The world of pretend of housing shows on television: Blowing through budgets and simply making it up to induce consumption.
Fake it until you make it. No truer words have ever been uttered especially when it comes to Hollywood and the make believe of reality TV. Just because you put the word “reality†in front of TV doesn’t make it so. Yet people flock to housing shows in mass because it feeds into their world view that real estate is always a winning bet. Whether the show is about a couple looking to buy their first home or a show where prospective investors take a chance at rehabbing a former meth home and turning it into a puppy daycare, these shows put out some unrealistic scenarios especially for those that actually buy and invest in the real estate market. Yet that is the rub. Most people never purchase investment property. Most that do own real estate own it as their place of residence. And that is why these shows do so well because they highlight an alternate reality that only works out in scripted reality.
Ridiculous budgets and emotional buying
I must admit to my chagrin I enjoy the episodes where they have first time buyers and how they analyze the situation:
“Currently, we live in a 700 square foot studio apartment but with a baby on the way, we need to upgrade to a 2,500 square foot home so we can have space for our 6 pound baby. Oh, and a sauna and a walk-in closet would be nice.â€
Then you get the agent slash personality TV star asking about the budget for the couple:
“We can comfortably afford $400,000. If it is a dream place we can stretch to $425,000â€
Next thing you know they are buying a $500,000 place and panning to the couple:
“I guess one of us can get a second job flipping burgers! I can wash the smell of grease off in my faux marble tiled shower.â€
The above scenario happens over and over and is taken as financially savvy home buying because real estate never goes down! Okay. Let us assume that is the case. But what about opportunity cost? What about the insane added financial pressure for the family since they just expanded their monthly housing costs big time? You also see couples tapping into their 401k which is simply ludicrous.
Would you overpay that much for a computer, car, or an airplane ticket? But this is the “roof over your head†so you can’t attach a value to that. Well in reality you can. That is what investors do all the time. Yet these shows in many cases portray fake scenarios that lead the public naively down the real estate cult. And yes, some of it is staged:
“(AC) For quicker turn-around, producers sometimes choose buyers who are already in escrow with one of the three locations shown. The other two choices that are filmed, are only shown to allow viewers the option of making the choice themselves.â€
Of course it has to be staged this way to get people living through rental Armageddon off the fence and into their mortgage broker’s office. In the case above, in some shows the “house hunters†really aren’t hunting because they already bought. This is like you going hunting only that someone already hunted the deer for you and has placed it out for you in the forest. Of course you have to go through the pomp and circumstance of it all. Call it housing foreplay. Also, why is it called house hunting? Are they trying to tap into our ancestral need for this? I doubt our ancestors used Range Rovers to drive a couple of miles to buy frozen meals out in the tundra.
And this is a deeper examination of cultural real estate psychology. Why don’t they have shows like “my escrow fell through†or “my 35 year old still lives at home†or “my bank denied my loan request†to show reality? Or what about looking at a household budget pre-home buying and post-home buying a few years out? What about the reality that many couples that buy have the added burden of childcare costs that in some states, rivals that of a mortgage? This is too much to think about. Real estate buying is simple! It never goes down! If this dingbat couple bought then surely “I†with my genius IQ and my spouse will live happily ever after so long as we buy. No one lost buying real estate (aside from the 7,000,000+ recent foreclosures from the latest housing bust).
In the end, no one cares about your financial well being more than you. In my view, managing your finances wisely is about financial independence, not being locked down as a house slave while having to forge into the toxic freeway wasteland of California. That financial independence may very well include owning a home. Heck, in most parts of the country buying is really a no brainer. But in expensive regions and states, the math isn’t so clear. These shows also lower expectations to get people more used to buying crap shacks without questioning deeper. Would you buy a car if the dealer told you the engine is leaking oil and the steering wheel only turns left after three tugs? But this is real estate! A land of pure happiness that comes with a 30-year mortgage.
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141 Responses to “The world of pretend of housing shows on television: Blowing through budgets and simply making it up to induce consumption.”
Brilliant, insightful, and made me LOL twice. Preach it!
BTW I’m a bankruptcy lawyer sad for my country due to how many stupid people live here, but I’m excited that most of those 7M foreclosures are finally eligible again to file BK….
Now this made me LOL!
+1
When will the insanity end? We’ve turned the most important aspect of human survival (shelter) into an asset class that is being chased by hot money driving up prices beyond reality.
There’s a section in a magazine called “the week” (BTW i only get it now because “mental floss” stopped print publication and replaced my subscription with that trash..the rag is almost unreadable it’s so liberal, but i digress) and it has a “best properties on the market” spread full of multi million dollar homes (like i said, intellectually liberal BS) but they always leave a spot for the “steal of the week” and that steal is ALWAYS …..well almost always…..over $400K.
What a world we live in when a “steal” in RE is still almost 1/2 a million $$$$
And on another bright note i recently read that 8 guys have as much wealth as the poorest half of the world….let that sink in for a moment.
http://planetfreewill.com/2017/01/16/8-richest-men-have-as-much-wealth-as-poorest-half-of-the-world-davos-elites-address-populism/
@mumbo_jumbo — half the world earns a subsistence income meaning they have zero wealth. By this measure the Dr. commentators have more wealth than half the world.
This is a meaningless stat fed into the trough of the slobbering liberal media who run it with zero analysis. (I’m not saying there aren’t implications of widening income inequality, but this global WEALTH inequality frenzy is garbage!)
For the wealth inequality, they use 1% or 10% from the top to camouflage the fact that the only increase in real wealth occurred for the 0.01% from the top who are corrupt to the core and steal wealth from the rest. They use this as justification to increase the taxes for the top 10% who still have some wealth, while providing loopholes for themselves (the top 0.01%).
The goal is to make everybody equally poor with a small group of oligarchs at the top like in Soviet Union, South America and China. Welcome to communism which is the result of heavy centralization of power (in our case the politicians and the FED owned by the banks).
Excellent comment and observation. Leftist journalism in this country controls almost everything in the media. People really suck it up!
I’m so tired of the characterization of the MSM (or Obama, for that matter) as “liberal.” The right has gone so far to the right that now they mischaracterize the centrist media as liberal.
Now, if we’re talking Mother Jones, or the old Air America, I’d agree, but those were never mainstream.
The left has gone so far to the left that anyone with any common sense knows that the MSM media and Obama are not liberal–they’re radical far left loons.
@GH
“Right”, “center”, and “left” are propaganda used to distract the public from the overall corporatist agenda of our political regime. The elite just buys up politicians regardless of their social leanings. Money talk and BS walks. Very little difference between the economic policies under Bush, Jr., and Obama.
CNN, NY Times, and the other alphabet soup called MSM are the US version of Pravda during the Soviet Union – “fake news” and propaganda. They did it again this week with the pool about Trump being the most unliked president at the start, practicing the same thing they did with the polls before the election – OVERSAMPLING. If you don’t believe it, just look at how many democrats they interviewed, based on their own numbers. They just count on the fact that most people do not read the fine print and just read the headlines.
