ReEconomist's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/235452/comments http://seekingalpha.com/article/96126-homebuilder-legal-troubles-large-and-small-housing-tracker?source=feed#comment-259160 259160 UsHousingMeltdown.org

One of the non-legal options to explore is if your state has a contractor recovery fund. This is a fund to pay out judgments against builders for incomplete projects – when the builder is insolvent. ]]> Fri, 19 Sep 2008 12:19:06 -0400 UsHousingMeltdown.org

One of the non-legal options to explore is if your state has a contractor recovery fund. This is a fund to pay out judgments against builders for incomplete projects – when the builder is insolvent. ]]> http://seekingalpha.com/article/94965-housing-on-the-slide?source=feed#comment-251821 251821
Check for yourselves: Article published on this website on 7/31/08 entitled Real Talk on Housing. Check the posts from 11:31 AM to 1:43 PM. RE Broker and Believe it or Not are posting to each other complementing one another while they resort to childish name calling on everyone else. Another example, article published on 7/24/08 entitled “Foreclosures Still on the Rise”. Beginning at 4:29 PM you’ll see a number of posts from RE Broker and Believe it or Not. Same pattern. Here are the links.
seekingalpha.com/artic...
seekingalpha.com/artic...

This poster needs to learn some manners. He has a clear pattern of childish behavior and resorting to name-calling and insults that have nothing to do with the article.

It has been suggested by one of the readers to remind Believe it or Not to take his medication. This could explain his hostility and why he talks to himself. Or perhaps, he talks to himself because he is so rude no one else will speak with him. Or it’s because he’s really a real estate broker and business is not too good at the moment.

]]> Thu, 11 Sep 2008 13:59:19 -0400
Check for yourselves: Article published on this website on 7/31/08 entitled Real Talk on Housing. Check the posts from 11:31 AM to 1:43 PM. RE Broker and Believe it or Not are posting to each other complementing one another while they resort to childish name calling on everyone else. Another example, article published on 7/24/08 entitled “Foreclosures Still on the Rise”. Beginning at 4:29 PM you’ll see a number of posts from RE Broker and Believe it or Not. Same pattern. Here are the links.
seekingalpha.com/artic...
seekingalpha.com/artic...

This poster needs to learn some manners. He has a clear pattern of childish behavior and resorting to name-calling and insults that have nothing to do with the article.

It has been suggested by one of the readers to remind Believe it or Not to take his medication. This could explain his hostility and why he talks to himself. Or perhaps, he talks to himself because he is so rude no one else will speak with him. Or it’s because he’s really a real estate broker and business is not too good at the moment.

]]> http://seekingalpha.com/article/94965-housing-on-the-slide?source=feed#comment-251643 251643
Supply and demand don't mean much if people can't qualify or are not willing to purchase. The fact is, 80% of all homes are purchased with a mortgage. The ability to get financing is crucial to the support or non-support of home prices. A lot of people would like a Ferrari, but
either can't afford it or are not willing to pay the price.
]]> Thu, 11 Sep 2008 11:29:54 -0400
Supply and demand don't mean much if people can't qualify or are not willing to purchase. The fact is, 80% of all homes are purchased with a mortgage. The ability to get financing is crucial to the support or non-support of home prices. A lot of people would like a Ferrari, but
either can't afford it or are not willing to pay the price.
]]> http://seekingalpha.com/article/94965-housing-on-the-slide?source=feed#comment-251545 251545
The maximum home price to income is about 4 times income. When you do the math, using 28% of income as the maximum a responsible lender will loan you'll see that home price at 4 times income works out.

What about the other variables? If home prices are below the maximum home price to income level of 4 to 1, the other factors, supply and demand, job growth, etc. now influence the direction of home prices.

In many areas of the center of the country including Texas, home prices remained at levels less than 4 to1. In these areas, home prices have the potential to rise. It doesn't mean they will rise, only that incomes won't be the limiting factor. Consider the other factors.
You can check out the income level to home price ratios with the Ceiling tool here. UsHousingMeltdown.org/....

The author brings up a good point about the land values. Land is the component of housing that is the most volatile. In high cost areas, land is often the most expensive component of housing and can comprise 60% of the total cost of a house. Building materials and labor are much more stable. The point is, if you want to get an idea of future home prices, look at land costs and the price scenarios of new supply coming to market. If new supply is coming to market at prices lower than comparable properties, expect downward pressure on prices. If new supply is coming to market at prices above comparable properties, prices have potential to rise.

