This all led to huge amounts of money flooding into the housing market. All of a sudden a lot more people could afford to buy a house and a lot more people could afford to buy a much bigger house than before. None of this was based upon economic reality, but this artificially increased demand led to soaring home price appreciation and a new construction boom. And as I said, none of it was either real or sustainable. But it was a hell of a ride for a few years until the bottom fell out. Securitizations are gone and they most likely aren't coming back for the foreseeable future. So they days of easy money are over.

Now we are in a situation where credit policies are more conservative and underwriting standards are much tougher again. Those mean bastards are actually making me prove the income numbers I claim now with tax returns and pay stubs. And that took loads of people out of the market. Thereby dropping demand like a stone.

Now with demand much lower the new equilibrium point means we are way overbuilt for demand and prices aren't sustainable at their current levels. Yes the government gimmicks can delay the inevitable for a while at great expense to the taxpayer, but prices will eventually drop to their natural equilibrium point. Over time, supply and demand is stronger than government. It just is. Sorry.
And it is this understanding that leads me to believe that all homebuyer subsidies intended to ease this crisis are a waste and will not yield a lasting benefit.

If you guys have any questions or would like me to go into greater detail about any of this stuff the just let me know and I'll do my best to accommodate.

Damn. The poor schmucks like myself that played by the rules, even paying off our home early, are now getting the wienie up the gazoo. Dan, you've made it pretty easy, even for this old fart, to follow. Good job. 

Great thread Dan.

Quote from: wally on October 16, 2010, 08:10:28 AM
I'm old enough to remember when "standard financing" meant 20% down and excellent credit.  First time homebuyers often had to save for years, or borrow money from their parents ( or sometimes receive a wedding gift of ) a downpayment for a very modest home that they could afford to pay for.

While I'm not advocating a return to such tight restirctions on qualifying for "the American Dream", When you have that much skin in the game, you tend to make whatever sacrifices you have to make in order to pay your mortgage!

In those days there were very few foreclosures and nobody ever seemed to go bankrupt for a variety of reasons; not the least of which was the social stigma attached to such "failures" in our communities!

That is the way it should be.  If people are buying homes left and right on credit, then the demand cranks up, construction kicks in, and voilà!  Instant bubble.  If people paid cash for their properties, that keeps inflated demand and credit in check.

I tell people all the time they need to buy their homes in cash.

The words "devil" and "bank" can always be used interchangeably. 

Quote from: taxed on October 16, 2010, 01:00:59 PM
That is the way it should be.  If people are buying homes left and right on credit, then the demand cranks up, construction kicks in, and voilà!  Instant bubble.  If people paid cash for their properties, that keeps inflated demand and credit in check.

I tell people all the time they need to buy their homes in cash.

The words "devil" and "bank" can always be used interchangeably.

     Thats ludicrous taxed,  90% or more americans cant pay cash for a house.

    Im with wally my first house and only because of a VA loan I just made the qualifiers...I had to have 5 yrs with one employer and excellent credit and x down and closing costs...and the house was truly a "STARTER". My wife and I saved for a long time to get in and buy furniture and have fixup money etc etc.
    Then 6 yrs ago my Brother in Law a real leach bum in every respect of the terms...wants to move to fla near us...he had gone bankrupt didnt have a nickle..I said to my wife he will qualify for a house on the moon not here...well damnit...they not only approved him but rolled closing costs and an extra 5 grand into his mortgage, so he could move here.
     Right now to just refinance you have to meet stricter qualifications than wally and I had to back then.....so the pendulum swings all the way left then all the way right

Quote from: zip on October 16, 2010, 01:13:30 PM
     Thats ludicrous taxed,  90% or more americans cant pay cash for a house.

There is nothing wrong with leasing.  Also, saving for something special would make people more responsible.  When you really want something, you may cut down on some frivolous expenses and save instead.  Far more people can save for a home than you give credit for Zip, IF they are responsible and stay under their means.

Quote
    Im with wally my first house and only because of a VA loan I just made the qualifiers...I had to have 5 yrs with one employer and excellent credit and x down and closing costs...and the house was truly a "STARTER". My wife and I saved for a long time to get in and buy furniture and have fixup money etc etc.
    Then 6 yrs ago my Brother in Law a real leach bum in every respect of the terms...wants to move to fla near us...he had gone bankrupt didnt have a nickle..I said to my wife he will qualify for a house on the moon not here...well damnit...they not only approved him but rolled closing costs and an extra 5 grand into his mortgage, so he could move here.
     Right now to just refinance you have to meet stricter qualifications than wally and I had to back then.....so the pendulum swings all the way left then all the way right

Zip, I am not saying _if_ you have a mortgage and can afford it and are responsible that it's a bad thing.  I am saying people should buy their homes in cash.  We would be a better society from it.

Quote from: taxed on October 16, 2010, 01:30:07 PM
There is nothing wrong with leasing.  Also, saving for something special would make people more responsible.  When you really want something, you may cut down on some frivolous expenses and save instead.  Far more people can save for a home than you give credit for Zip, IF they are responsible and stay under their means.

Zip, I am not saying _if_ you have a mortgage and can afford it and are responsible that it's a bad thing.  I am saying people should buy their homes in cash.  We would be a better society from it.

