If 64% of Americans don't have enough liquid savings for a down payment, they don't have a 3.5% down payment for an FHA loan either. Where are tomorrow's buyers going to come from?
Irvine Home Address … 180 GREENMOOR Irvine, CA 92614
Resale Home Price …… $232,800
I would give everything just for a taste
Everything's here, all out of place
Losing my memory, saving my face
KT Tunstall — Saving My Face
Last month I posed the question, “How are tomorrow’s buyers going to come up with a 20% down payment?” With the overhang of consumer debt and the lingering aftermath of the Great Recession, personal savings rate, at about 5%, are still well below the average of the last 50 years.
Realistically, your average would-be home owner is not going to save up 20% on their own.
The path to ownership and the property ladder
With a return to sane lending standards, most borrowers will obtain their down payment in the traditional manner — they will buy an FHA home and wait until it has gone up in value 20% or more.
Without a 20% down payment, borrowers need to pay private mortgage insurance or an FHA premium. This added cost of borrowing comes directly out of money available to make a payment. In a super-low interest rate environment like today's every dollar that comes out of the payment reduces the mortgage amount significantly. In fact, many of the properties I profile on the IHB are below rental parity for conventional buyers but above rental parity for FHA buyers.
Most people won't save 20% for a down payment from their wage income. It's too hard. Most people don't have the stomach for austerity high savings rates requires. It's far easier to buy a house and wait for it to increase in value.
Once the market bottoms, borrowers will have to wait five to seven years before appreciation adds enough value and amortization pays down the loan enough for them to sell their house and obtain a check after commissions large enough to serve as a 20% down payment on the next property.
By then, most borrowers will also be making more money as they will have progressed in their careers. The accumulated down payment from prior ownership equity and the increased borrowing power of a higher salary allow most buyers the luxury of bidding higher and moving up to a nicer property. That's the way the housing ladder really works.
Many times we have seen large down payments lost in the bubble deflation, but this money was most often a parlay bet with the appreciation of a prior sale. Very few people actually save the full amount a down payment from their wage income to buy property using 20% down.
The broken rungs
Borrowers climbing the property ladder face new challenges to accumulating the equity needed for a move-up. The biggest challenge is their own self discipline. Far too many borrowers avail themselves of the savings in their houses by taking out HELOCs to liberate their equity. Spent equity is not available to put down on a move-up property. Increased earnings is not enough. Without the 20% down payment, move ups are a smaller step than they should be.
The second major challenge to the move-up market is the ongoing decline in low end properties. If equity is disappearing rather than accumulating, move-up buyers are trapped in their starter homes. For the move-up market to function, low-end prices need to appreciate. It's only when these buyers have 20% down payments that the next level up the property ladder has significant buyer support.
Contrary to popular media fiction, there is not a hoard of buyers sitting on the sidelines waiting to deploy their 20% down payments. The reality is the buyer pool is largely broke. Their savings was wiped out in the housing collapse or the stock market crash (or both). Even those who missed those two fiascoes likely have their money sitting in bonds or CDs with yields south of 3%. The money is relatively safe, but it isn't earning much.
Without the requisite down payments, sales volumes will continue to be very weak, and as the major source of funding for mortgages with less than 20% down, the FHA will have a very large market share for the foreseeable future, despite the onerous cost of its insurance.
Besides the chart of personal savings rates above, there is survey evidence that backs up my contention borrowers simply don't have the savings necessary to buy houses.
Most Americans can't afford $1,000 emergency expense
Jessica Dickler, On Wednesday August 10, 2011, 1:40 pm EDT
When the unexpected strikes, most Americans aren't prepared to pay for it.
A majority, or 64%, of Americans don't have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday.
Only 36% said they would tap their rainy day funds for an emergency. The rest of the 2,700 people polled said that they would have to go to other extremes to cover an unexpected expense, such as borrowing money or taking out a cash advance on a credit card.
