patrick.net

well .. there must have been a reason why Barry was handing out $8K to anyone stupid enough to pay too much ... right? ANd Arnie handed out $10K credits, but that was not as popular since it was not cash-in-hand like the Barry money was.

I would much rather have money cost 10% and houses priced correctly. Cheap money to buy over-priced crap is not my intent.

If you think that these rules are going to crash the housing market, your in for a rude surprise. I am actually surprised that increasing property taxes have yet to crash the market. I pay $15,000 a year in taxes. My next door neighbor pays $18,000.

What's MIP?

Agreed. The difference seems minimal, I don't think it will make a dent (by itself) in demand or affordability.

analyst says

Agreed. The difference seems minimal, I don’t think it will make a dent (by itself) in demand or affordability.

It's still about value. Just because someone is more successful and makes more money doesn't mean they want to dedicate x% of their money towards housing. More successful should mean they should have to spend less money on housing, and have more money for other things.

zzyzzx says

What’s MIP?

Mortgage Insurance Premium, I suppose.

This will make an enormous dent in housing prices, unless it is offset by an equal mitigating force. Anyone who cannot understand why clearly needs a lesson in basic household economics. Housing is not purchased according to the price of the house. Housing is purchase according to the monthly payment. If the monthly payment increases from $1200 to $1400, that increase will price a certain percentage of households out of the market. Demand for those houses will then decrease. Decreased demand leads to further price reductions. How is this hard to see? FHA is the the new subprime. You make those loans more expensive, you drag prices down across the entire market?

Sure, that dollar amount seems small, but you're talking about the amount of house a guy can buy at his current salary or the amount he can buy with a 9% raise. That's a big difference.

HousingWatcher says

If you think that these rules are going to crash the housing market, your in for a rude surprise. I am actually surprised that increasing property taxes have yet to crash the market. I pay $15,000 a year in taxes. My next door neighbor pays $18,000.

Wow! Where are you located? In rural area of southern utah, I pay $1000/yr on a house I could probably sell for around $180k.

Vain says

I disagree. Who doesn’t have a $100k saved up nowadays?

I hope your being sarcastic...

ptiemann says

he renters are not morons. They have bad credit and / or no down payment.
I think you can find this anywhere in the USA. Not the top neighborhoods but not ghetto either.

I disagree... I believe they ARE acting financially moronic. If you have shitty credit, and no money in the bank.. then you should not be renting a $1900 house! THat's moronic!! You should be living in a 1 bedroom MAYBE 2 bedroom apartment for half that.... not a 3-4 bedroom rental home! It's called scaling back your lifestyle.. selling the useless crap in your life.. downsizing.. repairing your credit for 4-5 years and then using that money you were throwing away on renting a house.. and buying that same house for maybe $1500 a month mortgage in 2015.

THat makes financial sense!

roberto,

what he didn't tell you is that he probably has a small loan; if he bought it recently he probably made a very large downpayment, I think he said before he got a brokerage account loan. Don't forget he owns a law firm. He has been trying to say, that the wealthy folks who have lots of cash, securities, etc. are profiting from the working class who probably hafta work double shifts or hot bunk or whatever just to make the rent and living expenses for another day.

Los Angeles Renter says

Vain says

I disagree. Who doesn’t have a $100k saved up nowadays?

I hope your being sarcastic…

I'm not being sarcastic. Even minimum wage has nearly doubled since 1998. If people wanted to move out before they were ready, and ended up living pay check to pay check, and unable to save even a few hundred a month, that's their problem. Many people do save money and live by the saying, "A penny saved is a penny earned." Unfortunately, today, it's "A penny saved is a penny given to someone else."

Please let us not forget the approved 20% Health Insurance Rate Premium Increases due to start around October as well. This should knock down the selling price of all houses by about %5 or $20,000.

Someone posted a graph of the Real Estate lobbyist dollars over the years and it dropped after 2006. My guess is the Medical lobby increased at the point, thus the shift we will now see in the economy where our dollars are going to go, Medical, not housing.

See, I think that is a big part of the problem and the old line of thinking, if $125 is going to max out a familys household budget how in the world can they be thinking about buying a HOME?

I mean any number of small changes such as rise in say GAS prices, car insurance, Property TAX, Income tax, Pay Cut, will cause a change in the budget, if people would get it out of their mind that buying a home does not need to be maxing out their budget.

I hope we get to point of 50% down, and 7-15 year MAX loans No more Gov. guaranty of all these banks loans. Let them back own their own loans.