Yeah, Heaven forbid someone sacrifice a little.
I went without pretty much everything for several years, and saved every freakin penny, I bought an old motorhome and lived on a ranch that I worked for, no cable, phone, or any other piece of technology, I had a TV and that was it.
I bought my 10 acres of raw land with my savings and built my own home all by myself.
There were times I could only afford two or three 2x4s, but eventually, with a lot of sacrifice, the house is built, and I owe nothing to no one.

Too many people think they have to have it all right now, the BMW, boat Plasma TV, cable TV, the list is endless.
It's all about sacrifice, as you said, they tend to appreciate it when they work for it, like Zip and his wife did.
It may not be pretty, but when you earn it, it's a Castle. 8)

Quote from: Solar on October 16, 2010, 01:55:18 PM
Yeah, Heaven forbid someone sacrifice a little.
I went without pretty much everything for several years, and saved every freakin penny, I bought an old motorhome and lived on a ranch that I worked for, no cable, phone, or any other piece of technology, I had a TV and that was it.
I bought my 10 acres of raw land with my savings and built my own home all by myself.
There were times I could only afford two or three 2x4s, but eventually, with a lot of sacrifice, the house is built, and I owe nothing to no one.

Too many people think they have to have it all right now, the BMW, boat Plasma TV, cable TV, the list is endless.
It's all about sacrifice, as you said, they tend to appreciate it when they work for it, like Zip and his wife did.
It may not be pretty, but when you earn it, it's a Castle. 8)

So, so true.  And moreso today, if someone has a job that they feel will be there, the deals on everything are crazy.  There is no excuse, especially now, why people can't own a house, or a car, outright.

One of the multiple problems leading to the collapse of the mortgage market...

As US Secretary of Housing, Andrew Cuomo set Federal Housing Goals that required FannieMae and FreddieMac to purchase hundreds of millions of dollars of bad sub-prime mortgages.


IT WAS CUOMO who lowered lending standards.

IT WAS CUOMO who eliminated down payments.

IT WAS CUOMO who offered 105 percent financing.

IT WAS CUOMO who pushed sub-prime mortgages containing a two percent increase in interest rates, guaranteeing they would crash.

IT WAS CUOMO who cost taxpayers $2.4 trillion and the value of our 401k's when the sub-prime mortgage market collapsed.


As The Village Voice correctly reported in 2008: Cuomo "turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded 'kickbacks' to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why."

When the ultra-liberal Village Voice blames Cuomo for lighting the fuse on the sub-prime mortgage meltdown, even mainstream media reporters sit up and listen:
http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/

Quote from: taxed on October 16, 2010, 02:06:05 PM
So, so true.  And moreso today, if someone has a job that they feel will be there, the deals on everything are crazy.  There is no excuse, especially now, why people can't own a house, or a car, outright.

Right now, an entrepreneur can write his own ticket.
He only has to find a good location, and a building half full with tenants, and the land lord will bend over backward to get the space occupied.
In my case when I opened my first health club, the land lord fronted me eighteen grand for equipment, so long as I could make rent.
In today's economy, all someone has to do is show up and prove they can breathe, and the landlord will put you in business.
If I was younger, I'd be opening all kinds of different business.

Quote from: Solar on October 16, 2010, 02:12:36 PM
Right now, an entrepreneur can write his own ticket.
He only has to find a good location, and a building half full with tenants, and the land lord will bend over backward to get the space occupied.
In my case when I opened my first health club, the land lord fronted me eighteen grand for equipment, so long as I could make rent.
In today's economy, all someone has to do is show up and prove they can breathe, and the landlord will put you in business.
If I was younger, I'd be opening all kinds of different business.

Man, there is so much I want to do.

Quote from: taxed on October 16, 2010, 02:19:25 PM
Man, there is so much I want to do.

Now is your best chance, and without any up front cost to you.
Find someone willing to front the Capital that wants to be a silent partner, and get a landlord willing to forgo any rent for a year, and you're in.
I know a year sounds ridiculous, but most of the vacancies out there, won't be filled foe at least a couple of years.
An empty space is a bad for business, and all the other business in the facility suffer right along, because there is less draw, so they have less clientele, and the land lord knows this, he knows it's only a matter of time before another folds up shop, and the strain increases.
You are in the sweet spot at the moment, take advantage of it.

Quote from: Solar on October 16, 2010, 03:05:27 PM
Now is your best chance, and without any up front cost to you.
Find someone willing to front the Capital that wants to be a silent partner, and get a landlord willing to forgo any rent for a year, and you're in.
I know a year sounds ridiculous, but most of the vacancies out there, won't be filled foe at least a couple of years.
An empty space is a bad for business, and all the other business in the facility suffer right along, because there is less draw, so they have less clientele, and the land lord knows this, he knows it's only a matter of time before another folds up shop, and the strain increases.
You are in the sweet spot at the moment, take advantage of it.

Money isn't my problem, it's time.  I have too many projects right now.  I will be buying heavy commercial late next year.

Great point guys. Even if you can't afford to pay cash for the full balance you can still buy a modest home that you can quickly pay off. There is nothing wrong with buying a 80,000 house and paying it off in 5 or 6 years. Then trade up as you accumulate more cash.

Living gets pretty cheap when you don't gave a mortgage payment.

Back to the original point, what's most overbuilt are the upper mid range homes. In my area they are the $225-350K homes. Above that and people can pay cash. Below that and a lot of people can still qualify. But in that sweet spot mentioned above, there is a real weakness in many housing markets across the country. Now the amounts might vary from market to market, but you guys get the general idea.