasons.

That's why CEOs of big companies have no tolerance for governments complaining about making 5% or 10% across the board cuts or having to cut a small percentage of jobs. These CEOs have done much harder things -- much bigger cuts, all out of necessity. It's a joke that government can't do the same.

corntrollio says

It’s a joke that government can’t do the same.

Total government spending is $6.1T.

Taking out:

Pensions --$1T
Health -- $1.1T
DOD -- $1T
Interest -- $300B

That's still $2.7T, or over $20,000 per household. Given the median household income is $50,000 this means we've got to work 2 out of 5 days a week just to pay the basic bulk of government.

Of course, adding DOD and interest back in adds another $10,000 per household, or THREE days a week just to pay for basic government!

Something is really really out of whack with this.

Troy says

corntrollio says

It’s a joke that government can’t do the same.

Total government spending is $6.1T.
Taking out:
Pensions –$1T

Health — $1.1T

DOD — $1T

Interest — $300B
That’s still $2.7T, or over $20,000 per household. Given the median household income is $50,000 this means we’ve got to work 2 out of 5 days a week just to pay the basic bulk of government.
Of course, adding DOD and interest back in adds another $10,000 per household, or THREE days a week just to pay for basic government!
Something is really really out of whack with this.
“Nessuna soluzione . . . nessun problema!„

too bad we cannot colonize our way out of this any more. wait there is pandora

corntrollio says

Many government jobs basically involve being glorified paper-pushers that could easily be automated through an online process. Government has huge numbers of clerical workers that could be eliminated by technology.
The government jobs that require human-power still usually have some waste, as dodgerfanjohn pointed out. Many government jobs are restricted by work rules that discourage productivity, and many are overstaffed for other reasons.

The post iffice comes to mind. They should go down to 2-3 days per week residential mail delivery and lay off tons of people. How many days per week do you really need to get snail mail anyway? I bet a lot of people would opt for 1x weekly.

E-man says

Rememer that your local government, schools, hospitals, fire department, police department and city hall, just to name a few, need your tax dollar. Lower home prices would mean lower property taxes and less revenue for them.

They just need to do away with all their pension benefits, bloated payscales, and overstaffing. They don't need higher taxes.

"I bet a lot of people would opt for 1x weekly."

I would like to have mail delivery more than 1 day a week. Think of how many people will be late paying their bills if you drastically cut down delivery. Plus I get Netflix so my wait for movies would be far longer.

HousingWatcher says

I would like to have mail delivery more than 1 day a week. Think of how many people will be late paying their bills if you drastically cut down delivery. Plus I get Netflix so my wait for movies would be far longer.

Going to have to agree with you. In the case of packages that have to be signed for, what if you miss the delivery? Wait another week? That won't fly.

"These CEOs have done much harder things — much bigger cuts, all out of necessity. It’s a joke that government can’t do the same."

CEOs have cut their expenses by outsourcing jobs overseas. Are you saying the govt. should do the same thing?

zzyzzx says

The post iffice comes to mind. They should go down to 2-3 days per week residential mail delivery and lay off tons of people. How many days per week do you really need to get snail mail anyway? I bet a lot of people would opt for 1x weekly.

Yeah, although the post office isn't necessarily a great example. It's not fully a government agency for one thing.

Our postal rates are incredibly low by international standards; doubly, triply, or quadruply so if you consider how big the U.S. is. German rates are probably twice as much as here, but Germany is just over half the size of Texas. I do wonder what their revenue would be like with comparable postal rates, including how bulk mail would be affected.

The other thing is that our postal service spends a huge amount of money delivering mail to remote areas (e.g. large parts of Alaska, remote areas of Idaho, and other remote territory). If you take out the outliers, it's pretty damn efficient, especially in urban areas. In fact, the post office has recognized this and has stopped many unprofitable rural routes in the last several years, much to the detriment of these remote communities. Overall, it's probably the right thing to do, but perhaps it adds to the argument that people might only need mail once a week (i.e. when they go to the remote PO).

"and now they have to revert their spending amounts to account for the reality which is that housing prices can’t double or triple in a decade, nor can their operating budget."

They are not going to. As long as the political system remains corrupt with pay to play politics, money will be wasted. Texas has a massive budget deficit, yet they found a way to give Formula 1 racing a $25 million a year subsidy. New Jersey has a big deficit and is broke. Yet Christie found a way to give $400 million in subsidies to a shopping mall with an indoor ski slope.

