yagij --

It is my experience that "free" can get very, very expensive.

Seeing to it that the frenzy never subsides has been US priority number one for 50 years.

CR,

My understanding is that the 8k is to be used along side the 3.5%. I guess they could have nothing to put down as long as the parents were giving them the 3.5%.
USDA is 0% down but you have to living in the sticks and the big push for those homes was 2008.

Hey, Dawg. If no loans cure, then they don't cure.

That means the cure rate is zero. Doesn't mean the banks
get no money back. That would be a severity rate of 100%,
and yeah, if that were the case, paying even one employee would
put you below zero.

But, except in Detroit, I don't think severity will go to zero much.

why not nominate a replacement [for K\rugman] and make a poll?

"Shoot the messenger"

"The odds are very high that the tax credit will be extended."

And the Fed will keep printing like crazy to keep rates down.

Take those punchbowls away and you get some serious buzz kill!

One of the more depressing CR posts. Esp. the story of the two 30-somethings with no down payment.
This will end well I'm sure.

I've seen the push here. There was a letter to the editor from the president of the Home Builders Association of Delaware in the News Urinal yesterday. They're pushing to extend the credit and allow non-first-timers to use it. His claim is that it will add 80,000 new houses to the inventory, and 350,000 new jobs (that's 40% of the total population).

Awesome!

No money down, no payments required if you can't make them, no one will kick you out for a long time even if you stop paying, and thanks to the magic of non-recourse loans, some Federal agency will take the house back and eat the loss!

There's no such thing as a free lunch, but you can live in a free home! (*)

• For a few years. At the expense of your credit rating perhaps.

So after reading this I guess prices have bottomed... $300,000 dollar houses for all not working or otherwise.

I need to acknowledge a conflict of interests here. My eldest kid is thinking about buying her first house. She doesn't know that yet because we haven't told her. It depends on if/when and where she goes to grad school. Once there she'll buy close to campus and charge the silent investors (mom & dad) a management fee and rent the other two bedrooms out while living in the last one.

In truth I don't expect the FTHB rule to stand. $8k is also the minimum for which I expect the extension to grant. There is way too much government interest in the path to homeownership for them to allow it to deteriorate even if that means money to bottom feeders and vultures.

I guess freedom in America is now limited to the freedom to chose how you'll be brainwashed into a lifetime of debt slavery. A decade of lurching from bubble to even bigger bubble, financial crisis to near cataclysmic financial crisis, and no one appears to have learned a damn thing.

House prices need to come down more. I am camping out at my parents house until they do.

No risk, what is the downside? Buy and the default when the warket drops.

Extend is guaranteed....

When you can buy a 45k house that last sold for 180k?

But that is not what the nesting excuse implies, is it?

Re: I guess freedom in America is now limited to the freedom

You are making the assuming that most peasants can actually think.

"WestSac_grrl, read the linked article - Harney suggests buyers can use the credit as the down payment pretty easily."

I think it is only in certain states where that is allowed, and officially the downpayment is a loan from the state program.

freedom in America is now limited to the freedom to chose how you'll be brainwashed into a lifetime of debt slavery

led to:

assuming that most peasants can actually think

Actually, we all make choices with or without thinking. The road not travelled is the road not chosen. That which you do, implies a decision not to do, that which you do not do.

The beauty of it is that most of the sheeple don't even know they've made a choice. Or been brainwashed.

alert!!! run to the hills!

"In other words, you'll need equity in the house to participate. This won't be a zero-down plan, with one exception: If you obtain your FHA loan through one of the approximately 10 state housing agency "tax credit monetization" programs, you'll be allowed to pay for your entire down payment with the help of a bridge loan provided by the agency. Those bridge loans generally are low-interest or no-interest short-term second liens secured by the property, and convert into second mortgages if they are not paid off with the proceeds of the tax credit."

from harney

Of course these tax credits are yet another addition to our deficits, by virtue of smaller tax revenues.

Everybody seems to blindly assume that we can grow the deficits without bound, and allow our national debt servicing to become a larger and larger contribution to those deficits.

