........Not me.
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me neither but the figures were 40k-50k for the US and 20K-30K for canadians and there are way more of you than us ... like 10 times more
I am pretty sure canada would be in the middle of the same shit storm if Paul Martin the finance minister at the time had allowed the Canadian banks to de-regulate and play the same games as the American banks
One of the main reasons i bought a house is because im paying the same a month as i was renting. But now i get the write offs. Am i missing how this was a bad idea? ya im in debt, but instead of paying for someone else to have something to own, im paying to own something.
People buy a house based on the highest monthly payment they can afford. All a tax deduction does is let people buy a more expensive house, which means they are in more debt (banks make $$$) and houses sell for more (real-estate agents make $$$). Therefore, it's easy to see that the mortgage interest deduction is simply a subsidy to banks and real estate brokers.
Furthermore, the mortgage interest deduction is a subsidy to the rich, because the rich are taxed at a higher rate than the poor, and a deduction is worth more to them.
We should emulate Canada and remove the deduction immediately -- though existing mortgages should be grandfathered, so current owners don't get screwed by a much higher payment than anticipated.
http://www.doctorhousingbubble.com/
"I believe a big part of the housing bubble fuel was the ability for people to purchase homes with little to no money. In California, this was the accelerant that created the biggest housing bubble we have ever witnessed. For the lower end of the market you had subprime loans and for the mid to upper tier you had the Alt-A and option ARM products. There was a reason for a down payment. In this article we are going to try to trace the genesis of nothing down in California."
WSJ
* December 7, 2009, 1:06 PM ET
Why Hasn’t Canada’s Housing Market Blown Up?
Both Canada and the United States had low interest rates during the first part of this decade, so why has Canada been able to avoid the severe housing correction that has hit the United States?
This commentary from the Federal Reserve Bank of Cleveland singles out America’s lax lending standards as a leading culprit:
Monetary policy was very similar in both countries from 2000 to 2008, but housing prices rose much faster in the U.S. than in Canada. This suggests that some other factor both drove the more rapid appreciation in U.S. prices and set the stage for the housing bust. A likely candidate is cross-country differences in the structure and regulation of subprime lending markets. That mortgage delinquencies began to climb before the recession in the U.S. but only began to rise recently in Canada (after the economic slowdown began), points to the significance of those structural and regulatory differences in explaining the U.S. housing crash.
In short, lending standards poured more gas onto the fire than did low central bank interest rates, and those standards were too loose in the States.
In the U.S., for example, the ratio of mortgage debt to disposable income jumped by nearly 50%, rising from two-thirds to 100%. Canada saw roughly half of that increase, with the debt-income ratio increase to 90% from 70%. Canada also had much fewer high loan-to-value borrowers. Around 12% of U.S. households had loan-to-values of 90% or more, compared to around 6% of Canadian households.
Federal Reserve Bank of Cleveland
U.S. home prices, tracked with the S&P/Case-Shiller 20-city index, have fallen much harder than Canadian home prices, tracked with the Teranet six-city index.
The subprime market grew to around 22% of the U.S. mortgage market by 2006, but in Canada, it never accounted for more than 5% of mortgage originations. Securitization, or the practice of bundling loans and selling mortgage-backed debt to investors, was also much more common in the U.S. About six in ten loans were securitized in the U.S. in 2007, compared to one-quarter in Canada.
Why was Canada’s subprime market smaller? The study’s author, James MacGee, suggests that in part, Canada was just plain “lucky” to be a “late adopter” of American housing-finance innovations. The subprime share of Canada’s market, for example, was growing rapidly just as the U.S. home price collapse began, and the Canadian government clamped down on some riskier forms of lending in July 2008.
Mr. MacGee notes that Canada, which has seen home prices begin to fall, could still see a bigger correction in the months ahead, but recent data portend that a slowdown is more likely than an outright bust. “Canada’s smaller subprime market share and fewer households with high LTV ratios…suggest that the country is less likely to see the rapid increase in defaults that helped trigger the bust in U.S. housing prices,” he writes.
Looks like Morgan Stanley is getting into the strategic default business. Although they make it sound so much nicer.
http://www.bloomberg.com/apps/news?p...hnfoXOSk&pos=5
"“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”"
I suggest that everyone save that article and especially that quote if they have any qualms or get shit for walking away from an underwater mortgage.
