Rent vs. Buy: NY Times Leonhardt Buys
Submitted by
CalculatedRisk on Tue, 05/27/2008 - 6:44pm (139 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 24 members and 144 guests online.
Recent Recommendations
I think a lot of people are going to be surprised just how far prices really decline, simply because they don't quite yet grasp the depths to which the economy will eventually sink. Their loss.
p.s.: Leonhardt can likely take the hit better than most, which would alter the equation a bit.
He will re-change his mind soon enough.
For myself,a premium of 20% over the cost of renting would be about right to ensure that my daughter could stay in the same school district.which requires a further 45% drop.
Nothing like a guy who defies his own reasoning....
"the housing market has, obviously, changed quite a bit since our last move, in 2005"
Yep with prices up up... and down
"House prices rose so high in the first half of this decade that you could often get more for your money by renting"
Down but not there yet.....
Real reason..Beltway.... and my wife's been threatening to leave my sorry ass for 4 years.....
OT
Good WP op-ed by Pearlstein
Steven Pearlstein - The Fading of the Mirage Economy - washingtonpost.com
Simple & to the point. Even edukated Amerikans should be able to understand the jist.
He qualifies as a sucker. I know many others, who bought CSCO for their long-term portfolion after it made it first 20% drop.
The argument was very similar -
"This is for a long term portfolio. Its O.K. with me if my timing wasnt perfect."
Good for him that he found a house that seemed cheap enough. I question his assessment, however, that rents are continuing to rise (in real terms) - if the economy tanks, as it looks now, rents won't increase much.
tj & the bear writes:
p.s.: Leonhardt can likely take the hit better than most, which would alter the equation a bit.
tj & the bear | 05.27.08 - 11:06 pm | #
That is the whole story in a nutshell.
That rent vs buy calculator bummed me out. Prices for the houses I'm looking at still need to fall another 40% for the math to work out (this is in Brooklyn, NY).
One less person to compete against when the bottom does come.
y writes:
That rent vs buy calculator bummed me out. Prices for the houses I'm looking at still need to fall another 40% for the math to work out (this is in Brooklyn, NY).
y | 05.27.08 - 11:26 pm | #
That's a pretty cool tool - owning still pays off around here in between 3-5 years even with ZERO appreciation. But I figure the ratios are around 8 not 16 like DC (or nearby Twin Cities). I can't imagine ratios in the 20s & 30s. Insane.
The cost/benefits of living in fricking Hooterville... LOL
In her daily report for May 27, Asha Bangalore writes:
"The median price of a new single-family home rose to $246,100 vs. $225,500 in March. Home prices [see Chart 3-mp] appear to have bottomed in March 2008, putting the peak-to-trough decline at 14.1%."
Seems somewhat optimistic to me.
Daily Global Commentary Index
Simple & to the point. Even edukated Amerikans should be able to understand the jist.
this is real, folks | 05.27.08 - 11:21 pm | #
Should but won't... not until its turned into a reality show.
"Should but won't... not until its turned into a reality show."
You mean like The Addams Family?
Nesting. Women will do that to you, is she pregnent or do they have young kids?
We know who owns the pants in that family.
You mean like The Addams Family?
mp | 05.27.08 - 11:46 pm | #
LOL - ya somethin' like that.
BTW I was about to ask you about this too:
Seems somewhat optimistic to me.
Seems kinda muted - conjure go to bed early or are we baiting trolls? I think they are running...
So we're only NOW getting concerned about inflation? bwahahahahaha... WTF? Did they really not expect commodities to go haywire when rates were cut to under Core f&*)( PI?
And with the yuan linked to the dollar - that meant that Chinese rates were cut too? The two biggest hogs of commodities had their rates cut and NOW we're concerned about inflation? I mean, bite me, seriously, bite me.
good to be back from vacation only to see the inflation worries everywhere on bloomberg...
conjure go to bed early or are we baiting?
Yes to both.
Excellent Pearlstein article, tirf. He manages to wade through most of the major issues, but (unfortunately) fails to emphasize just how far our standard of living will regress.
mp I am biting.
What's Conjure take on things - missed out on commentary over the last month...
Ditto, I'm also in need of a conjure fix!
