home ownership?

[jack-be-lucky]

One street over from me Fannie just put a foreclosure on the market in its Homepath program. 3% down, no lender appraisal and no mortgage insurance(pmi) required. This is a five year old home, 2400 sq ft, 3 bd 3ba, huge deck that backs to trees. Solid hardwood throughout the first floor, granite, wd burning fp. Upstairs the master bedroom has 9 ft cofferred ceilings, and it includes a bonus room, sort of a small family room.

Sold new for 245,000. Asking 199,000. So for about $8000, thats $6000 dp and $2000 closing cost, and a monthly payment of $1250 for P&I, taxes and insurance, you can get a really nice home, that's been freshly painted, including all the doors and trim, has new carpeting all through the second floor, and a new dishwasher and microwave.

$1250 a month will get you a dump in this area, a fifty year old split level that's been on rental for twenty years. A similar sized house up the street, but not as nice, is renting for $1450. Ten years from now, your principal balance would be about $150,000. If home prices just return to 2006 levels in that time, you'll wind up with about $90,000(after sales cost) for your initial $8000. Thats a fantastic investment return by any measure.

And it could be much better. The echo boom demographic will be entering prime child-raising and home buying age, and since few new homes are now being built, there will likely be some real demand for recently built homes.

Of course all investments have risk. Without risk, you don't make any money. But I'm itching to jump on this place myself, and I'm a guy who's lost money on two homes already.

[Shryke]

The echo-boom demographic is having trouble being able to afford a house.

[jack-be-lucky]

The echo-boom demographic is having trouble being able to afford a house.

That's the whole point. If you wait until they can afford it, you're not going to get a deal like this. 3% down, no income restrictions, no first time homebuyer requirement, no pmi or fha insurance, no appraisal, probably 4.5% or less interest rate. That's a once in a lifetime deal. I guess I'm a contrarian. When people are buying gold at $1800/oz, I'd be selling. If I had any. And when most folks think housing's a bad deal, that's the time to buy.

I know that you understand that everything the fed and the government are doing to try to stimulate the economy is to increase jobs, and following that increase real wages. When a country is carrying as much private and public debt as we are, without real growth we're doomed.

And while the idea of letting housing prices fall to make it more affordable sound good in theory, the reality is millions more of borrowers walking away from underwater mortgages, more distressed banks, and of course, more bank bail-outs. And it won't work anyway because as prices fall, wages fall. That's the problem we're in right now.

Anybody thinking of buying a house should definitely check out the Fannie website at www.homepath.com, though.

The preceding was not sponsored by the National Realtors Association. Though I do feel kind of dirty.

[Hereward]

The BBC has an interesting piece on potential solutions to the very different housing crisis that exists in the UK.*

http://www.bbc.co.uk/news/magazine-15400477

*It is interesting, but mostly I just wanted to make Tormund's head explode.

[Tormund Ukrainesbane]

The BBC has an interesting piece on potential solutions to the very different housing crisis that exists in the UK.*

http://www.bbc.co.uk...gazine-15400477

*It is interesting, but mostly I just wanted to make Tormund's head explode.

It is indeed interesting. According to your article, it seems that Britain has the opposite problem in the US, and that you are underbuilt. I presume the reason that young people can no longer buy houses is due to tightening credit restrictions post-crash?

I don't know much about how these things work in England but I'm guessing there are myriad laws designed to keep "countryside" and "city" firmly separate? Such laws have a tendency to not allow small towns to grow, and drive prices in cities (where the jobs are) sky-high.

[MinDonner]

Lol. Houses were already unaffordable pre-crash; the loose credit let them all be snapped up by speculators and would-be landlords and prices have not fallen back nearly far enough to rectify that. The actual housing supply is a bit of a red herring when so many people still own multiple properties.

[Hereward]

Yes, there are strict rules on protecting the "Green Belt" around towns and cities, which is understandable when you have 50+m people rammed into a country the size of Alabama. But as Min says, young people were unable to get into the market pre-credit crunch in many, if not most, places, unless they had help and low expectations on size.

[Tormund Ukrainesbane]

Lol. Houses were already unaffordable pre-crash; the loose credit let them all be snapped up by speculators and would-be landlords and prices have not fallen back nearly far enough to rectify that. The actual housing supply is a bit of a red herring when so many people still own multiple properties.