For the village idiot who doesn’t understand statistics, it sounds like REAL news when in fact it is just another lie. The democrats do not count on the intelligence of the electorate but on their numbers (legals and illegals).
They are the same gullibles who believe in recovery and “green shoots” and that now they are wealthier than 8 years ago because of Obama.
You guys must not have a lot of liberal friends if you think that the MSM and Obama are anywhere near far left. You’d probably also say that FOX is centrist. lol
@Prince of Heck. Agreed.
I was sent a trial subscription to The Week (unsolicited) I could not agree with your assessment more! It is really bad even for someone that is progressive on some issues.
Well, I’M so liberal you can’t read it, and I actually agree with everything Dr. HB says. To the extend that I decided two bubbles ago not to buy a house largely because of beilieving him over what everything and everyone around me thought otherwise. I saved the money instead, managing it…conservatively… you might say.
So, not sure about your formula for who to loathe there, sport. But enjoy your next 4 years.
Oh, haven’t you heard? Saint Trump is going to save us. By gold plating everything, the working man will have a gold-plated pot to piss in, a gold-plated Yugo to drive to work, and gold-plated balony and mayo sandwiches to eat.
MumboJumbo,
Housing is generally affordable across this nation…. wtf are you complaining about?
Median Home price in most of SoCal is 5-6x median household income. Not sure everyone would call that affordable…
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=median%20household%20income%20socal
http://www.ocregister.com/articles/percent-736817-sales-home.html
He meant affordable for the super rich.
I love how these House Hunting geniuses are so handy. They make intelligent comments like “We can’t buy this place, the walls aren’t painted earth tones!” or “A dog run in the back yard??? How the heck are we ever supposed to remove that?!” “The counter tops aren’t quartz, how could we possibly move in here?”
They don’t have much money, and they don’t also have any talent or ability, apparently.
I’m a bit sympathetic to this line of reasoning. I tagged along with some friends to an open house on a half million dollar duplex. All the finish was low end builder grade, and the permanent shelving in the place looked like it came from ikea (cheap low density particle board that’ll melt if water even looks at it funny). I spent several minutes loudly criticizing the level of finish for the how much the seller wanted.
For the insane amounts of money people are spending on housing, I think buyers should get something nice without having to gut the place. Not that nice finish justifies the inflated prices of housing or the insane margins flippers try to get on cheap finish, but the expectation upon spending that kind of money should be that you get quality and not garbage.
The problem is that in this market (no longer skyrocketing in most places), upgrades get you nothing. Nada. $150k in gorgeous, professionally designed and installed upgrades will get you zilch compared to builder-grade comps. There is no benefit to the sellers to put them in if they aren’t already there.
And the other show that is so popular: flipping in a crap neighborhood and adding “comp drama” where they go over budget based on neighborhood comps, but then somehow even though the comps in the neighborhood are $500k you’re quartz-topped island justifies $550k – wow we made a profit on this flip!
I have 10 reasons why buying real estate is a bad idea in 2017. #4 will shock you!!
what’s number 4?
That housing will tank hard in 2017!
Hah! Of all people, you were the one to ask! Hah! He beat you to the punch this time! Hah!
hahaha that’s a good one 🙂
Buyers are frustrated and anxious, and they want to buy a house now. Last year, more than half the homes went under contract in the first month it was on the market.
This year, sellers should expect immediate action, and take advantage of it! If you don’t want to sell in the first month, then you should wait until you get closer to your preferred exit date.
huh? People who bought are anxious because they realize that every penny goes into their mortgage, upkeep and high taxes. Ask them how they are doing living the dream. I would be anxious too. People who rent have nothing to fear, they can save their cash and wait for the upcoming crash and then pick up a house for half off. You can never lose by winning ;).
There was an article about an increasing percentage of homes falling out of escrow. I agree buyers are anxious, but not about how quickly they can through a 30-year anchor around their necks
In the 6 years that Jim Taylor has called for housing to Tank, Tarek and Christina have flipped hundreds of homes and made a fortune. Nice call, Jim. Unfortunately the TV flipping couple is calling it quits and are filing for divorce. They will still flip homes and keep their TV business in which they both make 10K an episode.
http://www.thelist.com/31486/untold-truth-flip-flop/
So sad to see this young family breaking apart. Bless them both and protect their little children.
You serious? I did some googling.
* Both husband and wife are accusing the other of cheating.
* The husband has a net worth of $4 million — and is demanding alimony.
* The wife wants to keep their TV show going, and feign happiness on air, partially because she’s hoping to get her own spinoff show.
They’re a pair of realtor greedbags. They had a phony marriage, wore a lot of phony makeup (wife looks as plastic as Paris Hilton), on a phony TV show promoting flip-to-be-rich schemes.
But despite all their money and fame, they couldn’t keep up the sham of a happy marriage. Why should I care if they break up?
It is kinda of fun to watch a beauty like Christina and her hunky ex-husband Tarek flip over-priced SoCal tract homes for obscene profit.
There are episodes that will be filmed in order to fulfill contractual obligations but the show is scheduled to end in 2017.
http://www.eonline.com/news/816889/flip-or-flop-scheduled-to-end-in-2017-for-now-at-least
What a bunch of Nancys talking about some gay tv show
Housing To Tank Hard in 2017!
Dude, how much has your rent gone up in the 6 years you have been predicting a hard tank?
When you started your fixed payment was below your rent.
Never experienced it but i bet the pain of paying rent is by far less then losing a job and a house and seeing all that equity vaporize. Just by typing these words, paying rent feels like Christmas compared to going through foreclosure. I would choose paying rent over buying during a bubble any day. This changes of course when the market crashes and housing prices are normal again.
BigDaddy – Yeah, foreclosure when I was growing up was just magic … we ended up with no electricity and next to no food, cooking on the lawn using an old tire as a fire ring. I mean, I guess everyone went through stuff like this in the Starving Seventies, but why don’t more people remember it?
This article is great and hilarious.
Fooey on you, Jim! Real Estate only goes up!
Great post! It’s truly unbelievable how much my hometown Alameda, CA has changed. They are adding hundreds of homes when a backyard the size of a dog run and listing them for over million. My old place right on the best was 1200 back in 2003 now it’s 3700… gone are the people that made the little island great and replaced with Apple and Google folK. I cannot fathom how some of these houses go for the price that they do. A friend of mines mother told me to buy a house because prices just keep going up and up and up… very true but I’m going to side with my gut on this one and hold out.
With a back yard the size of a dog run?! Where do I sign up? Seriously. Around here in SoCal, the only new homes I have seen constructed literally have no back yard. That’s right, they build row after row of 2500 sq ft, 4 bedroom, 4 bath townhouse without even a small patio.