Most people take the view that credit cards are emergency savings. It's one of the reasons credit card write-offs are so large now. Many people during the recession relied on their credit cards to maintain their entitlements. When the emergency turned into chronic unemployment or loss of income, the credit card debt grew out of control, and many have opted not to pay them.
“It's alarming,” said Gail Cunningham, a spokeswoman for the Washington, DC-based non-profit. “For consumers who live paycheck to paycheck — having spent tomorrow's money — an unplanned expense can truly put them in financial distress,” she noted.
That's the case for Allyson Curtis, 35. “I think about it every day,” she said.
Curtis was unemployed for only three months last year, but in that time she accumulated $5,000 in credit card debt that she's now struggling to pay down.
Do you think that $5,000 in debt was to pay for food, water, and shelter? How many indulgent entitlements were included in the bill?
In the case of an emergency, Curtis said she would likely postpone other payments and pile on additional debt.
In other words, she would go Ponzi.
She is already putting off $450 in dental work and a car inspection due to a crack in her windshield, which will cost $300 to replace, she said.
Many respondents, 17%, said they would borrow money from friends or family. Another 17% said they would neglect other financial obligations — like a credit card bill or mortgage payment — in order to free up some funds.
It must be horrifying for bankers to realize so many view mortgage payments as optional, like Peggy Tanous of OC Housewives fame who got a boob job instead of paying her mortgage.
Budgeting for an emergency fund
Alternatively, 12% of the respondents said they would have to sell or pawn some assets to come up with $1,000 and 9% said they would need to take out a loan. Another 9% said they would get a cash advance from a credit card, according to the NFCC.
Cunningham finds that particularly troubling. Neglecting other debt obligations — or worse piling on more debt — “really exacerbates the problem,” she said.
An earlier study by the same organization found that 30% of Americans have zero dollars in non-retirement savings. A separate study by the National Bureau of Economic Research found that 50% of Americans would struggle to come up with $2,000 in a pinch.
Annndd it's gone….
Cost of ownership lower than the 00s
Very low interest rates certainly do make properties less expensive to own. Today's featured property is priced to reflect 3.4% annual appreciation. That is about the rate of wage growth in Irvine. The property was purchased in 1999 which was before prices got ridiculous in the housing bubble.
The monthly cost of ownership for these owners back in 1999 would have been similar to the cost of ownership today with most of the modest increase in price being compensated by the enormous reduction in borrowing costs. In fact, most of the appreciation in this property could be attributed to declining borrowing costs rather than increasing area wages. If Bernanke holds to his promise to keep rates low for at least two more years, condo prices will likely bottom soon, if they haven't already.
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599
sales@idealhomebrokers.com
Irvine House Address … 180 GREENMOOR Irvine, CA 92614
Resale House Price …… $232,800
Beds: 2
Baths: 1
Sq. Ft.: 889
$262/SF
Property Type: Residential, Single Family
Style: Two Level, Other
Year Built: 1985
Community: Woodbridge
County: Orange
MLS#: S669455
Source: SoCalMLS
Status: Active
On Redfin: 3 days
——————————————————————————
WONDERFUL OPPORTUNITY. RESORT STYLE LIVING IN WOODBRIDGE. CLOSE TO UCI. EASY ACCESS TO 405 AND 5 FREEWAYS. BLUE RIBBON SCHOOLS. CLOSE TO SOUTH LAKE. BRAND NEW CARPET.
