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The upside to a down market is increased affordability : comments
Submitted by admin on Thu, 07/24/2008 - 3:42am.
He waited a few months to save $4,000
Wow, what a winner. The increased interest will eat that up, plus thousands more. Maybe you should have not bought a four bedroom home for two people closer to Boise. You could have saved tens of thousands on your house and thousands on your commuting costs.
yes but...
the momo's need to start reproducing asap!!!! Gotta have that room.
jimmyfan
What an idiotic response.
Fitch says current prices will drop 25%
here's your link:
www.housingwire.com
so, it looks like these people are knife catchers ......
Good luck to him
Yeah, saved $4,000, but I figure his interest rate went from 5.75% to 6.25%. In the end he'll pay $40 per month more. My daughter and son in law live on the north side of Kuna and commute to Boise to work. They are really regretting it due to the increased costs. Maybe this young guy in the article will buy a scooter. Boise Inc. has pretty good life insurance benefits for their employees I hear.
$162,000?
For a Crappy Built Home (CBH)? I hate to break it to him but he still paid too much, increased interest rate and commute notwithstanding...I hope he has an additional fund set aside for repairs once he realizes he bought a sub standard structure!
$4,000 savings
What I'd like to know, if there are any math wizards out there that can tell me what $4,000 over 30 years means on a monthly mortgage payment.
Yes, I can
At today's rate of 6.5% $4,000 in loan amount comes to $25.28 per month. Over thirty years that's $9,100.80. The bigger difference is in the interest rate that was available when they started looking vs. today. It is not inconceivable that they would have gotten a 5.75% rate (that's where they were a few months back). At $166,000 with a 5.75% rate the P/I is $968.73. At $162,000 with a 6.5% rate the P/I is $1023.95...a difference of $55.22. Over thirty years that adds up to $19,879.20.
Yeah, I was way to lazy to plug that into Excel last night
but instinct told me it was something like that.
So basically, they're
So basically, they're actually paying $15,000 more?
Sucks for them!
I don't know anything about mortgages... Is that 6.5% rate fixed for the duration of the mortgage?
Yes
Yes, that's today's 30-yr fixed rate
Thank's BroncoBro
I was only curious to see if a savings of $4,000 was significant enough that it "increased affordability" but your figures actually show that waiting 4 months to save $4,000 was actually detrimental.
30 years vs 5 yrs
Its not often these days that a family stays in their first home for the duration of their 30 year mortgage. It will take 6 years of monthly payments to eat up the $4000 savings and so as long as they sell within 5 years and 11 months, they are still ahead. Its also likely that he has some savings toward a down payment and isn't financing 100% of the loan which provides further cushion before the higher interest rate eats up any savings.
.
.
most homes are sold by the amount of monthly payments
if interest rates go up, the asking price will have to go down, so your principal is less, your interest deduction is higher, and your property tax is less (because you paid less for your home), I think this is something the government doesn't want, because your are able to deduct more off of your taxes. If you look at the listings on realtor.com the first thing you notice is what your monthly payment would be, (how do you think we got where we are? low interest loans with low monthly payments, that's what has been sold the last few years) most realtors sell homes by monthly payment amounts, so rising interest rates only hurt current home seller and the state and feds, by increasing the amount you can deduct.
For a dollar down and a dollar a week
You can get all the things you seek
...
yeah, but if you have a low principle at a high interest rate, you can always refinance the rate, you can't change the principle. I don't think people thought about that, they're only concern was the monthly payment and if they didn't get a fixed rate (which I don't understand why, fixed rates were very low), a lot a people didn't; after all, they were told by their realtors that prices only go up. I'm just waiting for the next wave to roll in. History tells us that 30 months after foreclourses peak is the time to buy, looking at the BMIT foreclosure chart, we have a long way to go.. visit calculated risk, you can learn a lot.,
How many ridiculous fluff
How many ridiculous fluff articles is the Statesman going to put out trying to assure the public that we've hit the "bottom?" We've been reading this crap for the past year. Meanwhile, CNN and MSNBC have expert reports claiming the bottom is nowhere to be found, and they expect at least another year of falling prices.
Reeks of desperation to me. Our Valley must be in it worse than is reported.
I agree, it is in ..
worse shape than being reported - at least by the Idaho Statesman which is likely beginning to suffer from falling ad revenues. Since a lot of their ad income is derived from the real estate sector it is understandable that they don't want to shoot the gift horse in the mouth. That however ignores all precepts of true journalism - but hey what else is new.
Anyone buying a home right now is trying to catch a falling knife if they expect it to be an investment. A primary residence should never be considered an investment in spite of what the real estate industry would like you to believe. A home is a place to live. Your payment should not exceed about 30% of your monthly income. It is best if that number is based on the income of the bigger bread winner and not the total of both since one of you losing a job is always a possibility (especially now and for an intermediate time going forward). You should have 6 months of living expenses in the bank. It is a good idea to put 20% down, but most can't so they end up paying private mortgage insurance which drives your payment up and currently they aren't writing that unless your FICO is above 680.
