AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (11 comments)

  1. Che is dead

    “Much of the country is now a seller’s market, the Realtors group says, just one year into a potential housing recovery following the worst downturn since the Great Depression.

    The shortage of sellers, a force behind higher prices, is expected to ease as prices rise, economists say.

    But a return to healthy inventory levels could take years. Many homeowners can’t afford to sell because they don’t have enough equity to put into buying another house — or would have to write a check to sell. The supply of distressed houses for sale is thinning as the foreclosure crisis recedes, especially in some states. Home building, while improving, is still at low levels. And, after years of holding on, few homeowners want to sell when prices are just coming off the bottom, Realtors say.

    “We’re making a painful transition from a market dominated by distressed sellers to a market in which the only people selling are people who want to sell,” says Glenn Kelman, CEO of online brokerage Redfin.” — USA Today

  2. Vic Volpe

    This is truly great news. Now we can get back to propelling our consumer economy forward, like we did before. And if wages remain stagnant, we can go back to innovative ways to extract equity from our homes. This will certainly provide an opportunity for the free enterprise system to grow new businesses for such service. And let’s (Mark: notice the grammar) keep Government out of this so we don’t make the same mistakes as before.

    1. Che is dead

      “And let’s keep Government out of this so we don’t make the same mistakes as before.”

      Too late.

    2. Che is dead

      “A Bizarro World of home finance is being created by Dodd-Frank Wall Street Reform and Consumer Protection Act’s new enforcement agency, the Consumer Financial Protection Bureau (CFPB). In this world a loan with little or no money down, a FICO credit score of 580, and a total debt-to-income-ratio of over 50% is defined as a prime loan, even though it has a nearly 30% likelihood of ending in foreclosure. Like the bond salesman in Bizarro World, this sets up for failure working-class families striving to achieve the American dream. In the real world a prime loan with 20 percent down, a FICO score of 720 (the average score of all individuals in the U.S.), and a 40% debt ratio has a 1.5 percent chance of foreclosure. …

      In Bizarro World the government does not price for risk; instead credit is allocated by government agencies based on political goals. Here, the Federal Housing Administration (FHA) charges the same to insure a loan with 5% down, a FICO credit score of 580, and a total debt-to-income-ratio of 55% as for a loan with 20% down, a FICO credit score of 740, and a total debt-to-income-ratio of 30%.” — AEI

      Meet the new Democrat housing bubble, starting to look a lot like the old Democrat housing bubble.

    3. Dave Thomas

      If we are on the subject of grammar is “government” a proper noun that necessitates capitalization?

  3. Che is dead

    “Using September data from DQNews, investors bought 28% of all transactions in Southern California, 38% in Phoenix and 48% in Las Vegas. Based on anecdotal evidence, investors are even more active today than back in September. Not only are they buying, they are paying cash.” — Seeking Alpha

    A little dated, but still relevant?

    1. Vic Volpe

      Yes, in S. Calif we are in the 25% to 33% range for investors (they don’t occupy the home). And in that percentage is a small percentage of the big money — national investor groups like hedge funds, investor pools — I think they are buying small (1-4) rental units as well as SFR homes.

      1. Citizen B.

        Yep, the change of society preferring to rent instead of purchase, is an opportunity for investors looking for cash flow.

        1. Vic Volpe

          Prefer to rent? Or forced to rent? I don’t think it is much of a choice. A lot of people who lost a home cannot qualify for the low interest mortgages/loans. And there are many others in the same situation. Some homeowners cannot even qualify by today’s standards to refi to take advantage of the low rates. So this is not a true economic preference. But there is definitely an investment opportunity there. Let’s see what develops.

          1. Dave Thomas

            Rents minus mortgage payments, management, and maintenance in the San Fernando Valley return about 4% annually on investment currently. Where else can you get that rate of return with as little risk right now?

    2. David Stockman, for what it’s worth, thinks this investor led housing recovery will end in another disaster.

      http://finance.yahoo.com/blogs/daily-ticker/housing-bubble-2-0-david-stockman-133026817.html

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