Today’s New York Times features Paul Krugman continuing his role in the Obama propaganda machine while pretending to be an Economist. In today’s installment of “I have a Nobel, so I must know Economics”, Krugman lashes out at “The Destructive Center”.
Before I spend a few paragraphs taking issue with Krugman’s direct points, I think we first have to reflect on how far we’ve come as a country. Just one decade ago, it was a “vast right wing conspiracy” that was the enemy of the left, the only thing holding them back from a collectivist utopia. Today, the “destructive center” is thwarting their attainment of nirvana. These poor guys just can’t seem to catch a break.
Krugman first frames the stimulus bill as a bill that “eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, (and) undermines schools”. It’s usually rich enough when the government can’t spend enough crowd calls a reduction in the growth of next year’s trendline a “cut”, but seriously, we’re now resulting to calling trimming $900 Billion in off-budget, new spending to a pittance under $800 Billion a cut? Really? Spending $800 Million on pet projects of the democratic machine is depriving millions of adequate healthcare? Blowing almost $1 Trillion “undermines schools”? Why exactly must we pass this bill today if it will “eliminate hundreds of thousands of American jobs”?
As usual, these guys would be hysterically humorous if they weren’t trying to see how fast they could crater what’s left of our economic system.
But Krugman’s real fire is aimed at one of the few, common sense oriented and market based solutions in the bill – A $15,000 tax cut for those willing to wade into this ultra-risky housing market and buy. He refers to it as “a $15,000 bonus to affluent people who flip their houses” and the “flip your house to your brother” provision.
As usual, Krugman doesn’t let actual facts get in the way of his “compelling” arguments. There is both a 2 year holding provision for someone to be eligible for this credit. Most home flippers are out of business if they can’t unload inventory in 3 to 6 months. And as for family members, they aren’t eligible, as the tax credit does not apply if the purchase is from a family member.
Krugman apparently has never had a job in the real world, or at least not one at a for profit entity (The New York Times, included). But the man behind this provision has. Senator Johnny Isakson (R-GA) had a long and distinguished career as one of Georgia’s premier real estate brokers before entering the U.S. Congress. He remembers firsthand how a similar incentive in the early 1970’s cleared up an oversupply of residential real estate similar in magnitude to the one that we have today. It is from his practical experience that he understands that nudging an unsure market with temporary incentives can pull unsure buyers off the sidelines, and restore faith in a market that currently has none.
Despite not supporting the overall stimulus package, Isakson has worked tirelessly to get this amendment he authored added to the current bill, along with co-sponsors Lieberman, Enzi, Corker, and Chambliss. While maintaining one of the most conservative voting records in the Senate, Isakson does not believe there is a “destructive center”. Instead, he remains a steadfast conservative with an uncommon gift of pragmatism.
Isakson hasn’t forgotten the “real world” that he lives in outside of Washington. One where real people understand the value of $15,000, He understands that as vacant neighborhoods become populated, jobs are created, taxes are paid, and economic life returns to normal. But I wouldn’t expect Paul Krugman to understand this. He thinks not printing an extra $100 Billion and have it fall from the sky is a “cut”.
Someone should look into whether or not the Nobel Committee can be sued for incompetence.
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Obama didn’t help himself with his stupid news conference last night. He talks like an imbecile. His mainstream media boosters are studiously avoiding mention of it today.
Thought I’d throw a little more ad hominem in the mix.
Taft or is it Bill Green
little green man from outerspace
http://www.youtube.com/watch?v=7ZbEXm-A6tQ
BTW this is not real!
Konop or is it Tom Dewey
idiots on parade
http://www.youtube.com/watch?v=Dcs6byJ-zBo
BTW I’m pretty sure you’re playing one of the 76 trombones
so Shut up.
LOL. Yup. It’s still funny. Laughed out loud again.
OK, DecaturGuy, I’m not an economist and I don’t play one on TV so, explain to me why a business with no customers would expand.
I do teach marketing and the definition of a target market includes a very important principle that says your target market must be ABLE to buy your products.
What part of that is wrong?
Taft or is it Willaim Green
Now is this your economic background?
….Greene has been described as a right-wing activist that launches political campaigns and fundraising appeals….
….Despite being told by attorneys to cease using Terri’s name, he continues to do so on his website. “Don’t Let Terri Schaivo’s Name Be Exploited” shouts a headline from the RightMarch.com website above a picture of the disabled woman.
He’s collecting money for “ads” concerning the murder of Terri Schiavo by judicial tyranny but fails to indicate where the ads are appearing……
http://www.northcountrygazette.org/articles/090206ShamefulSolicitation.html
Obama doesn’t have a clue
Konop or is it Tom Dewey:
Shut up.
Wow. A former real-estate mogul proposes legislation to benefit his pals in the real-estate industry. Cronyism in the GOP? Whodathunkit?
However, Isakson’s proposal is little more than an empty gesture to his friends, and a political Pavlovian stimulus to the Republican minions always hungry for that tax-cut-cures-all panacea panini. Not much substance there, but boy, does it get the right-wingers drooling!
To take the insult flung by Icarus and turn it around, Icarus apparently has never taken a course in Economics, or at least, he never stayed awake during the course. For those along with Icarus who need a course in remedial economics, an article linked below should help. (You’ll have to go to the link to see the graphs)
Sorry, but I have to laugh at the flailing attempts to belittle ANY economist in favor of “Icarus” and Johnny Just-looking-after-my-old-business-friends Isakson. And if Icarus wants to chide the NYT, maybe he can brag about the massive profits at PeachPundit over the past 12 months. Go ahead, Icarus. Here’s your opportunity to blow your own horn. But you’ll have to peel your lips from Isaksons tookus, first. (Is Icaraus a speechwriter for Isakson? This article sounds like it’s taken directly from an Isakson PR release.)