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis 
Resale Home Price …… $232,800
House Purchase Price … $156,500
House Purchase Date …. 11/24/1999
Net Gain (Loss) ………. $62,332
Percent Change ………. 39.8%
Annual Appreciation … 3.4%
Cost of Home Ownership
————————————————-
$232,800 ………. Asking Price
$8,148 ………. 3.5% Down FHA Financing
4.19% …………… Mortgage Interest Rate
$224,652 ………. 30-Year Mortgage
$71,492 ………. Income Requirement
$1,097 ………. Monthly Mortgage Payment
$202 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$48 ………. Homeowners Insurance (@ 0.25%)
$258 ………. Private Mortgage Insurance
$241 ………. Homeowners Association Fees
============================================
$1,847 ………. Monthly Cash Outlays
-$173 ………. Tax Savings (% of Interest and Property Tax)
-$313 ………. Equity Hidden in Payment (Amortization)
$12 ………. Lost Income to Down Payment (net of taxes)
$49 ………. Maintenance and Replacement Reserves
============================================
$1,423 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$2,328 ………. Furnishing and Move In @1%
$2,328 ………. Closing Costs @1%
$2,247 ………… Interest Points @1% of Loan
$8,148 ………. Down Payment
============================================
$15,051 ………. Total Cash Costs
$21,800 ………… Emergency Cash Reserves
============================================
$36,851 ………. Total Savings Needed
——————————————————————————————————————————————————-
Tonight we will deliver our first-time homebuyer's presentation. Admission is free and open to everyone.
I hope to see you there.
I think your idea of the property ladder and move-up market is broken and completely reliant on unsustainable property appreciation rates. I would assume 2% annual appreciation, which I believe is generous as homes (in most of the country) should more track overall inflation, if not lower. It takes nearly 10 years to save your 20% DP for the same-priced-home, taking out the commission on the original home. If you go to a 15 year mortgage, your amortization has provided you with nearly 60% equity. Sure a 15 year mortgage means you will buy less house, but it will make moving up easier.
This is the opposite logic of the bubble. When prices were increasing people stretched to get into the most expensive house they could. First it was cool, everyone was doing it. But more importantly, it was an investment. Why only lever up 5X at 20% down, when you could lever 10X or 20X, or use no down payment. Owning that $1Mil home at 15% appreciation added at $150k earner to your household. A $500k home only added a measly $75k earner.
The key to having down payments available is a trending lower with DTIs. That combined with 15 year mortgages will provide savings for DPs and not rely on appreciation.
The logic of the bubble is still in the minds of most buyers here. The lingering memories of money for nothing is what motivates most buyers here to continue to overpay.
I love watching the house hunters episodes with young couples that can’t even come up with 3.5% down for an FHA load on a $125,000 house.
Yes, and then they negotiate the seller pay their closing costs because they don’t have $3K!
It always surprises me when I go on this site and find people amused with the difficulties of others. How is watching a struggling young couple a hilarious thing? Seriously, you don’t have to agree with what they’re doing, but you don’t have to take enjoyment in their struggles.
They’re not struggling to find their next meal! They’re buying a house they shouldn’t be buying – nothin’ wrong with mocking that!
The sad reality is due to the disparity in income levels in this country, more and more people are not going to be able to afford a house, especially if they’re young. It’s a sad reality of where we’re at and I don’t think that it’s worth mocking.
I’m sure you’d feel the same way if your son/daughter was trying to figure out how to afford their first home and some internet posters started thinking their struggles were hilarious.
My father would have applauded anybody mocking me if I was stupid and greedy enough to try the nonsense that “struggling” young people are trying. Heck, he would have mocked me himself
He sounds like a real winner.
A young couple trying to see how they can afford a $125k house sounds real greedy. Again, most people don’t understand finances well and that’s partly a function of financial literacy not being stressed. So they go to people that ‘know’, i.e. realtors, lenders etc, that try all these schemes to get them into a place.
You can argue that’s it’s their fault, and that’s fine, but there’s also a systemic problem in our society that also needs to be addressed and it’s not just the fault of ‘stupid’ ‘greedy’ couples.
We may have an entire generation that won’t be able to afford housing at the same point in their lives as their parents and that’s ultimately a sad thing.