Yes, there are strict rules on protecting the "Green Belt" around towns and cities, which is understandable when you have 50+m people rammed into a country the size of Alabama. But as Min says, young people were unable to get into the market pre-credit crunch in many, if not most, places, unless they had help and low expectations on size.

Sounds like England is just an expensive place to live. I dunno if I would call that a crisis so much as a natural consequence of (forced) population density. Sounds like the only way to really fix the issue is to open more areas to development. You guys need some good old-fashioned American suburbs. I'll have Del Webb give you all a call.

[MinDonner]

I should clarify - by "pre-crash" I meant "immediately pre-crash" (or at least a few years before), and that was as a result of easy credit and the speculation boom. My house sold for a reasonable £100k to the previous owners; five years later it cost me nearly double that. In, say, 2002, it would have been much much easier for young people to buy a place, and the population has not increased THAT much since then, nor has the housing supply dwindled.

[Hereward]

Well, it's indistinguishable from a crisis when young people can't buy and companies can't expand because they either can't get the workers they need and/or pay them enough to be able to afford to live where the companies want/need to be. We don't have room for American-style suburbs, and they are anathema to pretty much everyone anyway.

[Floria]

It is indeed interesting. According to your article, it seems that Britain has the opposite problem in the US, and that you are underbuilt. I presume the reason that young people can no longer buy houses is due to tightening credit restrictions post-crash?

Europe is a little bit more crammed than the states ;) There is no post- or pre-crash considering the real estate market. I think it's the same reason in Germany or the rest of Europe as ever: it's freaking expensive and you can't buy a house mainly financed by credit. An average house for a family costs around 500k € = 700k $. People will go with a downpayment of of 50% or higher. You would get a credit for a house for around 30% downpayment, but people don't take it. Not because they wouldn't get the credit, the high amount of total interests would not make the deal profitable.

High credits are also considered as risks and avoided. (divorce, unemployment, health etc.) Making debt seems to be considered more negative than in the states. Also banks demand higher coverings, because it's them alone who bear the risks. Trading credits is possible, but highly regulated, plus the credit giving bank would lose reputation.

Most people can't afford to buy houses when they are young. You buy houses as an investment, when you are around 40 or older and have safed a few hundred thousand euros.

I don't know much about how these things work in England but I'm guessing there are myriad laws designed to keep "countryside" and "city" firmly separate? Such laws have a tendency to not allow small towns to grow, and drive prices in cities (where the jobs are) sky-high.

But small towns keep growing non the less, because of the high real estate prices around the large cities. People want to live near their jobs. I guess, you could get really cheap houses in East-Germany, hours and hours away from any proper job.

There are also a myriad of laws and regulations in Germany, but those are mainly building regulations (cityscape, enviroment) plus a few important ones too discourage speculation and keep prices and rents stable (in most cases: low). Rents for example are bound to the average rent in the area during the last 4 years, in which you are living, landlords can't increase their rents at will, they have to justify it. It's the same with building areas. They have a "standard ground value", depending on a shitton of factors and data collected by the "public constrution office" over several years. There are also laws that discourage speculation with land. Basically if you buy land, you have to build or pay high taxes for owning derilict land.

Those rules might seem extremely strict, but the basic thought is, that the real estate market does not regulate itself as easy as for example tomatoes, because the timespan between buying and selling is several decades. And land is a narrow resource. Also having a roof above your head is considered basic human right in Germany and therefore protected from too much financial interests.

Nonetheless, prices are rising and real estate is profitable, if you can afford to invest. Profit is average, but at least a steady increase and not rollercoaster-like.

[Hereward]

think it's the same reason in Germany or the rest of Europe as ever: it's freaking expensive and you can't buy a house mainly financed by credit. An average house for a family costs around 500k € = 700k $. People will go with a downpayment of of 50% or higher. You would get a credit for a house for around 30% downpayment, but people don't take it. Not because they wouldn't get the credit, the high amount of total interests would not make the deal profitable.

Most people can't afford to buy houses when they are young. You buy houses as an investment, when you are around 40 or older and have safed a few hundred thousand euros.

None of this, except housing being expensive, applies to Britain.