Noble, Conjure and I got back from a three-month sojourn in New York last week. We finished our play in C a couple of weeks ago, are still very bearish, and waiting for the next shoe to drop.
Noble writes:
What's Conjure take on things - missed out on commentary over the last month...
mp I am biting.
Noble | 05.27.08 - 11:54 pm | #
tj & the bear writes:
Ditto, I'm also in need of a conjure fix!
tj & the bear | 05.27.08 - 11:55 pm | #
Oh sure - he tells us conjure is in bed & you guys safely somewhere else on planet blogosphere want mp to wake him up and ask the meaning of life and everything. You guys volunteering to pony up for mp's medical bills??
mp thanks... LEH is still out there and not the only one.
dryfly,
i still remember mp's explanation of what a bear screamer is... classic. yeah - i wouldnt want that to happen to mp.
Why are we bearish? Well, CR's excellent analysis, for one thing, Meredith Whitney for another. Like many of you, we also see signs that PCEs are deteriorating in response to the credit crunch. Also, the opinions of Soros and Buffett.
By the way, Soros, like Buffett, has some really scary things to say about credit default swaps.
Conjure, in response to the current debacle, is thinking about announcing his newest invention, "Conjure's Credit Collapse Clock."
mp,I thought credit default swaps were a way to eliminate risks,was there a flaw in the model?
Nice sarcasm, Tom. Very, very dry.
Conjure's brave to talk clocks. Timing is a bitch, and even if you're right everyone thinks your still wrong if the timing isn't precise.
I would think Misean's Super Colander headgear would be safer.
p.s.: Got one "you're" right and one "your" wrong. Obviously I need another beer.
I would think Misean's Super Colander headgear would be safer.
tj & the bear | 05.28.08 - 12:11 am | #
Might need a full body 'moon suit' before this thing is over.
Rent on our place in the bay area: $3K/mo
Zillow value: $1.6M
Price/Rent Ratio: 44.4
Beat that!
tj- "even if you're right everyone thinks your still wrong if the timing isn't precise."
Conjure has a pretty decent record so far. Don't forget, he predicted the failure of Bear Stearns last March, then started calling "Recession: Q1-08" in August, and finally stopped the "Global Financial Meltdown Clock" a second or two before midnight just two weeks before Bear Stearns imploded and the Fed jumped in.
I'm still wondering if Banker will ever emerge from his bunker. When he does, I'll be ready to buy (if I'm still alive).
Conjure has a pretty decent record so far.
Forget it? Hell, I'll vouch for it!
I say we all go into our bank/credit union next Friday and at the window in a loud voice say "What do do you mean 'almost out?' Well just give me what you have left and I'll be back in the morning for as much as you have then. Where's the best place to start the line outside the door?"
I have great respect for Banker's opinion. Unfortunately, he committed an unforgiveable mistake in investing.
He believed in Bear Stearns.
Dumb move by Mr. Leonhardt. Four years early, and he paid 3-4X what the price will be in 2011/2012.
Sure hope the NYT continues to grow subscribers (guffaw), 'cause he really needs his day job, now.
Rob, the "Riverpark" anticipation is killing me!!! Are you trying to drum up referral business for your doctors?
He believed in Bear Stearns.
mp | 05.28.08 - 12:19 am | #
Ya he forgot the "Ain't nuthin' personal, jus' bizness..." part.
Must have been tough though if - as he said - he really knew people there. Of course on the internet we're all just dogs so if he knew them all it means is he sniffed their balls.
totally OT dryfly,
but any opinions on Kathleen Sebelius for VP?
dryfly- "Must have been tough though if - as he said - he really knew people there."
Yup. I just hope he wasn't on board when it cratered.
Sure hope the NYT continues to grow subscribers (guffaw), 'cause he really needs his day job, now.
jg | 05.28.08 - 12:20 am | #
No problemo jg. If NYT goes down he can always go work for President O - ya think maybe? Safe as money in the bank.
You'd think my trading account was on board. I was absolutely hammered by that turnaround.
Noble writes:
totally OT dryfly,
but any opinions on Kathleen Sebelius for VP?
Noble | 05.28.08 - 12:26 am | #
Better than any of the pres candidates - but that goes for about half the governors out in the Midwest - of both parties.
