I recently wrote that the housing bubble creates a no-win political situation for either presidential candidate. Despite the political minefield housing policy creates, Mitt Romney has published a very brief and vague plan he hopes will excite voters. It won’t.
Housing: Fulfillment of the American Dream
Overview
For millions of Americans, homeownership is about more than just a place to live. For many, owning a home is the fulfillment of the American Dream. Yet today, the dream of home ownership is out of reach for many Americans as a result of President Obama’s failed policies and stalled economy.
Owning a home is oftentimes the most significant investment a family makes during their lifetime. The housing crisis of the last few years has reduced the value of this investment at a time when middle-class families already continue to struggle in an economy stuck in first gear.
A big problem with the updated American Dream is that owning a home became conflated with saving for retirement or supplementing one’s income. A home should not be viewed as a speculative investment because that leads to speculative finance and price volatility.
Obama’s Failure
The only path to a healthy housing market is a healthy economy, but a housing recovery is central to a healthy economy. President Obama promised a much healthier economy by now, but the economy he promised is nowhere to be found. Instead, our nation’s economy remains stuck with unacceptably high unemployment and economic growth too slow to ever reach a full recovery. The bottom line is that the President’s policies to improve the economy haven’t worked.
This is the central theme of the Romney campaign. Are Obama’s policies to blame, or did Bush and the Republicans who where in charge during the 00s screw things up so badly that four years of good policies under Obama were not enough to turn the tide? How the public answers that question will largely determine how they will vote.
Under President Obama, home prices have fallen, homeowners have received more than 8.5 million foreclosure notices, and 11 million Americans owe more on their mortgages than their homes are worth.
That was not Obama’s fault. He was not in charge while a massive housing bubble was inflated. He got stuck with the aftermath much the same as Bernanke inherited the problems Greenspan created.
President Obama’s only plan to address the housing crisis was the same plan he used to try to fix the economy: spend more taxpayer money on big-government programs. To address the housing crisis, President Obama rolled out an alphabet soup of more than ten housing finance programs …
Obama began all these programs due to political pressure within his own party to do something — anything — as long as it placated the sheeple. The success of Obama’s policies were rooted in the failure of any of these programs to do anything substantive. In other words, Obama’s housing policy succeeded wildly by failing spectacularly.
If Romney is proposing eliminating or curtailing this alphabet soup of programs, it will restart the foreclosure machinery and could crash home prices. Although I may think that’s the right thing to do, it won’t be politically popular.
rather than offering a real solution.
Any what solution would either Romney or the Republicans offer? The only smart and courageous proposal to come from the housing bubble was when Romney said to stop meddling in the housing market and let the process go forward. 
Unfortunately, soon after he said this, he felt the stinging criticisms of angry loanowners and abruptly rescinded his statements. This policy statement does nothing to get the wheels of progress turning again. What we need is several million more foreclosures to reduce people’s debts and recycle the homes into the hands of people who can afford to make the payments.
Meanwhile, credit-worthy borrowers are struggling to get a loan as a result of the uncertainty caused by the President’s policies.
That’s just bullshit. credit-worthy borrowers have no problem obtaining loans. People who aren’t credit worthy have an enormous problem obtaining loans, but giving loans to those who weren’t credit-worthy was part of the problem that caused the housing bubble.
By continuing to insist on a government-centric approach to housing and to the economy more generally, President Obama has hamstrung the economic recovery and slowed the recovery of the housing market.
On that point, I am in full agreement.
Right now taxpayers are on the hook for almost 90 percent of all new mortgages. The two government-sponsored government housing corporations (Fannie Mae and Freddie Mac) fueled a predictable disaster and President Obama has done nothing to reform these entities.
While the government is on the hook for almost all new mortgages, this was done to prevent an even deeper and more catastrophic collapse. If the free market had been allowed to operate, interest rates would have risen in 2007 to compensate lenders for market risk. Instead interest rates were cut in half to make the bubble-era prices financeable. No private lender would have loaned money at such low interest rates in 2007-2012. The risk was far too great. Only explicit government backing made the low interest rates and corresponding large loan balances possible. For better or worse, this saved the housing market from an even deeper correction. And since the GSEs were instrumental to propping up the housing market, the government was limited in what it could do to reform them. One thing the administration has done is it ordered the GSEs to wind down their portfolio of holdings which they are now doing.
Mitt’s Plan
Understanding that a healthy economy is the key to a healthy housing market, Mitt Romney has an economic plan that will result in more jobs and more take home pay. Independent economists estimate that the plan will create 12 million jobs by the end of his first term, an essential element to ending the housing crisis.
