Say bye-bye to home ownership

[KamaAina]

if the free marketeers -- now including some Dems* -- have their way.

http://finance.yahoo.com/loans/article/112270/without-loan-giants-30-year-mortgage-may-fade?mod=loans-home

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs....

Some Republicans and Democrats say the price is too high. They want the government to pull back, letting the market dictate price, terms and availability.

"A purely private mortgage finance market is a very serious and very achievable goal," Representative Scott Garrett, the New Jersey Republican who oversees the subcommittee that oversees Fannie and Freddie, said at a hearing this week. "No one serious in this debate believes our housing market will return to the 1930s."

Mmmm-kay, Scott -- but what about the 1970s? That was scary enough. :scared:

[pnwmom]

1. Here's what I don't understand.

Fannie Mae and Freddie Mac were a tiny part of the market as recently as the 1970's. So why could homeowners afford 30 year mortgages then?

[donco]

2. Check out what the interest rates

were in the seventies.

[Celebration]

3. ALL interest rates were high then

T Bills, Bonds, CDs, etc. Now, no.

[pnwmom]

5. They were high -- we got a mortgage in 1979.

But, as high as the rates were, house prices were lower, so monthly payments were still affordable -- just a little higher than rent on our little apartment. The payments were income tax deductible and they stayed the same over the ten years we had the house, while our income gradually rose.

We did put down a 25% down payment, which we saved by living on only one income for several years. We bought our furniture at warehouse sales, our appliances at "chip and dent" sales, and drove a couple of beaters.

[SoCalDem]

27. When we bought our first new refrigerator, we looked for one with a dent on the right side

because that was where the wall was:)

We got a very nice one for almost 1/2 off because it had a gigantic scrape almost the whole length, but no one ever saw it:)

Our first washer was a Speed Queen from a closed down laundromat.. It took 3 men to move it.. It was almost completely stainless steel..(I kind of wish I had kept repairing it...it was the best washer we have ever had).

Our stove was a freebie from my husband's boss..a 1940's behemoth that would be worth quite a bit NOW!

[sufrommich]

4. Here's an interesting article about home buying from the 1950's

until now. Houses were actually more affordable to the average worker than they are now.

http://www.mybudget360.com/buying-a-home-in-america-today-is-expensive-thanks-to-the-banking-sector-examining-income-and-home-prices-from-1950-to-the-present-can-home-prices-fall-another-38-percent/

[elehhhhna]

22. VA loans propelled homeownership in the 50's

[HughBeaumont]

23. In 1969, the average home cost 17,000 dollars while the average income was around 9,000 per year.

Not a bad ratio compared to today. Remember that there were no McMansions and people did this on ONE income. The dollar went a lot further on necessities than it does today, which is why it makes me laugh when people attest that the reason America is broke is due to creature comforts. No, it's due to the average wage not meeting the cost of living . . . and that's necessity spending.

[SoCalDem]

6. (1) You had to put down 20-30% of your own money

(2) Mortgages were figured on the affordability any income ONLY the primary (husband's) income

(3) You had to PROVE income & creditworthiness

Anyone who made it through that gauntlet, could afford the home they bought...and back then people used to raise 3-5 kids in houses of 1500 Sq Ft or LESS. a house with an attached SINGLE car garage was special:)

[sufrommich]

7. Yep, I think the average house was 1000 square feet with

three bedrooms.Maybe a bath and a half. Regular size closets and bathrooms as opposed to the bedroom size bathrooms and closets of today. We had to put 20% down on our first home too.

[MineralMan]

20. My wife and I live in one of those houses now. Three bedrooms, one

bath, with one bedroom now a dining room. It's more than adequate for us. I grew up in one of those houses, too, back in the 50s.

[Zoeisright]

8. And most families could do it on one income.

That's one point you forgot.

[SoCalDem]

11. since they only took one income into account, you had to be able to or no loan

It was item #2 ...(2) Mortgages were figured on the affordability any income ONLY the primary (husband's) income

[pnwmom]

9. But all of that was do-able for most middle class families back then.

That was about the size of our first home and we had two children in it. We also had only a one car garage and it seemed like enough.