Land prices in bubble areas are down 30-80% from 2006 levels. Meanwhile, the costs of the structure including labor and materials is down about 15% from 2006.

There is a replacement cost tool where you can get the building costs for four different quality levels of houses. Basic, Tract, Custom, McMansion. Add the cost of building the structure to recent land sales and you've got the price scenarios of new supply.
UsHousingmeltdown.org/...
]]> Thu, 11 Sep 2008 10:27:26 -0400
The maximum home price to income is about 4 times income. When you do the math, using 28% of income as the maximum a responsible lender will loan you'll see that home price at 4 times income works out.

What about the other variables? If home prices are below the maximum home price to income level of 4 to 1, the other factors, supply and demand, job growth, etc. now influence the direction of home prices.

In many areas of the center of the country including Texas, home prices remained at levels less than 4 to1. In these areas, home prices have the potential to rise. It doesn't mean they will rise, only that incomes won't be the limiting factor. Consider the other factors.
You can check out the income level to home price ratios with the Ceiling tool here. UsHousingMeltdown.org/....

The author brings up a good point about the land values. Land is the component of housing that is the most volatile. In high cost areas, land is often the most expensive component of housing and can comprise 60% of the total cost of a house. Building materials and labor are much more stable. The point is, if you want to get an idea of future home prices, look at land costs and the price scenarios of new supply coming to market. If new supply is coming to market at prices lower than comparable properties, expect downward pressure on prices. If new supply is coming to market at prices above comparable properties, prices have potential to rise.

Land prices in bubble areas are down 30-80% from 2006 levels. Meanwhile, the costs of the structure including labor and materials is down about 15% from 2006.

There is a replacement cost tool where you can get the building costs for four different quality levels of houses. Basic, Tract, Custom, McMansion. Add the cost of building the structure to recent land sales and you've got the price scenarios of new supply.
UsHousingmeltdown.org/...
]]> http://seekingalpha.com/article/94265-housing-did-we-learn-nothing-from-the-dotcom-bust?source=feed#comment-248657 248657
Another phenomena that might cause prices to over-correct on the downside is the waning enthusiasm for buying and owning a house.

With prices falling and not likely to appreciate anytime soon, a lot of people will be asking themselves why are they paying such a high premium for ownership over the cost of renting a comparable property? Up until the bust, most people would justify a premium for ownership cause they were getting a healthy amount for appreciation.

It's more expensive to rent assets that depreciate rather they buy them. Houses have been cheaper to rent than purchase because of the appreciation component. What happens to prices when the appreciation component buyers assign to a purchase is zero?

These days it's gotten difficult to ascertain whether there is a bottom forming or the bubble still has more to deflate. There will be a bottom and it could be the point where it becomes cheaper to rent then purchase.

Check out the home value forecasting tools based on time-tested fundamentals. Sell the Ceiling and buy the Floor. The Ceiling is the top level of prices where the income to home price ratio exceeds the historical norm for the area. So when prices reach or exceed the Ceiling, you'd be financially wise to sell and definitely not buy.

The Floor is the price level where buying makes sense due to the yield the rental income of the house could generate. If you buy the Floor there is limited downside risk to further price declines. UsHousingMeltdown.org/...
]]> Mon, 08 Sep 2008 15:05:59 -0400
Another phenomena that might cause prices to over-correct on the downside is the waning enthusiasm for buying and owning a house.

With prices falling and not likely to appreciate anytime soon, a lot of people will be asking themselves why are they paying such a high premium for ownership over the cost of renting a comparable property? Up until the bust, most people would justify a premium for ownership cause they were getting a healthy amount for appreciation.

It's more expensive to rent assets that depreciate rather they buy them. Houses have been cheaper to rent than purchase because of the appreciation component. What happens to prices when the appreciation component buyers assign to a purchase is zero?

These days it's gotten difficult to ascertain whether there is a bottom forming or the bubble still has more to deflate. There will be a bottom and it could be the point where it becomes cheaper to rent then purchase.

