What sort of bone-smoking idiocy is this?
Bob Walters, chief economist of the online mortgage firm Quicken, acknowledges that the recent collapse will create a “mind scar” just as the Great Depression did. But he argues that housing remains unique.
“You have to live somewhere,” he said. “In three or four years, people will resume a normal course, and home values will continue to increase.”
Notice who this firm is - one of those who profits when you flip your mortgage, whether you go bankrupt doing it or not.
Home values will continue to increase? You have to live somewhere?
Well, the second is true.
Look, the laws of economics on this are simple: Home prices cannot ascend, over long periods of time, faster than real wages. That is, you cannot afford more house unless you make and bring home more money, in terms of dollars.
Further, with interest rates now at extreme low levels, the "payment buyer" (that's nearly everyone) is buying at a secular high in affordability as measured by payment.
The $200,000 loan at 4.5% interest for 30 years carries a P&I (principal and interest) payment of $1,009.58. The same loan at 6% carries a P&I of $1,193.14.
Put a different way that same $200,000 loan is only a $169,232 loan when - not if - rates go from 4.5% to 6%.
You don't buy things on long-term amortization schedules unless you intend to run the clock on the schedule when rates are very low. You buy them when rates are high, because then affordability of those payments is at its worst and is likely to get better.
In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.
These people are on drugs, and that drug is being put on the table in front of them by Real Estate "professionals", who just like all other salesmen and women have never seen a crappy time to buy whatever they're selling.
Well, I'll say it if they won't - it's a crappy time to buy a house.
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