Hah, yeah I have noticed some of the newest constructions will have 3 bedroom homes with a token concrete patio. They make it look nice sure but this is like condo level outdoor area for what are supposed to be stand alone homes. My parents 2 bedroom came with a lot twice the size of the home in the inner city in San Diego…. Non existent in new constructions.
Some of the homes had a wall separation you probably couldn’t squeeze a person in between.
very good post. Thanks for bringing people to some sort of reality. I am sure this is a drop in the proverbial bullsht sea of idealistic idiocy placed forward for the public to imitate.
No one forces anyone to take their bearings of life and the housing market from such television shows.
I personally see those TV shows as a mirror to many of those in society. It plays up to millions of homeowner and property investor egos.
We each have to make our own financial decisions in the world around us.
People, including those in ‘Rental Armageddon’ can see the painfully high asking prices, the world around them, in a market.
If they choose to view, arrange financing, put down deposit and buy in this market – outbidding others in the process – they are make their own choices.
BU HPC: Agency and responsibility. It seems to me that the saying that eternal vigilance is the price of liberty has relevance here. We can imagine ourselves first and foremost as sheeple, prey to advertising and salesmen who have the ability to fit us up with a reality of their choosing, or we can imagine ourselves as a free people actively engaged in constructing reality.
Live in Atlanta GA, house is paid for and is a modest 3/2.5 ($260k) that we remodeled last year. We would love to move to OC Cali, wifes employer is there and they would help with the move if we decided but they are not pushing her to relocate. She goes out there every 10 weeks and I tag along basically for free, they cover all exspensives ( i pay for my own flight and meals). We have combed Dana P, Irvine, Huntington B, and other sourounding areas, anything close t what we have is $750 and up, no way we want to take on that debt at this stage in life, both over 50 and net worth over $1.5M. I kep up with the markets, hoping a correction comes over the next 18 months, possibly then well find something reasonable.
Ok but a “correction” defined as 20% is unlikely to be limited to real estate. So there goes $300k of your net worth? Sure you want Cali that much?
Yah, i understand that, and thats why when we get back from a trip, the thought kinda fades and we realize how good we got it. Actually thought about a motorhome, so we could stay out there for a month at a time, maybe longer and enjoy the life style on a shoe string budget so when the correction hits we are over exspoded and take a beating. Not sure what well do, thanks for the reply and info.
You can move to California and pay some of the highest taxes and fees in the country. Democrat plantation masters need folks like you for their boondoggle schemes like Gov. Moonbeam Brown’s bullet train to no where and to keep the FSA on the Democrat’s welfare plantation from rioting.
https://www.thebalance.com/california-state-taxes-amongst-the-highest-in-the-nation-3193244
totally get that, crazy Dumbacrats and the taxes are a joke, not to mention the waist these free loading politicians direct the citizens monies too. lol, I just wanna surf, ski, mountain bike, hike, enjoy the SoCal life style without going broke or living poor. We are shroud with our money, probably why we are very comfortable at the age of 50+, not gonna blow it because we want to move to CA.
Don’t get it either, and believe me I am a California native who misses the ocean! But, not enough to set myself up for a big financial disaster/liability! I can live much cheaper elsewhere, and don’t have to worry about the ticking time bomb that is California’s debt and liabilities! Start with the accounting requirements that only require California to report a small part of its overall debt, move on to CALPERS, then on to places like L.A., that ca’t figure out how they will ever fix all the streets, water mains, etc. It’s bad enough that every man, women, and child has a $32k national debt burden on their backs, but add California’s as well and you are done, finished!
Whenever folks talk about the crazy high TAXES!!!??!!! in CA I wonder a bit. As a retiree my state income tax works out to about 3%. Even better my property tax is about 0.6% of my home’s value. Even factoring out the inflated cost of CA housing I pay less in property tax than I would in a typical red state. But damn it those LIBTARD, SNOWFLAKE, DUMBOCRATS (am I forgetting any epithet du jour here?) are BLEEDING ME DRY!!!
Apolitical – I’m with you on this. Taxes are low in California. I’ve lived in red states and the taxes are insane. Sales taxes of 13% and even higher, and as my friend put it, “they tax my banana” – they tax food.
The only place I’ve lived with lower taxes than California, one of the few bluer states.
But then we blue states can afford to keep taxes low because we’re so productive. Way pay more taxes out to keep the red states afloat than we take in. And God knows the red states need it, poor uneducated inbreds.
Apolitical Scientist,
You must be a Prop 13 freeloader, and must be milking the tax system as well! The effective property tax rate is .81% of value, while the average income tax rate is 7.5%, higher than any other state. The gas tax is about $.46, sales taxes are high, so are fees such as auto registration. And, you are ignoring the mounting liabilities! Unless you live under a rock, the State has about $500 billion in debt on its hands and many local entities are just holding on. California is second only to Hawaii in terms of paycheck to paycheck living. All 3 major cities, L.A., S.F., and San Diego, are in the top 10 in terms of homelessness! Yea, life is great!
I once sold a maintenance free house. In the last 25 years there hadn’t been any maintenance. Got 6 competing bids.
I love the new crop of shows. Tiny Houses!!!!!!
So they ran out of lemmings who can overpay for normal homes,so the solution is to just push 400 SF caravan trailers as the American Dream!!!!! Brilliant. The first rule of success is to lower expectations.
This is so true. 50s trailers have better floorplans, space utilization, real heating and appliances and plumbing.
These Tiny Houses are glorified dumpsters for delusional people.
Pendulum swinging in a ridiculous manner.
I laughed so hard at your clever writing and then shared it with my whole company! Thanks for your great insights. This is truly reality.
I have to say, even though I know I’m doing the right thing, saving and saving and saving, when I look at everyone around me getting the 3-Series (as I drive my old car because it still works fine) and buying the overpriced places, I almost feel poorer.
Not to mention seeing them eating at all these restaurants all the time. The parking lots are packed. You get a pager and they tell you it’s a 30 minute wait at every single spot. Nothing makes sense. I know the salaries in my area, and it’s like everyone is making heart surgeon money. I feel disillusioned and wonder, well, life is short anyway, treat yourself.
Society makes you feel like the poor one. I just wonder how many of these people will wash away when the tide goes out. At least I can say my credit cards have zero balances, I sleep pretty good knowing that.
Well said. I get down about that stuff too. But in the end we will have a smile ear to ear when Housing Tanks Hard in 2017! 🙂
Jim, you promised a Hard Tank “soon” — specifically by March 15, 2014. The Ides of March, 2014.
Your “soon” is three years overdue.
Having cash in the bank, investments and low debt while saving money every month should never make you feel poor. Screw what other people chose to waste their money on. Next time you see a brand new 3 series ask yourself if you would feel better saving $500 a month towards your own security or spending it on a toy for the next 3-7 years … I would feel more poor with the 3 series because it would be true.