A Plan To End The Housing Crisis
- Responsibly sell the 200,000 vacant foreclosed homes owned by the government
- Facilitate foreclosure alternatives for those who cannot afford to pay their mortgage
- Replace complex rules with smart regulation to hold banks accountable, restore a functioning marketplace and restart lending to creditworthy borrowers
- Protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac
In towns across the nation, foreclosed homes sit empty, depressing the value of entire neighborhoods. The government owns about 200,000 of these homes, or almost half of all of the foreclosed homes in the country. Mitt Romney will responsibly get the government out of the homeownership business and return these vacant homes to productive uses that will increase neighboring home values.
How does he plan to “responsibly” sell these homes? Speedy liquidation would crash house prices, so that probably doesn’t meet his definition of responsible. Currently, the GSEs and HUD are selling their inventory largely to owner-occupants to prop up the flagging home ownership rate. According to HousingWire, “Romney has previously said he supports renting more of these homes out or selling them to investors. But again, these ideas first came from the Federal Housing Finance Agency and the Obama administration. Pilots were launched this year.” What new ideas does Romney have that Obama is not already doing?
Foreclosures are a difficult, long, and expensive process for homeowners and lenders alike. Mitt Romney will facilitate creative alternatives to foreclosure for those who cannot afford to pay their mortgage.
Lenders and squatters are not looking for creative alternatives to foreclosure. Lenders are content to kick the can until prices come back, and squatters are content to live payment-free in the bank’s house. Romney is proposing something nobody wants.
These alternatives will minimize the instability of communities hard hit by the housing crisis, preserve the credit of homeowners, and can help keep families in their homes.
What alternatives are these? None of what he proposes is possible. The people who aren’t paying their mortgage need to be foreclosed and evicted, and their credit should be damaged. To do any less promotes future imprudent borrowing.
Since the housing crisis, the government has produced more than 8,000 pages of new rules and regulations. The problem is that they are poorly designed, and have made it harder for people with good credit to get loans. Mitt Romney will put in place smarter regulations to restore a functioning marketplace that holds banks accountable and restart lending to creditworthy borrowers.
Smarter regulations? Give me a break. The regulations we have were a result of a thousand compromises necessary to get a bill passed. While the final product could certainly be improved upon, proposing “smarter regulations” does no good if nothing gets passed. Plus, it sounds insufferably arrogant and somewhat foolish for Romney to state he knows what a smarter regulation might be.
And when did Republicans start supporting more government regulations? According to HousingWire, “Romney then criticizes the administration for making it too difficult for borrowers to access credit. He points to “more than 8,000 pages of new rules and regulations,” which he himself actually backs. He told TIME Magazine in an issue released this month that the risk-retention rule under the Dodd-Frank Act was a good idea. Yet, many lenders have said they are waiting on it and the qualified mortgage rule to be finalized before mortgage credit can be expanded.”
Any serious plan for ending the housing crisis must address its root cause. Two government-sponsored companies known as Fannie Mae and Freddie Mac were at the center of the housing crisis.
No, they were not. This meme continually circulates through right-wing propaganda, but it has been refuted on many occasions by analysts looking at real facts and data. The GSEs were losing market share to private asset-backed securities investors who were funding all manner of toxic loans products under the false belief that house prices could never go down. The GSEs got in trouble because they loaded up on these toxic securities late in the bubble to regain market share. The GSEs were not the “innovators” who created and funded the toxic soup that poisoned the housing market. The GSEs did buy enough toxic crap later to go bankrupt, but they were not the driving force behind the “innovations” that fueled the housing bubble.
Mitt Romney will reform these government-sponsored companies to protect taxpayers from additional risk in the future by ensuring taxpayer dollars in the housing market are replaced with private dollars.
Specifically, how will he do this? As HousingWire noted, “The trick will be getting this idea through even his own party, many of whom are backed by special interest groups from the industry such as the National Association of realtors and the Mortgage Bankers Association. All have stressed the need for at least some government backstop to ensure the liquidity of old returns to the housing market.”
From what I read, Romney’s housing plan doesn’t cover much new ground. Publishing this plan is likely a result of the perception that the Republicans are losing on the housing issue. They are, but not through any fault of their own.
Bottom-Callers for Obama
The real victor in the political tussle over housing is Barack Obama, and not because his policies are having any positive effect. In fact, I posit that Obama’s housing policy succeeded wildly by failing spectacularly. The real reason Obama is starting to win the politics of housing is due to the chorus of bottom callers who are inadvertently coming to his aid. By far, the best thing for Obama is for the electorate to believe things are getting better. Obama desperately needs voters to believe the economy is improving, and more importantly, he needs voters to believe their financial condition is improving. The belief that the bottom is in for the housing market helps Obama on all fronts. Whether or not the members of the bottom-calling chorus set out to be Obama supporters, they are doing more to get him reelected than anyone on his campaign staff.