Sal, you should follow this blog more closely. If we have an entire generation that cannot afford to buy a house, then we will see serious further price declines in all areas.
we are talking about an optional product that these young couples DESIRE. they are arent starving, unemployed, or in miserable working conditions. they want to buy a house that is over their budget and they dont want to work hard and save for 5 years before the purchase.
the real problem here is a culture that doesnt teach kids about saving. no matter what you make, you can save something. most people eat out, have cable tv, dont clip coupons, have $100 cell phone plans.
take 2 of my friends. when we all graduated college, we were all making about $50K a year. one friend after 3 or 4 years still didnt have $5K to his name because as he put it, whats the point of saving a couple 100 a month. keep in mind he always has the highest tier movie packages, goes to theaters once a week, eats out almost every night, has leased cars vs 10 year old used cars, etc. the other friend does understand how to save and set aside $15K a year from their $50K a year salary. neither lives crappy lives but fast forward now 10 years from graduating college and though our salaries have gone up, the friend who never saved still doesnt have a dime to his name and always seems to struggle financially and the other friend can actually consider buying a house.
i cant feel sorry for people who dont want to save money. and as perspective stated, prices will meet the affordability of the next generation.
Yes, my father is a real winner and you are a jerk for attacking him.
My father is a self made millionaire who came from nothing. He has overcome many obstacles, never blamed anybody or any systemic problems, or realtors, or lenders, etc. He has passed on his sense of self reliance and his sense of taking responsibility for his situation and life, and he has helped many who are truly struggling.
A couple, young or otherwise, trying to buy a home with little or no down payment is both greedy and stupid, not struggling. It is hilarious how people like to attach descriptives like “struggling” to people who are actually failing. Yes, I can argue that it is their fault and not only is it fine, but it is the truth.
Yeah my father was an asshole like that too. He also beat the shit out of me, my mother and the dog.
Just because your dad’s an asshole, it doesn’t mean you should imitate him.
I dont understand why people think prices will stay in the stratosphere if the next generation cant afford the prices. rather silly
The only problem is we bail out the incompetent. Imprudent lenders will put themselves out of business, imprudent borrowers will put themselves out of business, imprudent realtors/loan officers will bankrupt their clientele. They all reap what they sow.
The only pass these scum realtors get is when everyone feigns ignorance. Who could have known? ha!
Hello left field!
Without all those “greedy and stupid people”, those who sold at an obscene profit would not have their retirements, estates, or hell, even the homes they own today. But we know that’s all ok, because those who made the profit are winners with wealth. The buyers are “greedy and stupid” but the sellers are wise above normal human limits.
We can only pray that housing prices drop to 3x the area income, and generations will not be able to Ponzi the system to retire on the backs of our children simply seeking a home to raise a family in.
@ awgee – someone once told me “truth without compassion is cruelty”, your write-up was hard, and your father, as well as YOU, grew up in a America that is far, far removed from the America of today. Your posts came off sounding arrogant, condescending, and judgmental, and from your other posts, I don’t think that’s really who you are.
I do apologize for attacking your dad, that was not well said on my part.
as for the rest of your post, listen to assume that there are no systemic problems and people can get by if they just work and not be mooch’s is naive. The paradigm of wealth accumulation for this generation given the economy, unemployment, job prospects etc is much different than the generation before.
The sad reality is that the situation young couples find themselves in is not because of their doing. They didn’t cause the debt, the gambling in the financial sector, the fraud, the political capitulations etc. they’re just looking to buy a house which has always been symbolic of the America dream. It is naive for them to feel that they can just go in with little down, but I see that as more a function of ignorance than greed. I feel the real greed was on the part of the lenders that pushed all these loans out because they are in the business and they should have known better.
Again, it’s a sad reality they face and not something that should be mocked or laughed at.
Right on.. Dummy me and my DH bought from folks
who made a 100% profit on their home in 7 years.
(We put 20% down ’cause we bought in our late 30’s
We’re sitting here 8 years later hoping our home
will someday be worth what we paid for it…
Sal, I don’t think people are mocking this young couple because they can’t scrape together a few thousand dollars to buy a house. We’re laughing at what the system has evolved into. Homeownership has evolved into the differentiator between have and have nots in much of our society. The young couple doesn’t want to sacrifice and save for that 20% downpayment like in the old days. No sir, the quicker they get the keys to that home the better…and if it means minimal down by way of the government…so much the better.