I hope it works out for those folks, but they may be playing dodgeball in the middle of a busy freeway.
Actually
We are not as bad as the rest of the country on average. That appears to be the point the Statesman is making, although they could state it more clearly IMO. Today the local lending entities were advised that Ada and Canyon county's risk assessment for declining market values have been revised to "soft", as opposed to "distressed" or "severeley" which applies to many counties in places like California, Arizona, Nevada, Florida, etc. It's not great, but we ARE better off than many places. I think the life preserver Congress through out today will help the situation more than many realize. The objective should be to stop the spiraling effect of foreclosure>--
The problem
with the lifesaver they threw out today is it won't really address the troubled loans and there are so many hoops to jump through that few loans can be modified to fit the new program. Simultaneously the financial community is giving the proposed "bail-out" of the GSEs a big Bronx Cheer. Fannie and Freddie's short term rate spread over the 3 month bill is now 1% instead of .4% from a few day ago. The bottom line is mortgage rates are going up because fewer and fewer buyers are showing up for mortgage bonds irrespective of their backing or AAA+ rating.
It appears as though the lifesaver may temporarily prop Fannie and Freddie, but in the end they will fail and if they follow through on the promises it will drive the yields on the treasuries much higher and quite possibly cause the AAA rating of US govt debt to drop, possibly collapsing the dollar.
This package was to a gift to the bankers at the expense of every taxpayer. The potential for financial Armageddon is quite high. The potential alone will cause the markets to begin placing "bets" on that fact which in itself will force rates higher. When the fed says it is raising rates becasue of inflation, understand it is truly the only response they have to the insanity that has just passed the House.
The technicals look that way
but I think there will be sufficient "positive psychology" from this move to prop up the real estate market a bit...at least slow or stall the downward trend. I wince at the thought of Fannie/Freddie failing. So, anyone care to complain about too much regulation of the financial industry after all we've been through lately?
Maybe you did not read the article....
It says some place are up like the north end. It's always been location, locatin and location in real estate. You sould just buy a house where you have all the amenties within walking distance. No commute, less fuel costs = great standard of living.
Location?
Location is nice and it will soften or delay the blow, but trust me the blow will come. The prices are largely determined by the numbers of people able to buy versus the inventory. In the highly touted high end communities in Marin County, California, arguably one of the most "location, location, location" places in the West, they made the same claims....up until about a year ago when it turns out that in order for the people to buy there they had to make a huge amount of money and that quite a few of the recent buyers had obtained mortgages they can't actually afford when the option pay loans were fully amortized. We are now seeing a huge spike in foreclosures in those areas and the prices are beginning to crater.
Good point...
...those neg am loans are the culprit in many cases.
Quit picking on the Statesman! They get lots
of advertising money from the real-estate pimps, so they have to report all the rosy news.
Good point CD
I never thought of that- but it's true- the bulk of their advertising income must come from the real estate brokers.
Hey, whoa...
CD, there is NO doubt that many real estate agents are clueless taxi drivers who shotgun homes at people to see what might stick and then collct a check. However, your comment implies that ALL real estate agents are "pimps". There are a lot of good agents that know a lot of things and manage to provide value to their clients. It is not those individuals fault that the industry they're in is not more discerning in who gets to practice the trade and who doesn't. Now, before you blast the entire real estate industry and all who work in it, consider this. Without the real estate agents working under their respective brokers and participating in the local MLS service, none of us would have the information necessary to price and sell our homes. Nor would we as buyers have a reference point from which to determine if a house we were interested in buying was a good value relative to other homes. When anyone went to the bank to get a loan, the bank would be in the position of trying to guess if the amount of money you wanted to borrow was appropriate for that home because there would not be an appraisal (despite all the formulas for determining the value of a home, it is comparable sales that are referenced to support the stated appraisal. Without them the appraisal is rejected). Idaho does not require you to state what you sold or bought a home for, so going to the county for sales data would yield nothing. In the end, the system is not perfect, but it is better than the free-for-all we'd have otherwise. And I dare say that we'd all likely be saving up the cash to purchase our homes outright (which might not be a bad thing, but we wouldn't have a very stimulated economy in most other ways either).
Tell it to the other bookies.
I ain't buying.
We live in a society where the unproductive get rich piggy backing on the productive. Take lessons in mandarin, it'll be more useful than 9th grade amortization analysis.
OK
Suit yourself...you nontheless have benefitted from the system of "pimps" you berate.
Go take a spin in your hummer.
It'll make you feel better.
Sorry, CD, I don't own one of those.
If my recollection is right, you and I agree on many things, including how to deal with the environment. I drive a 2000 model sub-compact...been paid for for 5 years and gets 32/40 mpg. Sorry you think that because I'm in the mortgage business that I somehow can't measure up to your standards. I've helped a lot of folks like the ones in this article buy their first home. I've never taken advantage of anyone...I just try to do the best I can with what's available and make a pretty humble living in the process.