Check out the home value forecasting tools based on time-tested fundamentals. Sell the Ceiling and buy the Floor. The Ceiling is the top level of prices where the income to home price ratio exceeds the historical norm for the area. So when prices reach or exceed the Ceiling, you'd be financially wise to sell and definitely not buy.

The Floor is the price level where buying makes sense due to the yield the rental income of the house could generate. If you buy the Floor there is limited downside risk to further price declines. UsHousingMeltdown.org/...
]]> http://seekingalpha.com/article/94110-housing-prices-bottom-or-temporary-bear-break?source=feed#comment-246605 246605
Opinion as to why people were willing to spend a higher percentage of income on housing in recent years?

Rationalizing this for many people was pretty easy when appreciation was delivering 4-10% a year. Why not get as much house as you can when it's going up every year was the thinking of many buyers. People were buying payments not price. No thought was given to what it would take to actually pay off the mortgage.

In the years ahead, home prices are more likely than not to be stagnant and flat. This will get rid of the "I'm going to make money on this house" mentality. For a while housing may begin to be viewed as just another consumption item we buy without the expectation of making money off of it. Mortgage pay down and equity build up will be back in style.

The generation of people now in their 70's and older aspired to have a paid off mortgage at retirement. This was a goal to work toward and an accomplishment to take pride in.

In recent times, the younger generation viewed the situation of a paid off mortgage as wasteful. The thinking became, why have all that equity in a dormant state? Borrow it out and invest it in more real estate.

I would expect people to become more conservative in the amount of money they spend on housing. Everyone now knows, real estate can go down and leverage can work against you and when it does it can cause severe financial shock. Most people also know now, they need to use other sources than the self-serving real estate industry when it comes to market information. How can it always be a good time to buy? It can't. There is a more optimal time to be selling and buying residential real estate.

Getting rid of or reducing the appreciation component and a return more conservative approach to housing spending will be good for the housing market in the intermediate and long term.
]]> Fri, 05 Sep 2008 18:35:23 -0400
Opinion as to why people were willing to spend a higher percentage of income on housing in recent years?

Rationalizing this for many people was pretty easy when appreciation was delivering 4-10% a year. Why not get as much house as you can when it's going up every year was the thinking of many buyers. People were buying payments not price. No thought was given to what it would take to actually pay off the mortgage.

In the years ahead, home prices are more likely than not to be stagnant and flat. This will get rid of the "I'm going to make money on this house" mentality. For a while housing may begin to be viewed as just another consumption item we buy without the expectation of making money off of it. Mortgage pay down and equity build up will be back in style.

The generation of people now in their 70's and older aspired to have a paid off mortgage at retirement. This was a goal to work toward and an accomplishment to take pride in.

In recent times, the younger generation viewed the situation of a paid off mortgage as wasteful. The thinking became, why have all that equity in a dormant state? Borrow it out and invest it in more real estate.

I would expect people to become more conservative in the amount of money they spend on housing. Everyone now knows, real estate can go down and leverage can work against you and when it does it can cause severe financial shock. Most people also know now, they need to use other sources than the self-serving real estate industry when it comes to market information. How can it always be a good time to buy? It can't. There is a more optimal time to be selling and buying residential real estate.

Getting rid of or reducing the appreciation component and a return more conservative approach to housing spending will be good for the housing market in the intermediate and long term.
]]> http://seekingalpha.com/article/94110-housing-prices-bottom-or-temporary-bear-break?source=feed#comment-246171 246171
There is another phenomenon of the downturn that is becoming more pervasive. That being the decline in people's enthusiasm for home ownership. One of the value propositions for buying a house has been the expectation of steady appreciation. (not with everyone, but it does exist in varying degrees in many home buyers)

With prices falling and not likely to appreciate anytime soon, a lot of people will be asking themselves why are they paying such a high premium for ownership over the cost of renting a comparable property? Up until the bust, most people would justify a premium for ownership cause they were getting a healthy amount for appreciation.

With no appreciation and even depreciation, more people are asking themselves, why are we paying such an exorbitant amount for ownership? And when some answer that question, they will walk away from their mortgages and give the keys back adding to the inventory.

It's more expensive to rent assets that depreciate. Houses have been cheaper to rent than purchase because of the appreciation component.

What happens to prices when the appreciation component buyers assign to a purchase is zero?