Say what you will, they no or low downs played a significant role in the housing bubble. And the toll that inflated housing prices will have on future generations is still TBD, I can only guess it won’t be good!
listen, to point out the issue in a young couple trying to buy a home with little down is fine. You can call out what the system has evolved into, but when the posts delight in these human problems it’s just sad.
I actually agree with you that couples should by a home when they can truly afford it, with a good down payment and manageable monthly payments.
It’s the difference in being decent and being a douche.
*loan
Actually, I like the word load instead…. I don’t think most people realize what a huge load they are taking on when they sign the promissory note.
Also amusing is how many of them are dependent on a large chunk of that shaky 3.5% coming from Bank Of Mom and Dad.
So many parents are risking their own financial future to make sure their kids get what they want. I have a feeling we will see more parents forced to live under the same roof as their kids – kind of like it was in the old days. Maybe it’s not such a bad thing.
Has this number of people who lack $1000 gone up or down or flat? And is it really even relevant to Irvine?
I understand the substitution effect but it can only take you so far. The type of place someone who cant even set aside $1000 for is probably not in OC and has little impact on Irvine specifically.
And at same time, millionaires are on the rise:
http://money.cnn.com/2011/03/16/news/economy/millionaires/index.htm
Not saying that these millionaires are looking at Irvine or that Irvine is even crème de la crème but as per IrvineRealtor’s data, people are bringing boat loads of cashing to closing for last few years.
“Do you think that $5,000 in debt was to pay for food, water, and shelter? How many indulgent entitlements were included in the bill?”
Maybe you are somewhat harsh here: $420 per week is perhaps not living in total austerity, but neither is it having an indulgent lifestyle. Still, it is not conceivable to me not having 6 months of living expenses in cash on hand, and another 6+ months readily convertible to cash if needed.
“It must be horrifying for bankers to realize so many view mortgage payments as optional, …”
Only when they are idiots. If the chances are nearly 100% that you can live in your house for free for 2 years or longer, aren’t the (underwater) mortgage payments truly optional?
I’ve been trying to budget $180/week on my variable expenses –
$35 groceries
$20 drinks
$50 dates/entertainment
$ 5 coffee
$10 fast food
$60 gas
It feels like austerity even though its really not. It has opened my eyes to how much money I waste. I am the cheapskate of the people i know. I can only imagine how much money they waste.
the $420 week was not just variable expenses but housing and things like auto insurance.
And how is that working out for you? $45/wk for food, what are you eating, ramen 3 meals a day? That’s less than $7 per day which, if you are doing that, can’t be too healthy for you.
Don’t mean to burst bubbles, but $420/wk isn’t austerity, it’s sustenance. Let’s work backwards, and see what a typical single person would need to live:
– Share a 2-bedroom apartment in a modest neighborhood, say, Huntington Beach or Costa Mesa
– A modest car, such as a Honda Civic
– Health insurance
– Auto insurance
– Basic utilities, i.e. power & gas
– A cell phone with reasonable minutes
So this being the minimum needs before food, gas, etc., I see the following monthly costs:
Rent: $750 to share a $1500/mo 2-bd, which is probably at the low end
Car: $300 assuming an $18,000 car with $3000 down
Health: $100 for a modest PPO group plan from employer
Auto: $100 full coverage on a financed Civic
Power & Gas: $50 assuming SoCal weather and minimal A/C or Heat use
Cell Phone: $50 assuming a regular plan with reasonable minutes
So, not including cable TV or internet which we will assume are considered “luxury”, the minimum monthly outlay is $1350. At $420/wk, that would leave around $400 for the luxuries such as food, fuel, entertainment, etc. The model matt138 put up came to $650 in those costs per month. Seriously folks? The minimum after-tax income you would need is $24,000, which translates to about $35,000 in salary to survive with only a resemblance of normal.