JR Wirth, hang in there. I feel same as you. It’s 2005 all over again. In a couple years, you’ll be glad you saved money, when everyone else is foreclosing on houses and declaring bankruptcy.
Quoting Buffet: “when the tide passes you will see who was swimming naked”.
You’ll be surprised how many have a “big hat and no cattle”. When you’ll see them in the streets remember that stupidity hurts contrary to what my mom used to say (if stupidity would hurt, there would be less stupids). The problem is that there is quite a lag time between cause and effect. People do not feel the consequences of their decisions right away (for the most part). People are free ONLY to make their own decisions but not to choose the consequences.
A wise man sees the danger ahead and takes measures ahead of time. He doesn’t wait to be last sucker in the game of musical chairs we play in real life (regardless if it has to do with RE or stocks).
Just keep taking your poor self to the banks to make make those deposits, JR. The mob will never grasp the concept of saving when immediate gratification can be had.
I completely agree and am the same way as you. I drive to work in a 15-year old Honda long since paid off and people making far less than me are pulling up in new Audis, BMWs, and Mercedes. We live in a VERY modest place that we would love to upgrade, but we can’t rationalize paying so much more to do so (our rent is dirt cheap right now).
Sometimes we feel poor too, so I have to really make a conscious effort to remind myself that we have a growing net worth when many of the others living better likely are up to their eyeballs in debt and expenses. I’d rather have low expenses and money in the bank, but it would definitely be nice to have a better lifestyle too.
As Dave Ramsey says “live like no one else (now) so you can live like no one else (later)”. Keep the faith!
That is so true about California! It is harder for people to budget properly here because salaries are generally higher than other cities. In Milwaukee $50k salary is similar to $71K in Los Angeles. Newbies to town think “wow that is a lot of money, i can eat out every meal and get a new Beem Show.” They don’t create a budget and stick with it. They march down to Crate and Barrel and buy that $3,000 chair that goes for less than $500 on Craigslist because “I make good money.” Then on the 1st of the month that $2,000 rent or $3,000 mortgage bill shows up and the credit card is the last to get paid.
Housing to spike hard in 2017!
LMAO…reminds me of the second best energy drink on the market…Bed Rull.
Meth home to puppy daycare is hilarious too, Doc. Thanks for your posts.
Save and invest. Don’t squander your hard earned money on empty crap.
It is amazingly easy to fool most of the people all the time! In the age of instant information where one can quickly fact check, get a history lesson, do research, educate yourself, still most people simply believe whatever they see sitting in front of the TV, read from Facebook or Twitter, or simply accept what peers, friends, or teachers say as fact! The HGTV affect isn’t a surprise … we especially like the Panama episodes … the perfect tropical beach/jungle getaway, a home open to the breezes, only they never mention the 10 inches or more of rain each month, therefore also cloudy, that it is 90 degrees and 95% humidity, or why there are mosquito nets around the beds! For my Wife and I, we just lived very modestly for the last 40 years and saved, saved, saved! We passed up the opportunity to take over the family home in So. Cal., but were able to retire early, buy a nice second home, have a comfortable retirement, and now pay cash for a low maintenance home. It’s all about priorities, common sense, not falling for the hype and noise, and self discipline!
Ever since i left Facebook my quality of life has improved dramatically. I left in 2013 after some tough times in my life. I decided I had my own things going on and did not want to hear about all that bragging.
Since then I have created an amazing life for myself. I fall asleep every night within 10 minutes. I am basically stress free because I have my own path and don’t care what others are doing. I do post photos sometimes for my family and just in general i like to share my photography but I no longer scroll through the headlines or have the apps.
Be careful because anything you post on Facebook becomes property of Facebook. Let’s say you catch a photo of some momentous event and stick it on Facebook to share with your circle. The event becomes big news, and here you got the best photo of it. Great, you think, you can sell it to LIFE Magazine and pay for the kids’ college. The answer is Nope, that photo is Facebook’s property, and if anyone makes money on it, it’s them.
2017 will be an awesome year for home buyers. Can’t wait for Trump to destroy the economy and make the bubble pop!
Amen. If they do what’s right, this economy should be destroyed…its fake.
” Can’t wait for Trump to destroy the economy and make the bubble pop!”
There is no need for that – Obama beat him to that. Or maybe you are one of those who believe in “recoveree” and “green shoots”.
RE will crash, but not because of Trump. It will crash because the whole nation is already to their eyeballs in debt and the FED started to raise the interest and continue to do so to achieve their goal – blame everything on Trump/populists and get their globalists in power again. Their ultimate goal is one world central bank and one currency. If they destroy the middle class in US and Trump in the process, so be it.
Be careful what you wish for. One world central bank means zero democracy and a TOTALITARIAN government you never dreamed about.
Trump’s already raised taxes on middle-class homeowners/homebuyers and he’s only been president a day.
@Alex
If you’re referring to his annulling the PMI rate cut, I would surmise that it it’s for the better in the long run for the middle class.
Obama’s HUD Secretary Julian Castro had announced that HUD would cut mortgage insurance premiums by .25% on what FHA charges on risky mortgages backed by taxpayers. He did it going out the door as a favor to lobbyists and donors (realtors, home builders, and fair housing advocates) because they hoped that the lower cost of this taxpayer subsidy would help them originate more mortgages.
Trump’s suspension of Castro’s mortgage insurance premium cut is good for taxpayers since FHA has become a giant guarantor of mortgages with little oversight and scrutiny. Buyers can score FHA mortgage insurance with a credit rating as low as 580 and a mere 3.5% down payment. This puts taxpayers at great risk if home values decline like they did in 2007-2008!
Prince- I agree, but the mouth-breathing morons think Saint Trump is going to save them. Where “save” means sent sending “the illegals” home, bringing back jobs, getting the Chinese out of the RE market and bringing RE prices down, things like that. Not raise costs.
I hope like hell that happens, and we get SOME good out of the Trump presidency. I’m unhappily back in the market for another condo as a rent hedge against the rapidly inflating rental rates in Chicago.
I’m a former condo owner who was recently displaced by a “deconversion” to rental, as 75% of the owners in my beautiful vintage condo voted to convert the building to rental and sell it to an investor. If you want to continue to own your condo, do NOT buy into a building that is dominated by investors, as mine was, no matter how much you love the place and how much a bargain it seems to be. I picked this place up for cash in 2013, fully cognizant of the risk, because I was so besotted by the lovely architecture of the 20s vintage 1200 sq ft beauty, that I felt the risks of buying in a smallish association dominated by investor-owners was worth it. I put a little bit of money in things like 240v for an induction range, and a lot of love and work into this gorgeous old building, renovating the front garden that had been neglected, pulling together a functional board, and bidding out necessary work to be done on the building. I enjoyed doing these things, but I am very sad to have to sell before I wanted to.