HousingWatcher says

CEOs have cut their expenses by outsourcing jobs overseas. Are you saying the govt. should do the same thing?

Nice straw man. Not all CEOs have the ability to outsource jobs. In fact, some CEOs outsource jobs to the U.S. -- German and Asian car companies, for example.

Are you mostly just trolling? You're not really giving substantive responses to people, and you're mostly just bringing up ancillary points that aren't really relevant. Do you think the government budgets are perfect and there's nothing we should cut?

No, I am not trolling. I have an idea: Why don't you list specific govt. programs you would cut? It's easy to say we need to cut. But it's hard to list specific things that should be cut.

HousingWatcher says

But it’s hard to list specific things that should be cut.

Only hard for politicians.

Agriculture subsidies -- cut in full
Ethanol subsidies to the extent not covered in ag subsidies -- cut in full
Defense spending -- there are plenty of non-essential projects that are basically Cold War era projects that aren't useful now. Before the Iraq quagmire, Rumsfeld started cutting some of these projects, but Iraq changed his focus. Sometimes they get maintained by individual congressmen as subsidies to their districts.
Social Security -- raise retirement age, raise income limit
Medicare -- yes, we need rationing, even though it's a 4-letter word. Not everyone should get everything at unlimited cost.

Another one -- there are some DOJ employees who have every 10th day off. Why not just eliminate 10% of the positions?

What about the Bush tax cuts?

I'm in favor of the 20% down as well.

We just (finally) bought a house and put 22% down. We absolutely refused to bid on anything we couldn't put down 20%. The process in buying a house was hella difficult because every house we got bid on got outrageously overbid by some asshole putting down much less then 20%. It's no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

HousingWatcher says

What about the Bush tax cuts?

Sure, I'd get rid of that too. But you asked what from the budget should be cut. That's on the revenue side.

You haven't held up your end of the bargain here. Please give your explanation for why undue increases in state budgets is justified. And don't say 9/11, because you just sound silly.

cearka says

I’m in favor of the 20% down as well.
The process in buying a house was hella difficult because every house we got bid on got outrageously overbid by some asshole putting down much less then 20%. It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

This is very very true.

BTW, realtards absolutely HATE when you point this out.

I'd like to see 100% cash.

All the "buyers" putting only 20% down are seriously interfering with my housing price discovery.

cearka says

It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

The funny thing, though, is that the housing payment is much higher with only 3.5% down -- $350,000 with 3.5% down is $2000/mo but only $1600/mo at 20%.

Alternatively, the $2000/mo pricepoint would result in home prices moving from $350,000 to $450,000 should the lending regime move from 3.5% down to 20% down.

If you think about it, and agree that home prices are set by how-much-a-month, all downpayments just get tacked onto the purchase price.

The lowest price level -- most affordability -- is set by 0% down!

This doesn't take into account though...that most people putting 3.5% down or whatever take out some "creative" financing that results in lower payments for the first few years, only to have the shit explode in there faces later.

Troy says

cearka says

It’s no wonder the prices of housing are so out of funct. No 20% = too many idiots bidding more then they can afford.

The funny thing, though, is that the housing payment is much higher with only 3.5% down — $350,000 with 3.5% down is $2000/mo but only $1600/mo at 20%.
Alternatively, the $2000/mo pricepoint would result in home prices moving from $350,000 to $450,000 should the lending regime move from 3.5% down to 20% down.
If you think about it, and agree that home prices are set by how-much-a-month, all downpayments just get tacked onto the purchase price.
The lowest price level — most affordability — is set by 0% down!
“Nessuna soluzione . . . nessun problema!„

Troy says

The lowest price level — most affordability — is set by 0% down!

You're not taking an overall view of risk. Someone who can't save 20% down may not be a good candidate to be a homeowner. So now, you're taking someone who's a marginal buyer at best and increasing the size of their payment. It's lose-lose.

Banks wouldn't do 3.5% loans in non-recourse states without government subsidies. The risks are way too high. A low amount down has thus far shown to be a good indicator of the likelihood of default.

"Please give your explanation for why undue increases in state budgets is justified."