If you search Google News for the term housing bottom, the headlines it turns up are overwhelmingly positive. You get stories with cheerleading headlines like U.S. home prices make biggest jump in 6 years or Here’s More Evidence That Home Prices Have Hit Bottom which has 231 related news stories. The collective Kumbaya of the bottom callers seems intent on squelching all dissenting opinion. Obama must be thrilled.
The former owners of today’s featured property illustrate the perils of simple refinancing. These people bought at the peak with a significant down payment — a down payment which is now lost. They refinanced their purchase-money mortgages with a same-sized refinance. They didn’t pull out any of their substantial down payment. However, by refinancing, they turned a non-recourse purchase-money mortgage into a full-recourse refinance. Perhaps the lender won’t come after them and everything will be okay. But perhaps not. They exposed themselves to a huge risk when they refinanced their loan.
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Proprietary OC Housing News home purchase analysis
223 ALABAMA St Huntington Beach, CA 92648
$699,900 …….. Asking Price
$1,050,000 ………. Purchase Price
9/1/2005 ………. Purchase Date
($350,100) ………. Gross Gain (Loss)
($84,000) ………… Commissions and Costs at 8%
============================================
($434,100) ………. Net Gain (Loss)
============================================
-33.3% ………. Gross Percent Change
-41.3% ………. Net Percent Change
-5.6% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$699,900 …….. Asking Price
$139,980 ………… 20% Down Conventional
3.55% …………. Mortgage Interest Rate
30 ……………… Number of Years
$559,920 …….. Mortgage
$128,187 ………. Income Requirement
$2,530 ………… Monthly Mortgage Payment
$607 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$175 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$3,311 ………. Monthly Cash Outlays
($396) ………. Tax Savings
($874) ………. Equity Hidden in Payment
$159 ………….. Lost Income to Down Payment
$195 ………….. Maintenance and Replacement Reserves
============================================
$2,396 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,499 ………… Furnishing and Move In at 1% + $1,500
$8,499 ………… Closing Costs at 1% + $1,500
$5,599 ………… Interest Points
$139,980 ………… Down Payment
============================================
$162,577 ………. Total Cash Costs
$36,700 ………. Emergency Cash Reserves
============================================
$199,277 ………. Total Savings Needed
The property above is available for sale on the MLS.
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32 Responses to “Romney’s housing plan lacks fresh ideas while Obama is boosted by bottom callers”
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Fewer home buyers are first-timers
The vast majority of home buyers already own a home.
Despite low interest rates, low prices and slowly rising sales, first-time homeowners accounted for just 34% of all buyers in July, according to data released Wednesday by the National Association of Realtors. While that figure has inched up slightly from the month and year prior, the association says first-time home buyers account for 40% of purchasers under normal conditions.
The reluctance of newcomers to enter the market may be further adding to housing’s woes. After all, first-time buyers are vital to boosting sales, especially during downturns, since when they buy a home, they aren’t also selling a previous home to finance the purchase.
Their recent absence is largely due to the current challenges of saving up enough for a down payment: In a survey released in June by Trulia, an online real estate marketplace, 47% of all adults who aren’t homeowners and who wish to buy a home said that the down payment is the biggest obstacle to entering the housing market. Most mortgages require at least a 10% down payment, and in some pricey markets, like New York and San Francisco, coming up with that cash can take years, says Jed Kolko, chief economist at Trulia. A poor credit history, which makes it difficult to qualify for a mortgage, was the second most common issue holding back would-be first timers, according to Trulia’s survey.
Many potential buyers are also facing higher unemployment rates than other groups. The unemployment rate among 25- to 34-year-olds stood at 8.2% in July, compared with 6.9% for 35- to 44-year-olds and 6.5% for 45- to 54-year-olds, according to the Bureau of Labor Statistics.
Separately, first-time buyers are competing against investors—who tend to have all-cash offers and who go after the same, lower-price homes, says Leonard Baron, real estate lecturer at San Diego State University. Sellers who are eager to unload their homes are more willing to work with investors, since the sale doesn’t hinge on a bank’s decision to approve them for a mortgage. More recently, experts say, tight inventory has made it even harder for first timers to compete.
In the past, government intervention encouraged more first timers to buy a home. They accounted for nearly half of all purchases during the first half of 2009 through spring 2010, according to the NAR. That spike was partly attributable to the federal government’s $8,000 tax credit for first-time home buyers.
But there was also a larger supply of homes to choose from at that point, says Walter Molony, a spokesman for the NAR. Going forward, experts say, a larger economic recovery will have to occur in order for more lifelong renters to become home buyers. And more lower-price-range homes—in particular, foreclosures and other distressed properties now being held off the market—need to go on sale, says Molony.
“That’s just bullshit. credit-worthy borrowers have no problem obtaining loans.”
When I read this, Romney lost me. He it shows he is a panderer like the rest of them, or does not understand what is going on.
