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Wednesday, August 26, 2009
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100 comments:
Oops, messed that up. Still a newbie ...
Came across a funny listing:
"Old but livable 4-BR, 2-bath, 2-car garage Cape Cod is functionally obsolete small kitchen, old-style utilities, fewer baths than bedrooms. Live like your grandparents did or build your dream house on more than one acre."
http://franklymls.com/FX7126488
HeadingtoFFX
That is hilarious. They get credit for humor. But it's a long skinny 1 acre. Not so great for building a bigger home. And FFX County thinks the land is only worth $302k at the peak $272k now, so I don't see how that listing is going to garner the asking price of $560k, even if that's dead-on the 2009 tax assessment.
you left off:
"Great location. Lots of parking. Tenant can move with 30-day notice. Shown by appt only w/ 2-hour notice."
Mmm, let's try to sell the rental property I bought in 2002 for $279k for a tidy $290k profit. I don't know about you but my response to that is a firm go to H E double hockey sticks. What did you do to deserve such a windfall and why on this green earth do you think someone will give it to you?
Sorry, profit mongering makes me angry.
The return of 20% down is coming?
Mortgage Insurance
Capital constraints on mortgage insurance companies could impede the ability of Fannie Mae and Freddie Mac to keep up with the demand for mortgage financing during the housing recovery, according to a report by the government-sponsored enterprises’ regulator. Former Federal Housing Finance Agency director James Lockhart has been urging the Treasury Department to provide capital assistance for the private MIs since last November. The Mortgage Insurance Cos. of America also is seeking assistance. “We have a request pending and we are waiting for a response,” said MICA spokesman Jeff Lubar. The GSEs can purchase single-family mortgages with loan-to-value ratios higher than 80% only if the homebuyer gets mortgage insurance. The FHFA Mortgage Market Note issued a few days after Mr. Lockhart’s departure projects that the demand for such high LTV loans could hit $230 billion in 2009. The ability of the MIs to meet that level of demand is “remote,” FHFA report says. “The industry’s ability to build and maintain sufficient capital to meet the needs of the enterprises over the short term without some federal assistance or an infusion of private capital is unclear,” the report concludes.
Mortgage insurers are calling for government cheese?
Important possible work-arounds, lenders can chose to keep 10% of the loan on their books in the first loss position, or lenders can agree to essentially self-insure the loans, i.e. to buy them back from the GSE's if they fail. Both of those seem a bit remote to me, but banks do have more capital than mortgage insurers, right?
Who knows how this will pan out, but it's certainly something to watch.
Cara-
Either the mortgage insurance companies will raise outside money or the fed will create a new program to do this. Mandating 20% down would probably remove at least ~75% of new buyers(just my guess). This would then limit move up buyers... so basically it would torpedo the housing market. With all of the other programs that have put in place to you really think they will let a lack of insurance be the thing that sinks the market?
housebuyer,
Indeed, something will be done. It's not clear to me whether this in any way impedes the FHA route. I believe it doesn't. Thus, they could let this die, i.e. slow to a trickle GSE purchases of higher than 80% LTV loans, so long as they maintain the high FHA purchase limits.
What surprised me was the $230 billion dollar figure for non-FHA high LTV loans. Who knew? How believable is that number?
There are other buyers here looking at less than 20% down, what percentage of you were planning on FHA versus conventional financing with MI? How much more is it going to cost you to go with FHA rather than the GSE route? Is it enough to convince you to reallocate your assets or postpone your purchase until you have enough of a cushion?
I guess my point is, if it's going to matter anywhere, it will matter in the over $617k?? bracket most, and I would guess most in that bracket are choosing not to put 20% down, rather than actually don't have it. Or that those who don't have it are a smaller sliver of that market these days anyway.
housebuyer,
It would probably remove ALL new buyers out there. I don't think I know a single person that has bought their first house in the last ten years with 20%. In fact, very few non first time buyers I know have done it. It would kill the market, but it would be very good in the long term.
Cara-
I was deciding between all three routes 20% down, 10% down + MI and FHA loan. I quickly ruled out 20% down because in a bad economy I wanted to have a safety net of cash particularly since I have a wedding to pay for. As for the other two option a conventional loan was ~1/8th of a percent cheaper and had 1 less point. It also would remove mortgage insurance when you got to 20% whereas FHA keeps mortgage insurance a minimum of 5 years. So the savings were pretty large. The one big advantage of FHA is the loan is transferable so if interest rates go up causing housing prices to fall you may be able to convince someone to take your loan because you had locked in a ~5% interest rate.
Kevin-
Yeah I figured 75% was a low ball estimate, but it got the point across. Also there are plenty of people who do put 20% down, Cara is and a lot of my coworkers have...
housebuyer,
Correct me if I'm wrong, but getting from 10% equity to 20% equity takes more than 5 years on a 30 year amoritization table. So, that portion of the savings is only relevant for folks like yourself who plan to pay it off more quickly (who I would guess are also in the minority).
So this would mean the additional costs are the points paid at the outset, and the 1/8th higher rate. For those who really have no interest in even considering putting down 20%, that may not be much of an impediment.