"I was absolutely hammered by that turnaround."
Bear Stearns was a terrific short for us, but there were some frightening moments engineered by Wall Street's propaganda organs. Conjure and I kept going back to play book, over and over again, and finally decided that everything they were saying was bullshit.
tj & the bear writes:
Rob, the "Riverpark" anticipation is killing me!!! Are you trying to drum up referral business for your doctors?
I don't have the closing concessions yet but 7% back at close so the pervious buyers and potential future buyers don't know is one thing I'm tracking. And it doesn't say exactly how long the HOA "forgiveness" actually runs.
Doctors? My neurosurgeon lives 4 doors away. My surgeon's partner lives immediately next door. My GP 1/2 mi on the other side of the private golf course. My cardiologist can't afford this neighborhood. My wife is my physical therapist. My extensively medicated butt is under 24/7 scrutiny. Keep your pants on for Riverpark. Besides I think the council is cutting an emergency bailout and that will make the new sales disclosed price shenanigans look amateurish.
I find it amusing when newspaper writers think that people care what they think. I don't think anyone should be taking home buying advice, or advice on pretty much anything, from a newspaper writer.
mp,
By turnaround, I meant turnaround in the markets after BSC tanked. I made good change on BSC, but then lost it all on the upturn.
Thanks for the teaser trailer, Dawg.
"I meant turnaround in the markets after BSC tanked."
I figured as much. You were cutting it awfully close. We got out a month or two before it finally died.
sw wrote :
Rent on our place in the bay area: $3K/mo
Zillow value: $1.6M
Price/Rent Ratio: 44.4
Beat that!
sw | 05.28.08 - 12:15 am | #
So, yeh, cap rate of 2.25%, mhm, that makes a lot of sense? Are they imagining rent inflation there of 20% a year again, or what? I mean, is the cap rate going to go to 1%? It is just absurd how people don't realize how bad these are as investments, or literal shelters.
How did this turn in to old folks at home night? All the young'uns are in bed?
sdtfs!!! What are you doing out of bed!?!?!!
Needed a drink of water.
"How did this turn in to old folks at home night?"
Speak for yourself. Conjure and I are still young enough to appreciate pretty young things, even though we may be too old to do anything about it.
Hey, I'm not too old!
FTR, my better half still gets carded and she's (barely) older than me! Besides, aren't 40's the new 30's???
[dryfly & dawg go suspiciously silent]
On this Leonhardt thing, I see the propaganda organs, all the Mighty Wurlitzers, at work again.
Housing is bottoming, prices are rising, now's a good time to buy or sell a home, equities are ripe, blah, blah, blah.
Yup, Im with ya MP (or conjure, if he was feeding you lines.) Someone has decided they are tired of hearing ol Justy bash the housing market. Maybe they put the down payment down for him as a bonus. Ha.
Not silent, just wisdom of the ages whispering in our ears any number of snappy comebacks. Besides at my 2 week appointment this afternoon the next nearest patient in the waiting room had 30 years on me.
mp,
The next leg down is going to be a cast-iron bitch, ain't it?
"Besides, aren't 40's the new 30's???"
For me, 40 is a very distant memory. Conjure will have to speak for himself some other time.
the next nearest patient in the waiting room had 30 years on me.
Now THAT's what you want to see!
tj & the bear writes:
[dryfly & dawg go suspiciously silent]
tj & the bear | 05.28.08 - 12:50 am | #
dryfly falling - he struggles to get up
LMAO!!!
For me, 40 is a very distant memory. Conjure will have to speak for himself some other time.
mp | 05.28.08 - 12:53 am | #
Having spent the weekend with my in-laws (both mid80s) if you HAVE a memory then you aren't all that old - yet.
tj & the bear,
You have to be more specific. For a lot here getting carded means the 4PM Early Bird Senior discount.
"The next leg down is going to be a cast-iron bitch, ain't it?"
Quite possibly. Conjure smells another major bull defeat coming, but we haven't yet figured out exactly "when" and "how." We're working on that.
The "who" we've figured out.
Banks.
Bernanke, as Scrooge McDuck would say, is really going to earn his salary (salarium, salt).