Below is a link to a couple of home pricing tools you can check home values for specific areas. The idea is you want to sell the Ceiling and buy the Floor. The Ceiling is the top end, or highest level home prices can be supported based on income levels to house price ratios. The Floor is the bottom end of prices where the income generating ability becomes attractive to investors. Market prices tend to move up and down between the Ceiling and Floor.
www.ushousingmeltdown....
]]> Fri, 05 Sep 2008 10:25:27 -0400
There is another phenomenon of the downturn that is becoming more pervasive. That being the decline in people's enthusiasm for home ownership. One of the value propositions for buying a house has been the expectation of steady appreciation. (not with everyone, but it does exist in varying degrees in many home buyers)

With prices falling and not likely to appreciate anytime soon, a lot of people will be asking themselves why are they paying such a high premium for ownership over the cost of renting a comparable property? Up until the bust, most people would justify a premium for ownership cause they were getting a healthy amount for appreciation.

With no appreciation and even depreciation, more people are asking themselves, why are we paying such an exorbitant amount for ownership? And when some answer that question, they will walk away from their mortgages and give the keys back adding to the inventory.

It's more expensive to rent assets that depreciate. Houses have been cheaper to rent than purchase because of the appreciation component.

What happens to prices when the appreciation component buyers assign to a purchase is zero?

Below is a link to a couple of home pricing tools you can check home values for specific areas. The idea is you want to sell the Ceiling and buy the Floor. The Ceiling is the top end, or highest level home prices can be supported based on income levels to house price ratios. The Floor is the bottom end of prices where the income generating ability becomes attractive to investors. Market prices tend to move up and down between the Ceiling and Floor.
www.ushousingmeltdown....
]]> http://seekingalpha.com/article/93550-how-much-further-will-housing-fall?source=feed#comment-244686 244686
However, all of the expert analysis assume borrowers will want to borrow the maximum amount of money a lender will give them.

What would happen to prices and the market if borrowers became more conservative on their home purchasing and instead of borrowing everything they could, spent much less on housing?

During the boom, the atmosphere was housing was a can't miss way to get rich and home buyers wanted all of the purchasing power a lender would give them, cause they wanted in on the boom.

Now, in 2008 buyers realize home prices can go down and leverage can work against them. Equity and mortgage paydown is back in style.

To get an idea of top and bottom home prices for a particular zip-code check out Home Price Ceiling and Floor fundamentals at
www.ushousingmeltdown....

The Ceiling is the top end of prices based on home price to income levels and the Floor is the bottom level of prices based on their value as income producing assets. The larger the spread between Ceiling and Floor the more vulnerable prices are. The smaller the spread the more stable prices will be.
]]> Wed, 03 Sep 2008 13:53:35 -0400
However, all of the expert analysis assume borrowers will want to borrow the maximum amount of money a lender will give them.

What would happen to prices and the market if borrowers became more conservative on their home purchasing and instead of borrowing everything they could, spent much less on housing?

During the boom, the atmosphere was housing was a can't miss way to get rich and home buyers wanted all of the purchasing power a lender would give them, cause they wanted in on the boom.

Now, in 2008 buyers realize home prices can go down and leverage can work against them. Equity and mortgage paydown is back in style.

To get an idea of top and bottom home prices for a particular zip-code check out Home Price Ceiling and Floor fundamentals at
www.ushousingmeltdown....

The Ceiling is the top end of prices based on home price to income levels and the Floor is the bottom level of prices based on their value as income producing assets. The larger the spread between Ceiling and Floor the more vulnerable prices are. The smaller the spread the more stable prices will be.
]]> http://seekingalpha.com/article/92200-homebuilders-try-to-ride-tax-credit-wave-housing-tracker?source=feed#comment-237153 237153
As Gato pointed out, the tax credit is really an interest free loan. There's a handy, free online directory of the new housing law where you can read or print out a few pages found at
ushousingmeltdown.org/...

The tax credit for first time home buyers is found on pages 628-637.



]]> Sat, 23 Aug 2008 10:47:08 -0400
As Gato pointed out, the tax credit is really an interest free loan. There's a handy, free online directory of the new housing law where you can read or print out a few pages found at
ushousingmeltdown.org/...

The tax credit for first time home buyers is found on pages 628-637.