Sure, I “made money” in that I sold the place for nearly $50K more than I paid for it, and for a good $20K more than it could have commanded as an individual condo, because it is almost impossible to get a mortgage in a building dominated by rentals. However, I find myself now renting my former owned home, and searching for a replacement in this overheated, overpriced market in which prices are inflating so rapidly that units that are at least slightly inferior are selling a little higher. So I am somewhat bummed by the whole business, and the only silver lining is that I now have the opportunity to move back to a neighborhood I like better.
So I might be hallucinating from false hope when I think I see signs of a slow-down, at least in the red-hot rental market. I figure the top is in when investors in search of rental properties look to “de-convert” small, old condominium buildings in fading neighborhoods. Several of these in Chicago have been converted back to rental and sold to investors, and many huge high rises downtown, most of which are just reaching the age, 30 or 40 years old, where they start to need a lot of expensive work. I am also beginning to sense some exhaustion in the market for individual condos and houses, with more listings beginning to linger longer on market and prices dropping an increment or two.
Exactly, Trump will make this housing market great again. Housing crash 2017!
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit.” Ben Bernanke July 2005
The irony of these house hunting shows is that the first timers want exactly what their parents have, even though it took them 20-25 years to get that current house.
Vinyl flooring, laminate counter tops and old appliances are seen as near structural problems that need to be solved before the couple can even move in.
And all this phantom “entertaining” they all plan ? How you gon’ entertain after putting in 60 hours a week between those two jobs trying to make dat monthly nut ?
But gotta have that 4 BR 2500 sq ft house because they need space for themselves and their two canine children. Like people who find out they’re pregnant for the first time and suddenly “need” a full size SUV.
I’d love to see a follow up on how many of these couples are still married after five years of debt ownership.
Those “elites” attending Davos finally heard loud and clear (thanks to Brexit, Italy referendum and Trump) that the middle class is angry and total dissatisfied with the direction the globalists were using for the West in general. Finally they realized that the redistribution policies of globalists like Bush and Obama backfired – the redistribution is always to tax the middle class to the max and give it to the international money changers and once in a while crumbs to the poor to buy votes and stay in power.
This week in Davos, they started to promote the same failed policies of taxing more the top 10% and the middle class, to eliminate any incentive for hard work and delayed gratification and make sure everyone ends EQUALY poor (so they can be more easily manipulated). I’ll accept this plan but as an offer of good faith you will have to start with the top .01%. You know, that list that doesn’t exist. And I mean all of them(Rothchilds, Warburgs, Vanderbilts, Carnegies, Rockefellers, Morgans etc. After you’ve extracted trillions from them, you can hit the mere mortal 1% like Soros, Koch, Buffet,Cargill,Gates etc. That would be a good start and that is the place where the TRILLIONS are. Once they’ve got their trillions they propose more taxes on the average guy to make sure there is a thick ceiling between castes and to preserve their power.
What they propose through globalism is not free trade but a global communism on steroids – one central bank with one currency (SDR). The only way you can keep so many different cultures and economies into a one market and one currency is through a TOTALITARISM that the earth never experienced. No wonder the “elites” at Davos are scared by populists like TRUMP – they have TRILLIONS at stake. They worked hard on this NWO for half a century. They will try to get him in their bandwagon like they did with Obama and they tried to do with JFK. If he will not cooperate they will attempt to kill him like they did with JFK and Reagan (attempt failed).
The real fight is not between Democrats and Republicans. It is between Globalism and Populism or 0.01% and the next 10% (who still have some money and power). What we have now is not FREE trade; it is a negotiated/regulated trade. Globalism (of financial institutions) is bad for the middle class of the West and the upper middle class. It serves ONLY the 0.01% who control the MSM.
With Globalists in power, the chance for the middle class to have jobs and homes and a decent living is gone forever.
So, um, you’re somehow interpreting the Trump victory as something other than a major tax cut for the wealthy?
Just curious where you get your news about Davos, since you’ve already stated that all MSM is fake news and globalist propaganda. I’d love to know your trusted unfiltered source of true news.
“I’d love to know your trusted unfiltered source of true news.”
http://www.doctorhousingbubble.com/….:-)))))
…and other alt-media who doesn’t match the “unicorn” news from CNN, MSN, NY Times, etc…
That is a reason I check sites like this and others and don’t go to the NAR web site. I am sure you are a big boy and your inquisitive mind will find plenty of sites which afford you to put all the pieces of the puzzle together; that, plus common sense and critical thinking.
Trump’s gonna save us from the Lizard People.
And, according to my boss’s wife, the Serbians.
This is the reason the interest and consequently the the real estate is going to be affected:
Entitlements consume 68% of the government’s budget leaving only 32% to pay for and run everything else the government does. Where will this money come from without massive deficits and debt?
Unfortunately, we have added $15 trillion in new debt since the beginning of this new century and we have nothing to show for it. Roads, bridges, levees and water systems have been allowed to deteriorate. The size of our military has been reduced while combat systems and equipment have been allowed to fall into disrepair. Deficit and debt levels are rising again along with interest rates. It is going to require astute planning and the right policy mix to dig our way out of this mess. The best way to do that is to get the economy growing again which will generate the extra tax revenues to help fund the nation’s infrastructure and military deficits.
The President-elect has a bold agenda promising to increase economic growth, create more jobs, and spend massive amounts of money on rebuilding both our infrastructure and military. When Trump assumes office this January 20th, he will face the cold harsh reality of his inheritance: an aging business cycle, Fed monetary tightening, a crumbling infrastructure, a downsized military and $20 trillion in national debt. Unlike his predecessors, he will bring a different background to his presidency. He is not a politician even though he vanquished his political rivals. Business and government are two different worlds. Let us hope for all our sakes that he can bring his success in business and use those skills to navigate and transform government.
“I hope Donald Trump is a good President. Wanting him to fail is like wanting the pilot to crash the plane that we are ALL ON.”
Well, President Hillary would have cheered on this debt-ridden train wreck of an economy. Like Trump said, what do you have to lose?
“Entitlements consume 68% of the government’s budget leaving only 32% to pay for and run everything else the government does.” – Please cite source.
Military spending makes up for over 20-50% depending on who you ask;
https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/
http://www.npr.org/sections/money/2012/05/14/152671813/50-years-of-government-spending-in-1-graph
Far more than entitlement programs….
You can google. What about if my source is “fake news” source???!!! These days pretty much the whole MSM delivers “fake news” and propaganda.
I forgot to say that NPR (National Proletariat Radio) is 100% “fake news” source and propaganda. I doubt if they are right even about the weather. I can read National Enquirer and I can get more truth than NPR.
No wonder you are so off from reality!
Yea, but the gov’t is supposed to defend us, not entitle us to other people’s money.