If you end up waiting it out until next year, will you then have enough of a cushion (in addition to the 20 + 3% closing) to go with 20% down?
Cara-
Yeah I agree the 5 year timing doesn't matter for most people, but in my situation it mattered so I added it to my calculations. The lease I just signed will go through September 2010. Assuming wedding costs do not get out of control we should have ~30% down assuming housing stays stable and we are still looking at similar properties. This should be more than enough to put 20% down and have comfortable savings.
Cara - I was reading through some old posts the other day, and oftentimes found myself fixated on your postings. I wanted to give you props -- you are very even handed, objective, and thought provoking, all the things I think are necessary for a blog like this.
So just wanted to say thanks. Keep this up and you will replace CRT as (IMO) the most respected blogger here (no offense CRT).
The Anonymous,
Thanks. I try to be even-handed. I really should cut back though. TBW and housebuyer will have to take over if the seller's bank ever lets me buy "our" house.
HeadingtoFFX,
Good find and humorous listing. One nitpick with the realtor -- isn't it still common to see fewer bathrooms than bedrooms?
Also, talk about phoning it in. Not only is there just one picture but it's from 2002. A lot can happen to the exterior in seven years. Also that really should be considered unethical.
kevin,
I know plenty of people who put 20% down. I even know one who put 60% down (Cara -- there's a good example of pent-up demand; high income couple in their 30s).
Frankly, I don't think 20% down kills the first time homebuyer market. It kills a good chunk of the 22-29 first-time homebuyer market. Which would probably lower the number of people who buy a condo. Which would encourage more condo buildings to become rentals. Which would lower the price of rent. Which lowers home prices in normal markets.
Of course, there are plenty of people happy to live in a condo their whole life. I've met people in their 30s and 40s still in condos. But I think part of the condo boom in this region (and nationwide) was from the massive increase of home buyers in their 20s who could now buy homes with loose lending practices and who were scared out of their minds that if they did not buy at 25 they would be priced out forever.
I don't know anyone who put 20% down in this area. But then again, I only know two people in this area my age who own anything(even a condo). I'm 30, FWIW.
paKa,
My sample might be skewed because I have talked housing with co-workers (who generally are older than me). If I just looked at friends it would look more like your results. However I think as you and I age we will see different results.
I also think that assuming we do not see a V like Robert believes but instead an L that people will not feel rushed to buy a home and will save up that 20%. I think a lot of people skipped the 20% because of fears of being "priced out forever."
Would anyone here not save up 20% if home prices were going to go up at most 0-2% the next seven years?
TBW-
If you get rid of the 20-29 year old buyers I think that would decimate the market. Most people in their 30s who want to own a house bought one during the boom(I know there are exceptions aka you/Cara), but I am pretty sure most first time buyers are under 30. I guess the major exception at least for this area is people with higher degrees because school delayed the process.
Either way I think it would cause the price of condos and TH to go down, which creates less move up buyer equity, which hurts the upper markets.
Cara,
I think you once found the pre-boom and boom first time homebuyer average age and posted it here. Do you still have those stats? I think pre-boom it was in the 30s.
TBW-
I know a lot of people who would buy even if prices stayed flat forever. There are a lot of people that have trouble saving and see paying a mortgage for 30 years the best way to save. They know that to retire you need to be rich or own your house so they figure they figure the sooner the buy the easier it will be to retire
housebuyer,
For retirement purposes you only harm yourself by not putting 20% down. In fact, the slower you pay off your mortgage the smaller your net worth at retirement age as you pay more in interest.
Also, I suspect anyone who did not have the discipline to save a 20% dp fund will not have the discipline to adequately fund their 401k (or IRA etc), college savings funds, etc. The people you are describing are going to live off of social security and reverse mortgages. Not a way to retire comfortably.
housebuyer,
Even in the boom the average age for first time buyers was 27, pre-2000 it was 29. Which means fully half of first time buyers are 30 or older.
(not that cutting first-time-buyer numbers in half wouldn't kill the market just as resoundingly as cutting it to zero.)
tbw,
I totally agree! If you already have 10% saved up, then you are in the habit, and then you want a cushion for emergencies, so you wait a bit more, and then you're so close to 15%, you might as well wait until you have 20%. It's an even stronger compulsion when you're making more than the piddly 1.45% on savings that I am now, but the concept remains, why pay interest to borrow money that you'll have accumulated anyway if you just wait another year?
The old argument against this was prices rising faster than you could save up, such that more savings didn't increase your downpayment percentage, just increased the home price, or decreased your purchasing power.
The other argument against this is if house prices become significantly cheaper than renting. In that case it's "silly" to bother to wait, because you can save money faster once you've bought. There the reason to wait is so that you can afford to buy your dream home without the transaction costs of the ladder.
Hey now, I'm a first time homebuyer putting down 20%. We do exist. There might not be many of us, but we're out there in the wild. That said, I do agree that having to put 20% down will probably kill the 22-29 demographic. (FWIW, I'm 30.)
housebuyer,
If you buy at 30 and get a 30 year mortgage then you will have it paid off at 60. If you buy at 35 and get a 30 year mortgage then you have it paid off at 65.