]]> http://seekingalpha.com/article/92045-home-prices-have-stopped-falling-the-statistics-are-skewed?source=feed#comment-236629 236629
Land values in bubble areas have come down 30-80% from 2005 levels. Meanwhile, construction costs have come down 15% . In high cost areas, land comprises as much as 60% of the cost of a house.
Builder today, can buy land, build houses, and sell the to consumers at prices 30% -50% below 2006 prices.

Specifically, in Sacramento area Pulte and Centex recently unloaded a huge chuck of land for homes. They sold it at a 80% off their purchase price. This works out building lot prices in 2008 at $32,000.

Add a 35% profit margin when the investors sell the land to a builder and you have building lot for $43,000. The estimated 2008 materials and building costs for Track quality home in this zip-code is $94 a square foot with $48 per square foot for the garage.

Total housing costs: $43,000 land+ $167,904 structure = $210,904.
For a new 1616 square foot home with two-car garage. Is this indicate a bottom? Check out the Home Price Replacement Cost Fundamental here.
ushousingmeltdown.org/...
You can type in four quality levels of construction including Basic, Track, Custom and McMansion and get the 2008 construction costs per square foot. Add this to recent land sales and you will have an idea of new supply price scenarios in the pipeline. For the story on
the Pulte and Centex land sale find the article in Land Price Reality Check.

]]> Fri, 22 Aug 2008 13:00:53 -0400
Land values in bubble areas have come down 30-80% from 2005 levels. Meanwhile, construction costs have come down 15% . In high cost areas, land comprises as much as 60% of the cost of a house.
Builder today, can buy land, build houses, and sell the to consumers at prices 30% -50% below 2006 prices.

Specifically, in Sacramento area Pulte and Centex recently unloaded a huge chuck of land for homes. They sold it at a 80% off their purchase price. This works out building lot prices in 2008 at $32,000.

Add a 35% profit margin when the investors sell the land to a builder and you have building lot for $43,000. The estimated 2008 materials and building costs for Track quality home in this zip-code is $94 a square foot with $48 per square foot for the garage.

Total housing costs: $43,000 land+ $167,904 structure = $210,904.
For a new 1616 square foot home with two-car garage. Is this indicate a bottom? Check out the Home Price Replacement Cost Fundamental here.
ushousingmeltdown.org/...
You can type in four quality levels of construction including Basic, Track, Custom and McMansion and get the 2008 construction costs per square foot. Add this to recent land sales and you will have an idea of new supply price scenarios in the pipeline. For the story on
the Pulte and Centex land sale find the article in Land Price Reality Check.

]]> http://seekingalpha.com/article/91505-today-s-negative-equity-update?source=feed#comment-234116 234116
Regarding falling home values, it's the unknown in consumers that causes the most angst. Not knowing how far prices can fall is a bigger part of the confidence for many than the amount of the actual correction.

For a better understanding on the top level and bottom level of home values, check out Ceiling and Floor Fundamentals at UsHousingMeltdown.org The Floor Fundamental identifies the lowest prices can go based on their ability to produce rental income.

The shorter the spread from ceiling to floor the less risk of price declines. The greater the spread from ceiling to the floor the more risk to prices.
]]> Tue, 19 Aug 2008 13:57:38 -0400
Regarding falling home values, it's the unknown in consumers that causes the most angst. Not knowing how far prices can fall is a bigger part of the confidence for many than the amount of the actual correction.

For a better understanding on the top level and bottom level of home values, check out Ceiling and Floor Fundamentals at UsHousingMeltdown.org The Floor Fundamental identifies the lowest prices can go based on their ability to produce rental income.

The shorter the spread from ceiling to floor the less risk of price declines. The greater the spread from ceiling to the floor the more risk to prices.
]]> http://seekingalpha.com/article/91566-socal-real-estate-sales-up-but-prices-are-still-down?source=feed#comment-234100 234100
You bring the key to home price stability, which is the re-alignment of home prices to their historical ratio to income levels. Income levels act as sort of ceiling on prices, limiting how high they can rise.

If you do the math and realize sensible lenders will only permit a borrower to use a maximum of 28% of their income for housing costs including mortgage payments, you get a maximum ratio of 4 to 1.

During the boom, home prices when to 8 and as high as 10 times income levels. When you go from 10 to 1 back down to 4 to 1, that;'s a 60% correction. Keep in mind, it takes a 4% rise in incomes to enable home prices to rise 1%. With the economy teetering, income levels may stagnate for a while or even fall.