I have closed on 4 loans in the last year and a half. I am far from a rich dude. Decent job and spent the bubble save a few $. And some of the loans my clients got(I am a part time agent), well lets just say I was pleasantly surprised. They make money too much looser, and we will start to see the default rate on new loans tick up.
IR,
You are undoubtedly one of the sharpest minds (and pens) commenting on the housing fiasco today. I read you every day, and wonder how you do it.
But you are dead wrong when you call BS on Romney for saying that people with good credit are being denied mortgages. I often think your obsession with a particular breed of Southern California schemers–those who gamed a rigged system for all it was worth–clouds your ability to see the big picture. Many, many honest middle class people were fooled by the bubble dynamics into paying waay too much for a house, and then their incomes dropped because of the deep recession, and then they lost or will soon lose their house. No ATM. No games.
The one aspect of Romney’s crapulous policy paper that is eye-opening is the line about 8,000 new pages of mortgage regulations being created over the past four years. Is it true? Who knows? But I have two stories that should make you wonder. The first is my own. Two years ago we signed a deed-in-lieu to our grossly underwater house (long story short: no second, bought at height of market, husband lost great job, had to take crap one at one-third salary, lender wouldn’t make a deal). We had a lawyer review the documents, and he told us it was the same as a short sale: two years and we’d be back in business.
Over the past two years we carefully managed our money, got our credit scores up (his over 700, mine around 800), saved a down payment, got our income up, maintained NO other debt–two older cars free and clear. We are in the top ten percent of earners by the way, so we’re not talking about minimum wage or stated income.
Now, three weeks ago we give all our documentation to a reputable mortgage broker, ask for a loan to buy a house just over 2x our annual income. Totally reasonable, right? No dice. He says we are untouchable for 7 years. 7 years! I asked him who we killed. He’s not laughing. So I call Fannie Mae and ask how long a DIL has to wait. They say four years except under extenuating circumstances. Ok, 4 is better than 7, but still not the 2 we were told. So I ask what are the ext. circumstances. She can’t say. I point out that HUD says there have to be ext. circ. to just get the DIL, so isn’t it redundant to ask for MORE? No answer.
Here’s the deal: banks don’t have to give anyone a loan if they don’t feel like it, and they can (and will) use any excuse to deny one.
Another example: my sister and her husband wanted to move from Westchester to Connecticut. They sold the house they had bought at the top of the market AND expensively renovated for a huge loss, because it was killing them (big income loss). But they brought their check to the table and saved their credit. So they thought it would be smooth sailing on the other end. Again, they have a good 6-figure family income, money in the bank and good credit. No way. The bank didn’t like the fact that he worked on contract with a start-up and the bulk of her money was commission (she has 12 years of verifiable 6-figure commissions–she is a great salesman). So they are renting, and will try again next year.
Don’t tell me this is BS. I’m living this new “dream.” You know what I think? I think the banks are going to deny lots of people loans over the coming years to make sure their investor friends have plenty of renters to stock all those SFHs in good neighborhood that are being purchased in bulk with taxpayer financing and sweetheart deals.
This is the new America–peasants will rent and cronies will feast.
I understand your anguish over being denied a loan. Even though you may be a borrower who would repay the loan, many others with circumstances similar to yours are not. That’s the point of actuarial analysis. Actuaries lump together people with similar circumstances and estimate based on past experience how many of those in the group will default. If the rate is too high, they will deny the entire group access to credit. That’s how the system is supposed to work.
I know you have your reasons, and those reasons were likely appropriate to your family situation and I would likely agree with them, but when you signed that deed-in-lieu, you didn’t give the lender all their money back. You are a proven credit risk. Despite what you may have been told about the consequences of that action, lenders have the right and the responsibility to make sure they don’t get burned again, particularly if the US taxpayer is insuring the loan.
“Here’s the deal: banks don’t have to give anyone a loan if they don’t feel like it, and they can (and will) use any excuse to deny one.”
If a lender gives you another loan, and if you stop paying for any reason, the GSEs can compel the lender to buy that loan back and absorb the loss. This is making lenders very cautious. Anything outside the GSE guidelines will be rejected for fear of the buyback.
Lenders are not looking for excuses to deny loans, they are looking for reasons they may be forced to buy these loans back if you default. If there is a reason, they won’t likely approve the loan.
So are creditworthy borrowers being denied loans? It depends on how you define creditworthy. The actuaries who compile the statistics on creditworthiness have determined people with similar circumstances to your’s and your sister’s are a high risk. In your circumstance, they determined that people who provided a deed-in-lieu pose a significant risk of doing it again if they fall underwater (a distinct possibility), and in your sister’s case, they determined that people who work on contract with a start up don’t have stable enough income to consistently make payments for 30 years. It’s not unreasonable to assume many people in that circumstance have in fact lost their source of income.
