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(Unless you buy on margin, generally a bad idea.)
For every millionaire made in the stock market, a lot of people need to lose money.
Refer to my thread “Brag about your RE investments” for how I turned $10K into $160K tax free after buying in 2012 putting 3.5% down.
A fair comparison uses performance of index funds. Owning individual stocks is highly risky and the chance of becoming millionaire this way short term is very low because it is a zero sum game. For every millionaire made in the stock market, a lot of people need to lose money. Good luck with that odd.
FortWayne saysHousing had some nice appreciation in last 6 years, but so did everything else. From 2012 and on you could have put money into stock market and gotten all same gains as houses. Hell some stocks would have made you an instant millionnaire.
Only difference, is you can't borrow money to buy stocks. So some borrow money to buy houses, and hope to cash out on appreciation. Although most house purchases are still families.
No, that's not true at all.
It's not a zero sum game. A stock can go up simply because the underlying company is creating value. No one loses if you buy it. Even if you sell and take a profit, the next guy does not necessarily lose anything either.
We don't have the crazy loans anymore. We have loans that must meet excessively tight underwriting conditions.
We don't have principal balances going up anymore. We have principal balances declining, especially with the 15 year fixed.
We have a ton of equity in our homes.
Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.
Strategist saysWe don't have the crazy loans anymore. We have loans that must meet excessively tight underwriting conditions.
We don't have principal balances going up anymore. We have principal balances declining, especially with the 15 year fixed.
We have a ton of equity in our homes.
Any idea how many new home buyers are going 3.5% FHA for loans? One report says over 35% of new Millennial buyers are going this route. They're underwater the day they move in. Almost 25% of all home buyers are going 3.5% FHA. They have no equity or cushion, even if housing just drops 10%. Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.
The average down payment today is barely 10% across all purchasers. The days of 20% down are long gone.
That's not a healthy market.
anon_85c53 saysPlus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.
They're only stuck with it until they build 20% equity.
Any idea how many new home buyers are going 3.5% FHA for loans? One report says over 35% of new Millennial buyers are going this route. They're underwater the day they move in. Almost 25% of all home buyers are going 3.5% FHA. They have no equity or cushion, even if housing just drops 10%. Plus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.
The average down payment today is barely 10% across all purchasers. The days of 20% down are long gone.
That's not a healthy market.
anon_85c53 saysPlus they're stuck with MIP for the life of the loan and many are getting approved at 43% DTI levels.
They're only stuck with it until they build 20% equity.
They are not the primary cause of defaults. They go through full documentation unlike the 1% loans we had with no qualifying, which caused the the housing collapse.
EconPete saysanon_d1db0 says
I am assuming from your comment you did not buy?
Property taxes are more than my rent, why would I buy. Plus interest from cd's pays the rent.....
Ok then - if that's true then what is your long term plan - rent forever?
Wrong, new FHA loans have MIP for the life of the loan, unless they refinance elsewhere.
anon_09ed8 saysWrong, new FHA loans have MIP for the life of the loan, unless they refinance elsewhere.
Who wouldn't refinance after you get to 20%?
Ones with crappy credit, living paycheck to paycheck, or don't have money for new closing costs.
The rock gym at Basecamp in downntown Reno is dog friendly,
Hoe do you like living in Reno Roberto? Can you describe why move there from Bay Area?
anon_0128c saysHoe do you like living in Reno Roberto? Can you describe why move there from Bay Area?
He didn't move there from Bay Area.
You can roll the closing costs into the loan value or opt for a slightly higher rate.
I guess if your credit has taken a turn for the worse since you bought it, but I would think that's a small minority. With inflation and principal paydown, the ratios for most people will look better after a few years.
Lol, a fair comparison would point out that leverage works both ways. Houses may not go to zero (except in Detroit) but your equity can easily go to zero, and then keep on digging a hole you may never be able to climb out of. Stocks don't do that. If they go to zero, that's the end of the damage. (Unless you buy on margin, generally a bad idea.)
Then what was gained by refinancing and eliminating PMI if you're going to add more costs and a higher rate?
If you only put down 3.5% originally on the FHA, it's going to take a lot more than a few years to get below 80% LTV.
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This is a great article that uses the Case-Shiller housing price index to compare home affordability today to the bubble ten years ago. This is eye opening!!