To see the historical home price to income ratio, the bubble ratio and what happens to prices when we return to the historical ratio check out the Home Price Ceiling Fundamental at UsHousingMeltdown.org



]]> Tue, 19 Aug 2008 13:38:29 -0400
You bring the key to home price stability, which is the re-alignment of home prices to their historical ratio to income levels. Income levels act as sort of ceiling on prices, limiting how high they can rise.

If you do the math and realize sensible lenders will only permit a borrower to use a maximum of 28% of their income for housing costs including mortgage payments, you get a maximum ratio of 4 to 1.

During the boom, home prices when to 8 and as high as 10 times income levels. When you go from 10 to 1 back down to 4 to 1, that;'s a 60% correction. Keep in mind, it takes a 4% rise in incomes to enable home prices to rise 1%. With the economy teetering, income levels may stagnate for a while or even fall.

To see the historical home price to income ratio, the bubble ratio and what happens to prices when we return to the historical ratio check out the Home Price Ceiling Fundamental at UsHousingMeltdown.org



]]> http://seekingalpha.com/article/91127-more-mixed-home-price-sales-data-housing-tracker?source=feed#comment-231333 231333
The top or price Ceiling is the highest prices can be limited by the income levels of the zip-code. The bottom, or Floor is the lowest prices can be based on their ability to generate a yield from rental income.

The shorter the spread from Ceiling to Floor the less risk of price declines. The greater the spread from Ceiling to the Floor the more risk to prices. You can check out the Ceiling and Floor for your area at
ushousingmeltdown.org/...

Market prices tend to move up and down between the Ceiling and the Floor. Are your local prices trending upward toward the Ceiling or downwards toward the Floor?

]]> Fri, 15 Aug 2008 13:27:53 -0400
The top or price Ceiling is the highest prices can be limited by the income levels of the zip-code. The bottom, or Floor is the lowest prices can be based on their ability to generate a yield from rental income.

The shorter the spread from Ceiling to Floor the less risk of price declines. The greater the spread from Ceiling to the Floor the more risk to prices. You can check out the Ceiling and Floor for your area at
ushousingmeltdown.org/...

Market prices tend to move up and down between the Ceiling and the Floor. Are your local prices trending upward toward the Ceiling or downwards toward the Floor?

]]> http://seekingalpha.com/article/90706-calculated-risk-new-home-sales-bottom-in-h2-08-housing-tracker?source=feed#comment-229484 229484
Home prices at 4 times local incomes are about the maximum level prices can be supported at. When you do the math, and realize lenders will only permit a borrower to use 28% of his/her income for mortgage payments this ratio pencils out. To see the historical home price to income levels for your area, go to UsHousingMeltdown.org and type in your zip-code. Current prices are either trending up toward the Ceiling or down toward the Floor. Floor is the value as an income producing asset. Bubble areas will settle close to the Ceiling. Economically distressed areas, prices will settle closer to the Floor or below it.
]]> Wed, 13 Aug 2008 12:16:20 -0400
Home prices at 4 times local incomes are about the maximum level prices can be supported at. When you do the math, and realize lenders will only permit a borrower to use 28% of his/her income for mortgage payments this ratio pencils out. To see the historical home price to income levels for your area, go to UsHousingMeltdown.org and type in your zip-code. Current prices are either trending up toward the Ceiling or down toward the Floor. Floor is the value as an income producing asset. Bubble areas will settle close to the Ceiling. Economically distressed areas, prices will settle closer to the Floor or below it.
]]> http://seekingalpha.com/article/89394-greenspan-still-almost-childlike-in-his-idealism?source=feed#comment-223915 223915
The FDIC issued a report recently on the banks it insures. What they found is that despite a 400% increase in loan loss provisions from 2007 levels, reserve growth is not keeping pace with rising non-current loans as troubled mortgage loans continue to increase.

More banks will need to raise capital to keep from becoming in solvent and some of them will be unable to. Link to download the FDIC report
www.ushousingmeltdown....]]> Wed, 06 Aug 2008 09:32:45 -0400
The FDIC issued a report recently on the banks it insures. What they found is that despite a 400% increase in loan loss provisions from 2007 levels, reserve growth is not keeping pace with rising non-current loans as troubled mortgage loans continue to increase.

