patrick.net

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.

Yeah, I'm sure it has nothing to do with risk mitigation and everything to do with evil Republicans creating a serfdom society.

The rationale in your argument is truly bizarre, since it negates the severely diminished level of consumer demand at current prices.

Since you aren't considering the aggegate, maybe an example will paint this better for you: A person with substantially high income and a $20,000 DP will go from being able to buy a $571k house to a $100k house.

That will increase prices?

klarek says

A person with substantially high income and a $20,000 DP will go from being able to buy a $571k house to a $100k house.

Substantially high incomes will save the down payment. Your example here is nonsensical.

High down payments are unnecessary as long as housing doesn't fall more than 3% a year. I did the math for you for this too -- PMI is 1.15% and principal paydown starts at 1.6% the first year and increases from there.

After just 2 years a 3.5% borrower has 10% skin in the game, via principal paydown and PMI payments.

since it negates the severely diminished level of consumer demand at current prices.

Demand is demand. It only takes 2 buyers to bid against each other. The 20% regime would knock out demand for a while, but it would come back, and if it doesn't -- eg landlords are forcing their renters to fork over their monthly savings --, then that's another indictment of 20% down.

klarek says

and everything to do with evil Republicans creating a serfdom society.

This has nothing to do with Republicans and everything to do with this serfdom society you speak of.

http://research.stlouisfed.org/fred2/series/USHOWN

If 3.5% down is risky given future price declines, raise the PMI up from 1.15%. That's also a win-win -- the less we spend on housing the better.

Troy says

Substantially high incomes will save the down payment. Your example here is nonsensical.

Your argument is assuming that the person was making the substantially high income for an eternity. Might be a doctor just out of residency.

Troy says

After just 2 years a 3.5% borrower has 10% skin in the game, via principal paydown and PMI payments.

It takes SIX years to pay down 10% of the principal. Two years puts the owner only a hair above 3% principal paid off. That along with their 3.5% down payment is hardly enough to cover the cost of selling the house, assuming prices are the same.

PMI payments aren't "skin in the game" any more than car insurance is a contributor to my auto loan.

Troy says

Demand is demand. It only takes 2 buyers to bid against each other.

You're seeing the aggregate here. A pool of buyers will effectively be limited in what they can purchase since they don't meet the DP threshold. So it's not going to be the 3.5% versus the 20% on the same house. The 3.5% guy will be making an offer on a much cheaper house. The 20% guy has less competition, and the house he was going to purchase has to lower its price to attract a buyer since so many of those people whose incomes can afford the house are now well below the DP threshold.

This is basic supply and demand. The way you're pegging this is as if you assume everybody has $200k in their bank account, and can pay whatever DP percentage is required. Perhaps you should look at the personal savings rate in this country. It's been hovering around zero for quite some time now.

Troy says

If 3.5% down is risky given future price declines, raise the PMI up from 1.15%. That’s also a win-win — the less we spend on housing the better.

You wouldn't even need PMI were these people to put a significant down payment on the house. It's a complete waste of money to have them plow their earnings into PMI when it could be going into their principal or down payment.

It's just a way of ushering people into the market earlier than they should jump in. They're pawns, really naive pawns whose willingness to purchase is exploited by abysmally low DP requirements while raping them with insurance fees for years which would have been much better put into savings and hence into the principal of the house, thus limiting their risk factor.

klarek says

Your argument is assuming that the person was making the substantially high income for an eternity. Might be a doctor just out of residency.

Um, yes, I assume stable household incomes. So do lenders, obviously.

It takes SIX years to pay down 10% of the principal.

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that's 19.4% "skin in the game" in just 6 years. Almost there to that magical 20% zone of safety!

PMI payments aren’t “skin in the game” any more than car insurance is a contributor to my auto loan.

Sure they are. PMI perfectly offsets any losses the lender will take on the property. Hell, maybe we ought to make PMI a set-aside account and just apply it to the principal if & when there's enough equity to hit 80% LTV.

The 20% guy has less competition

You are overly attached to this demand destruction of high down-payments.

I argue this would be a temporary thing and establishing a 20% regime would not result in long-term demand destruction, it would just delay entry, forcing millions of families to pay their LL's mortgage payments for years, all unnecessarily, while also raising the price level since "affordability" rises more than linearly with every dollar of down payment.

It’s a complete waste of money to have them plow their earnings into PMI when it could be going into their principal or down payment.

Better to 1.15% PMI than to being a rent-slave to their landlord.