You only miss having more if you HAVE had more. My parents' home was bigger and nicer -- but I never expected to have a house like that just starting off.

When we bought in 1979 they would have counted both incomes if we had asked them to - but we asked them not to. We didn't want a mortgage bigger than we could afford on one income, even though we could have bought a house in a nicer neighborhood that way. It took us a few years of saving and we had our 25% down payment. House prices were so much lower back then mortgage payments were manageable even though interest rates were high (and our incomes were low).

[SoCalDem]

12. We had 3 kids in 5 years..one income and a 1004 sq ft house

3 bedrooms.. small ones.. We could not even fit two cribs into the "baby-room"..(12 mo & 10 days apart), so we had a crib and a porta crib :)

One bath room.. no dining room, no family room.. and we were fine:)

I went to Zillow & found out the house was even smaller than I originally remembered:)

[pnwmom]

25. The same thing happened when I went to Zillow.

The house had fewer square feet than I thought.

But I did get a bad case of sticker shock!

[Sherman A1]

14. I got a 5% down loan in 1977

bought a house on my own. I don't recall the interest rate, but I could afford the monthly payment working as a grocery store clerk.

Then over 30 years wages stagnated, prices went up and we all know the story.

[kelly1mm]

10. Houses then were 3 br 1 or 2 baths. The parents got one br, girls

another and boys the third. No one bedroom per child, no home office, no craft room, no media room, no wine cellar, no game room, no storage room, no man cave, etc.

[MineralMan]

21. Well, in the midwest, those houses all had full basements.

My house in St. Paul, was built in 1954. Upstairs is 800 sq. ft. Three bedrooms, one bath. Downstairs, there's a bedroom, a utility room, and the rest is one big room. Another 800 sq. ft. of usable space. My office is in that basement, but we rarely use the rest of it. Families often turned those basements into a recreation room.

[JDPriestly]

13. Privatizing the home mortgage market makes ideological sense to conservatives,

but let's think it through.

It used to be a rule of thumb that a person (or family) could only qualify for a loan on a house if they can cover monthly payments without spending more than approximately 1/3 of the income that remained after they made all payments on outstanding debts. That is still, I think, a pretty good rule of thumb.

In the past within my experience, normally when interest rates were high, housing prices were low.

At this time, however, both interest rates and housing prices are low.

In spite of the low interest rates and housing prices, houses are not selling. That is partly because potential buyers cannot qualify for loans, and in our current economy, many people are earning less than they used to earn.

If interest rates on mortgage loans are raised, even fewer people will be able to qualify for loans, and, theoretically, housing prices will decline even more.

Now, the US government owns a good share of the mortgages that are in default either because it took over the mortgages in the bail-out or because it had insured the mortgages in the first place. So, if housing prices fall still further -- the US government will take a bigger loss than it would take if the housing prices remain steady or go up.

So, I do not understand why the government would want interest rates on mortgages to rise (since that would reduce the sale value of housing in general).

Can someone explain to me why the government would want to make it harder for people to buy houses when the government will lose money if people can't buy houses?

[jtuck004]

15. Who profits by raising interest rates?

Mostly banks.

And what is good for the banks, (and by inference, the very wealthy who also make a lot of money from debt), is the primary objective. That millions of Americans will not have homes they own is more a byproduct - because they really don't give a rat's ass about you or your home, other than how they can profit from it. Prices are going to continue to fall, (at a particularly bad time for the thousands of baby boomers wanting to cash out), but the only places housing shows up on the radar are 3 or 4 government programs, with at least one that isn't even up and running yet, and others with at least a problematic implementation.

But these people that profit have names. For example, "JPMorgan Gives Jamie Dimon a $17 Million Payday", of which 12 million is a stock grant, $5 million in stock options here.... Oh, and he gets a million dollar salary and "other" cash.