Letting housing fall and fall big will hurt then it will be nice, as people can live, and work and play, and not do it all just to have a house.

Vain says

Los Angeles Renter says

Vain says

I disagree. Who doesn’t have a $100k saved up nowadays?

I hope your being sarcastic…

I’m not being sarcastic. Even minimum wage has nearly doubled since 1998. If people wanted to move out before they were ready, and ended up living pay check to pay check, and unable to save even a few hundred a month, that’s their problem. Many people do save money and live by the saying, “A penny saved is a penny earned.” Unfortunately, today, it’s “A penny saved is a penny given to someone else.”

Come on, Vain. You're looking down on a hundred thousand dollars like it smells bad. There's quite a distance between that and being able to save a few hundred a month -- even saving $400 per month would mean 20 years until you got to $100k. If you make the minimum wage (even if it has doubled since '98), you will *never* get to $100k even if you have no kids to feed.

I only got to $100k myself because my company bestowed a generous bonus on all the founding employees for all the slave-like hours they put in at the beginning which made up more than half of it.

Knock a zero off that number and I'd be with you. Housing prices need to fall until the average ordinary responsible worker can afford a home.

schmitz_kris says

I have been trading for many years now so I’ve done my time in the trenches.

Your parents' house has a trench?

Nomograph says

Did it ever occur to you that possibly YOU are the dumb simpleton who falls for get-rich-quick schemes? Based on your attitude it doesn’t sound like it’s going that well.
Just sayin’.

Another fine illustration of nasty liberalism at its best. Everyone of Kris's points are intelligent and correct, yet Nomo goes personal and ballistic.

tatupu70 says

I disagree. Are you just saying that because your bank accrues the property tax and insurance along with your mortgage payment? That’s not always the case…

Silly point. First, almost every lender will require the taxes & insurance payments to be paid through the lender, with very few exceptions. ALL FHA & VA loans, without exception, will require the borrower to include T & I with their payment. Second, the fact is, PITI is your mortgage payment. Stop paying your property taxes and see what happens. Furthermore, as long as you have a mortgage, the lender makes it mandatory to carry adequate insurance.

well, it will be paid and it could be broken down monthy to answer the question honestly ... I think that was the point. Even if you hold your own taxes and pay them when due you still are paying $loan + $taxes + $insurance X 12 = $house payment per year. So, $house payment per year / 12 = $loan + $taxes + $insurance per month (give or take a few bucks earned in interest if you hold your own taxes).

I know you guys like slamming Ray, but his point about the total being the relevant number is a good one. I passed on a home that had MelloRoos and a service district ass. tied to it that only equaled about $200 per month. So, that FHA change will make a difference to some people, like me, that notice $200 changes in a month. I would imagine there are people that do not even notice $2,000 changes in a month, just like there are some that notice $20 changes in a month.

On a related note, do you find it odd when a wife gets cought stealing hundreds of thousands of dollars from work over a few years and the husband says he didn't notice anything? I would notice if my wife came across an extra grand in a month.

Bap33 says

I know you guys like slamming Ray

Do I get slammed? I never noticed. LOL

RayAmerica says

PITI is your mortgage payment. Stop paying your property taxes and see what happens.

No, your mortgage payment is PI. Taxes and insurance are taxes and insurance.

tatupu70 says

No, your mortgage payment is PI. Taxes and insurance are taxes and insurance.

LOL !!!

My dad was physically and emotionally abusive to me, my brothers and my mom. I've been out of that hellhole since I turned 18 and went to college.

kris ... you seem to be very well adjusted now. These experiences always leave scars, but fortunately, as time goes on they tend to heal more and more. Hopefully, you can help others (if you're not already) that have been through, or are now experiencing the same.

Nomograph says

I think he meant to say “basement”.
Like most day-traders, he’s just following the herd. Currency speculation is all the rage right now. What he doesn’t realize is that the institutional investors are in the process of bending him over. Fool. Money. Part.

I've been profitable for many years now. The first couple of years were very rough, however. I am not in the 85% or so of traders who lose and then quit. Sorry to disappoint you, but I am exceptional. Since it's early in the AM, and testosterone levels are at their daily peak, I think Nomo is letting his fantasies (see the "bending him over" reference above) sneak into his posts.

Nomo, one other thing: LEARN the rules for when punctuation is to be placed inside or outside of quotation marks. Here's a HINT - MOST of the time it's supposed to be INSIDE. I'll just assume English is not your native language.

RayAmerica says

kris … you seem to be very well adjusted now. These experiences always leave scars, but fortunately, as time goes on they tend to heal more and more. Hopefully, you can help others (if you’re not already) that have been through, or are now experiencing the same.