For a real normal life, we are probably looking at additional $350 for your own 1-bed apt, extra $50 for basic cable, and $50 for internet. Add to that extra $50 for food (because honestly, you can’t live on $45/wk for groceries and fast food as specified by matt138) per week, and we’ll still assume you will only go out 1 time per week to spend the $50 entertainment budget (and you will blow that in one outing), we are looking at additional $650/mo premium for what would still be considered extremely modest in any modern society. That brings us to $2650/mo in bring-home pay. These levels look awful austere to me, and it requires about $45,000 in annual income to “reduce” down to that. Add to that any type of retirement and after-tax saving accounts as well as emergency funds, and you are easily looking at $55,000+ to live a normal but very boring life.
I think we sometimes get too caught up in wanting to blame the society for their excesses (and they do exist in bunches, I don’t deny) that we forget that we live in a society where it would require at least a couple thousand bucks just to survive these days. And austerity costs quite a bit more than that.
Maybe matt138 is at the low side but you are not living a boring life and austere life at $55K a year.
In the Irvine/Tustin/Costa Mesa area, $700 gets you bedroom with bath or shared bath in nice house. my friend lives in a big 3000 sq ft 5 bedroom tustin ranch house and has the master for $750 and the other guys pay $700 each. fully furnished, maid once a week, internet and all utilities included. perfect for a young guy or girl.
Your car cost is way off and its just like a house – why do you need a freaking new civic? another buddy of mine bought a 97 saturn with 50K miles for $3500 in 2005 and still drives that car today. its not a poor car or rich car – its just a car. outside of saving for a few months, this car is paid for and done
i think matt138 food is a bit extreme but $300 should get you buy well per month – $10 a day is easy and includes going out to places like CPK. there are many days my total food is less than $5 and I enjoy eating. sure organic groceries are more but go to h-mart or worldfoods for cheap groceries.
i grew up in WLA and there are tons of free entertainment that we routinely went to. movies, concerts, shows etc. heck even now, my friends who live in santa monica and WLA always are doing something and they spend nothing
I do blow through the budget from time to time, but it is more an experiment in austerity.
Minus the beer, i probably eat healthier than most. beans rice spaghetti veggies eggs get a lot of bang for your buck. no top ramen. i water down juices because they are generally too sweet and the sugar rush is hard on the body, plus it makes it cheaper to drink juice. or just drink water. BRC burritos from Pollo Loco are great, add a bunch of cilantro and onions. $1.09 and plenty of calories, green, and protein.
when i go out to eat with friends, they all know to give me their leftovers. it is amazing how much food they throw away. i’ve been to a couple poor areas of the world and i am always amazed to come back home and watch how much we take for granted.
The issue at hand is that some people on this blog has been so intent on criticizing the excess ways of the general public (and rightfully so) that it has skewed their vision of what is “normal”. “Freaking New Civic”, in no time in history, was considered Excess. Since when has living alone in a 1bd apartment in a decent neighborhood driving a Corolla become “excess luxury”? ’97 Saturn is “freakin'” 14 years old! People, that’s not “normal”, and has never been.
Sounds like what matt138 was trying to experiment with was an exercise in minimalism, trying to find out if that still constituted a normal life. I’d be interested to know how that compares. But my rant above was more in addressing the veering of some people here to extremism. Renting a bed/bath at a house, driving a 14 year-old car, seeking out free movies and gatherings for entertainment, eating sprouts and eggs – these are not normal, folks. It never has been. What is normal is having your own, decent residence (I don’t mean purchased, I mean private), driving a dependable, economical car, going out to the latest release once in a while, having a couple cocktails on the weekend, eating meat, poultry, fish every couple days or so; this is normal.
These are times of excesses, but not because we are doing what I mentioned above. It’s because we do way more than that. But I don’t think the call should be to go back to pre-industrial revolution days and live crouched in a shack and feed amongst mice.