IMHO, this belief will be shattered and become the next "Hoocoodanode" claim by economists. I believe the national debt is much larger and more out of control than anybody cares to admit (although you're starting to see the cracks appear, even in the MSM, with noted shortages in the social security fund, state and local pension shortfalls, increases in the 10-year federal deficit estimates, etc...).

We are moving up the day of reckoning with every additional bailout, but housing-related bailouts have got to be the largest.

Elmo here on monday right after the real market opening.
Bad news for the market.
Well, hope everyone like $74 a barrel- a nice counterpoint to the $149 high last year.

Time to sell my scrap gold-b-i-l needs cash again- anybody here in Phoenix want to pay $16 a gram for 14k scrap- I have one hundred grams available. $1.70 per gram under the current gold price.
Send me an email.

Someday this war's gonna end...

You could take an adult man from 1959 and he'd be a bit bewildered, but if you time-warped him to 2009, he'd fit in ok...

Now try the same tactic with an adult woman from 1959~

She wants the option of being able to decorate it they way she wants, buy furniture to match the house, paint it the colors she wants, update the bathrooms, etc.

Another advantage of renting. In the 1.5 years we've been renting we've spent $0 on upgrades, while the owner has done some necessary repairs/upgrades. Between major repairs and upgrades at our last home, I'd say we spent on average $5K per year.

Still happy to rent. They're gonna have to open the credit up to more buyers and raise the incentive if they want this program to really juice the market beyond just lower end.

Bean there, done that.

"Everybody seems to blindly assume that we can grow the deficits without bound, and allow our national debt servicing to become a larger and larger contribution to those deficits."

We can, if we have no intention of paying them back.

Ok, in that ONE case I cited--45 k for a house, a small nothing house in
a nothing neighborhood, but not dangerous, with No loan, and prolly NO
real estate taxes (prolly less than 500 bucks), just insurance, that the nesting
instinct wasn't a good thing?

It is worthwhile pointing out that there is an income cap on the 1st time buyer program which means it is targets at lower income. The problem is now moving into the prime/jumbo area which this program does apporx. zero for. $6-10K on a huse that is still overpriced by a multiple of it is negative NPV: inother words don't do the project. Good link to spreadsheet over at ZH for 125% LTV refi - net net would remian in neg position even with a normalized 2-3% appreciation retruning for something like 7 years.

The government bringing forward what meagre demand there is with tax incentives like this and cash for clunkers, etc, and essentially incentivising people to take on even more debt that they can't afford, is setting things up for a cliff dive again next year. There is simply no way this can end well.

So - for you 'young guys'... deal with it... this too shall pass.

Just like the current stock market, you either have to play or sit on the sidelines.

I think I need more

CR,

Do you think this will impact PCE? With income stagnant/down and consumer credit dropping it seems that herding people into buying when they could rent for less would mean less disposable income.

Any immediate tax credit creates an artificial floor. In other words, the cost of those homes just increased 10%.
What is really interesting is the idea that free money created an artificial floor that led the housing bubble. When the emperor was shown to have no clothes housing cash dried up and property values dropped.
Now the Federal Government has decided the best way to improve the housing market is by artificially inflating housing prices by 10%.
I don't know if this is de ja vu or if we have encouraged the fox back into the henhouse.
I'm not impressed.

If I could find that and had the cash, I'd do it.

But only if I had a job that was strictly tied to the area and an employer that would have a hard time laying me off. Otherwise, that cash represents a lot of opportunity when the SHTF.

Massachusetts: $1,000 Fine Per Day, 30 Days Prison for Refusing to Obey State Officials During Swine Flu “Emergency”

cryptogon.com » Massachusetts: $1,000 Fine Per Day, 30 Days Prison for Refusing to Obey State Officials During Swine Flu “Emergency”

Well, I caught my knife; and yes, I took the $8k Obamabucks. In my case I see it primarily a way to cushion the impact from the fact that the house we bought is pretty much guaranteed to lose value. I sold in Aug. 2006, bought in Aug. 2009, so it's still a net positive from the housing bubble.

The cynic in me says this was the original intent regardless of the dialogue. In a number of states they will impound your vehicle if you are caught driving without insurance. Helps that when they run your plates the insurance companies provide the law enforcement database with your current coverage status. I wonder what will happen if you are caught living without mandatory health insurance?

