OK, so this past week, I decided to refinance on my 15 year mortgage - take advantage of 4.75% rates. I live in TN which has been impacted some (or so I thought) but nothing like in FL, AZ or CA. So prior to the refinance, I had about 35% equity in the home. I am looking at my appraisal, its $80K less than 2 years ago (400K to 320K), so now my equity is less than 20% and much to my dismay I can’t refinance without writing a check or paying PMI. Its been an eye opener to me. So I was reading about the housing bubble and I stumbled on this chart. Holy crap, we are still about 20% higher than the other peaks. Bubbles don’t bust half way…if they do, they will find their way to equilibrium.
This sucks for all of us who are homeowners, but untill it settles within the average historically we will still be in a bubble. So why does the President continue to try to keep the prices from dropping when they really need too.
My guess would be that they’re trying to avoid putting more home loans underwater to keep people in the homes. Otherwise what keeps them from just walking away from the house if they can’t refinance without paying out another down payment and the value isn’t going to come back to a point where they’re not going to take a bath on the sale?
My theory is that Boomers are the largest segment of the population and being such they can put pressure on the government to keep prices inflated. These people are quickly approaching retirement and there is no way the government is going to p/o the largest voting block by telling them the cushy retirement they had in mind (due to the mind-bottling, yeah I said it, mind-bottling gains from selling their house) is now gone and possibly even pushed off years into the future.
Simple answer, because we’ve created a mentality in this country of “No suffering allowed”. We want all the ups and none of the downs. On top of that we want “More ups” and “Faster ups”. Working all our lives for a reasonable retirement is no longer acceptable. We expect to put in 20-30 years and be able to travel the world and stay at our vacation homes. In short we create bubbles and then do everything we can to keep them from popping because only a bubble will give us what we want.
As you stated the market WILL find equilibrium. The trillions being spent to avoid that point will do nothing more than put that off at best, make it worse at worst.
In either case the market will find it’s level, but it will be a bit lower than it would have been 6 months ago because it will now be weighted down by the trillions in new debt we have to support which will affect every market…so yes it’s already made it worse we are just waiting to see how much and when.
By preventing home prices to fall, it also prevents lower-income folks from buying houses at more affordable prices. It also sends signals to home builders to keep building, which will act to make the eventual correction that much worse.
Isn’t that the purpose of modern-day government? To work for the benefit of the haves, regardless of its effect on the have-nots?
I’ve been noticing this amazing level of contradiction in the government more and more. Out of one corner of their mouth they speak of “Helping the have nots” yet the actions they take do nothing more than help the haves.
At this point I’m not sure whether this is a concerted effort to do so or simply a complete lack of understanding of how the whole system works.
I believe Obama stated the other day something to the effect of “Those jobs aren’t coming back and we don’t want them back because they would not create a job that offers a “Living wage””. This was in a response to a “I’m unemployed what are you doing to bring back jobs from overseas we’ve lost”.
So let me get this right unemployment is better than a low paying job? Tell me who this effects…yes the have nots, because all the “Haves” have jobs that are far enough above “Living wage” they don’t have to worry about it.
Entry level buyers are driving any sales you see right now. They still have to qualify for a loan now which is no easy thing compared to three years ago. Builders building new homes is a good thing as it burns through their inventory of lots, which eliminates many of the toxic assets from lender’s portfolios. Many lender have land or lot loans with collateral that maybe be worth 60-70% less than 2006.
But isn’t the issue the high inventory of houses? If we have more houses available than buyers at these prices, how does building more homes help? Don’t you need home prices to fall and inventory levels to decline for a real recovery in housing. I see the issue around lots as a derivative of the housing inventory.
*"I’ve been noticing this amazing level of contradiction in the government more and more. Out of one corner of their mouth they speak of ‘Helping the have nots’ yet the actions they take do nothing more than help the haves. *
** At this point I’m not sure whether this is a concerted effort to do so or simply a complete lack of understanding of how the whole system works."
There’s no need to adopt a conspiracy theory, because it’s all part of the natural, predictable devolution of a mixed-economy system, such as our own, into a system based on pressure groups, turf wars, etc. To get some idea how it all works, you might want to check out the graphs on this page: http://www.humanactioncourse.info/pp/cf/HI40051a.html. Note particularly all the self-reinforcing positive-feedback loops (marked by plus signs), both within each of the four graphs and also from graph to graph. The arrows are explained in detail in the accompanying text, beginning at this page: http://www.humanactioncourse.info/pp/cf/HI40050.html.
“So let me get this right unemployment is better than a low paying job? Tell me who this effects…yes the have nots, because all the ‘Haves’ have jobs that are far enough above ‘Living wage’ they don’t have to worry about it.”
Look up “Marie-Antoinette syndrome” in the Glossary on my website.
These are interesting times…its amazing at the speed at which my personal net worth has changed. Its been cut in half in just 8 short months. I am 44 years old. At this point, despite saving faithfully for over 20 years, buying a house I could afford, and leaving within my means, my ROI after 20 years is effectively 0%. Please note, I am not whining. I am just stating the facts. This along with the chart tells me that we are not at the bottom yet at least in regards to housing prices.
Our govt at all levels must start spending less immediately or we are headed for the mother of all crashes that will make the last 8 months look like childs play, we have to end all bailouts. Why can’t we all just accept the fact that the foundations of our economy have been shaken and we need to reset. If we don’t the coming expenses in Medicare and SSI alone will bury us, you could confiscate all the wealth in the USA and it wouldn’t be enought to cover the debt we are looking at with current budgets proposed by Obama or the Majority.
I think there are two issues we are mixing. There is is good sized inventory of resale homes for sale, but this is also shrinking at least in my area. This is due to short sales, foreclosures etc. Burning through these homes is slower due to lender response time. Buyers are also shifting to new construction due to tax credits and ease of purchase. Issue 2 is new construction. I don’t see this issue as one of home inventory as the lender typically won’t let the builder get too far out in front of buyers. The issue is large subdivision loans held by lenders (large ones and community banks) held on land and lots) So getting home built on the lots so they can be sold (with help from ample tax credits) helps banks.
As long as we still have foreclosures and short sales, I can’t see things stabilizing much. One encouraging sign I see if that several large lenders are getting real aggressive about blowing out their foreclosure inventory. Indymac is really getting rid of stuff in a hurry.
Interesting…I just had a long discussion with Art about this very subject. Everyone thinks we are out of the woods, stock market is up, people are seeing some recovery in consumer spending, business is starting to see some interest in their products so in theory everything is hunky dory.
My contention is that this is only a reaction to the fact that the economy was completely paralyzed in the first quarter and things are loosening up as we approach the beginnning of the second quarter. That is by no means an indication that we are on the mend but only and indication of just how bad things were in the first quarter.
Come June I think all bets are off. Unemployment will continue to rise, business’s that are hanging on by a thread will start to fail and the true meaning of this recession will be there for all to see.
I hope I am wrong but I have two many clients hanging on by a thread and too many banks being just unbelievable in their requirements for lending to believe otherwise. I do, seriously, hope I am wrong.
