Are we to believe that the Democrat led super conforming limit is going to be allowed to fizzle? To hear him speak, Obama is continually pledging new stimulus package. Right now it appears as if he’ll win. It appears as if it will be a Dem congress and a dem White House. Would anyone be surprised if super conforming finds legs? We’re talking about loans with real vetting nowadays. The credit market’s chief problems include liquidity in markets, and credit worthiness. Well, these are worthy borrowers injecting 20% down.
What do you guys think?
I think people should buy homes that they can afford. Creating loan products and artificial conforming limits that make larger (e.g., more risky) loans more affordable don’t really help the issue.
Wages have increased over the past 10 years and certainly there has been a lot of wealth creation both domestically and abroad; but it doesn’t change the fact that most Americans cannot afford to purchase a $950k home. Sure people finance homes like this all the time and can make the payments. But these are risky loans.
I wish they would tie risk and rates for loans closer to the % of household income spent on home ownership / liquid assets. A home buyer with $3M of liquid assets making $700k a year taking out a $750k loan should pay a much lower rate than someone who is 100% leveraged making $350k per year.
But this really isn’t the way loans and risk are priced. And this has a lot to do with how asset values have increased as our beloved citizens across the country have leveraged themselves to a point of insanity.
Not saying this has anything to do with what’s going on in SF, but this is the core of the problem that needs to be flushed out.
IMO.
I agree that people should be able to cut deals on sliding scales with lenders. Why not? Seemingly only the ultra elite can do that, tho.
This has everything to do with SF, NY and other more expensive areas. This is not about people taking loans out that they can’t afford. This is very much loans people CAN afford, with 20 down, full docs, and real vetting. It would seem illogical to let this expire when this sort of borrowing is precisely what the market needs to be doing in order to right itself.
First off, after the expriation of the super conforming, there is already announced a new conforming cap of 625K. In regards to creating rates based on risk. . .This was called subprime and look where that got us. Right here. The reality is that Interest only loans, low down payment loans, and the like make more sense in an accelerating market. The truth is, regardless of your income situation; you must be qualified if not over qualified to obtain mortgage financing, and these specialty loans have been a vehicle over the years to help values increase in the Bay area, especially San Francisco, and allowed many people to buy. Where almost all homeowners lean towards being cash broke.
Today, in a market like ours, we have injections of billions of dollars in the banking systems and a continued halt in lending and a raising rate enviornment. This leaves one to wonder if the government’s first attempt of a bailout will help and how much moeny it will take to actually help repair this mess.
Are we to believe that the Democrat led super conforming limit is going to be allowed to fizzle? To hear him speak, Obama is continually pledging new stimulus package. Right now it appears as if he’ll win. It appears as if it will be a Dem congress and a dem White House.
——————-
Dolly
To Eddy’s point of “Wages have increased over the past 10 years and certainly there has been a lot of wealth creation both domestically and abroad; but it doesn’t change the fact that most Americans cannot afford to purchase a $950k home.”
Here’s why: Real wages have not increased and the wealth creation has been concentrated in the upper reaches. See the below article.
From the Washington Post 08/27/08 (click here for link) – seen it other places but that was the first google hit:
“median income is slightly below the 2000 level”
“Many U.S. workers have seen no real income growth since 2000, even though the economy has been mostly healthy and recorded strong corporate profits over much of that time period. Meanwhile, inequality has grown. The nation’s top 1 percent of wage earners now account for 23 percent of total income, the highest level since 1928, according to Economic Policy Institute calculations. “
PS: Most homes shouldn’t cost 950k either but that’s a whole other conversation.
Sure, sometimes market forces will generate those conditions, say here in SF or in ultra-desirable communities, but, the housing prices in Stockton, Hayward, the North Bay, Solano County, etc. are absurd.