"It's nothing personal. Just business."
I just read that home prices are up every month for the past five months. Does this mean that the real estate crash is over?
Prices are up due to to massive government stimulation & manipulation. $8,000 tax credit is set to expire on 4/30 (maybe). Fed has said it plans to stop purchasing $1.5 trillion in MBS some time in March (maybe). Let's see what happens after all this government intervention ends (maybe).
To me, this is more like reading thrown chicken bones. You can divine whatever you want from the numbers.
Many stories about SAME REPORT say things like "House Prices Stall..." and "Home prices are flat for second month in a row"...
Of course I'd need to see exact methods used for the study to suggest it was anything this simple... but remember that explaining changes in "averages" (and even "medians") in something like a housing market, the SIMPLE explanation can often be wrong.
A quick example to illustrate my point.
Imagine a scenario where;
a) in reality ALL home prices had fallen 10%
b) somewhat fewer lower priced homes were selling
c) somewhat more higher priced homes were selling
Again, even though by definition (see a) prices had FALLEN 10%... simply by having somewhat MORE higher priced homes used to calculate it, the AVERAGE (or MEDIAN) sales price number COULD BE SHOWN TO RISE DRAMATICALLY.
Specifics;
Month A... 10 homes sold;
5 @ 1,000 sq.ft. sold for $100,000 each
4 @ 2,000 sq.ft. sold for $200,000 each
1 @ 5,000 sq.ft. sold for $500,000
0 @ 10,000 sq.ft. sold
Month B... 10 homes sold;
4 @ 1,000 sq.ft. sold for $90,000 each
3 @ 2,000 sq.ft. sold for $180,000 each
2 @ 5,000 sq.ft. sold for $450,000 each
1 @ 10,000 sq.ft. sold for $900,000 each
Average Calculations;
Month A: $100,000 + $100,000 + $100,000 + $100,000 + $100,000 + $200,000 + $200,000 + $200,000 + $200,000 + $500,000 = $1,800,000 / 10 = $180,000 AVERAGE SALES PRICE FOR MONTH A.
Month B: $90,000 + $90,000 + $90,000 +$90,000 + $180,000 + $180,000 + $180,000 + $450,000 + $450,000 + $900,000 = $2,700,000 / 10 = $270,000 AVERAGE SALES PRICE FOR MONTH B.
Remember I'm NOT saying that knowing the average has changed is useless, just that it might be telling you something OTHER than the easiest explanation. In my example above it is telling you MORE expensive homes are selling, NOT that homes are selling for more.
You are dead on. Median price is rising because more expensive homes are being sold. Me, being in pretty much ground zero for the meltdown in the bay area can attest to that. There isnt anymore bottom feeder houses left to buy right now. They've all been snatched up. My neighborhood was empty when i bought 1 year ago. Its now full. Now its the more expensive ones selling, thus we are seeing that median price rise and stabalization in the worst hit areas. If there is no inventory of foreclosures / short sales, housing prices arent going to fall. The hard hit areas hit rock bottom a good year ago. At least here in the bay area. Probably the same for all of California. Now its the higher end homes selling....
Just looked at mls.
1 year ago
Antioch 1200
Brentwood 500
Oakley 350
Today
Antioch 194
Brentwood 152
Oakley has 112
Oakley has only 11 listed in the price range i was looking. There was like 80 of them last year.
crazy shit.
SF was up 15% today in the Case Schiller thing, which just makes me refer you back to the article I posted at the top of the page. I'm convinced that California is still as beautifully insane a place as it always has been and has inspired such great artists as Thomas Pynchon and Charlie Manson to do their thing, both of which would have been swallowed up and spit out in the east. It's a crazy fucking place, and makes no sense at all, and it pisses me off, because I'd like to live in the most beautiful city in the country, but it's always been so expensive.
What do people do out there to make so much money?
I didn't see what happened today but what cause freddie mac and fannie mae stock to jump so high yesterday?