Seriously, this feels like a lull just before the next squall. I'm off to Yellowstone on Thursday (my sister's 50th) and I expect all hell to break loose while I can't be here to watch it. Hell of a spectator sport.
Your 40 yo still gets carded. Youre one lucky SOB.
THE FED (The latest from Jay-Yello)
U.S. economy steps back from abyss: Yellen
Odds of Depression-era 'dark scenario' have minimized
U.S. economy steps back from abyss: Yellen - MarketWatch
LOL Dawg!
A month or so ago a clerk refused to sell her a lottery ticket. Honestly.
Minimized? What, from 100% to 99%???
FFDIC, I read Yellen's speech. It's The Mighty Wurlitzer at its finest.
mp,
"The banks." Spot on. Reggie at boombustblog.com has an excellent list with deep research. LEH-man walking.
Speaking of the lottery,...I'm thinking Calfornia Scratcher Bonds, they pay 1% normally but if you scratch off and see three 7's we'll boost it to 14%!
California bonds are lottery tickets. By August every Tuesday at 7:30 we'll see the Treasurer spin a wheel live on TV for which gets paid that week.
"California bonds are lottery tickets."
NO SHIT?!
It's not as simple as ROI rates for many people. I bought my house at the peak in AZ (2006). They wanted 399K, I paid 290K. It was seriously run down, 100 years old, etc. I figured it needed 80k put in to it. Now I think it's more like 180k in improvements easily. By any reasonable standard It looks like I bought a pup here.
Here's the thing, I've got an acre of land that I love, a 2700sf house that can never be replaced (I'm a contractor) for the price, and I'm not ever leaving. Sometimes a home IS more than a house. This is the ONLY house like it in the vicinity. Houses aren't commodities everywhere. Sometimes you just must have them.
If he's really committed to happiness (and not to an institution...) he'll ignore all real estate news until 2 years before he's thinking of moving again. If he can really afford the place, then he should be fine. But the psychology of fairness is hard-wired into the human brain... best not to risk triggering it in his case.
Sometimes you just must have them.
If I found something like that I'd probably buy, too. Perhaps that's why I'm not looking too hard...
"Sometimes a home IS more than a house."
Bob, there are really few here who would argue with that.
I've got a teen who gets teary eyed when we trade out appliances. There is a difference twixt house and home and that difference is a large part of the reason we are in so much trouble across the nation. I couldn't imagine uprooting kids just to climb the property ladder. Sadly I am expecting some substantial turnover in their classmates and few teachers this summer. Just too many bought into the district 2002-06.
The problem is: many started to regard their HOMES as "investments" after being indoctrinated into doing so. People forgot that it was home first, house second, and not the other way around. IMO, that's what sowed the seeds of the current problem.
End of an era:
LG Electronics Inc. and China's Haier Group Corp. are among potential suitors that may acquire General Electric Co.'s century-old appliances division, said Jeffrey Immelt, chief executive officer of the U.S. company.
LG, Haier May Bid for GE Appliances Unit, Immelt Says (Update6) - Bloomberg.com
So, yeh, cap rate of 2.25%, mhm, that makes a lot of sense? Are they imagining rent inflation there of 20% a year again, or what? I mean, is the cap rate going to go to 1%? It is just absurd how people don't realize how bad these are as investments, or literal shelters.
Market value of 1.6M, but probably purchased in the 80s for 250K and nearly paid off.
There's no reason to sell a $3,000/mo moneymaker that outperforms a TIP bond and has a $3000/yr tax carrying cost.
Just a little insight. In japan housing has been declining for years yet thousands of home are bought and sold every month. I met a real estate agent there, the housing market is completely rational. There is a desire for some to own their own space. The point I think people are trying to make is that the economic "adjustment" that will be required from homes as investments to homes as dwellings will be slow and painful.
I see my friends down in Maricopa county with their identakit stucco monstrosities and these really are commodities. Don't tell Tanta, but they are walking away. With money in their pockets. Leaving the F350's too....
sw writes:
Rent on our place in the bay area: $3K/mo
Zillow value: $1.6M
Price/Rent Ratio: 44.4
Beat that!
I'm close, at 41.5 Price/Rent ratio in Los Gatos, Bay Area... Hey, you got a good deal!