What you are seeing is a return to the sound lending practices of the pre-bubble era. It’s supposed to be difficult to qualify for a mortgage. That way only the most stable borrowers get loans and default rates stay very low. That’s what creates a stable housing market.
If I was the bank and it was my money, I would not lend to her. Especially at sub-4% rates. Put yourself in the lenders shoes. If you were loaning your own money, would you lend to someone with your history?
There are allot of excuses but in the end she bought a place she could not afford and defaulted. End of story.
Go rent until you prove out your credit worthyness over time. Why is that so hard? What is the obsession of owning?
To think you should be given a tax payer backed loan two years after defaulting is insulting to taxpayers.
You’re complaining about your current inability to obtain a mortgage, but your default had a price for which you’re now paying. And you’re completely discounting the enormous monetary value you received by the DIL. How much debt were you able to eliminate with that signature? $100k? $200k? More? The system provided extreme value to you. The system has adjusted.
Your story and mine start out the same. We bought in 2007 a house < 3x our household income. However, we've been fortunate over the last five years and our income has steadily grown. We recently decided to spend $100k to payoff the second in order to refinance the first. We spent our entire savings to preserve our credit and obtain the benefit of a 15-year 3% refi.
Long story short, the system has provided both of us benefits. I'm still hoping prices fall further, even though that would hurt my current position, because I want to move-up to an Irvine house currently selling for $1m some day soon. $900k would be a much nicer entry point.
Extenuating circumstances would be serious illness or death of a spouse, neither of which sounds applicable to your situation. A DIL is effectively the same as a foreclosure on your credit history. So is a short sale, which FICO confirmed openly just a few days ago (you can google the story).
I understand that you had a loss of income so this may not apply to you:
I’ve always thought strategic defaulters were deluding themselves about how quickly they would be able to re-obtain financing, and I believe we will start to hear more stories like this as the strategic defaulters of ’09-’10 attempt to reenter the market now that many believe the bottom is in.
All fair points, reasonably put. But I’ll point out a few more things for the record.
1) People are being told that short sales and DILs are different from foreclosures and bankruptcies. They are being lied to. How are millions of American families to make reasonable plans for the future when they are repeatedly lied to about issues that are critical to them? Or doesn’t that matter anymore?
2) People on here (including IR) are always complaining about “squatters” and how they are preventing the market from finding a real floor. You cannot induce people to give up their homes if you promise them 7 years in the wilderness (where does that number come from anyway?–sounds biblical to me), and you can’t get them to come out at all if they find out you are lying about the time being less. So what’s more important? An honest clearing of the market or punishing people who have already lost everything? I’ll wait. Take your time.
3) I actually got a loan and got a damn good deal on a house because we didn’t have a lot of room to negotiate and the sellers really wanted out. Not a distressed sale either. I know you’ll all want to congratulate me.
4) Most of you strike me as hard-bitten businessmen to whom RE is no different from any other money-making venture. But there are millions of kids whose lives are turned upside down by foreclosures, and they didn’t do anything to deserve it. What’s seven years in the life of a child? Most of it.
Compassion is free.
“How are millions of American families to make reasonable plans for the future when they are repeatedly lied to about issues that are critical to them? Or doesn’t that matter anymore?”
It doesn’t seem to matter to the banks or politicians. They keep lying to us every day, and we accept their bullshit as truth. Exposing these lies is part of what I write about daily.
“You cannot induce people to give up their homes if you promise them 7 years in the wilderness”
That’s why most of delinquent mortgage squatters will end up as foreclosures. There is no real incentive to leave before the foreclosure because the punishment after the fact is the same, and once they leave, they have to start paying rent.
“So what’s more important? An honest clearing of the market or punishing people who have already lost everything?”
The whole purpose of a waiting period after a foreclosure, short sale, or DIL is to discourage strategic default. If people knew they could qualify for a loan with no waiting period, everyone who is underwater would strategically default and buy a less expensive property. It has nothing to do with punishing those who already did default and everything to do with discouraging current borrowers from defaulting.
“But there are millions of kids whose lives are turned upside down by foreclosures, and they didn’t do anything to deserve it. What’s seven years in the life of a child? Most of it.”
So children who grow up in a rental have inferior lives? Perhaps you need to examine your beliefs about home ownership. It seems you brought misery on yourself while you weren’t an owner due to your negative opinion of renting. I have been renting for as long as my 11-year old has been alive, and he has a tremendous quality of life.
Renting money to “own” a house isn’t much different than renting a house. If you fail to pay the rent on your money, you can lose the house just the same as failing to pay the rent on the house.
If you recently obtained a loan and bought a house that makes you happy, then I am happy for you, and I expect the other readers and observers are too. Their remarks were not heartless, they were merely pointing out there are consequences to life’s decisions. When you gave the deed-in-lieu, you did the best thing possible for your family. Sometimes, all your alternatives are bad, and you chose the one with the least negative consequences. I applaud you for making the right choice.
