It seems like any way you look at it. Responsible, modest home owners who still have a job and pay more than their fair share of taxes are going to get the shaft. I was wondering yesterday, if anyone can come up with a set of policies/incentives that might encourage these responsible folks to stretch a bit and upgrade to a more expensive home. It seems like this could be a possible solution to the “people in unaffordable houses” problem. Why not structure some sort of program or incentive for those people to trade down, and the responsible people, who could actually afford a few hundred more per month on the mortgage, to trade up. Realistically, this could improve the quality of banks’ lending portfolios, put some more money to work in the economy, and reward the responsible people with a nicer house. They’re going to pay more in the form of taxes. There’s no way around it, but its going to be a lot more if some money doesn’t start flowing into the economy. Someone help me brainstorm this good-guy-trade-up / bad-guy-trade-down program.
For banks that received help from the government, senior execs have their pay capped at $500k. For homeowners who will receive bailout should get a fair portion of their wages garnered until the initial nominal amount of the loan is paid off.
Well the story goes that they want to help the irresponsible because if the house prices fall the innocent and the responsible also suffer. This is a bag of dog poop. If you live in your house, it doesn’t friggin matter what its value is. The house should be a place of residence not some bet on future economy. And you should not be taking out home equity loans to support your lifestyle. So I don’t see how home values falling will impact those who intend to use a home as a place to live. One could argue that today’s workforce needs to be mobile. Ok as someone else pointed out if the value of my house falls and I have to sell it, chances are that I will pay a lower price when I move to a new city for a new house.
I agree with needhelp that a home is a dwelling, not an investment. What I’m saying here is that in my zip code, there are people making 50% less than me, with a house that is worth 50% more than mine. Now the value of both our houses might be a little inflated, but as a banker holding both notes, wouldn’t you like to see us trade ?
dlpicket Wrote: ------------------------------------------------------- > I agree with needhelp that a home is a dwelling, > not an investment. What I’m saying here is that in > my zip code, there are people making 50% less than > me, with a house that is worth 50% more than mine. > Now the value of both our houses might be a little > inflated, but as a banker holding both notes, > wouldn’t you like to see us trade ? Sorry I dont agree with this point of view. If someone cant make their mortgage payment they need to ne kicked out to the curb, or better yet, shot.
dlpicket Wrote: ------------------------------------------------------- > I agree with needhelp that a home is a dwelling, > not an investment. What I’m saying here is that in > my zip code, there are people making 50% less than > me, with a house that is worth 50% more than mine. > Now the value of both our houses might be a little > inflated, but as a banker holding both notes, > wouldn’t you like to see us trade ? Interesting in theory but very difficult in practice. Most likely there are far fewer people like you than there are people like your stretched neighbor.
at the same time, you can’t completely ignore it as an investment. the cover of maclean’s in canada says, your house will drop 20% in the next year, but that you shouldn’t do anything about it… HELLO! sell your house and rent for a year and then buy the same house for 20% less and have a smaller mortgage at a lower rate. duh. this is what i don’t understand. people, mostly not you guys, but normal people, do not realize at all that all assets are extremely correlated. if equities are down 50% and houses are down 10%, then wouldn’t it make sense to sell your house, rent and buy a little more equity. isn’t that true diversification. even if you don’t decide to buy more equity, keep some cash on the side and buy in when your house is 20% cheaper. this 20% figure is theirs, but i think its clear that unemployment is rising and housing values here need a little more decline to feel bottom. the article actually said that the loss on your house isn’t real. unless you sell its not a real drop in value. isn’t this the exact problem people have when they buy losing stocks? “I’m gonna hold because its not a loss until I realize it” I think the risk of selling and renting for a while is much less than staying put. I don’t see house prices snapping back up to their values seen in 2007 less some insane inflation but if you put the cash you banked on the sale of your house and put it in TIPS, you’d likely be wealthier anyway. i see staying in your house knowing there is a higher probability of a decline as the exact same behaviour as holding onto a dog stock. i’d would love to see a rebuttal to this argument.
Line of the millenium is: Home Ownership is overrated. I dont understand why anyone would ever want to buy a house in today’s mobile world before they are 45-50 with 2 kids and a hot housewife.
needhelp Wrote: ------------------------------------------------------- > Line of the millenium is: Home Ownership is > overrated. > > I dont understand why anyone would ever want to > buy a house in today’s mobile world before they > are 45-50 with 2 kids and a hot housewife. agree 100% or at least until owning makes sense relative to renting, which in 90% of western countries, it hasn’t for the past 30 years… could very well be longer than that and it likely is, but i don’t have the data to prove past that.