This is obvious, no?

would have been much better put into savings and hence into the principal of the house

LOL. Putting savings into principal? Talk about risk! Look, either the market is tanking from here or it isn't.

If it is, then buying with 3.5% or 20% is a total waste of money.

If it isn't, then 3.5% is perfectly safe. The numbers say borrowers will have 19.4% principal paydown + PMI payments in just 6 years.

Troy says

Um, yes, I assume stable household incomes. So do lenders, obviously.

Stable in their terms is what, like six months? A year? Don't know anybody that makes enough money to save up $100k in that time period.

Troy says

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that’s 19.4% “skin in the game” in just 6 years. Almost there to that magical 20% zone of safety!

What in the world makes you think that all the PMI is going into the principal?

Troy says

You are overly attached to this demand destruction of high down-payments.

No, I am just overly stating an economic must-know fundamental: supply and demand. You're completely dismissing this in your theory, which is why it's b.s.

Troy says

I argue this would be a temporary thing and establishing a 20% regime would not result in long-term demand destruction, it would just delay entry, forcing millions of families to pay their LL’s mortgage payments for years, all unnecessarily, while also raising the price level since “affordability” rises more than linearly with every dollar of down payment.

No offense, but that's really dumb. Do you think that if we lived in a world of 20% down, then the next morning it went to 3.5% down, people would be going out and buying cheaper houses? That prices will fall?

Troy says

Better to 1.15% PMI than to being a rent-slave to their landlord.

This is obvious, no?

No, it's not. It's part of the bullshit "renting is throwing money away" crap I and others have heard ad nauseum for years. If you're going to use this as a basis for your argument, then this discussion is effectively over.

People nowadays have to be so mobile due to job insecurity that owning is a liability. Prices are still too high, especially if people have to have a decent sized down payment. I hate it when the industry lobbies for self serving stuff then promotes it as being "good for the economy," or "good for you." Any benefit of their lobbying is incidental, but usually the result of industry lobbying is the public getting shafted.

klarek says

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?

Only if you don't understand economics.

Even the Cato Institute says that legalization would add $180B to GDP over 10 years:
http://washingtonindependent.com/55152/cato-institute-finds-180-billion-benefit-to-legalizing-illegal-immigrants

Other studies have found an even greater benefit by an order of magnitude, making Cato's estimate a lowball:

http://www.americanprogress.org/issues/2010/01/raising_the_floor.html

According to this study, a path to legalization would raise GDP by $1.5 TRILLION over 10 years. A guest worker program would raise GDP by $792 billion over 10 years.

In contrast, mass deportations would lower GDP by $2.6 TRILLION.

What you're missing is that the U.S. economy did well when we allowed more immigration. Certainly it would make sense to have more skilled workers here and more people with advanced degrees.

klarek says

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.

Sure, undocumented immigrants do pay a ton in sales tax, but they often also pay property tax, income tax, and payroll tax. One of my friends who is an immigration lawyer has had multiple clients with tax returns going back more than 10 years -- sometimes you need to add them to your immigration applications. This phenomenon is well documented.

In addition, a path to legal status generally requires paying a big fine and making absolutely sure that all back taxes are paid, which would be a huge boost to our revenues in and of itself.

"Certainly it would make sense to have more skilled workers here and more people with advanced degrees."

Why do we need more peope with advanced degress when there are tens of thousands of people with advanced degrees unemployed or flipping burgers?

In Pennsylvania alone, there are 15,000 unemployed skilled workers:

http://articles.philly.com/2010-09-30/business/24977870_1_unemployed-engineers-college-education-unemployment

And FYI: We already have a system in place that allows workers with advanced degrees to come to the U.S. IT is called the H1-B, which is basically a criminal enterprise that allows companies to fire US workers and replace them with cheap foreign labor.

Troy says

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%.

Not true. If anything, raising down payments LOWERS housing prices because fewer people can meet the down payment requirement. It only takes a quick look at the current bust to show this. Basically, the opposite of everything you have said with respect to 3.5% down is true. It's nice to have opinions, but the facts say differently.

Troy says

Right, and in these SIX years they will have also paid 7.9% in PMI. Added to the 2.5% down at purchase, that’s 19.4% “skin in the game” in just 6 years. Almost there to that magical 20% zone of safety!

What is this magical math where you include PMI as "skin in the game"? That makes no sense. You've said this at least twice in this thread, and it's still not true. You don't understand the concept of insurance.