Housing

[atlcomedy]

Originally Posted by pjorourke

http://www.cato-at-liberty.org/homeo...mortgage-debt/

"One of the rationales commonly given for massively subsidizing our mortgage market is that without such homeownership would be out of reach for many households. Such a rationale implies that more debt should be associated with more homeownership. (Let's set aside the obvious, how are you actually an owner without any equity?)
But is that the case. The chart below compares the homeownership rate with the average debt-to-value ratio of U.S. households. (Data on debt-to-value is from the Fed's Flow of Funds and homeownership is from the Census Bureau)."




By 1960, the homeownership rate was already over 60%, yet debt-to-value was less than 30%, half of the current value. Even in 1990, when homeownership reached over 64%, debt-to-value was still under 40%. From 1990 until today, the percentage of mortgage debt to value increased by over 50%, all to gain a 2 percentage point increase in homeownership. So it seems the story of the last 20 years has been a massive increase in home debt with very little increase in actual homeownership rates. The converse should also hold: reducing homeowner leverage should have little, if any, impact on homeownership rates.

Although the logic works I'm not sure I want to take that theory out for a test drive right now.

It is a compelling graph. If I had to try to describe the "why" it was "back in the day" people started in "starter homes"....they skrimped or saved for a couple of years (while renting) until they had 20% then bought a modest home...Today a family does the math with a mortagage broker, learns that based on their income they qualify for an $X loan so they get a $X home

Originally Posted by Rudyard K

2) In Texas, and maybe elsewhere too, you could not borrow money against your homestead for any reason other than purchase or home improvement.

.

Kinda funny story...when I bought my first home years ago I took out an equity line because I was making significant improvements. I asked the mortgage broker what kind of documentation did I need? Plans, bids, receipts? and he laughed at me(the point being no documentation was necessary, I could have gone and bought lottery tickets for all he cared)

[Rudyard K]

Originally Posted by atlcomedy

Today a family does the math with a mortagage broker, learns that based on their income they qualify for an $X loan so they get a $X home

Yep...and today those same folks are now figuring out that such "mortage broker" was not really qualified to assess what they could afford. He/she could only really tell them what they qualified for under some set of qualification rules.

Originally Posted by atlcomedy

Kinda funny story...when I bought my first home years ago I took out an equity line because I was making significant improvements. I asked the mortgage broker what kind of documentation did I need? Plans, bids, receipts? and he laughed at me(the point being no documentation was necessary, I could have gone and bought lottery tickets for all he cared)

Interesting. Like I said earlier, I've been out of that game for a while now...but I know that lenders used to make sure that the home improvement loans were used for home improvements. The borrower not using the money for home improvement (even if done in a clandestine manner) was a pretty valid defense against the preference role of the loan against your exempt homestead. Lenders were pretty adament that they could show the money was spent for home improvement...at least the ones I was familiar with. Based on your comment though...it would appear not all were.

[atlcomedy]

Originally Posted by Rudyard K

Interesting. Like I said earlier, I've been out of that game for a while now...but I know that lenders used to make sure that the home improvement loans were used for home improvements. The borrower not using the money for home improvement (even if done in a clandestine manner) was a pretty valid defense against the preference role of the loan against your exempt homestead. Lenders were pretty adament that they could show the money was spent for home improvement...at least the ones I was familiar with. Based on your comment though...it would appear not all were.

This was about 12 or years ago & I was working under the same assumptions you were and I think that was right about when things were really changing. Hence my naivity.

[Rudyard K]

Originally Posted by atlcomedy

This was about 12 or years ago & I was working under the same assumptions you were and I think that was right about when things were really changing. Hence my naivity.

Yep, and I'd be curious...when the sh*t hits the fan on a loan and forclosure is looming... whether that "monkey on the back" of the lenders has been removed (via case law)...or whether that just another "risk" that the "loan documentaion" process (or maybe I should say...lack therof) was being shouldered by lenders, without them really recognizing it.

[Nina Rae]

Originally Posted by Tiffani Jameson

Boy Charles, there's just no middle ground with you. But I happen to agree. But as a 2x homeowner who took advantage of not having 20% down, and I'm pretty sure you did too, so I don't think it's fair. But I agree. People rely on credit way too much.

I agree with the study. Making that much a requirement would ruin the market. But on the flip side, God knows if it were possible to get that kind of money from people, it would surely help the market.

I disagree, I think it would strengthen the market. To me, it seems, what has helped ruin the market is allowing people to acquire mortgages on homes with little to no down payment. They all ended up with ARMs or huge monthly obligations they could not meet. In my state, that's translated into tons of properties back on the market within a couple of years because of defaulted obligations. Had the requirements been more strict, then we wouldn't be looking at for sale signs on every corner here and forclosure listings a mile long.

I took advantage of easier loan restrictions when I purchased my first home, but mitigated that possibility of failure to meet my obligation by actually purchasing something far less expensive than I could afford, putting down 30%, and increasing the value of it reasonably quickly. Common sense goes a long way. If people with less spent less time trying to keep up with the Jones' and more time stabilizing their personal economies, then the "dream" would become a closer reality in my book. So I definitely agree...credit shouldn't make your "dream" come true....well managed income should.