I agree with you that you don't want to wait too long or else you are still paying a mortgage past a normal retirement age. I think most people who have mortgages past normal retirement age though are the ones who trade up in their 40s and get a new 30 year mortgage.
Since few employers offer retirement health care benefits anymore it's hard to retire before 65 (the first year you can get Medicare) as it's almost impossible (or affordable) to buy an individual health care plan between 60-64. Health care reform might help out with those hard to insure outside a group plan ages (55-64) but we'll wait and see. So I don't see many people retiring before 65 unless they have a spouse working whose health plan they can use.
housebuyer,
Good point, for those who aren't inherently savers, the "forced savings plan" of a house payment is a central tenet. Too bad a bunch of those same people didn't see the flaw in I/O loans...
Tbw,
I'm not sure on your math though. For most of these buyers they qualify for a loan of X amount, and then buy a house for X + DP. The rate of amoritization and the total amount of interest is "only" dependent on X anyway (modulo higher interest rates charged for low dp's and morgage insurance, but these amounts are smaller than the normal level of fluctuations in the interest rate through time). My point being, that these folks would likely just use the DP to allow them to buy a more expensive home. Which doesn't help that much.
"no offense CRT"
None taken. I am glad to see the torch being passed to someone like Cara. Although based on what she said she might be windin down too.
Also remember that when you buy you purchase something that you can afford *then.* You are almost guaranteed between 35-60 to have a substantial pay raise. So even if you bought at 35 you could almost certainly pay off the mortgage in 25 years (or less) because your salary will substantially increase.
Now I'm not saying someone should wait until 35 or 30. People should buy whenever it's right for them.
tbw,
That would be an interesting thing to find:
Of those who don't sell in 30 years, what percentage pay down their mortgage early, versus what percentage refinance back out to another 30 year term?
At a guess, those who restart a new 30 years are a much larger group, despite all the online financial advisors admonitions to the contrary. Though the 15 year loan is a very popular refinancing option.
Cara,
I thought banks set interest rates in part based on loan to value ratios. So while they will give you a 90% LTV mortgage it will have a higher interest rate than an 80% LTV mortgage.
Cara,
Unfortunately I think very few people realize the comfort that comes in retirement when you've paid off your mortgage.
I often scratch my head when I read how much money investment groups think you need each year in retirement. If you own your house in full you don't really need 60-70% of your pre-retirement income.
TBW, do you think it could be because those investment houses want to scare people into investing more with them? :-)
Ace,
Yes, that's always been my theory as well. :)
I often scratch my head when I read how much money investment groups think you need each year in retirement. If you own your house in full you don't really need 60-70% of your pre-retirement income.
I've always questioned why they base it on pre-retirement income at all - rather than pre-retirement spending. If I'm living off 50% of my income before retirement, why would they think I'd need 70-80% after retirement?
I agree - pure scare tactic.
I am so happy to see that I'm not the only one who thinks the 70ish% number is ridiculous!
I am so happy that my parents paid off their mortgage years ago. It is not only a relief to them, but also to me!
Cara/CRT -- Wait, are you both leaving us?!?!?!
Who will work as the "checks and balances" to keep this blog from turning into an echo chamber? Who will provide the insightful commentary and thorough research/analysis? This cant happen. The king and queen of data mining cannot both abdicate their positions :)
Indeed, I am very glad at least my mother-in-law has her house paid in full (4 to 5 years before retirement even though she re-entered the work-force at a "late" age). Too bad the same can't be said of my mother or my father-in-law.
KeithK, totally agree about pre-ret. spending vs. income.
To be fair to the investment pushers, the people on this board are probably much more careful with their spending and willing to save for priorities than the average person. So the people who SHOULD hear their message -- those spending all of their income (and more, when you consider debt), with no defined benefit pension from their employers, etc. -- are probably the ones tuning it out.
I think I posted this before but I will repost Michelle Singletary's article about paying off your mortgage in full. It noted this troublings statistic:
But now more than 55 percent of boomers who have mortgages do not plan to pay their mortgages off until their 70s, if ever.
Don't Drag That Mortgage With You Into Old Age
Hopefully parties celebrating paying off one's mortgage will come back in style.
By the time you retire,
...your house is paid off
...your house if fully furnished, and all of the other start-up costs for a household are taken care of
...your kids are out of the house, on their own, and paid for.
Except for medical expenses, retirement should be far cheaper than say when you were 30, or 40, or 50.
"except for medical expenses"
Now there's the rub isn't it? How do you know how able you'll be in your later years? What if you can't do the gardening anymore, or even the cooking? Things that you used to do for yourself can start costing real money. And that's well before you get to the stage of assisted care.
Not to mention that most people would like to SEE their kids and grandkids some of the time, which at least in my family has always been footed by the oldest generation no matter who's doing the traveling.
Some careers require moving around the country or the world, even, for jobs and opportunities. If your last career move puts you in the middle of nowhere with respect to your kids, then you're probably going to move again for retirement, and your previous house may not be enough to buy a new house outright.