@Flyover
I don’t recall mentioning ‘fake news’, but am still eagerly awaiting on you to cite source for your statement that;
“Entitlements consume 68% of the government’s budget leaving only 32% to pay for and run everything else the government does.â€
Every site I visit has different information, all based on how they tabulate the numbers, and whether they include mandatory vs discretionary spending, e.g.
http://www.politifact.com/truth-o-meter/statements/2015/aug/17/facebook-posts/pie-chart-federal-spending-circulating-internet-mi/
I am not trying to be partisan, I hate both parties equally. One would hope the numbers from the CBO would probably be the most accurate;
https://www.cbo.gov/publication/51110
But does anyone really care if it doesn’t fit their narrative in the ‘post-truth’ world we live in?
Here is the source, Jon:
http://www.financialsense.com/james-puplava/inheritance
I provided the source because you acted as an adult. When I am dealing with children who believe in unicorns, I don’t bother to put the effort.
I liked your expression of “hating both parties with passion equally”. That is a sign of intelligence. For me, I like ONLY one politician – Ron Paul. He is too smart for our dumbed down electorate. He gets to the source of the problems. The rest, just change band aids without addressing the source of the problems. Among financial writers I like Mike “Mish” Shedlock. Not because he is always right but I like his critical thinking and intelligence and the analysis he provides. Nobody knows the future, not even the president or the FED – there are too many variables and too little control over all of them.
In this world of fake news, propaganda and disinformation we live in, it takes lots of work and effort to sort through mountains of lies. However, with lots of effort and critical thinking, you can still get close to the truth. I go through lots of different sources who still have some credibility. Doc on this site, also provides good insight into the housing and RE. It is a specialized site, but good. If I would be happy with CNN, I would not be here. I could be lazy and believe in unicorns like 4.5 unemployment, Obama recovery and what the globalists from Davos say – “we never lived better than now” (that means they). However, you can never get ahead by being lazy.
Jon – can’t you see this guy is waging a life-or-death struggle against the Lizard People for our precious bodily fluids? He can’t be bothered with “sources”. All this fact-checking… that’s defeatist talk.
Great post Flyover. A refreshing voice of reason among all the fear and misinformation..
I think with this new presidency we may start seeing reality for a change. Maybe back-to-sanity home speculating. However, i think we may start seeing the real price for what it takes to live here without having to brush off on someone else shoulder. No more free rides.
When I was a kid, there was a small septic tank pumping truck that would go around, with “HAPPY DA PUMPER” painted on the side. You’d always see that guy around. He always seemed … happy. At least his truck said he was. He had no experience being President. I feel he would make an idea president – having no experience, and being a generally happy guy. Even had some experience draining swamps, if of the smaller, smellier variety.
It’s not too late! HAPPY DA PUMPER 2017! He’ll drain the swamp! He’ll save us from the lizard people! (And the Serbians; dammit, they’re too quiet over there.)
How about Tarik and Christina? They always go 100% over the reno budget and then decide the exit price after they are done… Never do they add 2x the reno budget plus profit to the S/P. Since they are divorcing and one reportedly has been linked romantically to a contractor on the show – THIS IS MUST SEE TV as they force smiles on the set after fighting all morning in court!
I got a kick out of this article. When I was pregnant, I marathon watched 5 seasons Property Brothers on Netflix. I sat there eating peanutbutter fudge with crazy nesting urges and couldn’t get enough of those renovations. I had a feeling it was all fake, and my husband ended up meeting someone who was on the show and already owned the house they “picked.” We never bought a house, and I have no interest in any HGTV anymore. Our baby is our main focus, and our rental will do until we leave the Bay Area. Then I’ll just have to worry “is a mansion or a McMansion?”
Reply to Flyover: “everybody equally poor with a small group of oligarchs at the top like in Soviet Union, South America and China. Welcome to communism”. I don’t know where to start-you are wrong on so many levels. Every class has made huge gains in China. The poor have come the farthest. The middle class is 54% and growing, no backsliding as in America. And the rich get richer. It is easier to start a company and get rich in China than in America. Capitalism is doing very well here.
Also, China has not been communist since 1978. Mao died in 1976, but you didn’t get the memo. Within 2 years almost all his policies were cancelled or reversed. Any country that has private property, free enterprise, freedom to travel inside and outside the country, private banking, etc, does not meet ANY definition of communism.
I’ll bet you have never been anywhere near China. Where do you get these “facts” you use to form these wildly erroneous opinions of yours? Do your handlers give you talking points to disseminate or do you just watch the government approved TV channel?
Let me clarify my point on China:
1. The have a small group of oligarchs at the top who got extremely rich through massive corruption and connection to those in the communist party – you can not deny that.
2. The communist party is still in power with all the characteristics of a communist power – monopoly on power and ideology. If anybody criticize the president or the party s/he is sent to jail. You can not deny that.
3. There is no freedom of speech (which is typical of a communist regime) – you can not deny that…
4. It is true that unlike other communist countries, China has private property. However, the legal system is very twisted and corrupted. Just get by “accident” in conflict with a business owner who is a member in the communist party or connected to the top party official in the province and see what happens. You can not deny that corruption.
….shall I continue with more??!!!…
Well, the US is evolving more and more in that direction. It is not there YET. EU is more advanced than US in that direction.
Disclaimer: I didn’t go to China but I read extensively about it and talked to many people who go there few times per year. Also, I lived under communism and I can “smell” communism a mile away.
You have consumed your allotment of propaganda and are now a Good Citizen. You dson’t need to experience anything, just need to believe what you are told to believe.
Sad.
Your “point #4” is another sign of how you get your “information” from third hand sources with political and religious axes to grind. Since the crackdown on corruption began, the scenario you mention does not happen. Any party member trying to get out of a tight spot by throwing his weight around is in big trouble. There is a phone number to call to report corruption. If a rich guy or his son start that bullshit, they will soon be in the newspapers and in court, maybe jail.
But you wouldn’t know this in Flyover Country. Does your “information” come by snail mail or do people stop with updates for you to read and believe?
Presumably from the interwebs @flyover reads that all reference each other as sources. One giant circle jerk inside his bubble.
Are you speaking from experience? Do you cross reference WA Post, NY Times, Communist National Network (CNN), Huffington Post and then conclude that since all of them say the same lie, it must be truth? If you really believe all that garbage I have a bridge to sell you!!!! I thought that this blog is for adults!
Flyover’s more clued-in than us because he only reads The Spotlight, the “Only Honest News Source Ever-Ever In The Whole Wide World”.
https://en.wikipedia.org/wiki/The_Spotlight
Alex,
You can not say that I read “ONLY” so and so because, as you can see I also read this blog for housing.
Since Doc is at odds with CNN and other MSM “fake news” most of the time, I don’t know why do you come and get your news from alt-media such as Housing Blog!?!…When Obama, MSN and NAR were seeing “green shoots” everywhere, the doc and many of the bloggers here saw only wilted grass.
If you want to celebrate “recoveree” you should read only Huffington Post.