"The half-dozen leading overhaul proposals circulating in Congress would require all citizens to have health insurance, which would guarantee insurers tens of millions of new customers -- many of whom would get government subsidies to help pay the companies' premiums.

"It's a bonanza," said Robert Laszewski, a health insurance executive for 20 years who now tracks reform legislation as president of the consulting firm Health Policy and Strategy Associates Inc.

Some insurance company leaders continue to profess concern about the unpredictable course of President Obama's massive healthcare initiative, and they vigorously oppose elements of his agenda. But Laszewski said the industry's reaction to early negotiations boiled down to a single word: "Hallelujah!""
Healthcare insurers get upper hand -- latimes.com

RockyR-Sorry about your job loss. Good luck.

I'm fond of a sparkle in the eye, a nice smile, and a body that just won't quit, but I think most men just care about submissive qualities.

yagij--you do divorces? Yick.

Couldn't listen to that crap.

Its all a process... you put them in a house... yagij divorces them... then you try to help get them out of the house via short sale or walk away... somebody else does their bankruptcy. Its all good...

[Dryfly- never admit you weren't paying attention. Say instead you were thinking about whether she had changed conditioners because her hair was so shiny.]

Copy and paste next to the one about pants and asses not looking big... must remember where I put them.

I then take the USD she earns and turn them into commodity positions...

Ha, my wife does the same. She has huge positions in shoes and clothes, with options on jewelry. Always explaining to me about dollar hedging.

I never noticed the smiley with the dollar signs.

I can only imagine your bull market is really flying with all of the boomers about to hit their divorce max flight too.

Financial stress is one of the biggest drivers of divorce.

The sense of entitlement of the average person making over 100k is immense. I am still close enough to starving grad student to remember those days.

What really bugs me is folks just don't want to downsize, in fact seem incapable of understanding the need to cut their expenses.

Someday this war's gonna end...

Anybody who loves that ad should listen to this bit from the Dr. Laura show:

Suzanne Researched This: Part 2 | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

It's essentially a (frighteningly real) fast forward to two years later...

OK, I'll admit I'm a stay home mom growing impatient with renting.

And while I'll readily admit I'm tired of my cruddy master bath, it's much more than just "nesting". We're renting in an expensive area, so we're spending what I consider massive amounts on rent every month. Meanwhile, our cash is earning less than 2% interest. And I spend SIGNIFICANTLY more time than I should on redfin, my brokerage accounts, and calculated risk. I'm willing to hold out longer (I've waited this long, why quit when it's finally all but certain that prices will decline), but I am looking forward to the day I don't have to think about housing anymore.

...but I am looking forward to the day I don't have to think about housing anymore.

That is usually when you move into hospice;-}

Someday this war's gonna end...

...but I am looking forward to the day I don't have to think about housing anymore.

I hate to throw out the wet towel, but if anything, I don't think you are going to get to stop thinking about housing. I think that is the whole point about our current problem. Employment, valuation, and demographics issues aside...

The sense of entitlement of the average person making over 100k is immense. I am still close enough to starving grad student to remember those days.

I have been self-employed for 25 years... some of those years I netted goose eggs. Tell me about it. I run into $100K plus middle managers all the time who tell me they are going inde... first question I ask them is how long they can last on zero income... 'cause if they can't make it at least two years & maybe more I tell them to keep the day job [if that's an option]. I usually get the glass eyed stare...

I always laugh when people who have never had to be entrepreneurs start out.

They almost always waste a lot of time and money. Really cheap people usually do fairly well.

Working in a corporation larger than 25 people is not training on how to be in business, it is training in bureaucracy.

The other fun thing to do is ask them who is going to be the janitor- if they don't know, well they are screwed!

Someday this war's gonna end...

I've looked at renting in the Nashua, NH area, where we are moving, but it doesn't seem to work. It's either small apartments in a run down area, or "accidental landlords" in the suburbs. And it's not cheap, either-- the least expensive place that is large enough for us, and will take a cat, is $1200.00 a month, IIRC. That's right up there with a house payment. I'm sure it varies by region, but that's what I'm finding.

lawyerliz (profile) wrote on Mon, 8/24/2009 - 2:29 pm

Oh, well, neither of us can help it.

