Monday Open Thread
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11 comments:
I am very curious about some sketchy info I heard regarding tightening of lending standards beginning this Fall.
S Crow, anyone? Any factual info about this?
Peter-
Thanks for that link. It certainly did seem like we had more than enough condos around here didn't it?
Personally, I'm fine with the overbuilding, better too many dwellings than too few.
And we're not nearly caught up to Miami and Phoenix yet.
So bring 'em on!
Sarah,
Here is some info about it:
http://bigpicture.typepad.com/comments/2006/07/new_more_string.html
Sarah -
Regarding the tightening this Fall.... If you can recall where you read about it I can start to do some research.
I do know that some lenders are scrutinizing pay-option ARM's and other products, but I have seen a shift over the last 6 mos. to a lot of interest only on a 10yr. fixed period. So your payments are fixed paying only interest for a 10 yr period (amortized over a traditional 30 yr period). This program helps a lot of people who wish to buy while reducing risk. There is some benefit in this scenario if you decide to sell prior to the 1st adjustment anniversary or have the foresight and judgement to do financial planning, like paying down principle. Ten years is quite a hedge and a lot can happen both positive and negative.
If anyone else can help Sarah find information regarding lending standards tightening, please give us links (ie. Fannie Mae or Freddie Mac white papers on this topic).
Regards,
Tim Kane
"S-Crow"
S Crow,
If I come across the info again, I'll post the source here.
Today on the housingbubbleblog a mortgage broker posted a note he recieved from his company informing that minimum FICO scores for 100% loans were being raised.
It's a tiny raise but it's a start. Effective end of August.
I assume the new rule applies to the whole country and not just NV?
Paul Muolo of Merrill Lynch said today that the "buyers" market in RE will continue for YEARS.
Good to hear somebody finally come out and say this.
The link's on todays "thehousingbubbleblog.com"
Anon 11:52-
Whoops, mised your link. Thanks.
so Anon's link to "bigpicturetypepad" is one article that has info on tightening lending standards S Crow.
I can't believe no one has mentioned that the Seattle Bubble blog is a year old...way to go Tim!
It's interesting to see what has happened in the market since then:
Aug 2005
King County Median Price (Residential): $385,000
30 Yr Fixed Interest Rate: 5.2%
Aug 2006*
King County Median Price (Residential): $434,950
30 Yr Fixed Interest Rate: 6.4%
*I'm using the June #s...we won't have the August #s till next month. The interest rate is current.
Looks pretty clear to me that so far the "waiting for crash" strategy hasn't really panned out. Not only are houses 50K more, interest rates have gone up over 1 whole % point. If you calculate the amortization on a median house the difference is staggering. These calculations assume no down payment:
A median price house bought in August 2005 will cost $761,068.80 when completely paid off. Monthly payment's are $2,114.08
A median price house bought in August 2006 will cost $979,430.40 when completely paid off. Monthly payment's are $2,720.64
It cost $218,361.60 more to buy the same house as it did a year ago. Your monthly payments cost $606.56 more per month then if you had bought a year ago.
Most of the discussion on this blog has been concerned with prices...but the rising interest rates are the real killer. Even if prices come down somewhat, you're still paying more because of substantially higher interest rates.
When the choice is between buying an overvalued asset or buying an extremely overvalued asset, I choose neither.
In other words, I'd rather keep on happily renting than throw that much money at home "ownership." To put it very simply, owning a home is just not worth the going price in King County.
P.S. (Technically the 1-year anniversary is on the 8th.)
If given a choice between buying an overvalued asset at a low interest rate or a reasonably priced asset at a high interest rate, I'll take the later. Refinancing is always an option once interest rates come down. Can't do that for purchase price. Not that I'd call 6% high, historically.
And congrats on the anniversary, Tim. I run a local website as well, and it's nice to see a project that you've spent time and effort in get popular. :)
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