IT, Entertainment (porn/movies/music), medical industry, biotech and Cops. Cops make an obscene amount of money here. California has the 8 hour OT law, cops work 4 12's a week as a majority. That is 64 hours of OT a month. The rest of the collective country, you dont get OT until after 40 hours of work. You do the math. Nurses are in a shortage here big time. Best industry to get into right now if you medical and live in cali. You command the pay. The same goes for nurses, they can work obscene amounts of OT.
I think scientists discovered that owning Fannie and Freddie stock means yer wife/girlfriend is a crazy horny virgin each and every night again in your bed??? Either that or the Federal Government gave a carte blanche to them regards losses/guarantees... But I really think I'm right on the "virginal" thing?
WSJ
DECEMBER 28, 2009
U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy
By JAMES R. HAGERTY and JESSICA HOLZER
The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.
The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.
Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.
"The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed "to prevent the general public from taking note."
Treasury officials couldn't be reached for comment Friday.
So far, Treasury has provided $60 billion of capital to Fannie and $51 billion to Freddie. Mahesh Swaminathan, a senior mortgage analyst at Credit Suisse in New York, said he didn't believe Fannie and Freddie would need more than $200 billion apiece from the Treasury. But he and other analysts have said the market would find a larger commitment from the Treasury reassuring.
In exchange for the funding, the Treasury has received preferred stock in the companies paying 10% dividends. The Treasury also has warrants to acquire nearly 80% of the common shares in each firm.
The Treasury removed the cap on the size of available bailout funds by amending agreements it reached with the companies in September 2008, when the government seized control of the agencies under a legal process called conservatorship. The agreement allowed the Treasury to make amendments through the end of the year, without the consent of Congress. Changes made after Dec. 31 would likely involve a struggle with lawmakers over the terms.
Some Republicans are angry the administration is expanding the potential size of the bailout without having a plan for eventually ending the federal government's role in the companies.
The Treasury reiterated administration plans for a "preliminary report" on the government's future role in the mortgage market around the time the federal budget proposal is released in February.
The companies on Thursday disclosed new packages that will pay Fannie Chief Executive Officer Michael Williams and Freddie CEO Charles Haldeman Jr. as much as $6 million a year, including bonuses. The packages were approved by the Treasury and the Federal Housing Finance Agency, or FHFA, which regulates the companies.
The FHFA said compensation for executive officers of the companies in 2009, on average, is down 40% from the pay levels before the conservatorship.
Under the conservatorship, top officers of Fannie and Freddie take their cues from the Treasury and regulators on all major decisions, current and former executives say. The government has made foreclosure-prevention efforts its top priority.
The pay packages for top officers are entirely in cash; company shares have been trading on the New York Stock Exchange at less than $2 apiece, and it isn't clear when the companies will to profitability or whether common shares will have any value in the long term.
For the CEOs, annual compensation consists of a base salary of $900,000, deferred base salary of $3.1 million and incentive pay of as much as $2 million.
When Mr. Haldeman was hired by Freddie in July, the company set his base pay at $900,000 and said his additional "incentive" pay would depend on a decision by the regulator.
At Fannie, Mr. Williams was chief operating officer until he was promoted in April to CEO. As COO, his base salary was $676,000. He also had annual deferred pay of $2.3 million and a long-term incentive award of as much as $1.5 million.
Under the new packages, Fannie will pay as much as about $3.6 million annually to David M. Johnson, chief financial officer; $2.4 million to Kenneth Bacon, who heads a unit that finances apartment buildings; $2.8 million to David Benson, capital markets chief; $2.2 million to David Hisey, deputy chief financial officer; $3 million to Timothy Mayopoulos, general counsel; and $2.8 million to Kenneth Phelan, chief risk officer.
At Freddie, annual compensation will total as much as $4.5 million for Bruce Witherell, chief operating officer; $3.5 million for Ross Kari, chief financial officer; $2.8 million for Robert Bostrom, general counsel; and $2.7 million for Paul George, head of human resources.
The pay deals also drew fire. With unemployment near 10%, "to be handing out $6 million bonuses to essentially federal employees is unconscionable," said Rep. Jeb Hensarling, a Texas Republican who is a frequent critic of Fannie and Freddie.
He also criticized the administration for approving the compensation without settling on a plan to remove taxpayer supports: "To be doing that with no plan in place is just unconscionable."
The FHFA said that Fannie and Freddie "must attract and retain the talent needed" for their vital role in the mortgage market.