Houses are priced with a 30 year loan assumed, even in the best of times. So if you move around every 5-12 years during your career, to areas with vastly different costs of living, you won't "get" to pay off your house, because while the house does work somewhat as an inflation hedge, that works a lot less well if you're changing locations. 10 years in a SFH outside St Louis, still the TH, which was the best we could do in North Shore Chicago, was still 150% of the price. And then when my parents moved to Athens OH, in another 12 years sure that brand-new house was a lot cheaper, but in the meantime Dad had refinanced 3 times to keep monthly costs low while sending three kids to college. And then they retire to Massachusetts, at exactly the wrong time. Such that even with selling my grandmother's condo in Silicon Valley netting $300k (after a reverse mortgage) my mom still has a $300k mortgage on her house.
What's funny, or not funny, is that despite all this? My mom's retirement worth is in way better shape than my mother-in-laws.
Bottom-line. Life is complex and unplanned, save everything you can, everywhere you can, while enjoying what you have while you have it.
I'm still hoping that once things start selling again in MA, we'll be able to convince Mom to downsize into something she CAN buy outright, sooner rather than later.
Cara,
The one life lesson they should be giving (but few are) is that if you want to be rich in retirement you should watch your diet and exercise. Not smoke or use other drugs and do not excessively drink alcohol.
I guess few are hyping it because there's no money (and in fact less money for many industries) if we all end up like those 70+ year olds who have a lot of vitality.
I'm a firm believer that people respond to monetary incentives and if they realized that 30 minute run at age 30 = $100 in health care savings in old age they probably would up their running.
Of course if we all lived to 100 that would really bankrupt social security and Medicare...
"Of course if we all lived to 100 that would really bankrupt social security and Medicare... "
Yeah, I was going to say, um living longer has actually led to greater health care costs as new diseases crop up. Most of my grandparents and great grandparents died before 55.
(but cutting out alcohol and smoking has immediate cost savings too)
TBW-
It would bankrupt social security, but medicare might be ok if we were all healthy. I agree it really is a shame that more money isn't spent on preventative care.
One good thing I would comment on is you mentioned smoking which is one of the few major success our country has had. We have vastly reduced the number of smokers in the past 30 years. Back in the day it was cool for teens to smoke I think now people think it is nasty and smokers smell bad.
"I'm a firm believer that people respond to monetary incentives and if they realized that 30 minute run at age 30 = $100 in health care savings in old age they probably would up their running."
I think they'd do it if you offered the $100 immediately but postpone that $100 by 30 years and I'm pretty sure most people would keep watching TV. People, and I think Americans particularly, are horrible at long-term planning. Those of us on this blog are the exception, not the norm.
Eldon-
I agree there are enough studies that tell these people that if they exercise they will be better looking which will mean more promotions and a better looking spouse. If these incentives don't make people exercise I doubt money in the far future will.
Regarding the 20% down:
The wife and I looking to sell/buy in the next month or two. House is two rooms of painting away from going on the market. Guess I'll need to change my screen name :)
Anyways, the lenders we talked to encouraged us do 20% down and even stated that 10% to 15% is required for loans nearing 417k. Above that, they required the full 20%. The only loan packages they could do below those was FHA -- but the rates were higher and the insurance really killed you.
So we were advised two things, since we're looking in the $500 o $550k range: 1) plan on the full 20% down and 2) keep the loan below $417k. While the Jumbo limit is higher, banks still charge around 3/8% higher for a "high principal value loan" at 417k.
Thankfully we can make that all happen even with a conservative price for our TH.
Just FYI
housebuyer,
Ah but TV sitcoms tell us that men can be total dogs and still land hotties for wives.
And wasn't there something that showed the promotion bit only worked for men, not women? And that nothing could beat being taller?
Eldon,
Sure, some people will never change their actions no matter how many incentives are thrown their way. Nonetheless, I think a good chunk of society contributes to their 401k plan.
I suppose they can "feel" the benefit now in seeing the pretax dollars go into the 401k but they can't really touch that money for 20-30 years if they are young. And I guess some feel they can always take a loan from the 401k. So it's not as hypothetical as the savings from working out. But nonetheless it's an example of Americans doing long term planning.
There are plenty of studies saying people underinvest in 401k plans but they still do it. Even in their 20s and 30s despite it meaning not touching that money for decades.
They could monetize it through the health care system both for employers and employees. They could offer lower monthly premiums to employers/employees based on a variety of preventive factors. Could even provide a subsidy for those who walk, bike, or mass transit to work (presumably more healthy on average than driving.)
I suspect it's just insurance companies being evil. They don't spend any money on preventitive care because it's probably better for their profit margin. Why is it free for me to get two annual checkups (x-rays, etc) at my dentist but not free to do the same with a doctor?
I should bring this back to housing. :)
So . . . do all of those baby boomers sell their McMansions to pay for the Medicare premiums and diabetes, heart, cancer, etc medicine and doctor appointments? Do they move to the city to live in walking distance of a hospital?
tbw,
What? you get two free dental checkups a year? Bastard! OTOH, My yearly physical is only a $10 copay out of pocket.