The interesting part is that aside from obvious status displays among fellow chimps, genetic "differences" really exist only on a very very long time horizon in any meaningful way by the level and speed of selection we're doing. Think about how little genetic difference we are really selecting against and it is pretty mind-blowing how NON-diverse we really are as a species - most of our selection criteria are short-term, and based around psychosocial constructs... so arguments about this being a result of human "nature" are basically crap - you get either social conditioning or a collective unconscious. Meaning in the larger sense, "nature" doesn't give a shit as to the 'who'. The alternative always makes me think of the Bene Gesserit in Dune, actually...

I wonder how many single people can use the First Time Homerbuyer credit in the the NYC-DC I-95 corridor, because if you make enough money to qualify for a loan on even the most modest house, you will be beyond the income limit for an individual.

This credit may keep prices up a bit for longer than they should.

This means I have to wait to buy a house.

One data point - I'm delaying my house purchase because this program. Its artificially inflating prices and I dont need downpayment help.

Misc: Long Hours at the FDIC, Foreclosures Movin' on Up!

Re: 3x annual income has traditionally been the standard by which homes were valued in our country

Too me, THIS "3x" thing is the "direction" for housing. If you look at buying a house and plan to keep it for 10 years THEN with annual income dropping it would make sence (to me, anyway) that house can NOT go up over 10 years (after inflation, of course). I just don't see how annual US income can drop and housing NOT drop.

Split decision. INDU and OEX to Kermit, everything else of consequence (except VIX, LOL) to Elmo.

I think in Vegas they call that a 'push'... and it carries over to the next round of wagering.

the least expensive place that is large enough for us, and will take a cat, is $1200.00 a month, IIRC. That's right up there with a house payment

Perhaps, depends on how nice a place you want to buy. The median sale price in Nashua is about $240K which (assuming 0% down) is a bit over $1300 per month just for principal and interest. Add in taxes and maintenance and you're probably closer to the $1700-1800 range.

dryfly, We've crunched the numbers. We may be in an unusual situation ... since we sold a property three years ago, the equity we could put into a house would actually make our mortgage lower than our rent. When we initially decided to rent, we had expected that interest income would cover quite a bit of the payments. At <2% interest, that hasn't turned out to be the case. Our decision to rent only makes sense if there is either significant depreciation or if interest rates spike dramatically. I'm still betting on the depreciation.

Rob, "My eldest kid is thinking about buying her first house."......
A good friend did that for his daughter, UC Redlands, about 10 years ago. According to him it didn't pay off.
Best of luck.

"surely tax credit just holds prices up a little as people just pay 8K more."

Works differently. The $8k is used upfront and leveraged. Thus, it is multiples of $8k. But more has to do with taking future demand away now with the tax credit. if the tax credit leaves,then demand plummets and people who have to sell set considerably lower comps, because competition is so fierce for buyers.

Thank-you Elvis - but I am still not conviced prices will plummet, however it would be interesting to see what that 8K is being used for - are people applying it directly to the downpayment and using the leverage taking a 200k-20% down to 32K? or taking the credit at the end of the year and buying furniture... with that information we could estimate where the bottom is.... Also you seem to be assuming a death spiral of increasing unemployment, I agree if that is in the cards than yes many people buying houses will be forced to walk away - however what happens if unemployment stays steady or declines? then are we at bottom? Also someone mentioned declining housing demand - haven't we seen the opposite - demand is picking up....

One more thing - one would expect the 8K would matter less in states like CA than the midwest which has much cheaper housing - I would expect this program is having no impace in high price areas of CA but a large impact in the midwest - is that true?

unemployment is not the relevant metric. I think it is job loss and net new jobs created. Unemployment could be going down as people leave the work force but if we are still losing jobs that would be serious. Similarly unemployment could be going up as there are new entrants into the work force- but as long as there is no net job loss it should not pressure the housing markets.

It's sounds like a good time to start flipping small houses.