Write to James R. Hagerty at bob.hagerty@wsj.com and Jessica Holzer at jessica.holzer@dowjones.com
Just fucking incredible. Obviously the administration is aware of all the foreclosures "off the books" and is anticipating a shit load more, especially in CA, NV, AZ and FL where the majority of the Option ARMs were originated from 2004-2006. As the 5 year resets start to hit on these loans, it will be interesting to see what the banks do to try and keep people from defaulting. I know FNMA and FHLMC are not holding most of these loans. Wells Fargo and B of A are in their portfolios from acquiring Wachovia who bought World Savings and Countrywide to B of A. I suppose they have off loaded these toxic assets to the Fed in one of the TARP deals by now.
On a brighter note, you can buy a pretty nice SFR in Mammoth now for $575k. http://www.mammothcondoblog.com/mls-...mes/101588.php
Who would of thunk it a few years ago. Resort properties in the US are getting hammered. If this shit keeps up I may get a home in the mountains yet.
In other words, Obama is willing to destroy the entire US middle class before he will allow his banker buddies to lose one cent.
The wealth of our entire nation is being poured into a doomed attempt at keeping house prices so high no one can afford to buy them, in order for banks to pretend they aren't all completely insolvent after leveraging over 20:1 on real estate prices.
Who benefits? The banking oligarchs. (Secondarily, failed flippers, and people who partied for decades off their HELOC.)
Who loses? Everyone who works for a living and tries to save money for their kids and their future.
I said in late 2007 that the US would become Argentina, which destroyed its middle class to pay off its unsustainable debt. We're getting there, step by step.
(Skeptics: do you really think they'd have pushed this through if they didn't know FNM and FHLMC weren't going to lose unimaginable amounts of money this year? Riiiiiight. Remember, almost every foreclosure sale is double-counted, because regular homebuyers don't show up at the courthouse auctions: real estate flippers show up, buy the houses, and put them in the NAR database, from which regular people buy them.)
http://market-ticker.org/archives/17...sury-Know.html
the 'middle class' is the primary mortgage defaulter, due to their materialism and desire for conspicuous consumption
i guess they were all hoodwinked into buying McMansions they couldn't afford by their own greed
i know of a couple in another state, he an assembly line worker at a Nissan plant, she a school bus driver
a couple years ago, they were quite disappointed that they couldn't buy a $538,000 house because they couldn't get mortgage insurance
after all, their combined pretax income was almost $40/hr
But dood, they were counting on the non taxable income from all the meth they could make in the new 3 car garage and the pot they would grow in the 3 unused bedrooms:rolleyes: I mean, how else were they going to make the monthly $4000 PITI payment? With their credit cards until the house appreciated enough in 6 months to get a HELOC to pay off their credit cards and cover their shortfall a few years until they sold at a HUUUUUGE profit. GTFO
Spats... I'm not going to blindly support everything and anything done to help the market, but can you not see how a real estate market that further deteriorates ends up wiping out the middle class in and by itself?
Get over it. It will deteriorate. It has to. These actions are outrageous and futile. A cynic will note the time frame. Three years. Why three years? That keeps your darling debt bloated middle class somewhat above water on their stupid, overpriced mortgages until the next inauguration. Why else?? This is so pathetic. Wages have been stagnant for the last decade, the stock market is actually down a little, so WHAT THE FUCK justifies the stupid inflation of home prices? One thing, and one thing only. Real easy money. And, it still continues. Barney Frank wants to raise the FHA loan limit to 800000 fucking dollars! This was a program that was supposed to help low income first time buyers just 3 years ago. Now it's supporting a market, mostly in California, where families making 100,000 can actually buy an 800000 house, on your fucking dime. That is just so fucking stupid. They just want to re-inflate the bubble, and it just makes me and anyone else who have been trying to do the right thing feel like a fucking chump. But, they can't do it. They can huff and puff, but it won't work, in the end.
but this is the real killer:
"Fannie Mae and Freddie Mac stocks became hot commodities earlier this week. But before jumping on that bandwagon, consider: The companies’ own executives aren’t being paid with their companies’ stock.
Fannie and Freddie shares rose earlier this week on the Treasury’s decision last Thursday to hand a blank check for any losses the companies may take over the next three years.