I know it's hard to believe, but my rough childhood was actually a blessing. It forced me to become very responsible at a young age, and, ever since I turned 18 and became an independent adult, I APPRECIATE life so much more than other people. Simple things, like being able to sleep through the night without being disturbed/awakened by screaming and physical fights (my dad used to get up EARLY in the AM for work) are STILL appreciated to this day, and I am 33. The alcohol-induced antics and physical fights in the dorms were A JOKE compared to what I was used to at home, and then, after I graduated college and began life on my own, I thought it was PURE ECSTASY to have my own place with peace and quiet. That continues to this day.

Evil has purpose.

Bap33 says

On a related note, do you find it odd when a wife gets cought stealing hundreds of thousands of dollars from work over a few years and the husband says he didn’t notice anything? I would notice if my wife came across an extra grand in a month.

That's a load of crap if I ever heard one. Of course he'd notice, but he'd have to plead stupid or plead guilty.

The mortgage payment including taxes & insurance is pure semantics. Many mortgages have impounds for t&i. Many don't. Some include impounds for extras like melloroos & hoa, others don't. I've seen it both ways.

phew! It won't effect me...

Seriously though, I just got an FHA loan, the bone heads all recommended that I ONLY put down 3.5%, I had enough to put a higher DP. It wasn't until after the loan approval process got rolling, that I was told I would have to pay MIP.

FHA Loans are a new Vehicle racket for banksters to rob and defraud people. The process was tedious and arduous, it's set up perfect for people making less than 50K a year, on a W2. Those that actually make money, but are self employed, and file 1099's that make the kind of money that can afford to pay the loan. Are pretty much SOL, if not for one of my clients that pay me with a W2, I would have never been able to buy my house.

It's a loan that in theory "On paper" is an easy loan to qualify and get, by putting up a measly "3.5%" down. But then in reality, when all the figures are tallied, you'll damn well need 3.5% interest rate, because every swinging pen wants a chunk of your monthly mortgage.

These are Jumbo Loans just on a smaller scale, especially when the Night clerk at Mc Donnald's starts qualifying for these loans. Sure they will qualify, but 1500 a month is still not normal for a Mortgage that is supposed to be "AFFORDABLE".

Tenouncetrout says

but 1500 a month is still not normal for a Mortgage that is supposed to be “AFFORDABLE”

Housing can never be "affordable". Even without the idle wealthy looking for more property to buy up, since it is sold on the auction basis housing will always be bid up to the point of unaffordability.

You're probably better off paying the 3.5% down and keeping the rest of your down payment money somewhere else.

The 0.5% is tax deductible so it's really 0.3%. On a $150,000 purchase the 0.5% MIP is $40/mo, after-tax.

The $25,000 you're not putting down can earn $20/mo @ 1.1% at HSBC, or $60/mo if you put it in a 10 year treasury bond @ 2.8%.

IOW, $150,000 30yr @ 4.5% with 3.5% down has a nominal cost of $850/mo and 20% down lowers this to $800/mo.

This is with an opportunity cost of 2.8%. If you could get 5%, the two approaches would have an equal monthly cost.

Troy in my area, what I'm saving on interest and mortgage, I'm paying $890 a mo on 160K btw, which is doable. But then Insurance and Taxes here in SoFl is 300 each, that's almost as much as my mortgage payment. It seems like for every penny the Gubbmint looks to shave off the cost of Home Ownership there's two Sons of Bitches waiting wanting a dime, throwing their claim into the hat.

It's insane, I'm just glad I bought now, while I still could, money, job and otherwise.

With in a year a loan will be a White Elephant, it damn near is already instinct. In the last three years I've been looking, almost every house I watched get signed contracts on and taken off the market, financing fell through. The Girl at my title company when I was closing told me I was lucky FHA loans are hard to get.

They talk a lot about how easy it is to get, but the forces that make up what an FHA loan is, actually works against the favor of those that are supposed to get them.

Considering that for recent sales, split between Freddie, Sallie, and FHA 95% of the financing for recent sales have been backed by the government. And the FHA %% is increasing monthly. This will cause a slow down and/or price decrease in the coming months. Not sure if it will push the market into crash mode, but it'll definitely help prolong the slowdown. People who had their cap at $200k now will drop it to $175k.

elliemae says

The mortgage payment including taxes & insurance is pure semantics. Many mortgages have impounds for t&i. Many don’t. Some include impounds for extras like melloroos & hoa, others don’t. I’ve seen it both ways.

