The government could force mortgage rates across the board to 2%, it won’t matter. They can re-introduce a tax credit worth $15,000 for anyone buying a house, it still won’t matter. Don’t you get it? You can’t fix housing with artificial demand. Tell me where you can find enough buyers of homes that have money for a down payment and who can purchase a home without government incentives, and then have the job and income security
to not be at risk of not being able to afford to live there. Sure there’s a handful of those folks running around these days, but don’t you think they are already in homes? Where are the new buyers? Hint: there are none.
Read the entire article at http://20smoney.com/2010/06/01/nothing-can-fix-housing/
Bankruptcy Code section 1322(b)"subject to the provisions of subsections (a) and (c) of this section, the plan may...(2) modify the rights of holders of secured claims, OTHER THAN A CLAIM SECURED ONLY BY A SECURITY INTEREST IN REAL PROPERTY THAT IS THE DEBTOR'S PRINCIPAL RESIDENCE..." emphasis supplied. This section in general prevents cramdown of a residential mortgage in Chapter 13. You can cure arrears over the life of a chapter 13 plan, but have to make the ongoing payments, and you can't reduce the mortgage lien to the current value of the property.
Its the prevailing theory in the mindset of most Americans. That is that we all should own a home that is at the route cause of the problem. Then there is the massive amount of oversupply in most market, some of them large planned urban developments. US consumers assume that 30 year fixed rates loans are a right. So, when FHLMC and FNMA are put into liquidation and can no longer create or origianate new loans (we have spent $145B to date and could spend another $150B if we let the governemnt continue the idea that we have to own a home and have get 30 year fixed rates loans), the only place to go will be your local bank or thrift. Because the supply of loans will dry up, the rates will be higher. So, you have two many homebuilders building unncessary homes that can't be financed with 30 year money at some point in the not - to - distant future. I don't know when it will happen, but yesterday's price action again shows that people think that we need homebuilders in their present form building more and more homes. Yes, it was a large surprise to me that the prices of the builders went up yesterday. I can only hope that more sensible minds will prevail today and realise how bad the situation really is.
It's really the notion that we should make easy money from house ownership, and I'm not talking long term investment. Many Americans got into houses because it was cheaper than paying rent, or so they thought. Many others thought they could use their homes as an ATM. Others tried to play the housing bubble; look at all the new TV shows on flipping houses.
We lost the notion that home ownership is the reward for success, instead, we now believe that home ownership is the way to success.
Thing you missed is that part's of the world are swimming in cash, "ASIA" to be exact. Have you seen the sales tours in many parts of the country?
America & your freedom are on sale to the world & they are buying, I just hope they run it better than we have!
Just a question of enough time to get the excess inventory off the market, should be about 6 to 9 more months & then a shortage will hit & prices will spike.
Even so, that is a very small number of buyers which will not make a difference. The real problem is jobs and the economy which will not get better unless confidence is restored. After getting burned in the crash, people and companies are keeping a tighter grip on their wallets and that grip will not loosen unless people are more confident that they will not need immediate liquidity in the near future.
I believe strategic foreclosures is the next big problem. People will jump on the housing deflation bandwagon just like they jumped on the housing inflation bandwagon. The government needs to pass strong legislation that will allow banks to follow these people and garnish their paychecks if they choose to walk away. Otherwise we're headed for a double dip.
The strategic foreclosure I just bought had no breakage, yet all the appliances, light fixtures, ceiling fans, even wall outlets. I think they would've taken the cabinets given a bit more time. Many other foreclosures that I looked at were totally trashed.
Until there are real consequences for this behavior, it will continue. The attitude is screw the banks. Never mind about the next person. Never mine about the neighborhood. The rental down the street is occupied by a SWAT guy and his wife, they chose to walk away from their house, yet they both work, are well off, have three cars, including a brand new BMW, and pay relatively high rent. That's wrong, and we're all going to have are pay for this.
The fix is an agressive immigration policy for about 20-30 million new Americans, bringing in 250-500k as an entry fee. The US is overbuilt. Then return the US economy to a PRODUCER not a consumer/ service economy. We need to create jobs, and not double pay gov jobs, nor $10 per hour private sector jobs. The US has the highest corporate tax rate, don't blame the widget company for making widgets cheaper anywhere else but the USA, blame the unions, for the unreasonable demands, and tax policy. We can't compete with 3rd world countries, or anyone for that matter ? Save our great USA, do the math. Houses that sit empty in Florida with no AC, are tear downs,don't buy them, the mold and fungus will kill you, and you will never get it all out. People that don't pay that can, will get a big shock with a new law to pay it all back. There is no free Lunch. The housing crash was a criminal conspiracy, classic wealth extraction
An $8,000 tax incentive is not enough to make the difference, in general, between someone being able to afford a home and downpayment and not being able to. More likely it just soaked up the near term demand. So this hit as the incentive dried up is expected. Plus you had another wave of resets. As the builder who previously replied said, there is a ton of shadow inventory still out there. And we had a blip in the employment picture.
So, while April and May have stung a bit in the economy, I do think that inventory eventually gets soaked up. You still have households forming. You get a slowdown in the immigration picture when construction jobs dry up, but all of these things do eventually reverse. They always have.
Jobs will pick up gradually and then the pace quickens. And new home sales will come back.
I agree there is no fix for housing at this point. As a home builder I see the demand swings and while my market is graced with Military building from BRAC there is no demand as you move away from the base. The supply has to be sold off. The so called shadow inventory is real, homes sitting on banks books while the Gov. lets them borrow at .25% to buy Treasuries at 2.5% to keep the revenues up so they can hold them on the books at depressed values. It is not a cover up but about the only way to leak the supply back into the market while not crashing everything. It will be a while before we use our supply up, just hope the manufacturing and lumber sectors can hold on.