AND

William Daley, President Barack Obama's chief of staff and brother of Chicago Mayor Richard M. Daley, received $8.7 million in salary and stock and cash bonuses in 2010 and the first week of 2011 while working at JPMorgan Chase & Co., according to a 43-page financial disclosure document released by the White House today, here...

Now, of course, he has to subsist on abut $170K a year. For a while. (I am going to go out on a limb here, and suggest he may be back working on Wall Street in just a few years. Or is that belaboring the obvious?)


It baffles me why we don't take the very little bit of useful work people like these do, turn that over to a vend-o-matic, or maybe one of those coin-operated fortune-telling machines with the little cards, and distribute their salaries among those with no income, maybe encourage some entrepreneurship.

[eridani]

16. An alternative to cashing out

Home sharing. There are a lot of URLs with info out there.

[jp11]

18. Government is on corporate payroll.

Keeping people from owning homes means first that those people are renting or otherwise throwing away the money they spend on housing, it doesn't get them anything like ownership/equity in a home. Owning a home offers/offered? the chance to build 'wealth' (move up) when there might be few if any opportunities to 'invest' for people.

It also 'frees' them up to move around when their jobs are downsized, moved, or otherwise changed so they have 'better opportunities' going somewhere else. That plays into an aspect of corporations wanting a more dynamic labor pool of 'skilled/professional' workers when you become obsolete either you can pickup and follow them to the cheaper/better locale(assuming you can sell a home you own) or someone else there will take your old job. Typically the 'easy' work force to recruit is unskilled workers, skilled workers were/are more tied to a home, school, family, etc if you remove the home and then the job you only have the crutch of family to lean on until you can get back on your feet. End goal, make the entire labor force essentially migrant workers, it helps business be more flexible and therefore 'profitable' and it 'allows' workers the ability to keep/find jobs by not 'burdening' them with an anchor they can't walk away from easily.

On the other end of this is as you get older if you don't/didn't own a home you can't stay there like people have in the past. You leave the workforce and retire you're either getting a tiny apartment if you can afford it, going to some senior home/center, getting 'roommates'(family/other retirees), or in worst cases the street. An entire segment of retired workers now has at least half of their numbers putting more of their money back into the system for corporations to get a chance to keep siphoning it out.

Then you can look at lower home prices that people can't afford further ruining the market for people who are not only stuck in a system where they can't sell a home but have homes worth less than they may have paid or ended up not building any investment through their efforts. Corporations could buy up homes, rent them out, or build apartment buildings rented out cheaper than buying one of the 'cheaper' homes that will be flooding the market.

These are all diabolical angles with not helping/wanting people get homes anymore I can't say that they are all the end goal but possible.

[JDPriestly]

26. Excellent analysis, jp11.

I might add that the foreclosure crisis is a sort of inheritance tax on the children of those in the middle and working classes who will not ever be able to buy a home. Normally, when a person owns a home, the children either sell the house to cover the parents' medical and other bills as they age thus permitting the children to save their own money and build wealth or the children inherit the house, which also helps the children build wealth.

The foreclosure crisis has deprived many children of the opportunity to inherit the house their parents intended to have for them. This will hit most of the baby-boomers really hard. But it will hit their children even harder.

[n2doc]

19. So that the wealthy can buy up those houses at fire sale prices

And then rent them back to us. They've been doing this all over the place.

Besides, as long as Obama is Prez the Repubs will support anything that causes more misery.

[Lastactiongyro]

17. This is a good thing, the banks and such will destroy themselves

in their constant striving to strangle the goose for the golden egg. They will end up with trillions of homes on thier books and no way to sell them. They are already bankrupt, with derivitives, the home repossession is just to counterbalance the overwhelming bad debt they still have. It's a house of cards.

[rdking647]

24. theresno freddie or fannie

in canada and their mortgage market seems to be ok.. as a matter of cat I dont think there is an equivalent entity in any major country. an dpeople still manage to buy houses

[Shagbark Hickory]

28. Home prices need to be controlled by the government. Mortages = pyramid scheme.