Taxes and Insurance are an integral part of the mortgage payment. For those that live in la la land, what that means is that you cannot arbitrarily pay, or not pay, your taxes & insurance without violating your mortgage contract (yep, it is a legal contract between the mortgager and mortgagee). They MUST be paid and if they are not, the lender (and county) has the right to foreclose. Why? Because property taxes are legally the FIRST lien on the property. Insurance is mandatory because it protects the lender's (and to a lesser extent the borrower's) equity position. Read the conditions in any mortgage loan and you'll see paying taxes and carrying adequate insurance is an integral part of the mortgage contract between lender and borrower. Ask any loan originator what constitutes the “mortgage payment,” and they will ALWAYS tell you it is PITI. In fact, legally, the written Good Faith Estimate will quote (by law) the mortgage payment as PITI.

RayAmerica says

In fact, legally, the written Good Faith Estimate will quote (by law) the mortgage payment as PITI.

http://www.frisco-tx-homes.com/default.asp_Q_f_E_cpg_A_pg_E_MortgageNewGFEEffectiveJanuary12010

According to this article, legally the written GFE quotes (by law) the mortgage payment as principal, interest, & pmi if applicable. It doesn't contain info about taxes, home insurance, hoa fees, or the actual loan product such as VA, FHA, Conventional.

We're talking semantics, here. Generally speaking, people accept that their payment will be PITI plus HOA, PMI, and melloroos or any other assessments. You are correct in your statement that (eventually) if the taxes aren't paid, the home will be sold. If you don't have insurance, your contract may be null & void because it's normally a condition of the loan.

But not legally. Rayray, when you assert that this is a legal requirement, you're challenging people to prove you wrong. Acccording to the search I performed, it took 1.18 seconds to get 39,600 search results that prove you wrong. It's the word "legally" that gets you, here.

Even tho it's pure semantics, don't challenge us unless you're sure.

elliemae says

But not legally. Rayray, when you assert that this is a legal requirement, you’re challenging people to prove you wrong. Acccording to the search I performed, it took 1.18 seconds to get 39,600 search results that prove you wrong. It’s the word “legally” that gets you, here.

Here's the challenge: don't pay your taxes and insurance on your "mortgage loan" and see what happens.

But that wasn't the question, rayray. I agreed with your principle that mortgage payments, generally speaking, does include impounds of all sorts.

But not legally. You specifically challenged us with your statement that it's a legal requirement. According to the laws that took effect January 2010, they're not legally required to base the payment on PITI. Just PI, & PMI.

RayAmerica says

Here’s the challenge: don’t pay your taxes and insurance on your “mortgage loan” and see what happens.

No one is disputing that Ray. You can try to change the subject now, but the fact remains that Ellie proved you wrong. I suggest you start another thread about Obama and the evil Libs--that's something you can handle...

20% downpayments in the Bay Area is a lot of cash to most people, especially if they call some non-Bay Area place home (like, Arizona for instance). That is why I think it is that both you and those who argue with you are right.

But the ones that are not from the Bay Area have a different frame of reference, their logic does not apply here.

Even though on the other hand, I noticed that you are not telling them why they are wrong about their area.

There is a lot of anti-California-ism in flyover land, a lot of it is particularly directed at the Bay Area + LA.

(AFAIK) The system is letting specuvestors buy up properties with 20% down @3.5% rates right now.

For the cashflow buyer with additional capital to handle the accelerated amortization, the nominal TCO on a $300,000 property is $1400/mo.

Purchase Price 300000.00
Down Payment 8700.00
Loan Principal 289500.00

Points 4342.50
Points Net Tax 2813.94

IO 844.38
PMI 361.88
Prop Tax 308.50

Tax Credit (533.19)

Subtotal 981.56

HO Ins 100.00
HOA/Utils 200.00
Maintenance 137.50
Opportunity 0.00

Total Other 437.50

Nominal Cost 1419.06

With Amortization 2744.27

So a $1900 rent is $500/mo profit to the LL. On the $12,000 or so it cost to acquire the property, that's a 50% annual cash-on-cash return.

These are just the FHA numbers going into effect now. I doubt real investors would be excited by these numbers but people doubting that the specuvestors are making killings skimming middle class rentslaves are severely disattached from reality.

Cvoc13 says

What reasons do you see as price drivers?

Only one thing: wage inflation. Something that has arrived in the 1970s, 80s, 90s, and 00s.

http://research.stlouisfed.org/fred2/series/AHETPI?cid=11

Is the party over now? Or is it just beginning?