Malkiel

'Too Much House' Buyers To Be Rewarded?

It drives me mad when somebody who clearly hasn't been in the housing market recently or ever begins bloviating about this kind of stuff--very few mortgages today are initiated with a 20% down payment, in fact very few mortgages in the last 20 years have been subject to that requirement. Most mortgages big and small are initiated with 0%, 3%, or 5% down FHA or VA's; 20% down requirements are a thing of the Gerald Ford era. Even today the stringent conditions in a handful of bubble markets like LA is giving people the wrong impression that credit is that tight everywhere else. I can tell you it's not because I took out a 3% FHA in January of this year with no problem in a non-bubble market.

And while on the surface it may seem that people who were given way too large a loan for their income will be rewarded, they really won't; the prices which they paid for their homes are likely to be so inflated that the market won't rise up to meet them for many years and they'll likely take their loss later. Only people who really stay in the homes for decades are likely to see a profit rather than a loss, not the common scenario any more...