Originally Posted by Camille

That makes a ton of sense PJ.

In England, qualifying was the toughie. Making sure you could prove you could make the payments was way more important than how much of a deposit you could put down. it's ages since I had a mortgage there, but I think you could borrow a maximum of 3 or maybe 3.5 x your annual gross salary...but they would look very closely at your outgoings (via bank statements etc) to see how close to that max you could get.I don't know much at all about qualifying here...but I'm getting the impression that prior to the economy tanking qualifying wasn't overly stringent. Is that right? I do agree that people could still walk if the onus is simply on a persons ability to pay with no downpayment required...just curious though.

C x

In my experience, its been the same. The banks here looked at my (documented) income, my expenditures via 4 months of bank records, and credit to determine the risk associated with me making payments. Yes, before the tank, everyone with a job could buy a home. Now, not so much...and that's a good thing.

P.S. Camille, I love your sig line.

[atlcomedy]

Originally Posted by Rudyard K

Yep, and I'd be curious...when the sh*t hits the fan on a loan and forclosure is looming... whether that "monkey on the back" of the lenders has been removed (via case law)...or whether that just another "risk" that the "loan documentaion" process (or maybe I should say...lack therof) was being shouldered by lenders, without them really recognizing it.

I don't know what happens now from a legal standpoint when there is a foreclosure. One thing's for sure tough: whoever sold them the loan isn't sweating it. The thing's probably been sold half a dozen times and it is somebody else's problem.

& back in the day foreclosures were rare: the market was strong enough that after a year or two even with nothing down you had equity and could get out if you needed to.

[Egrbvr]

A barrier to home ownership in Texas is high property taxes..they run about 3% of the homes appraised value every year!

[pjorourke]

Originally Posted by Egrbvr

A barrier to home ownership in Texas is high property taxes..they run about 3% of the homes appraised value every year!

But you have no income tax. Talk to someone in the NE -- they have both + higher sales taxes.

[WTF]

Originally Posted by Egrbvr

A barrier to home ownership in Texas is high property taxes..they run about 3% of the homes appraised value every year!

And they are a fix'n to go up!

[atlcomedy]

Originally Posted by Egrbvr

A barrier to home ownership in Texas is high property taxes..they run about 3% of the homes appraised value every year!

Originally Posted by pjorourke

But you have no income tax. Talk to someone in the NE -- they have both.

I was just gonna say "money's gotta come from somewhere"

Or how bout California?

Tough to come up with a single point # in Georgia because there is an exemption on the first x $'s of appraised value but if you have a nice house you are pushing 2% of appraised value...

+8% sales tax

+ a state income tax

edited to add: I used the word appraised because it is what egrbvr used but in reality in it "assessed" value which isn't always close to "appraised" or "fair market value"

[WTF]

Originally Posted by atlcomedy

I was just gonna say "money's gotta come from somewhere"

Or how bout California?

Tough to come up with a single point # in Georgia because there is an exemption on the first x $'s of appraised value but if you have a nice house you are pushing 2% of appraised value...

+8% sales tax

+ a state income tax

Things are not good here in Texas....we have a huge shortfall and this Gov is in a pickle of his own choosing.

He lowered property taxes with a promise that businesses would make up the difference....that has not come to fruitation, just as our comptroller at the time said they wouldn't.

Things are not rosy down here as our slick Gov tries to make out.

[atlcomedy]

Originally Posted by WTF

Things are not good here in Texas....we have a huge shortfall and this Gov is in a pickle of his own choosing.

He lowered property taxes with a promise that businesses would make up the difference....that has not come to fruitation, just as our comptroller at the time said they wouldn't.

Things are not rosy down here as our slick Gov tries to make out.

I'm sure not unique to GA or TX, but things are fucked here too....

We finally got the tax assessor to bring assessments in line with reality (I mean after awhile it got hard for them to duck the obvious appeals, "So I just bought this for $x and you are telling me it is worth $2x? Wanna buy it from me?")...but has caused HUGE revenue shortfalls for agencies that primarily rely on property taxes including schools.

[charlestudor2005]

Originally Posted by WTF

Things are not rosy down here as our slick Gov tries to make out.

Maybe instead of a Slick Willie, we've got a Slick Rick.

[atlcomedy]

Originally Posted by charlestudor2005

Maybe instead of a Slick Willie, we've got a Slick Rick.

Did you come up with that all by yourself or did your staff help?

[WTF]

Originally Posted by atlcomedy

I'm sure not unique to GA or TX, but things are fucked here too....

We finally got the tax assessor to bring assessments in line with reality (I mean after awhile it got hard for them to duck the obvious appeals, "So I just bought this for $x and you are telling me it is worth $2x? Wanna buy it from me?")...but has caused HUGE revenue shortfalls for agencies that primarily rely on property taxes including schools.

We are raising fee's on things like marriage lic and driver's lic.

That would be a regressive tax for all you folks that cry about the poor not paying Federal taxes.

But our Gov wants to be able to say he did not raise taxes!