Geez give it a break already. Everytime someone says something negative about Chi na on Zerohedge you always use your canned “Oh you don’t live in Chi na. What would you know?” response. I’m glad some some elderly buffoon who couldn’t make it in the US has finally found a measure of success in Chi na. I’m really happy for you. Unfortunately, dating some 30 year old Hebei chick doesn’t give you some special insight into Chi na.
But hey maybe I’m wrong, maybe all the Chinese elite and their disgusting offspring who are scrambling to buy any form real estate outside of China before TSHTF don’t know what they are doing. I mean ya Chi na is a bed of roses. Who cares if China is leveraged up to their necks? Who cares if their economy is going down faster than Monica Lewinsky in the Oval Office? Who cares if you can’t see five feet in front of you because of all the smog? Roddy6667 has lived in Chi na for 6 years so he know what’s up. If he says Chi na is doing fine it means Chi na is doing fine.
roddy iddn’t your mother teach you not to poke fun at the special kids?
I was just watching a rather nice BBC documentary on the space race leading up to the moon missions – all through it was amazing how the US was playing catch-up all along to the Soviets, and even now if we want to put anyone up in space we have to ask the neo-Soviets “pretty please”.
“With the fate of Fed’s balance sheet suddenly under Wall Street’s spotlight, following last week’s hints by several Fed presidents that a runoff in the balance sheet may be on the horizon and prompting various sell side analysts to share their thoughts. Overnight, Goldman too decided to opine on the rising debate of what happens next to the Fed’s $4.2 trillion balance sheet, and cutting to the case, says that it continues to expect full reinvestments to end in the middle of 2018 (i.e., no runoff for at least 18 months), but adds that while “we would be very surprised to see a discussion of asset sales under Chair Yellen’s leadership” a shift to “more active management of the maturity of new Treasury purchases could be an option; shortening the duration of new purchases would quicken portfolio runoff once it begins.”
Goldman also confirms what other analysts have said previously, namely that “ending reinvestments would result in an increase in MBS issuance to private investors. For Treasuries, the impact on duration supply will depend on how the incoming administration chooses to adjust its sources of financing.”
In our debt based money system, do I see a money supply contraction (like mopping the liquidity from the financial markets)? …and that on top of 3 more interest raises this year. What would the impact be on SoCal real estate prices which are heavily dependent on borrowing???!!!…
They have over 4 Trillion in MBS to sell…it doesn’t matter what Trump will be doing, they will crash the system to get another globalist in power.
I’m going to launch a new real estate show that is much closer to reality: every episode will either feature a hedge fund manager buying a home and renting it out to five families, or Chinese people buying & razing historic homes to build McMansions. I expect a major ratings winner.
How about a new real estate show which profiles people in their 30s and 40s who screwed up and live in one of those dreary large apartment complexes.
Or one that shows the strain on families that bought at the peak of a market cycle, only to see a 5-20% correction wipe out their life savings, put them underwater, and unable to rent or sell without a massive loss.
Or a show about minimum wage workers who live close to the coast. The show will open with them expressing anger at their misfortune and the evil 1%, with depressing shots of the studio apartment with bars on the windows. Their jobs will then be revealed to be work that can be found literally anywhere in the country, in areas where rents are two thirds less, and where everything from gas to groceries to child care is significantly more affordable. This will be followed by IQ tests.
Occasionally there will be episodes with recent college graduates who looked down their noses with disdain at community college, complaining bitterly now about the burden of student loans and the lack of jobs in the fields of liberal arts and sociology in their chosen downtown hipster loft neighborhood. Followed by IQ tests.
+1
Excellent post!
Love your comment.
John D – it will play big with Boomers for sure. It won’t fool anyone who’s actually lived in flyover country. No work for 7 months of the year, meth, some months making $5 all month, winters where you just try your best to hibernate, meth, kooky religious sects, neo-Nazis, meth, “highly intellectual reading” meaning Harlequin Romances, siblings getting each other “pregnit”, meth, feral dog packs, politicians saying stupid things like “I didn’t know you (another politician) were Jewish because Jewish people have big noses and you don’t”, and did I mention meth?
Rents are super-high all over the country with a few exceptions, those exceptions being places no one wants to live. The kind of places that make you want to shoot yourself. Those are maybe 20% cheaper.
Take a look at the Craig’s List for any city you think might be cheap, and you’ll find California level rents being charged. And people are supposed to pay them on the Federal minimum wage. At least in California the cities have minimum wages that are higher than the Federal one.
I don’t need to check CL because I have relatives all over the country, which is how I know “California level rents” is complete BS. I’ll do you one better, though, and stick to CA – a nice two-bedroom apartment in Temecula runs $1,200-$1,300. Two people working full time for CA minimum wage can comfortably afford that. It’s one of the safest cities in the country.
You’re painting a picture of “flyover country” with far too broad of a brush. There are many beautiful areas of the country that are still cheap. Yes, they have drawbacks. 6-month long winters, or 9-month long summers, too conservative, or too liberal, or not close enough to medical care. So you find the places with issues you can handle.
Here’s an anecdotal story for you – the only plumber a relative was able to find in Wallace, ID (population 1,000) is 90 years old. He has tried repeatedly, and failed, to find and retain an apprentice – because the 20-somethings in the area are too lazy to actually work more than 2-3 days/week. Unemployment is high for those people because they choose to be unemployed (this is common all over the northwest. “Professional Homeless”). I understand that there are a few areas where there are literally no jobs – and I have no sympathy for the people dumb enough to remain in those places.
Just to humor you, I googled “safest cities in america” (a good criteria I think for avoiding the overwhelming meth plague that you imagine gripping the nation), ended up on CL in Salem OR, in a 2 bedroom apartment for $875/month. Took me all of 30 seconds total. You were saying?
When I watch Christina and Tarek do amazing upgrades(most of the time), i look around our living room and think “That house is now too nice for any of our stuff”. When I see how much they sold it for, I wonder how the buyers have any extra money to buy furniture to match their new house? How many people are sitting on lawn chairs in their brand-new ultra-modern renovated homes?
That’s what HELOCs are for! Well, that and Escalades.
Christian and Tarek’s divorce is getting uglier and uglier: http://www.intouchweekly.com/posts/flip-or-flop-divorce-tarek-el-moussa-christina-court-123640/photos/tarek-el-moussa-cancer-226191
Trump already suspends Obama-era FHA mortgage insurance cut.
http://www.marketwatch.com/story/trump-already-suspends-obama-era-fha-mortgage-insurance-cut-2017-01-20
No more freebies under this new administration
Yes, I hear everyone wailing about how the suspension of the FHA mortgage insurance cut is an “assault” on the middle class, but I am glad to hear it. It means one less factor inflating house prices at the lower end, which will benefit first-time buyers more.