I think your idea of austerity is a little different than mine. When I was in my early 20s (back in the 90s) my expenses worked out to:
$400/month for a room with a shared bathroom and kitchen down the hall.
$20/month for a telephone with an answering machine.
$200/month food (1 giant $5 burrito for lunch, ramen for dinner, an occasional splurge)
$200/month for drinks and going out.
No car or car insurance.
No cell phone.
No health insurance.
No internet.
No TV.
I rode a motorcycle that I bought for $100 plus another $150 to get it running and registered.
I have a lot more stuff and money now but I was happier being young and broke.
For my family:
2 cars
Insurance $600/year = 50/month
Gas = $80
food for 5 = $800 month
Health Ins = $400 month
Other insurance = $100 month
cars payments = 0
car repair $50 month
rent $2800
Utilities= $120
Phone/cell = 130
eating out = 150 month
I probably was too harsh on this woman. It’s very hard to cut off all your living expenses quickly, and I can’t say that I wouldn’t have done the same.
Thank you for that. Blog commenters often make me wish there was a god who read their posts and doled outbadly-needed doses of humility as required.
Nah, it is the job of the bloggers to discuss the blunt, ugly truth that face to face discussion usually sugar coats. If they sound condescending or rude, good as long as they make a decent argument. People can let it all hang out anonymously and in time, the truth rises from the bullshit like a phoenix from the ashes.
Everybody benefits, even the ones who made mistakes and have their tail between their legs.
“The monthly cost of ownership for these owners back in 1999 would have been similar to the cost of ownership today with most of the modest increase in price being compensated by the enormous reduction in borrowing costs. In fact, most of the appreciation in this property could be attributed to declining borrowing costs rather than increasing area wages. If Bernanke holds to his promise to keep rates low for at least two more years, condo prices will likely bottom soon, if they haven’t already.”
What happened to the old adage that it is better to buy cheap assets with expensive money than expensive assets with cheap money?
It seems like you are implying increase interest rates in the future won’t hammer house prices….
What about this collage?
Isn’t saving stupid now when Bernanke is hard at work converting your saved dollar bills into trash?
It’s only stupid to save if you put your money into a conventional savings account which earns practically no interest.
Actually it is never stupid to save. What IS stupid is feeling entitled to earn a high rate of interest on a federally-insured bank account. Try putting your savings in CIM or NLY, two mortgage REITs that are paying dividends well into the teens.
In case you don’t read the papers, the economy is doing poorly which means responsible monetary policy is to encourage economic activity (spending). Raising interest rates in order to provide the interest on savings which you feel entitled to, would guarantee a double-dip recession.
(do you work for one of those Republicans who would love to tank the economy for 2012?)
ah, please rethink your Rachel Maddow/Krugmanite education in economics.
https://www.youtube.com/watch?v=Ofy3yIeMJbk
responsible monetary policy at 0% interest rates? spending our way into prosperity. please rethink this.
Embrace the recession; it is the cure.
I thought usury was bad….0% interest is good isn’t it? means no usury?…
Didn’t god or someone say usury is bad…or was that allah…same guy..whatever.
This is awesome. The Bernanke and the Blankfein are doing gods work!!!…they are limiting usury.
To elaborate on my previous post, the episode of House Hunters was about a young couple (early 20s) that had been living with the guy’s parent’s for the last two years and not paying rent. Both of them were employed but didn’t save the money for the 3.5% down payment on a house that cost around 125k because they spent everything they earned.
Other’s have already mentioned this, but the housing bubble created an attitude of entitlement for potential loan owners. No one wants to put ANYTHING down when they finance their house because saving would require sacrifice and putting off things we want now.
With so much market uncertainty, isn’t there’s an argument to be made that if one has been wise enough to hold an emergency cash fund of any description today, it may be a good idea to double, triple or perhaps even quadruple it?