Yes, I think the cheerleaders are out in force today, as evidenced by this CNBC article as well. I mean, have they no shame?
Investors Who Looked Abroad Now Coming Home - CNBC
"Market Pros Think It's Time To Buy US Stocks Again"
As stocks have staged a comeback and the economy is showing that it is in for at most a mild recession, ... a growing confidence that most of the bad stuff is over for domestic companies and there should be reason to grow. ...
Among the areas to benefit, according to Twibell: Community and regional banks, as well as domestic water companies, which he believes will perform well as demand continues to increase overseas.
"LG Electronics Inc. and China's Haier Group Corp. are among potential suitors that may acquire General Electric Co.'s century-old appliances division, said Jeffrey Immelt"
Something, isn't it? Immelt can't meet his earnings target, so he blows off the legacy. Eventually, they'll probably sell the turbine business too. He'll preside over GE's final transition to just another whore finance company.
If I found something like that I'd probably buy, too. Perhaps that's why I'm not looking too hard...
Doesn't matter whether you are looking or not tj. The question is whether anyone else near and dear (and often still carded) has her eyes open as she drives around town.
MLM,
She & I are of the same mind on that issue. Yes, I'm a lucky man.
MLM- "Doesn't matter whether you are looking or not tj."
Excellent point. tj, I think the takeaway here is: make sure the little lady stays close to home, otherwise she'll soon have you helping her choose wallpaper, while making you think that it was your idea.
Homes are for living in, houses are for flippers. I'm a bleeding Realtor, I know these people.
Troy, that's not my point. While the owner might not be inclined to sell, only a maroon would buy if he offered.
I seem to recall dryfly commenting a while ago about GE having previously sold off their mundane, but profitable, plastics business simply because it was mature and no longer a growth business.
When you need cash, you sell whatever you think is boring, unimportant and has a market. I'd hate to see what's under the hood of GE Capital these days.
tj-
I know exactly what you mean. I was there, totally in tune with my SO. But then...
Ooh, ahh, that's how it always starts, but then later there's the running and the screaming...
YouTube - The Lost World: Jurassic Park - Theatrical Trailer
Heh heh heh... one of her favorite movies!
Tj
Hope she has better taste in men than in movies.
Hey, she likes popcorn flicks with great special effects. Besides, who doesn't love dinosaurs? Sure, it's not high art, but we don't take ourselves that seriously.
Tim,
She loves football. Eat your hear out!!!
[Shit. Supposed to be "Eat your heart out", obviously.]
ShortCourage, the article to which you linked was written by Jeff Cox, special to CNBC.
Here's his curriculum vitae:
Jeff Cox - LinkedIn
Do I need to saw more?
I feel you. Favorite part of that movie was when the Unocoal 76 ball rolls into the street after the T-rex knocked it over or something...
tj
Honestly can't really remember the movie. i liked to I guess. doesn't touch the first one though. Catch yall tomorrow.
First one definitely the best. Even better read; dig that Crichton. G'nite!
Got this from an IMB employee this afternoon. Doth Perry protest too much?
From: Perry, Michael
Sent: Tuesday, May 27, 2008 2:15 PM
To: _IMB-IndyMac Bank Personnel
Subject: MarketWatch Article on Nonperformers and Reserves:Confidential
There was an unflattering and materially innacurrate web-based article today on MarketWatch regarding Indymac Bank and the Texas Ratio .a calculation of non-performing assets divided loan loss reserves plus capital. I believe the article said we had the highest ratio in the Country at over 150%.
It is clearly frustrating to have these incorrect articles being published. First, the only way they can get to that ratio is if they used our GAAP common equity versus our regulatory capital. As a result of the fact that we issued Trust Preferred Securities (at the holding company) and Perpetual Preferred Securities at the Bank level (which count as Tier 1 capital, but not common equity) and as a result of the fact that cumulative temporary unrealized loss on our MBS securities (reduce GAAP common equity, but do not reduce regulatory capital), our GAAP common equity was significantly lower ($959 million); about half the amount, of our regulatory Tier 1 capital ($1.84 billion).
continued...