Let’s see if he applies the same “no more freebies” mentality to investors buying blocks of houses, or apartment buildings, with HUD loans with super low interest, and to the lenders still hording REO inventory and keeping it off the market in hopes prices will inflate enough to rescue them from their losses.
Finally someone with 20/20 vision of what liberal policies are doing to the middle class!!!! I almost lost hope of seeing signs of intelligence.
Now, if the government will get out of all “subsidies” we might finally see affordable college tuition, affordable housing, affordable medical insurance, etc.
If they also go out of the minimum wage business, finally those with lower incomes would be able to buy more with what they earn and find jobs easier.
For those supporting minimum wage, they should move to Venezuela – their socialist president is raising the minimum wage with 50% every year – a worker’s paradise!!!! I think they should move their sooner, before Maduro stops the invasion of liberals from US.
Hear hear. Let the free market, or what buyers can really afford without drowning themselves in a sea of debt, decide RE prices.
I am a mortgage broker and the word in the industry is that the MIP cut and subsequent reversal was just a political middle finger from the outgoing administration to the current one.
The way the cut was done was unprecedented in terms of timing and proximity to the inauguration as well as the EFFECTIVE date.
Let me expand slightly on the effective date (jan. 27th). Never has HUD (FHA) implemented a change (mortgagee letter) whereby the aforementioned change has an effective date the equivalent of closing date. All previous changes were always ORIGINATION dates.
Basically; whenever FHA made a change they would say for all new loans starting on or after xx date, but, in this case it was all loans closing on this date or after. That caused a lot of confusion in the flow of loans in the industry; b/c every loan must be re-underwritten (electronically) with the correct MIP just before closing.
Essentially this was done to make the new admin and head of HUD look bad.
What HUD loans are you referring to here?
Agree, Flyover. Most people, including “conservatives” do not understand the connection between the availability of subsidies, and the escalating prices of everything that is subsidized. Making subsidies and E-Z money available drives up prices. Our health care system was destroyed the day health insurance was invented in 1944 as a way to circumvent wartime wage-price controls (another government sponsored market perversion that produces great negative unintended consequences), our cities were destroyed when our policy makers decided to throw the entire budget at building highways, and in “urban renewal” (i.e. conversion of intact functional poor neighborhoods into vertical slums and vacant lots), and in financing tens of millions of GI Gen and Silent Gen young people to move to cheapjack houses in new suburbs in the middle of nowhere with no-down VA loans and low-down FHA loans.
I could write for many pages about how government policies backed with massive subsidies have destroyed our cities and skewed our citizen’s choices toward wasteful consumption that has made them broke and debt encumbered, while squandering irreplaceable resources and encumbering our nation with public debt that can never be repayed.
Trump’s suspension of former HUD Secretary Castro’s mortgage insurance premium cut is good for taxpayers since FHA has become a giant guarantor of mortgages with little oversight and scrutiny. Buyers can score FHA mortgage insurance with a credit rating as low as 580 and a mere 3.5% down payment. This puts taxpayers at great risk if home values decline like they did in 2007-2008!
Couple comments to the below comment by samantha:
“Trump’s suspension of former HUD Secretary Castro’s mortgage insurance premium cut is good for taxpayers since FHA has become a giant guarantor of mortgages with little oversight and scrutiny. Buyers can score FHA mortgage insurance with a credit rating as low as 580 and a mere 3.5% down payment. This puts taxpayers at great risk if home values decline like they did in 2007-2008!”
While it is true that FHA allows a 580 score with only 3.5% down; there are caveats. 43% max DTI (debt to income ratio) for all debts including the proposed mortgage. Also; it must receive a DU approval (automated desktop underwriting approval). Think algorithm. So, just because FHA *allows* it doesn’t mean the buyer will get approved.
Lastly; many lenders have what are called “overlays” which help mitigate risk on the lower fico FHA programs. So, even though FHA will technically insure the loan the lender may not approve the loan. There is more to it than that; but, to simply say FHA will approve a 580 fico w/ 3.5% down is too simplistic.
I remember when I was buying my 1st home. It was a conventional loan with 20% down and the margins were REAL close. I was spreading myself razor thin to qualify. I tried to get a silent second loan with CALHFA to help with the closing costs, so I wouldn’t be totally house-poor and could afford to fix some things and buy furniture. I didn’t get the CALHFA loan because I was told my income was to high for a single person (I was well under six figures and considered poor by LA standards). During this same time my agent was closing on another home using the same mortgage broker and commented on what a good job the broker did stacking government programs for the other buyer. She explained that the other buyer had got a FHA loan on a home bigger then mine and costs twice as much and only put a couple grand down, and that was contributed by like 6 different family members. Because there were so many people living in the home they qualified for multiple low income assistance programs which included down payment assistance and closing costs assistance which could then be stacked upon each other along with other programs effectively putting them in the home with less then 1% of their own money contributed. Of course this made me feel wonderful while I turned over my life savings as a down payment on my first stucco crapshack and prayed to the housing gods to look kindly down upon me.
While law-abiding homebuyers must supply airtight proof of identity, legal residence and a Social Security number to lenders, illegal alien purchasers (such as a visa overstayer who recently received a green card) need only supply a “taxpayer identification number†(TIN) issued by the Internal Revenue Service. No criminal background check is required before applying for a TIN, which many banks now accept from illegal alien customers as a primary form of identification — no citizenship or Social Security number required.
FHA approved loans through the U.S. Department of Housing and Urban Development do not require lenders to obtain proof of citizenship or legal permanent residence. These FHA/HUD programs, primarily targeting minorities and first-time home buyers, are federally insured and require minimal down payments.
It boggles the mind to think how many illegal aliens are homeowners in this country thanks to these programs, all fully insured by taxpayers. Because of fear of lawsuits for discrimination, it will not be questioned nor any proof required if a borrower speaks little or no English and claims to be either a citizen or resident alien. Since FHA does not require any such documentation, a lender cannot cite their regulations as a basis for the request as they can on conventional loans.
I check zillow on occasion and still see foreclosures being sold after the owner was probably forced to finally default or given the eviction notice. Amazing. I wonder how many foreclosuresl could be out there?
Peak house prices and rents is now in place….and now the slide down begins…..
I thought that banks had supposedly gotten their acts together after the housing market crash of just a few short years ago. Nope. The people who bought the house across from my parents couldn’t qualify for one loan on their $700k house so some other idiot bank gave them a second mortgage to fill in the gap. Who in the hell does that?
Banks seem to to doing extremely risky things once again. I had never heard of a borrower who couldn’t qualify for one big loan being given a secondary loan from another lender before. That’s insane. It makes me wonder how many risky loans are out there again just waiting to drag the housing market back down.
My mom found out yesterday from the lady who sold it that a family of eight bought this house, which is essentially a three bedroom, so that doesn’t make much sense to me either. They could have moved one city over and bought a five or six bedroom house for less than that price.
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