Here are a few rebuttals: You don’t live in your Microsoft stock, though. You have to have somewhere to live, and as long as you can make the mortgage payment you are building equity, while renting is a pure cash outflow. Not sure about Canada, but in the US there are significant tax benefits to paying mortgage interest. No one is saying that house prices will approach 2007 levels soon (although given the speed of the prinitng presses, we may inflate our way there sooner than most think).
tobias Wrote: ------------------------------------------------------- > Here are a few rebuttals: You don’t live in your > Microsoft stock, though. You have to have > somewhere to live, and as long as you can make the > mortgage payment you are building equity, while > renting is a pure cash outflow. Not sure about > Canada, but in the US there are significant tax > benefits to paying mortgage interest. No one is > saying that house prices will approach 2007 levels > soon (although given the speed of the prinitng > presses, we may inflate our way there sooner than > most think). there are also tax benefits to using borrowed money in investing. and you don’t live in your microsoft stock but it is liquid and you always know a price. if you’re last to sell in a neighborhood, you get jack, same as a stock. they are one and the same. why stay in a stock if you know its going to go down? so why stay in a house if you know its going to go down? and inflation is not a gain. saying your house will go up in value because of inflation says that you maintained your purchasing power, but the value of your house can still be dropping relative to other investments. house prices often do fall relatively in inflationary environments because the prime rate is so high that getting new mortgage is difficult and costly. and as for the ‘as long as you can make the mortgage payment you are building equity’ statement, as long as you invest the excess you have from a lower rent payment, you are also building equity.
i am agreeing with Matt here. i dont get the whole home eqyuty thing. it sounds very fishy. so your stake in yoru house is more than you owe on it. so what do you do? you go to someone and say, hey give me some money and if i dont pay it back you can have my house. how is that not irresponsible? hows that not using house as something other than a place to live.
MattLikesAnalysis Wrote: ------------------------------------------------------- > at the same time, you can’t completely ignore it > as an investment. > > the cover of maclean’s in canada says, your house > will drop 20% in the next year, but that you > shouldn’t do anything about it… HELLO! sell your > house and rent for a year and then buy the same > house for 20% less and have a smaller mortgage at > a lower rate. duh. > > this is what i don’t understand. people, mostly > not you guys, but normal people, do not realize at > all that all assets are extremely correlated. if > equities are down 50% and houses are down 10%, > then wouldn’t it make sense to sell your house, > rent and buy a little more equity. isn’t that true > diversification. even if you don’t decide to buy > more equity, keep some cash on the side and buy in > when your house is 20% cheaper. this 20% figure is > theirs, but i think its clear that unemployment is > rising and housing values here need a little more > decline to feel bottom. > > the article actually said that the loss on your > house isn’t real. unless you sell its not a real > drop in value. isn’t this the exact problem people > have when they buy losing stocks? > > “I’m gonna hold because its not a loss until I > realize it” > > I think the risk of selling and renting for a > while is much less than staying put. I don’t see > house prices snapping back up to their values seen > in 2007 less some insane inflation but if you put > the cash you banked on the sale of your house and > put it in TIPS, you’d likely be wealthier anyway. > > i see staying in your house knowing there is a > higher probability of a decline as the exact same > behaviour as holding onto a dog stock. i’d would > love to see a rebuttal to this argument. 1) Market timing: it’s extremely hard to time the stock mkt, imagine timing an illiquid mkt like housing. And what happens to your plan if the stock mkt tanks another 40% this year? 2) Good luck finding a buyer for your house.
> 1) Market timing: it’s extremely hard to time the > stock mkt, imagine timing an illiquid mkt like > housing. And what happens to your plan if the > stock mkt tanks another 40% this year? > 2) Good luck finding a buyer for your house. Uh, it’s way easier to time houses than it is stocks…house prices don’t go up 20% one month, then down 50% the next year, then up 10% the next week. Tons of momentum and a much smoother ride.
Your house is like a crappy Mutual Fund with a huge front end and back end load (closing costs, real estate agent, fees, etc.) and a really high expense ratio (property taxes, up keep, etc). I don’t expect to make a ton of money on my house but did try to buy in an area with favorable demographics so maybe, long-term, I will beat inflation by a small margin. Maybe.
I agree with both sides. (1) Definitely buy if it’s cheaper than renting AND if the place has rental value. That way you’re not locked into it. (2) buy if you’re old like me. There is substantial uncertainty, lack of control and general unpleasantness in renting. (3) When you’re young and mobile… rent a lot because it’s fun to try out different things. Before we settled down we rented all over the place, different styles, houses, etc.
There are some ridiculous deals on homes right now and that tax credit is sweet for 1st timers. But you had better have stellar credit and a nice downpayment. Only buy if you are willing to stay there for 5 years or more and have extra cash to cover the inevitable disasters that strike every new home owner (roof collapse, AC blows up, termites, etc.). They call em’ money pits for a reason.
i will only buy a house if and when i have kids who go to school. this recent economic turmoil and the morality of our society has seriously made me wonder whether i even want to ever have kids. i dont see why i should bring a life into this god forsaken world.
Because we need more good people around. Ever see the movie Idoiocracy? Basically, smart people stopped having kids and the idiots reproduced at an exponential rate so eventually the world was full of Mountain Dew drinking idiots. Really bad movie (didn’t make it through the first 30 minutes) but the idea may come true at this rate (Octomom). It’s not all bad out there. It just doesn’t get the media hype.
The human plight is at least as good now as it has ever been. Spread your seed!