[TerraPrime]

(in which the German system of real estate pricing is briefly described)

If more government regulations lead to more distortions of the market, and more distortions of the market leads to easier ways to exploit, which in turn leads to a likelier case for bubbles to form, then it would stand to reason that housing prices in Germany is much more volatile and exploited than it is in the U.S. I don't think that's the case. So, somewhere, on that chain of logic, a step is faulty.

Or, perhaps, with enough dampers on exploitative measures, the government can indeed heavily regulate land use without causing a financial crisis.

But, you know, unique snowflakes.

[Tormund Ukrainesbane]

According to what Floria is saying the average house would run you at just under $1,000,000 US. Which people need a down payment for which is larger than the cost of an average US house. That sounds like a pretty damn distorted market to me.

[Altherion]

According to what Floria is saying the average house would run you at just under $1,000,000 US. Which people need a down payment for which is larger than the cost of an average US house. That sounds like a pretty damn distorted market to me.

The population density is 10 time larger than in the US. The government somewhat distorts the market, but the fundamental problem is that there is only so much land to go around. Also, they get their salaries paid in euro, not dollars so the price is not as high as it looks.

[Tormund Ukrainesbane]

Germans don't make that much, whatever currency you are counting it in.

[Shryke]

Germans are crazy frugal. Their experience is not really applicable to places like North America or the UK.

Probably closer to some place like Japan.

[Floria]

If more government regulations lead to more distortions of the market, and more distortions of the market leads to easier ways to exploit, which in turn leads to a likelier case for bubbles to form, then it would stand to reason that housing prices in Germany is much more volatile and exploited than it is in the U.S. I don't think that's the case. So, somewhere, on that chain of logic, a step is faulty.

Or, perhaps, with enough dampers on exploitative measures, the government can indeed heavily regulate land use without causing a financial crisis.

Most regulations origin in the housing crisis of the 70ies, when rents and real estate prices went through the roof to keep prices and speculating down. People often wait for years to get a chunk of building land. You could make a fortune by just buying, hording and reselling land, if it wasn't regulated that strictly.

Building land and real estate prices are regulated on city level. If bubbles were to form, then on city level. Prices mostly decrease, if employment drops drastically (for example in the 80ies when lots of mining companies went down), but in those cases, dropping real estate prices are the least of your concerns.

Concerning "bubbles"

- If you can't afford a house, you don't get a credit

- Flop rates of housing credits are very low, therefore a secure cash cow for banks. Non-performing-loans are handled internally (bank gets your house) and not cut into pieces, bundled, resold, bundled again etc.

The market is not really "distorted". There is expensive land (large cities), "average priced" land (suburbs, smaller cities) as well as crap land... supply and demand. In an incest-ridden town in East-Germany, where 50% lives of welfare and the other half from their meager pensions, building land is dirt cheap. Considering the low wages and people killing for contracts, you could build a house for 200k $ or less.

The population density is 10 time larger than in the US. The government somewhat distorts the market, but the fundamental problem is that there is only so much land to go around. Also, they get their salaries paid in euro, not dollars so the price is not as high as it looks.

Exactly. Same as in Britain. So I doubt, you can compare the real estate market of Europe to the States'. The price is even higher than it looks ;) German wages are low compared to the rest of Europe or the States as Tormund stated (and half of it even vaporizes in form of taxes and mandatory insurances). Owning Real estate is considered luxury or a way to avoid some heritage-tax. Buy a house for 500k or rent it for 200 years :P

Germans are crazy frugal. Their experience is not really applicable to places like North America or the UK.

Probably closer to some place like Japan.

I would rather call it pragmatic than frugal.

[Hereward]

If you think German wages are low compared to the rest of Europe, I don't know what to say.

[Andystoteles]

Somwhere something is very wrong. Where i live, a normal house goes for about 75 000$, 20 miles to the east the price is about 175 000$, 10 more miles and you have to pay 250 000$ for the same kind of house. To make it even worse, if you buy the same thing in the capitol a few more miles away, the price will be about 750 000$.

Thing is, all these places are within driving distance of each other. You can live in any of these places and work wherever you want to without any real difference in traveling time.

People think i´m lying when i tell them i bought my townhouse (if thats the correct term for it) for 6000$.

To me it seems that if you dont have a chance to actually own your own house in the end then what´s the point, other than giving away all your money to banks.