And be very very careful what you wish for. My mother-in-law works for a Blue Cross, and for their own employees they're implementing a cost-reducing wellness program, which includes such brilliant and untested things as, requiring 15 minutes of weight lifting daily, but outlawing bananas on campus. And she's supposed to eat 6 100 calorie meals a day rather than 3 larger ones. This for a woman who is if anything well underweight (at least if you adequately allowed for the muscle mass she's put on).
Cara,
Your employer is not providing good dental insurance. I think 100% coverage of preventive dental care is pretty common but I may be wrong.
In theory six small meals instead of three large meals is supposed to be better as your metabolism will burn more calories. But I think in reality most people eat six medium meals and surpass what they ate with the three large meals.
It was really the requiring her to work out, but then not letting you eat bananas, which make zero sense from a exercise-physiology point of view.
She's wasting away on this system, so she must be following it I guess.
I chose the one that provides better comprehensive dental coverage (at the cost of a co-pay for my annual) since I had to go without any at all for 10 years in grad school and post-docs.
Deficits
I encourage anyone who is listening to Robert's predictions to look carefully at the chart in this op-ed. For those who do not like the WSJ note the chart comes from the non-partisan Congressional Budget Office.
Does anyone but Robert really think there will not be political consequences in the 2010 or 2012 elections if debt keeps rising at that alarming rate? Look at how current deficit spending is shooting up debt well above levels we had even during the 80s.
Remember that the Democratic Party won a lot of people over in 2006 and 2008 by noting Bush's runaway spending. They don't keep that segment of the vote if they then engage in even worse spending. There is a pass right now because some of the excess spending is seen as Bush's fault but that excuse does not work in 2010 and beyond.
TBW-
I am pretty sure most companies do not give 100% dental coverage. Even if you are looking at just professional service firms, which tend to have better benefits a lot of them only offer half off or make you pay a decent amount for the insurance
housebuyer,
I was not talking about who pays for the monthly premium that is employer-by-employer. I was talking about 100% coverage of the cost of twice annual cleanings and x-rays etc.
tbw,
Even by that chart the deficit doesn't exceed 40% of GDP before 2010. Anything longer away than that is almost pure speculation and requires a god-like knowledge of what's going to happen in the economy.
Besides-which, I think it depends strongly what the American public gets for this money. If they get out of the recession, get to keep their precious houses, get to feel good about health care, and green jobs, I think it will be status quo.
I also think that something's been fishy with the CBO lately, the head of the CBO has been mouthing off with pure opinion, which makes me question the reports he's letting out of his office. Looking back I think we'll find out there was some underhandedness just like there apparently was for the terror-alerts. Remember that these agencies have quite a bit of lag between administrations and the Bush administration wasn't above putting political appointments in career positions at Justice, why not in the CBO? Where could be more influential than that?
I also find it highly ironic that someone who could think the insurance companies should act like nannies over our individual life-style choices would chose to impugn the nanny-state when it comes from the government.
When I bought my condo I had 20+% available for the down payment, but, I was 37. Also I decided to do an 80/15/5 and keep several months salary for emergencies set aside--and it was in privately held stock shares I didn't want to sell and pay cap gains on anyway.
I paid the 15% loan down quickly ahead of schedule with the plan to have it paid off by around now, but life plans changed and I sold the place after 5 years. Also was required to sell the private stock before that.
So in the next couple of winters, IF(!!) I can find the house I want for the price I want to pay, I'll be able to put 30+% down and have another 30+% (more than a year's salary) in emergency funds. Might be able to swing a 15 year loan too--I'm 45 now.
But I agree with others, we're a skewed sampling on here.
I also agree that the 80% retirement figure is scary and a tactic, but if you want to travel more and/or have bigger health issues, especially long term care, your costs can get high quickly. Pretty hard for an old person without job income to get loans or new credit, too. So you need to live off savings, investment income, and stock sales, and you can't have your money in high-risk/return investments and do interest rate arbitrage as easily either.
I think living on only 50% of your income while working and especially while having a family is HIGHLY unique, so people are going from a 50% spending rate to 80%, more like 95-102% rate DOWN to 80% or whatever they can manage. And yes, not needing work clothes, commuting costs, more furniture, or continuing professional education can save money, they probably aren't 20% of your spending now.
Best thing is to not have high (or any) housing costs when you're retired--and property taxes as low as possible too. Which is why everyone retires to FL (ugh!) and not NH.
TBW-
Sorry I thought you were talking about companies that pay for it all themselves. If you are counting companies where you pay the premium you are correct that the number is much higher.
I agree with the comments about a possible 2010-2012 debt backlash against the Dems.
I mean, according to that chart, accumulating 50% of GDP during the spend-and-debt Republican years is perfectly acceptable--fits right in with their hypocrisy.
But allowing Obama Depression avoidance to roughly cancel out the Clinton net debt REDUCTION? UNACCEPTABLE. UNAMERICAN. ANTI-CAPITALIST. SOCIALIST!!!!
Scott,
When you put it that way. Too true.
Cara,
I don't think I used the term nanny-state anywhere.
I don't think I was encouraging "nannyism" for health care. Why should someone who is 400 lbs (or a smoker) not pay extra for their health care insurance when someone who got into five car accidents pays a lot more for auto insurance?