As I said before, there are several reasons:

1. Rising health care costs
2. Illegal immigration costs
3. Education costs
4. Unemployment benefits

HousingWatcher says

1. Rising health care costs
2. Illegal immigration costs
3. Education costs
4. Unemployment benefits

None of those are justify state or local budgets being that far out of balance. Very few states outside California have significant costs from #2. Very few states are facing heavy costs from #1, although they may in 10-15 years. I agree that teacher's unions are causing problems with good education, but the education costs alone aren't bumping budgets out of balance. Unemployment benefits are after the fact -- they happened after the budgets were already out of balance. If it would help, you could pick a specific state -- NY since you seem to favor it.

NY spends $5 billion a year in illegal immigration related expenses. California I bet is double or triple that.

HousingWatcher says

NY spends $5 billion a year in illegal immigration related expenses. California I bet is double or triple that.

I'm calling BS on that -- those costs are never accurate, and almost always assume that undocumented immigrants don't pay taxes, even though many of them do.

Providing a path to documentation would be a net economic benefit to every single state, and these studies never include the net economic benefit that already currently exists.

cearka says

that most people putting 3.5% down or whatever take out some “creative” financing that results in lower payments for the first few years

No, all the suicide loans have been removed from the marketplace thanks to Dodd-Frank.

Teaser-rates and negative-amortization have been banned, and prepayment penalties have been reduced and banned altogether for subprime loans.

Dodd-Frank requires lenders to keep 5% of any risky loans on their books -- ie be in a 5% loss position after the borrower. This aligns the lender's financial interest with that of the borrower's.

corntrollio says

A low amount down has thus far shown to be a good indicator of the likelihood of default.

So has the market falling 50% from peak. This correlation is not a causation.

The market falling 10% from here is going to cause a lot more problems than recent 3.5% borrowers throwing in the towel.

If the market falls 10% in two years, 3.5% borrowers will only be 1% underwater -- current regs require 2.5% down, 1% PMI prepay, and ~1.6% principal paydown and 1.15% PMI every year, so all that adds up to 9% after 2 years.

3.5% isn't that big a deal, eh.

corntrollio says

So now, you’re taking someone who’s a marginal buyer at best and increasing the size of their payment.

No, loans are still qualified based on debt-to-income limits. Increasing the down payment to 20% will just result in home prices inflating, resulting in the same monthly payment for the same house, but with 20% down instead of 3.5%.

We should have negative down payments to lower housing prices, LOL.

corntrollio says

I’m calling BS on that — those costs are never accurate, and almost always assume that undocumented immigrants don’t pay taxes, even though many of them do.

Sales taxes on Doritos and Slurpees don't amount to a whole lot.

corntrollio says

Providing a path to documentation would be a net economic benefit to every single state, and these studies never include the net economic benefit that already currently exists.

It will encourage an even larger number of people to come here illegally. That's an ass-backwards way to deal with it, and history has proven that it backfires in the end. It sure makes for a sweet-sounding platitude though, right?

Troy says

The market falling 10% from here is going to cause a lot more problems than recent 3.5% borrowers throwing in the towel.

Well there are risks that are unavoidable, and there are those risks which can be mitigated. Can't help those who are going to lose 10% of their house's value. We absolutely can prevent and mitigate those who are going to buy from being underwater. It's all a matter of degree.

Troy says

Increasing the down payment to 20% will just result in home prices inflating

How does that work exactly? Answer: it doesn't, the opposite is true though.

klarek says

How does that work exactly?

I did the math here already. The 3.5% down payment has a larger principal balance and also the 1.15% PMI cost. This eats up buying power and thus the 3.5% population can't bid as high as the 20% buyers.

The example is the $330,000 property. 20% down is $264,000 principal balance, at 4.3% interest this is a $1300/mo payment. 3.5% buyers would have a $1900/mo payment, which includes the $300/mo PMI and $300 more in P&I -- note the very large difference here -- ceteris paribus 3.5% borrowers can't qualify for as large a loan as 20% borrowers.

Since real estate prices are determined by the monthly payment, for buyers that can only afford a $1300/mo payment the price level will thus be $330,000 in a 20% down regime and $230,000 with 3.5% down ($230,000 with 3.5% down is the same $1300/mo in payments). Requiring a $46,000 down payment increases the price by $100,000!

Now, requiring 20% will tamper the number of buyers temporarily, but this is only a temporary effect as buyers labor those long years sending the rent checks to their landlord, gradually scraping together that 20% down payment.

Which is better for the buyer and the market, 3.5% down on a $230,000 purchase or 20% down on a $330,000 purchase?

It's the same house and same monthly payment.

20% down is just excessive conservatism, and I suspect the ulterior motive here is to keep renters renting.