OK. I'll let it go. It's a pet peeve of mine. A society
that over-rewards selling, advertising, & money changing while under-rewarding production & labor is, in my opinion, not likely to survive in the long run.
Believe it or not, I agree...
The way in which we assign more or less value to things is pretty backwards in a lot of cases. I've been in some type of sales all of my career. It chose me rather than the other way round. I have the "personality" for it, whatever that is. I kind of see it like athletes and movie stars. They have the talent and get paid stupid sums for it. Talk about a couple of groups you could really harbor some resentment for! Nonetheless, it's fed my family and I've always tried to give people their money's worth. I've worked along side others with whom you needed to take a shower afterward...too bad they leave a lot of people like you feeling like it's a sleaze fest. In the end, somebody has to do what I do because you can't expect people to buy a mortgage out of a vending machine. Most people I deal with are pretty clueless when it comes to financing a home.
And I suppose...
... that you are somehow qualified to be the great arbiter of who is over-rewarded and who is under-rewarded? I've never seen anyone hold a gun to a person's head in this country and tell them that the line of work they are in is the only one they are allowed to be in. If you believe you are not being justly compensated, change jobs. If you stay in the job you are in, then you are by default agreeing that you are being justly compensated.
Hmmm
not sure you're addressing my comments, but I think it's a matter of opinion about how our society places relative value on the type of work people do. Just a thought.
Correction
The market, not society, places relative value on the type of work people do. If not, professional athletes would make $50K/year and firemen would make $12,000,000/year. The market has been, and should be, the arbiter of value.
Typically, people that complain about others making too much for what they do are themselves unworthy of and unwilling to do what it takes to earn what they feel would be "fair". The market always takes care of that.
There goes that halo again, joe.
The market does what society thinks it should do. There is nothing "free" about the market. More talking points interpreted as facts.
How funny.
The market does what society PAYS it to do. The market "THINKS" society should pay more for it's products. But the market is forced to ignore what it thinks and correct itself to what it can get paid to do. The market is free to do a lot of things. No one forces Chevron to sell gas. No one forces you to buy it. Those ARE facts.
Market, shmarket
The dearth of teachers has done little to prop up teacher salaries. So much for the application of free markets to compensation.
Downside of Sitting on the Fence is increased payment.
Lets analyze the real effect of waiting.
April 18, 2008 Asking price $166,496 buyer hypothetically negotiates discount of $2990 (same discount as actually negotiated. Buyer purchases home for $163,506 taking out a 97% ltv fixed rate loan at 6% financing $158,600.82 resulting in a payment of $950.89 (princ. + int.).
"Upside" scenario that Joe Estrella and the Idaho Statesman promote.
Asking price of $164,900 buyers negotiates a $2990 discount (weak) resulting in an actual purchase price of $162,000. Buyer again takes out a 97% ltv financing $157,140 at 6.5% on 30 year fixed resulting in a payment of $993.23 (princ. +int.)
Increased cost of waiting =$42.34 per month
If the buyer keeps the home for 30 years they will pay it off about 3 months later and spend an additional $15,242.40= $42.34 X 360.
The buyer will realize savings if they sell within the next 3 years (and it's not a short sale or foreclosure). If they hold longer than 3 years they will see an overall loss.
Way to go!
sell! sell! sell!
Way to go!
CBH
Don't forget, this is a Crappy Built Home we're talking about. The chances of getting somebody else to buy it in the next 3 years, at any price, are slim.
IdahoMistatesman
Is that really true? I always thought the re-sale problems were with Hubble homes.
Flooded market
And most CBH are in new developments right next to farm land that will be developed in the next 5 years.
So why would I buy their house when they want to sell it in 3 years instead of buying my own NEW home with my modifications, right across the street??
Because it comes with
Because it comes with fences, yard, landscaping, window coverings, etc., all very expensive when you've just bought a home and don't have a lot of extra money hanging around.
Nice to see those in the long game
are still somewhat ahead on price... That little CHB house sold for about 100k 10 years ago. And now with a weak $ the numbers are about the same. Hound those neighbors that are so depressed they show it on the front lawn.... they will cost you as much as a bad market.
Wise people...
Do not like either company. Hubble is by far the worse of the two. A CBH would be like a low end normal house. A Hubble is more like a trailer.
But if one is smart, they can buy a CBH near a subdivision of higher quality homes, wait a few years and then sell it (without listing it as a CBH).
But honestly, they are going to lose equity on their house as CBH cuts prices on their newer models to sell them.
There are subdivisions that hold value and some are even appreciating. Those subdivisions are not in Meridian, Caldwell, Nampa and Kuna though. They should have went to Boise to buy.
But if the house meets their needs and is something they plan on staying in for a long time, then it was a good choice for them.
Shaun Tracy is a jackal...
You sure this isn't one of his investment homes that he defaulted on?
$180,000 to $250,000
Is not affordable on Idaho wages.