I'm for universal health care and voted for Obama (and Jim Webb in 2006 and so on). I did not sign up for higher deficits than what Bush gave us. We were promised fiscal responsibility.
contrarian,
free rent from your bank, it's the new I/O loan.
Scott/Cara,
You are arguing that two wrongs make a right. By your logic, Obama could start a needless war with a foreign country because Bush led us into a needless war with Iraq.
I'm biased as a moderate Democrat, but I don't think a majority of this country voted for an explosion in federal spending.
Scott,
Also, I'm not saying the country would freak out if debt were at the Reagan levels during the 80s. I'm saying the country will freak out if we in a few years exceed the Reagan levels amount by 10-15% in a matter of a few years.
contrarian,
The link to housing is the Robert argument that explosion in federal spending equals more fed gov't (and contractor) jobs in the DC area which equals higher home prices. I'm saying the projections Robert is making are unrealistic and political realities (as well as possibly foreign creditor realities) will stop that sort of explosion in federal spending.
You didn't use nanny-ism. But I can't condone the tactics you suggest for allocating insurance premiums. So, I'm calling it nanny-ism. And elitist at that. Have we all listened to ourselves in this echo chamber of fiscal and physical responsibility?
1) There are conflicting studies on what actually costs most, and even conflicting studies on what constitutes health.
2) Not everything is in your own control. I reject the Calvinist notion that the chosen shall be rewarded on earth.
Part of the reason I'm not worried about the deficit is I think you will actually get what you voted for. Once the necessary stimulatory spending has passed, and the economy is back up to providing the tax revenues needed, I think you'll be pleasantly surprised that Obama is far more middle of the road than I'd like. He was never the liberal candidate as far as I was concerned, and keeps proving to be less and less so in office. Therefore he must have some ideology, which leaves fiscal discipline as about the only thing he stands for as far as I can tell.
That is hilarious. They get credit for humor. But it's a long skinny 1 acre. Not so great for building a bigger home.
Cara,
I zeroed in on this portion of your response. I looked at the aerial photo of that home. Based on my experience as a former home builder (1980's) there is ample room for up to 5,000 sq foot home and still have a decent yard. Even from my Southern "grew up in the country on a really small farm" perspective the current home isn't that shabbby. It's probable that the current home raised a nice set of Brady Bunch kids at least once.
I am not dissing your comment. I am just curious as to what makes you look at a lot like that and think "Not so great for building a bigger home".
Are the standards for "bigger homes" here in the DC metro area that different from the rest of the country?
I seek to understand why folks today seem to think they need so much square footage in order to live the exact same lives our parents lived in 1/2 or 1/3 of the square footage.
Me, I grew up in a 1400 square foot home with 5 siblings spread not more than 2.5 years apart. Tight, but plenty of room for us.
Am just wondering is all...
Cara,
Also I think Obama is moderate. I have said I think there will be belt tightening after the recession ends.
But Robert thinks differently. My point was only IF Obama and Congress do not tighten the belt, THEN America will make them.
Texas Native,
Well then you have a lot more experience building than I do.
Did you look at the lot lines? It's about 5 times as long as it is wide. Presuming there are ordinances on how close to the boundary lines one can build, I'd say the width is a factor of two larger than the current home.
Assuming the current house is square (which it isn't) the current 40 feet could be widened to 80 feet, giving a huge 6400 footprint.
So, sure if you want to be teeth and jowl to your neighbors out in Annandale, go for it, build whatever size suits your fancy.
It was really just the long and narrow bit. I mean 1 acre sounds great, but most people picture something a bit more square.
And more than one acre, 1.04...
My sisters own a 1200 sq ft 2 bedroom and are raising two kids, I'm looking to buy a 1360 3 bedroom and planning to raise two or fewer kids, so I can't really say what consitutes bigger.
I can only say hear, hear, when you say why can't we live in what our grandparents did, both the houses I grew up in and the ones my parents did were way bigger than anything I'd be willing to pay for around here.
Texas Native,
I would guess homes are larger in your native Texas (at least in the major cities and areas similarly wealthy) as the DC area. Mainly because I think a larger percentage of the growth of those Texas cities and accompanying suburbs occurred in the 80s and beyond than in the pre-1980 period. And for the most part the later the neighborhood was developed the more likely the homes are huge.
I suspect (but may be wrong) that the NE corridor (including DC) has way more 1940s, 1950s, 1960s, and 1970s suburban developments than Texas. DC also developed a little later than the rest of the NE corridor so I think we have larger homes on average here than further up the NE corridor.
tbw,
I agree, if the Obama administration does launch perpetual spending that would engorge the local area, the voting public would pull it back.
It wasn't just you being elitist it was the whole group. We pat ourselves on the back too much about our fiscal responsibility, our fabulous school system, and so I was reading that bleeding in to the conversation on health.
I do want a nanny-state though. I want more regulation of financial products like Vermont, I want universal health care, I want cheap or free university or vocational education for all, I want all kinds of things. But I don't agree with how their currently being monetized. Cigarette taxes are even worse than state-sponsored gambling. They are not about health care costs, they are about sins. And letting the poor, naive and powerless foot the bill. What I want is socialism. Plenty of countries are socialist without reverting to draconian measures, why not us?