Treasury made its Christmas Eve gift the same day that it signed off on multimillion dollar compensation deals to Fannie and Freddie’s senior executives. Those deals, which offer pay packages worth up to $6 million to chief executives of Fannie and Freddie, are being paid in cash.
As the WSJ reported last week, government overseers wouldn’t force the executives to take stock because it doesn’t have much value, and they didn’t tie pay to long-term performance because, well, no one knows if Fannie and Freddie are here for the long term.
“They’re fully aware the stock is not worth anything down the road,” says Bose George, an analyst who covers the companies for Keefe, Bruyette & Woods Inc. “This acknowledges from all sides that the stock is not worth anything in the long term.”
It’s not unusual to see big jumps–driven mostly by small investors and day traders–in Fannie and Freddie stock whenever news filters out about what the government may or may not be doing to the companies. Freddie gained around 33% to a mid-day high of $1.68 on Tuesday from last Thursday before closing at $1.42 on Wednesday. Fannie posted a similar jump to a mid-day high of $1.38 on Tuesday before closing Wednesday at $1.16.
Investors cheered the Treasury’s decision to uncap the government’s bailout of the two companies because rising losses alone won’t be enough now to push the companies into receivership, a form of bankruptcy restructuring. The government had previously pledged up to $200 billion to each company to keep them afloat and out of receivership. (This WSJ story today looks at some questions that those decisions have raised among analysts).
Some investors and pundits have argued that the companies could one day have value, but most analysts who still cover the companies think their common stock is worthless because the companies won’t ever be able to fully repay the government, which has taken preferred shares in the companies that pay 10% dividends in exchange for pumping $112 billion into the companies."
Get that? These guys are being paid in fucking cash, because they know the stock is worthless. And we get stuck with the company.
I swear, this whole health care thing is just a smokescreen to avert our eyes from this criminal behavior. Write your congressman. It's all you can do.
Don't even get me going about that GMAC bailout #III announced today, with no management shakeup. The UAW will live to vote again.
Greedy homedebtors are part of the problem -- but greedy banks, corrupt ratings agencies, stupid institutional investors, and bribe-taking politicians and regulators formed the rest of the value chain, without which the crisis would not have been possible.
That's like blaming the victim of a Nigerian 419 scam or other con artist, while holding the scammer blameless. The victim is stupid or greedy, and the scammer is a criminal.
Whats wrong with someone taking an fha. Me and my wife make 100k. But we sure as hell didnt buy an 800K house. We bought a 200K house. So did 5 of my other friends because of FHA and cheap houses. None of them paid over 250K. I pay taxes. They pay taxes. Its our fucking dime too that paying for this house. Ive never had the luxery of living with mama and dada like alot of people i know. Its pretty fucking easy to come up with a down payment when you have no fucking bills. I've been supporting myself since i was 17 years old. Paid for everything including my school. You think its a bad thing that someone like me, who sat on the sidelines gets rewarded with a new house, lower payment than i was paying in rent? Ive worked my ass off the last 20 years and paid a fuckload of taxes. Its about time i rewarded myself and the government did too, ffs.Quote:
This was a program that was supposed to help low income first time buyers just 3 years ago. Now it's supporting a market, mostly in California, where families making 100,000 can actually buy an 800000 house, on your fucking dime.
You arent going to prequalify for a 800K house making 100k a year. Theres no fucking way. We only prequal'd for 300K and i wasnt willing to spend that much.
Because it doesn't.
Home mortgages are non-recourse, which means that middle class defaulters lose their credit rating but little else. The banks are the ones who lose money in a default.
However, what we are doing is saying "Defaulters can't lose money, and the banks aren't allowed to lose money either because they paid for our reelection campaigns." But someone has to lose money -- and guess who it is? The American taxpayer!
Taxes are not only recourse obligations -- they cannot be discharged, even by bankruptcy! What we are doing is shifting $TRILLIONS in losses from big, politically connected banks (GS, JPM, BofA, Citi) to you and me.
That's bad enough. But look at some of the other consequences:
-Housing prices are such that it is impossible to purchase a home without going into crippling debt that is impossible to pay back, and can only be got rid of by finding a sucker willing to pay even more than you did before the teaser rate expires. How does mandatory crippling debt benefit Americans?