Please share how much debt you eliminated by completing the DIL. I’m guessing the number is pretty high. Aren’t you extremely grateful for that? How many months were you able to live rent-free?
You ran into some bad luck, and boy, did the system work for you magnificently! Your only punishment was a lower credit score and a waiting period before you get another mortgage.
i.e. Your glass is 7/8ths full, but you see it as mostly empty.
Thanks, IR. I have no problem with the mostly respectful exchange that takes place on your blog. That’s why I bother to post and take part in this discussion.
As for raising kids in rentals, that is absolutely not a problem per se. I am living in a rental right now that is nicer than our last home. But we’ve had to move several times since the DIL, and THAT instability is definitely not good for kids of any age. Also my youngest was 11 when we left our house. Old enough to know what was going on, and to yearn for the stability of “owning” something. Kids can get anxious and depressed same as adults. It has not been a great few years. I hope to give them something better now.
To Perspective,
I’ll tell you that it was a substantial sum, and yes we were glad to get it off our back. I would say we lived rent free less than 6 months. We certainly could have milked it a lot longer, but it’s not our style. We actually want our kids to learn that you pay what you owe to the best of your ability. Do you pay what you don’t have? No. But if you have options you take the least bad one and move on.
I’ll tell you what, I do feel blessed. Thanks for reminding me. It’s been an awesome week. Hope the same for all of you.
It’s not bullshit,
Thank you for taking the time to post and share your story. I appreciate your adding to the conversation.
It is tough to find compassion for those that are part of the problem.
You are part of the reason we are in an environment of zero interest rates and ever increasing taxes.
I save and live well below my means (can survive for years if I lost my job). I get a pathetic returns on my hard earned saving and I seem to be paying more and more taxes, fees, levies (and whatever else you want to call them) every month. I can’t help myself but to blame people like you who bit off more than you could chew and passed your burdens off to the fiscally responsible.
Oh – and it must be like living is a Soviet gulag to become a renter right?
“7 years in the wilderness”? . That comment alone paints you as an just one more of the self-centered, entitled, masses too common in Orange County.
It would be nice if we can have cake and eat it too.
Rentals can be great, good and ugly. Rented in places that were worse than one of the houses I owned and lived in. Rented one for 4 years that was a McMansion and better than my custom built house. I’m back renting that like the original house that I own. Most of the rentals were better than the house that I grew up in and parents’ owned.
I don’t think my kids suffered anything from living in rentals for the last 12 years. It was hard to reduce down from 3500 sf to 1600 st on the first long-term rental. The hardest to deal with was the draftiness and high heating cost in that rental.
Agree with the others here. You made some bad decisions and now you need to live with the consequences. You bought at the peak of the bubble and obviously didn’t put a lot down and probably bought more house than you should have. Not having any skin in the game will lead to wild housing swings both on the upside and downside. Job losses occur, but that is part of the overall ownership equation…can I pay my mortgage for the next XX years? Do I have a marketable skill, what is the future outlook for my industry, can I still get by being unemployed for a significant amount of time, can I get by if my pay gets cut substantially? Those are questions everybody buying a home needs to ask themselves.
Renting isn’t ideal, but it’s definitely not the worst thing in the world. It can be tough on kids, but that leads back to the responsibility of the parents to ensure stability. 7 years in the wilderness? I have been living 3.5 years in the wilderness. It’s probably the best financial move I have ever made. I rent cheap, live close to work and have saved like a madman. I am now in great position to buy when I choose.
If everybody was given a 2 year cooling off period before buying again, there would be absolutely NO consequences to making bad decisions. I think 4 years is being generous too, I think a minimum of 5 years is in order here. Thanks for sharing your story, good luck!
“…I’ve always thought strategic defaulters were deluding themselves about how quickly they would be able to re-obtain financing…”
I agree. I don’t necessarily buy any of the “facts” floated about foreclosure consequences. The agencies can always change the waiting period. The credit companies can always change the formulas for calculating the consequences of default to the many different FICOs. This is all beyond your control.
Exactly. Those that were promising it would be a 2-3 year wait were really just guessing. The assumption seemed to be that “they can’t block this many people from getting financing.” Oh yes they can.
Underwriting requirements are fluid and change constantly, usually in subtle ways. Nobody knows what things will look like a week from now, much less in 2-3 years.
When we see the purchase mortgage origination chart start to trend upward, we’ll know people are beginning to get their credit back. For the last two years, it has flat-lined at 1990s levels.
One that I know of is back in the market after 4 year from a short sale (no squatting and brought money to the table), divorce and remarriage.
Lots of credit card defaulters are given new credit cards almost immediately and at high credit limits.
It’s a long term investment, right?