Does anyone but Robert really think there will not be political consequences in the 2010 or 2012 elections if debt keeps rising at that alarming rate?
TBW, does this mean you are changing political parties?
Cara-
I agree that gambling taxes are just taking money from the poor. I disagree about smoking though. I personally think it is a public nuisance so they should pay for it. I and most non smokers hate the smell of smoke so if someone is going to ruin my air I think they should have to pay for it. The same thing is done with gasoline. Because it is a pollutant it also has a very high tax.
The link to housing is the Robert argument that explosion in federal spending equals more fed gov't (and contractor) jobs in the DC area which equals higher home prices. I'm saying the projections Robert is making are unrealistic and political realities (as well as possibly foreign creditor realities) will stop that sort of explosion in federal spending.
TBW, there are two ways to close a deficit: tax increases or spending cuts. Obama has said and most likely will increase taxes.
And he doesn't have to balance the budget or get even close by 2012. If the deficit is $1.5T in 2010, $1.2T in 2011, and project to be $1T in 2012, that won't ruffle a feather.
All my opinion.
http://franklymls.com/PW7119877
for those of you waiting for foreclosure shadow inventory ...good chuckle..and really, really supports roberts V
Arkey-
Whats wrong with the price I mean they are going to spend a couple hundred bucks on new carpets :-D
In all seriousness it is depressing needing to live near the city. They obviously meant to price the house at 71K or 79K. That same house would probably go for 3 to 4 times as much in the areas I am looking... Ohh well
tbw,
I should also apologize.
housebuyer,
I'm not against there being any sin taxes, I'm against using it as such an easy out. Don't have the money for SCHIP? Just raise the cigarette tax.
On gas taxes, I'd like to see them higher such that $4 gas was a given. But that's just me.
Arkey,
Snort!!! Glad I wasn't eating or drinking. I think there's a misplaced zero there...
Cara-
I agree I would also love to see them tax gas a couple of dollars. I think they would need to phase it in very slowly though so people could adjust what car they own over time. Maybe raise the tax 5-10 cents a year for the next 20 years. Maybe they could also say there would be little to no tax on natural gas.
Seeing we have tons of natural gas and it is cleaner there is very little reason we don't use it... ohh well
I'm not arguing that two wrongs make a right.
But I would argue that the spend-and-debt GOP policies are especially hypocritical for the party that says they are more fiscally responsible.
I would argue that a preference for war-for-profit and healthcare-for-profit over giving poor people medical care is especially hypocritical for the party that says they are more moral.
I would also argue that avoiding or even trying to avoid a New Depression is more moral, useful AND sustainable that trying to be the world's greatest warmaker ever, for ever. It's why we now need two incomes instead of one---and soon THREE--in a household to be prosperous. It's why McCain can't have his wished-for Ireland-sized corporate tax rates.
I would also argue/agree that we should crank up taxes on cigarettes, fuel, low mileage autos, ATVs, snowmobiles, motor homes, and probably sugar, to help correct the unsustainable imbalances and recoup some of the costs those vices create. And maybe bigger taxes on vacation homes, boats, guns, and alcohol, too.
And a couple more things--what do you call the slate of Republicans who would rather have millions of Americans NOT get adequate health care, rather than risk health-industry CEOs getting a little less rich?
I call it a DEATH PANEL.
The Dems had a clear case for calling the GOP liars, and they didn't, so now the GOP calls Dems liars and get traction off it.
The Dems had a clear case for calling the Bush policies (and the likes of Coulter/Limbaugh) fascist, and they didn't, so now Dems are called fascist and the GOP gets traction off it.
Fools. There are many other examples like this from the last 8 years or so, but I won't bother typing them in.
Tabitha..did you see this?
http://franklymls.com/PW7138915
YIPES, I knew we were gaining fast but this makes your eyes pop.
sold 3/07 for 290,000, listed at 425,0000 or 132% of 09 assessment and wentt U/C in 2 days for 475,000..in Yorkshire..Robert is gaining credibility. I bet it's not a VA loan...
Texas Native,
I get the impression from a lot of the posters here, that a modest home is one that is under 3000 sq feet. I grew up in CA, VA, and HI and the only house I lived in that was over 1600 sq feet was here in NOVA. Did you see from the aerial photo the rather large house three lots to the right? I looked up the property in the Fx County database(8325 Robey Lane) and that is a 5900 sq foot house on a .8 acre lot.
Cara,
Van Metre is building 4k-5k sq ft homes in Springfield on 1/4 and 1/3acre lots. You think those homes have much privacy even with square lots?
http://franklymls.com/PW7119877
for those of you waiting for foreclosure shadow inventory ...good chuckle..and really, really supports roberts V
Arkey, it's not my V, it's the data.
What I don't do is make up kooky theories why the V will turn into an L or a W.
What do you call it?