Hint: it doesn't. It benefits banks, which is why maintaining housing prices that no one can afford, by any means necessary, is our official fiscal policy.
-Bank lending has collapsed, which is why the economy is stagnating (since money is created by bank lending) and the only economic activity is being produced by our government borrowing and spending money. If prices collapsed, bondholders would lose -- but banks could lend again, because people could actually afford to buy houses, and our economy would restart itself. How does forcing the middle class to pay for the losses of the banking industry benefit Americans?
Hint: it doesn't. It benefits banks, which is why the Obama and Bush adminstrations have been willing to torpedo the entire US economy before allowing Goldman Sachs, JP Morgan, Citibank, or Bank of America to lose one penny of their $billions in profits.
you can thank bush for that one. Passed a law in 2007 that on your primary home you foreclose or short sale on, you have no tax liability to irs. what a sham. Pisses me off so many people got off basically free and got to keep their cars, etc. All they took is a credit hit. Whoopidy doo. I have one credit card i rarely use. They arent necessary.Quote:
However, what we are doing is saying "Defaulters can't lose money, and the banks aren't allowed to lose money either because they paid for our reelection campaigns." But someone has to lose money -- and guess who it is? The American taxpayer!
Well, first, read Spats posts above, he's on a roll.
And, yeah, i may have enhanced my argument with the 100000/800000 spread, although, as you may know, the loans that many took in your neighborhood out there recently had an even wider spread, because they were NO MONEY DOWN. Some of those actually went to million dollar loans. It's true. Maybe not now, but, to answer your question, what's wrong with FHA is the low down payment requirement, that combined with the 8000 tax credit on about a 225000 house, means NO MONEY DOWN, which is just plain wrong. You need to have people with skin in the game to make it work in a non recourse state like yours, or they will just walk away when it's underwater, as hundreds of thousands are doing right now. Why stick around when you're 200000 underwater? You could be there for at least ten years, maybe your whole life, if Japan is any indication. You'd be stupid if you didn't just walk. Trust me, the banks do it all the time when deals go bad in their world.
And, you're not "rewarding yourself" with a life of debt servitude to wood, drywall, and stone. Just the opposite. Be careful, man, you're OK, but your state is about to see a world of hurt this year and next with all the option ARM loans resetting and the banks releasing all the foreclosures to the market. It ain't over yet, and, I gotta tell ya, when I see SF bubbling back up again with ridiculous prices, I have to think that that area may be the canary in the coal mine for the double dip.
edit: bookmark this guy: http://www.doctorhousingbubble.com/ He knows your territory.
"Free" government money? Check. Historically low interest rates manipulated by the Fed? Check. Easy credit for deadbeat loser first time buyers like Cramer and all his douchebag friends? Check. All of the elements that caused the housing bubble are still in place. Now instead of your friendly neighborhood bankster providing the fuel for the fire it's your friendly neighborhood turd burgular Barney Frank & his crony bloodsucking dirt pimp Johnny Isakson. Nothing has changed.
Amen, brother. No matter what, we've gotten screwed by this bubble because I planned to move (up) a long time ago, but refrained (mostly) because of the dramatic increase in prices that started in about 1997, especially the second wave that started in 2003 or so.
I agree with Spats and Benny that prices have to be allowed to find their "natural" level. Perhaps moderating the rate of decline is desirable (I'm pretty sure Spats would disagree), but, long term, no good can come of avoiding reality.
And Benny is right on with his numerical example above, at least in the not too distant past: http://www.washingtonmonthly.com/fea...ace-wells.html. (Edit to add - While numbers like that may not be accurate any more, actions taken to artificially pump that ratio up, even if not to that level, are still going to produce pain on down the road. If things are as Cramer indicates in his post, that's not bad.) From that April 2004 article:
"Truth is, in most of the country there's no housing bubble. Perhaps the crucial ratio from which economists determine whether housing markets are out of whack is the ratio of home prices to annual income. In most of the country, it is modest, 2.4:1 in Wisconsin, 2.2:1 in Kentucky, 2.9:1 in Illinois.