Election Coverage 2012: Do homeowners who bought in 2008 feel better off today?
With election season in full swing, there’s been a lot of talk about how the past four years have gone, and whether American people feel “better off” today than in 2008.
While Republicans contend that the American people are worse off, and recently took to Twitter to prove their point – promoting the hashtag #AreYouBetterOff (with mixed results), Democrats are taking the opposite side (it wouldn’t be politics if we all agreed!), saying that compared to four years ago, Americans are absolutely better off today.
But with the housing crisis as the elephant in the room in both the recent GOP and Democratic conventions – the big topic neither party has made part of their official platform – we thought it would make sense to ask the people who bought a home in 2008 if they feel better off today.
And here’s what they said:
* 61% of homeowners who bought a home with ZipRealty in 2008 stated they were neutral, better or significantly better off today.
* 94% of those homeowners still own the same home they bought four years ago.
* And while 73% said that they believe their home had decreased in value, 85% said they viewed their purchase as a medium to long-term investment, with 60% planning to live in the home for over seven years – plenty of time for the market to recover.
“The results of this survey are telling, given the hit that the housing industry has experienced over the past four years. Despite widely-experienced declines in home prices over the last few years, a large percentage of ZipRealty homeowners who responded still feel satisfied with regard to their home ownership. These folks look at their homes as a long-term investment and a place where they’ve settled down,” said Lanny Baker, CEO of ZipRealty. “Beyond the financial dynamic, homeownership brings substantial social benefits for families, communities and the U.S. as a whole. Homeownership has been an essential part of the ‘American Dream’ for decades and the results of our recent survey substantiate that owning a home remains today a very satisfying proposition for the majority of consumers.”
Those that bought in December of 2008 probably feel alright, while those that bought during the previous Spring or Summer are probably hating life.
Yes, I think 2009 would have been a better cutoff. Plus, Obama didn’t take office until January 2009.
Democrats (Almost) Silent on Housing at the Convention
Education, health care, small business, new private-sector jobs—those economic themes were hit on over and over again at the Democratic convention Tuesday night. So far, though, there’s been silence about a huge piece of the economy: housing.
It’s a tricky political card for the Democrats to play. On one hand, the housing market is finally starting to show signs of improvement. On the other, foreclosures still haunt the country, including in some key swing states such as Nevada, Florida, and Ohio. And Obama’s key anti-foreclosure effort, the Home Affordable Modification Program, has made a much smaller impact than originally promised. As I wrote last week, it will boost loan modifications by only about 0.7 percent and reduce foreclosures by at most 0.48 percent, according to a recent academic study. Outside of foreclosures, rents are up around the country as inventory is falling behind demand.
Here in Charlotte, a consortium of 19 real estate industry trade groups met with legislators Wednesday afternoon to press the importance of the market. (They held a parallel meeting with Republicans in Tampa.) The groups talked about what they saw as the hurdles to recovery—weak capital markets, lagging consumer confidence, and regulatory uncertainty among them. Steve Brown, first vice president of the National Association of Realtors, told legislators that the association fears tax changes that would cut back or eliminate the mortgage interest deduction, which NAR estimates could trim home values by 15 percent. Alexandra Jackiw, from the National Apartment Association, told me she doesn’t expect housing will get much attention on the convention stage, which doesn’t make sense to her. “We are a $2 trillion industry, just in multifamily alone,” she says.
On Wednesday night two big speakers were particularly well-suited to bring up housing and foreclosures. Kamala Harris, the attorney general of California, has led anti-foreclosure efforts in her hard-hit state. She pushed though a Homeowners Bill of Rights and fought to get stronger pro-consumer measures in the $25 billion robo-signing settlement with mortgage servicers. Her speech provided the most direct discussion of the housing crisis so far in the convention. ”We’ve all seen what happens when you roll back all those rules,” referring to financial regulation. “What happens are rows of foreclosure signs.” Harris didn’t bring up loan modifications at all, though the biggest applause line was for the robo-signing settlement–she said Obama “stood with me and 48 other attorney generals” who secured the agreement. Then there’s Elizabeth Warren, who had a prime time speaking spot. She’s an academic expert on consumer debt. But, awkwardly, she was a harsh critic of the Obama administration’s anti-foreclosure programs. Her prepared remarks say Obama has taken on Wall Street–but hardly mentioned foreclosures and housing at all.
The only smart and courageous proposal to come from the housing bubble was when Romney said to stop meddling in the housing market and let the process go forward
IrvineRenter -
Have you no heart? Clearly you speak from the position of a disgruntled low person who is not capable of obtaining a mortgage. I can only imagine all of the poor choices that you have made in your life and how it is now the fault of everyone else who did things the right way and are therefore worthy of joining the Gentile of society.
Nevertheless, let’s consider your biased and hateful opinion.