Perry's letter continued:
In addition, because Indymac Bank was a large mortgage banker and had a lot of home loans it got stuck with when the secondary market collapsed in the 3rd quarter of last year, we transferred a huge amount of loans from held for sale to held for investment (we increased our loans held for investment by roughly 140%+ (more than doubling loans held for investment). Before we transferred them, we had to take credit marks (which are exactly the same, economically, as loan loss reserves), but do not show up in our financial as loan loss reserves (they show up as a discount to the loan balance). These credit marks were huge for Indymac (probably larger as a percentage of loan reserves than any financial institution in America, with the possible exception of the GSEs).
more...
The 3rd and final part of the IMB CEO letter:
If you take our regulatory capital of $1.84 billion and add back our loan loss reserves of $483 million and our credit marks on loans of $481 million, they total $2.8 billion. Non-performing assets at 3/31 are $2.1 billion; 75% of this amount (not 150%+ of this amount). In addition, if you take our total credit reserves of $963 million, they are 46% of non-performing assets (not counting $188 million in secondary market reserve, $121 million in write-downs on REO, and significant charged-off amounts on other non-performing loans). Banks need to hold higher reserves to NPAs than thrifts, because more of their loans are unsecured (credit cards, auto, etc.) or home equity loans all of which have roughly 100% loss severities versus Indymacs predominately 1st lien single family portfolio. To put this point into further context, an article in the WSJ today said that Freddies credit reserves are 17.1% of non-performers and Fannies are 16% as of the end of the 1st quarter (might also be because they have credit marks that dont count as traditional loan loss reserves).
Thanks. mike
Michael W. Perry
IndymacBank
Chairman and Chief Executive Officer
Thoughts?
He sounds like a man trying to justify his wife's decisio
AnonyMouse- "Thoughts?"
BWAHAHAHAHA!
Conjure will drool over this. I'll have to wait until after breakfast to show it to him.
Housing Panic needs a few more votes to overtake the other blog. Take a moment to help out...
Real Estate Blog Contest Leaderboard
.
.
OT
"Ex-press aide writes Bush misled U.S. on Iraq"
"McClellan says in new book that White House used propaganda to sell war"
McClellan: Bush misled U.S. on Iraq - Washington Post- msnbc.com
mp | 05.28.08 - 2:32 am |
Wow, that's a shocker.
I have a comment on Indymac.
"Dear Employees who haven't been laid off yet. Please don't bail out before we throw you away. Fannie and Freddie are in worse shape than us. I promise!
Those evil vile internet bloggers say we're dead men walking but I tell you it's just a FLESH wound!
I'm okay with my millions but need you a tad longer because I have a bonus due soon if the company stays on life support just a little longer. We're like family!
Sincerely yours,
Uncle Mikey"
Fucked Company would be proud.
However, I bet Fannie and Freddy are in worse shape.
o I think now is the perfect time to buy, the bottoming-out of the market wont go to far below this, hopefully anyways.
The problem is: many started to regard their HOMES as "investments" after being indoctrinated into doing so
People should regard their homes as investments. If they did, they would not pay more to buy one than to rent one. That's what investment is - buying an asset that yields more than the cost of borrowing money.
People were regarding homes as guaranteed lottery tickets, not investments. That is the end result of the casino economy.
I don't know about you guys, but my home isn't sticks and dirt - it's where ever my family is.
Confusing your home with sticks and dirt is a big part of what went wrong, if you ask me.
But then, noone ever asks me...
Anything bought with 20x (5% down) or 33x (3% down) leverage is not an investment.
This is like tiddlywinks on the deck of the Titanic.
No, it's more like drunken grabass in the locker room of the Lusitania.
In any case... Tanta? CR? You going to take that week long retreat to sketch out a better economy? Maybe it doesn't even require a week. Couple of hours and a 5 page manifesto?
Leonhardt just became a bagholder. Sorry but he did not have the patience to wait it out and he just wanted it now.
House prices are not down to realistic levels yet.
Hmmm...takes some pretty low numbers to make the math on that chart favor buying rather than renting.
Inflation is rising globally because of an easy monetary policy, especially in the United States, leading economist and former U.S. Under Secretary of Treasury for International Affairs John Taylor said on Wednesday.
To tackle rising inflation, Taylor urged the world's policy-makers to talk about adopting a global inflation target.