Robert, I told my first listing agent that when this market turns it will turn on a dime that was Nov 07. I still believe that espically now from what I've seen list and go U/C in PWC in the 8,000bribe market. Geez, if you follow Ca. they are selling everything 10 to 20% over list in the foreclosure market and vets are bitching gang busters in every market because no one wants to deal with Va. apprasial issues and the extra Closing costs to the sellers. I know what the media reports but I have also been around long enough to know they only report what the government agenda wants reported or what a lobbiest wants reported. It's like buying stock, you buy what you know not what is pushed on TV and if the government agenda is housing is in the dumps so money can be tapped for insiders well then housing is in the dumps and shadow inventory is everywhere..yeah right..the first of the year, spring, summer..this winter except for one little boots on the ground fact in every market foreclosures sell over list with multiple offers and banks seldom accept a SS or few SS go to completeion BEFORE the house is foreclosed on. That in itself should clue people in that there is no shadow, just a bunch of clogged courts and paperwork needing to be filed.
HayfieldGrad,
Don't make assumptions. I grew up in a modest home by your definition (~1600 sq ft or less).
It's precisely the fact that the modest home I grew up in had such a ridiculous price in 2006 that I knew there must be a bubble. I knew the types of people buying in that neighborhood for 20+ years and they were not people who could afford the bubble era prices. And I saw no reason why similarly situated families should have been priced out of my childhood neighborhood forever.
Robert,
The proposed tax raises are meant to pay for universal health care so they'll need to do even more to lower the deficit. I suggest they remove the home mortgage interest deduction and capital gains exclusion to raise revenue. :)
Robert said...
Arkey, it's not my V, it's the data.
What data makes a "V"? Three years of down and three months of up?
I just don't understand how some people believe that home prices must always go up faster than wages. Where does the extra money come from? Is the rest of the country collectively getting poorer to fund the housing market in DC? Please show me anything that supports the theory that home prices can outpace wage increases in some sustainable fashion.
On another note, I really like this house, but I'm guessing "deal fell thru" is code for "would not appraise for asking price." Or does it have something to do with the fact that the bank is taking a 275k haircut over the 2007 sold price? And does the 525k to 850k sale in 14 months look like mortgage fraud to anyone else?
Jeremy, that house is a favorite for several of us - I think NoVAWatcher found it first some time back. Let us know how it goes if you put an offer in!
The wife and I drove there today. The grass was not mowed and the house appeared empty. We turned around in the driveway and did not like trying to get back onto Fox Mill. That could be fixed with some trimming of the brush/weeds - but we also plan on having kids in ~2 years and were kind of hoping for more of a neighborhood street. We'll see, but I think we're going to wait a bit longer and keep saving. The houses we really like are all 700k, and we refuse to borrow over 500k. If we really do wait 2 years that would be possible, but I'd rather move sometime late 2010/early 2011. Depends on what we see I guess.
And I'd much rather borrow 417k, or whatever the conforming limit happens to be when the time comes.
Jeremy-
I like that house too, but you are smart to think ahead about the busy road. A very fast child with no impulse control doesn't mix well with a double-yellow-line road.
Hayfieldgrad,
For me, starter is 2000 sq feet and under. modest is 2000-3000, Large is 3000-4000, 4000 plus is more room than anyone actually needs unless they are intending a multigeneration home. (actually the shore house my grandparents bought in the 1930's fits 3 families for under 3000 sq ft so whatever, it's a fabulous house, absolutely maximizes the number of bedrooms per sq ft., 3 on each floor plus a sleeping porch.)
So, yes, I think those people who are buying 4000-5000 sq ft houses on 1/3 acre lots are nuts. That kind of sizing is appropriate in say, Old Town, or downtown DC, or even orange county CA, but not in the suburbs of a southern city. People put up with it in Arlington, and pay good money for it. But I think "most" people want a higher land to house ratio than that. Personally, I'd much rather do the yardwork than the housework, but that's just me.
Jeremy,
It's a short sale, so "deal fell thru" is most likely to mean "buyer ran out of patience". It could indeed mean the bank was unwilling to take the haircut, such that the bank's offer back to the contract was not a number the buyer would accept, However, since it fell out in only a month (sawbuck gives contract dates), and didn't get a price change until 7/20 I would guess that it was purely on the buyer's part, because it's highly unlikely that the bank did anything that quickly.
A bunch of us love that house, so will be very jealous if that location works for you and you're able to buy it.
It's been listed 3 years in a row for prices that would have, made money, not lost any money, and now as a short. So, I think the market has spoken loud and clear, such that the bank should be accomodating if they can snag a buyer. On the other hand, if they don't drop the price further to snag a short sale, it will still be around as a foreclosure in another 8 months. However, it may be in better condition if you take it now. If you like it enough to live in it, offer $475k and see if the seller and their bank bite? Why not sit in a good short sale while you're waiting for prices to come down?
TBW, contrarian,
I saw the proposal last year to eliminate the mortgage interest on over 3000 sqft houses. It was meant as an answer to global warming, I believe. It is a very clever piece of legislation because it targets Republicans in my opinion. Many of the coastal liberals live in expensive, but smaller condos and townhomes.
That would suck for me. Not the end of the world, but definitely suck.
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