Have you ever tried to raise children in a rental, IrvineRenter? I would argue that real men fix their own roof rather than defer to their landowner’s expense. Real men pay their property taxes to the Government themselves rather than have their landlord do it. Do you enjoy being a serf, IrvineRenter? How does it feel to pay money to another man referred to as your “landlord” each month? How inferior can you be? Do you want your children to come of age and discover that you are not a member of the Gentile, IrvineRenter?
Not to mention that house debtors are, in general, better citizens than these modern day Gypsies that we know as “renters” for the sake of Political Correctness. I can smell the mobility and freedom on a renter from a mile away and it disgusts me to no end. The way that they come and go with little encumbrance moving from job to job and not sweltering in traffic jams for hours a day to and fro. I don’t even want to look at them, just get them out of my sight.
Your solution is to simply take the inane Ron Paul approach and let children suffer. Think about the children, IrvineRenter. Without Government coming in and helping house debtors pay more for houses via taxation of renters – just imagine the chaos that would ensue. Let me guess, IrvineRenter, you are a member of an underground Anarchist group that seeks the overthrow of the Government. A most clever approach to mask your unpatriotic agenda with this “housing blog” of yours. Unfortunately, your words betray your end goal. We have free housing at Guantanamo Bay for people like you; I imagine that you would feel right at home among your fellow “housing bloggers”.
Otherwise, let me suggest that you take some stock in yourself and put on a happy face, my friend; get yourself a nice cheap renter-subsidized mortgage immediately and show your family that you care about them. Hang a flag above your door and show passerby’s that the foundation of Freedom is laid via the levy of Property tax.
Romney and Obama both love you very much and care deeply about your family want you to be in a happy loving interest-bearing relationship with a Financial Institution. Don’t be so selfish, bend over and let Big Government help you.
LOL! It’s good to see you again. Thanks for stopping by and making me laugh.
What better way to enjoy the 4-year traveling Circus? The Freak-show on display at the Conventions this time around are A+ entertainment.
Which Cola flavor is your money on for this round? Are we going to stick with Pepsi ONE or go back to Coke Zero?
Either way, I say we hurry up and pick our own serial numbers and get the tattoos quickly while the easy-to-remember ones are still available.
While the lemmings are entertained (aka distracted)…………… backstage, a jigsaw puzzle continues to piece together nicely.
Small businesses are struggling to stay afloat because they have to compete with super cheap prison labor.
Federal Prison Industries (FPI), a corporation owned by the federal government, employs more than 13,000 inmates at wages from 23 cents to $1.15 an hour, making everything from military apparel to call center and help desk support to solar panels and selling the products to the Pentagon and other federal agencies.
http://www.businessinsider.com/corporate-prison-labor-is-forcing-small-businesses-to-close-factories-2012-9
el O, America using prison labor. Back to the chain gangs or sweat shop labor. It still costing the Calif about $50,000 per prisoner plus unknown medical expense. The $1 per hour is easy off set by the housing cost, but maybe they can stay out of trouble in prison and get some skills to use once released. I would want to be a business owner competing with “Made in the USA” prison labor.
Big RED FLAGS for current OC market participants….
they will be transacting right smack in the midst of:
1) a speculator mania near its peak
2) a marketplace driven by ‘demand pulled forward’ dynamics under the influence of ultra-low (constrained by artificial means) inventory levels
3) the most non-organic marketplace in county history
4) a cost basis that’s based-on the continuance of negative real rates
In other words… this market is a farce.
I read the stupid ridiculous emotional pleas and realize:
The people who “lost” their homes deserved it.
Their children’s situation is their responsibility, not society’s.
We rented from 2006 to 1012 and I have absolutely no idea how my children suffered.
If they want to believe they are victims, whatever, but the rest of us are not buying it.
If you are an adult and don’t realize that 90% of the what the government tells you is a lie, you are a moron and in denial.
Awgee, Only 90% are lies? You’re an optimist. Rented from 2001 to current. Children didn’t suffer for renting either. I likely would not have the last job if I owned (HR asked lots of questioned if I could move and was tied down to a house). Once I said I was renting the cloud evaporated. Kids didn’t like moving, but better than being unemployed. If you don’t want to move get a long-term lease. My sister got ~10% off for a four year lease with no increases in yearly rent for the next four years.
Four years to re-establish credit worthiness is not that long. Say the DIL was saving $200,000. That’s $50,000 tax free money per year. Most people need to work very hard and long for that amount of money. Most see losing the house as a great hardship are not seeing its benefits. The one that are having the hardship are those that purchased at the high with a large down payment, lost their job or had an illness, then bank foreclosed quickly to get back their money because some equity was still in the house (loses the large down payment). If only they did a 100% to 105% loan and got to squat so the bank would not have to show a loss with mark to fantasy. Punish the innocent and reward the guilty.