More banks will need to raise capital to keep from becoming in solvent and some of them will be unable to. Link to download the FDIC report
www.ushousingmeltdown....]]> http://seekingalpha.com/article/88551-california-signaling-a-housing-bottom-housing-tracker?source=feed#comment-220280 220280 ratio of home price to income ratio. Nationally, the ratio has been home prices are 2-4 times local income levels. This ratio makes sense when you realize that in normal times, sensible lenders will only allow a borrower to use a maximum of 28% of their income for mortgage costs.

For instance, in many bubble areas, the ratio in 1999 was 4 to1.
Home prices were four times income levels.

During the peak of the bubble in 2005-06, median home prices shot up to 9 times median income levels and more in some areas. This was enabled by excessive and temporary purchasing power in the form of exotic mortgage products which enabled borrowers to bid up home prices to unsustainable levels.

Now that lending standards have tightened, is it reasonable to expect a return to the historical ratio? Most think so. What happens to prices? Consider a typical So Cal area where the median income in 1999 was $75,000. At 4-1 the median home price in 1999 was $288,000. In 2005-06 the median home price shot up to $700,000. Meanwhile incomes rose 3% or were $87,000 in 05/06.

At 4-1 prices should be $348,000. Keep in mind, it takes a 4% rise in incomes to allow home prices to rise 1%. (.28 x4 = 1)
There is a nifty tool where you can get historical, bubble and post-bubble home price to income ratios for your zip-code found at UsHousingmeltdown.org. Look for the Ceiling fundamental.
]]> Fri, 01 Aug 2008 11:55:21 -0400 ratio of home price to income ratio. Nationally, the ratio has been home prices are 2-4 times local income levels. This ratio makes sense when you realize that in normal times, sensible lenders will only allow a borrower to use a maximum of 28% of their income for mortgage costs.

For instance, in many bubble areas, the ratio in 1999 was 4 to1.
Home prices were four times income levels.

During the peak of the bubble in 2005-06, median home prices shot up to 9 times median income levels and more in some areas. This was enabled by excessive and temporary purchasing power in the form of exotic mortgage products which enabled borrowers to bid up home prices to unsustainable levels.

Now that lending standards have tightened, is it reasonable to expect a return to the historical ratio? Most think so. What happens to prices? Consider a typical So Cal area where the median income in 1999 was $75,000. At 4-1 the median home price in 1999 was $288,000. In 2005-06 the median home price shot up to $700,000. Meanwhile incomes rose 3% or were $87,000 in 05/06.

At 4-1 prices should be $348,000. Keep in mind, it takes a 4% rise in incomes to allow home prices to rise 1%. (.28 x4 = 1)
There is a nifty tool where you can get historical, bubble and post-bubble home price to income ratios for your zip-code found at UsHousingmeltdown.org. Look for the Ceiling fundamental.
]]> http://seekingalpha.com/article/88219-some-real-talk-on-housing?source=feed#comment-219258 219258
Now it's 2008 and borrowers have essentially the same income levels, but now it's a 6.5% fully amortized loan with tighter standards. That $1800 payment will only service a $284,000 mortgage. This is a home price 4 times income or where it should be. The difference between $720,000 and $284,000 is your bubble.

Plus, today the prevailing belief among buyers has changed from a can't miss mind-set, to a mind-set of caution and prudence.
There is a great explanation of maximum home price levels and the minimum home price levels based on the underlying fundamentals found at www.ushousingmeltdown.....
You can type in a zip code and see what happens to home values when the income to home price ratio returns to the historical norm for the area.

]]> Thu, 31 Jul 2008 10:21:57 -0400
Now it's 2008 and borrowers have essentially the same income levels, but now it's a 6.5% fully amortized loan with tighter standards. That $1800 payment will only service a $284,000 mortgage. This is a home price 4 times income or where it should be. The difference between $720,000 and $284,000 is your bubble.

Plus, today the prevailing belief among buyers has changed from a can't miss mind-set, to a mind-set of caution and prudence.
There is a great explanation of maximum home price levels and the minimum home price levels based on the underlying fundamentals found at www.ushousingmeltdown.....
You can type in a zip code and see what happens to home values when the income to home price ratio returns to the historical norm for the area.

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