The creator of the so-called "Taylor rule" of monetary policy, which stipulates that interest rates should rise by more than the increase in inflation after smoothing out temporary price changes, Taylor said U.S. interest rates are now below appropriate levels indicated by the rule.
Easy policy behind global inflation: Taylor
| Reuters
Another call from someone that knows better for Bernankie to get his head out of his ass.
The UK public's expectations of inflation hit another new high in May, giving rate-setters further cause for concern, a survey by Citigroup and pollsters YouGov showed.
The general public's median expectation for CPI inflation over the next 12 months hit 4.1 percent in the May poll, up from April's 3.8 percent and the highest since the survey began in late 2005.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Time for the world people to drag these central bankers out in the streets and give them the beat down.
Well my brother inlaw just bought a house, and get this, the koolaid is still flowing freely, no money down, 30 year fixed rate $ 220,000 so all this crap about the banks not handing out free money is well crap to say the least. Oh and just encase your wondering...Indymack is the note holder.
Hmmm...takes some pretty low numbers to make the math on that chart favor buying rather than renting.
What surprised me most about that calculator was not that renting came out ahead in most cases (even at today's prices), but rather the sheer amount of time needed to just break even on buying.
The length of the average American mortgage has historically been about 7 years.
We live in the Philly 'burbs - where the bubble never really got up to speed - and yet even using market prices and rents here it's really tough to make buying come out ahead after 7 years, much less the 3-5 years that are typical of my peer group these days.
And we're in good shape, relatively speaking. When I plug numbers that friends and co-workers of mine provide for areas like suburban Boston and D.C. into that thing ... well, it just makes me laugh.
Ah, intangibles. Guess it's homeownership fantasy time again.
According to that chart, people who bought at the height of the boom were often doing the right thing - as long as you assumed the rate of house price appreciation would continue.
The chart is fine, but understanding the underlying conditions is cricial.
I actually didn't know about that Purchase Price to Annual Rent ratio and would have thought a little harder about purchasing a new construction project last year (which I closed on 2 months ago)
"Besides, aren't 40's the new 30's???"
For me, 40 is a very distant memory. Conjure will have to speak for himself some other time.
mp | 05.28.08 - 12:53 am | #
For conjure, aren't the 700's the new 600's?
Rob Dawg writes:
I say we all go into our bank/credit union next Friday and at the window in a loud voice say "What do do you mean 'almost out?' Well just give me what you have left and I'll be back in the morning for as much as you have then. Where's the best place to start the line outside the door?"
Love this... and I may give it a try for real in the coming weeks as I end a loan I've made to JPM.
Hey, who here says with any conviction that homes HAVE to drop back down to "realistic" levels?
I'm somewhat playing devil's advocate here, but look at South Korea, where people are regularly getting 100-year mortgages so that they can buy wickedly expensive property. Seriously.
If the banks had their way here in the U.S., that would have probably been the next step (and who says it still might not be), where they keep extending the terms of the "standard" mortgages so that home prices can continually bloom out of control? After all, even a 30-year mortgage was unheard-of when people bought homes 40 years ago, weren't they? I think that 20 or 25 year terms were the max.
In the end, its month-to-month affordability that most short-sighted consumers look at, and a leap to 40-year, 50-year, and ultimately 100-year mortgages and beyond could jump-start the housing market to rejoin its insane pricing climb. Again, only post-poning the ultimate crash and pain, but wouldn't a scheme like this potentially kick housing prices back into high gear?
Even as I put this question out to you, please know I hope to God this doesn't happen.
But seriously --- on what grounds does everyone assume that housing MUST return to affordable levels? And by what measure? Monthly payments? Or actual sticker price? They are two very different things entirely!!!
HealthySkeptic,
What part of "Interest Only" do you not understand? That's an "Infinity Year" loan - far past your Korean 100 years. And that's been the currency of the bubble markets for a number of years already.
Curious --
To your assessment of interest-only loans as "infinity year loans" ---
Agreed.
What I was postulating (but not advocating) was the idea that perhaps a new home loan paradigm of 40- or 50-year mortgages would have effectively made credit more available (and affordable) again, and propped up house prices at their inflated levels for a longer stretch.
It doesn't sound very tasty though, to anyone.