Only in about 20 metro areas, mostly located in eight states, does the relationship of home price to income defy logic. The bad news is that those areas contain roughly half the housing wealth of the country. In California, the price of a home stands at 8.3 times the annual family income of its occupants; in Massachusetts, the ratio is 5.9:1; in Hawaii, a stunning, 10.1:1. To some extent, there are sound and basic economic reasons for this anomaly: supply and demand. Salaries in these areas have been going up faster than in the nation as a whole. The other is supply: These metro areas are "built out," with zoning ordinances that limit the ability of developers to add new homes. But at some point, incomes simply can't sustain the prices. That point has now been reached. In California, a middle-class family with two earners each making $50,000 a year now owns, on average, an $830,000 home. In the late 80s, the last time these eight states saw price-to-income ratios this high, the real estate market collapsed."
Yeah, but, you're not mentioning one thing. Many many people in those non bubbled places are all maxed out on HELOC loans, which has been a illusory rise in their standard of living over the last decade. Game over on that one, and now they pay - if they have a job.
There you go, I was talking to a much younger buddy, saying that when I bought my first home the sales price to annual income ratio was 2:1. Now where I live, it is easily 8:1-10:1 which is just fucking nuts. He and his wife to be make an easy $150k between them and are looking to buy around $350-$400k so 3:1 if even. Cool, they will be fine.
Well i guess its how you look at owning a home. I bought on a 2:1 ratio, so im not too worried about it. I could rent the place out for as much as my mortgage is easily. As for my state and all these loans resetting, i really couldnt give a collective fuck. Im already taking it in the ass on taxes, whats another couple grand a year they take from me. Ya, it fucking sucks ass that all these people get to walk free. But the value of my home is of no concern to me. In 15 years i might care when my daugher graduates from high school. But until then, it really doesnt matter. I'm not going anywhere.Quote:
And, you're not "rewarding yourself" with a life of debt servitude to wood, drywall, and stone. Just the opposite. Be careful, man, you're OK, but your state is about to see a world of hurt this year and next with all the option ARM loans resetting and the banks releasing all the foreclosures to the market. It ain't over yet, and, I gotta tell ya, when I see SF bubbling back up again with ridiculous prices, I have to think that that area may be the canary in the coal mine for the double dip.
And that's what it's about. Cash flow, cash flow, cash flow. If you can generate cash on a 30 year fixed, INCLUDING taxes, insurance, and 2%/year for maintenance and repair, then friggin' go for it. It's all the people that bought on the "greater fool" theory that deserve their ass handed to them.
Benny: another big part of the SF puzzle is that no one in the city has children. That money all goes straight into rent/housing.
a2m, as usual, is obnoxious yet perceptive.
SF mega-mansion update....:)
2845 Broadway Is Withdrawn In 2010 After 1400 DOM At $65,000,000
http://www.socketsite.com/2845%20Broadway%202010.jpg
Full read and comments here:Quote:
Speaking of properties that were withdrawn from the MLS at the end of the year, after 1400 days on the market at $65,000,000, and without a single official reduction, on Friday the first the listing for 2845 Broadway was withdrawn from the market without a sale.
As we wrote in 2006 when the property was first listed:
Apparently the original two structures at 2845 Broadway sold for $32 million in November 2002, cost of construction to date is estimated to be $18 million, and the “Buzz among brokers” is that it will cost another $8-16 million to finish the property. Just to clarify, for $65M you won’t be getting any “interior walls, ceilings and finishes”.
No update on the current finish of the property (or whether it will soon return to the market with 1399 fewer days on the market and no official reductions).
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I'm hearing more and more about folks with modest ARMs -5/1s and such resetting to 1 - 1.75% lower than their previous rate, saving hundreds per month. That's give many some breathing room on HELOCs and other debts. Perhaps this is all part of the Obama/Bernanke/Geithner conspiracy to take the crash out of the wave - if such a plan or conspiracy really is that coherent. Too bad the whole credit card industry jacking rates up is working in the opposite direction, not to mention those truly predatory bad loans that are resetting to LIBOR plus 6% or more.
Renegotiate your credit card debt, sell that fancy car and buy a beater, live with less luxury, shop Goodwill, and come out of this economic mess without too much hurt. Nah, most folks don't have impulse control - they are signing up for 90days same as cash for a bigger TV at BestBuy.