Konopster – Funny how the culpable party blanches at “finger pointing” when they’ve been caught with their hands in the cookie-jar.
Will a Home Purchase Tax Credit Help Boost House Prices?
Boosting house prices across the country is the stated goal of the big tax credits to home buyers (some are talking about $15,000) that are being considered as part of the economic stimulus package currently stuck in the Senate. But after thinking through the economics of the situation for a minute, I think it quite likely that such a tax credit might have very little impact on the level of house prices in today’s housing market.
A simple graphical analysis can help us think things through. The following picture shows a downward-sloping demand curve for house purchases (i.e. how many houses people are willing to buy in any particular month at any given price level), and upward-sloping supply curve of houses (i.e. how many houses are being offered on the market every month at any given price level).
The picture above shows the situation at a point in time when the housing market was clearing in an uncomplicated way, supply was meeting demand, and everything was fine. (We should really be imagining a different picture for each regional or city-wide housing market — each of which, as I’ve pointed out many times in the past, should be considered quite distinct… Plus, there’s a pretty complicated dynamic interplay between long-run and short-run supply curves in reality… But this analysis is simple enough that it can give you the general idea.)
Now let’s have some fun, and mess up the clean picture above with a housing crash. In 2007 and 2008 we saw an end to easy credit for potential home buyers, combined with a fall in incomes of potential home buyers, possibly combined with an unquantifiable change in perceptions and attitude and willingness to shell out ridiculous sums of money for mediocre houses. These forces all meant a fall in the demand for houses.
The situation we’ve been living in over the past year or two is depicted in the next picture.
Demand has fallen way back. Prices have fallen somewhat, from P0 to P1, but they haven’t fallen by enough to clear the market. (That would be where S0 meets D1, the new demand curve.) That’s because sellers haven’t fully adjusted their sales prices down to meet current market realities. As a result, only Q1 houses are actually purchased every month, and we have seen a substantial buildup in inventories of unsold houses. (Just take a look at Calculated Risk’s monthly pictures of inventories of unsold houses for an illustration; while inventories may not be rising much right now, we still have a tremendous overhang.)
Now enter the tax credit. What will that do to the situation? Essentially, it gives each potential homebuyer an extra $15,000 to spend on houses. That doesn’t mean that they will necessarily buy a house that’s $15,000 more expensive than they would have without the tax credit… but it does mean that they would be willing to pay almost $15,000 more for a house that they were already willing to buy. We can depict this as a vertical bump up in the demand for houses of $15,000. The last graph shows the result.
The demand curve shifts up by a bit ($15,000 to be precise) in the vertical direction, to D2. But chances are that this is not going to soak up all of the additional unsold inventory of houses – not unless we think that all it would have taken to prevent inventories of unsold houses from piling up in the first place was for sellers to just drop their asking price by $15,000. Myself, I have a suspicion that in most of the markets that are foundering right now many sellers still need to drop their sales price expectations by $50 thousand, $100 thousand, or more.
If my hunch is correct, then all the house purchase tax credit will do is to modestly increase the number of houses sold each month… with no noticeable impact on house prices.
That doesn’t mean that the tax credit would have no impact. In particular, it may be a boon to some cash-constrained households that want to buy a house right now but can’t borrow enough. And it should help to reduce inventories of unsold houses by a bit. But if you’re hoping that it will make house prices rise, with all of the beneficial economic effects on home equity that such a rise might have… think again.
Wow, I can’t believe the DNC attack machine took a whole 48 hours to spin that one out.
First, take a few classes in html sometime.
Second, I find it very interesting that you presume to understand my views on economics, tax cuts, or anything else. You’re clearly not from around here, are you?
Thirdly, Isakson proposed this tax credit about 18 months ago, or to put in in better perspective, about $2 Trillion in lost home equity ago. That’s also about $1 Trillion in TARP money ago, $2 Trillion in Federal Reserve money ago, $2 Trillion in lost stock market equity ago.
I know it’s startling to see someone with practical real world experience offer a solution that allows the market to correct itself, instead of trying to fix the root of our current problem by Krugman’s means. After all, he has a Nobel. So that must mean the best way to fix a housing/mortgage crisis is to deficit spend money on health care, nutrition studies, and STD prevention.
I think I’ll stick with the guy that’s been in the business over the guy with an award from the same people that gave Gore a “Peace Prize”.
iLarynx
You have a very little knowledge of research methods and credit.
I will give you a free education on my dime.
First the economist made a major 101 mistake in his or her analysis. Anyone who ever took the course research methods knows you cannot compare a different set of variables and use them in your conclusion.
The major factor left out is the down payments required to get a loan has gone basically from nothing to about 10% on non jumbo loans. On Jumbo loans it is now around 30 %.
This bill was actually designed more to help the non jumbo loan market. If the average loan is about 200k now that means a person needs 20k for the down payment. And with a 15k credit they would only need 5k. to buy the home.
From a credit stand point the person now has 10% in the house. Any study will show you defaults are very low in that category. Your riskiest loans are when they have nothing in the house or upside down.
As far as helping the rich, I will help you with that math. If a rich person had a 1 million dollar mortgage they would need 300k down for the loan. Any rational person would understand 15k is not a factor on a 300k issue.
Class over!
First, pardon my HTML. I missed the closing tag. You’re welcome to invite me to a remedial HTML class.
Second, my “presumption” on your views was based on your post. Was your post not representative of your views, or were they representative of Isakson’s? Is there any way to tell the difference?
If by “around here” you mean PeachPundit, the answer is ‘no,’ thank you.
Thirdly, if you truly think, as you imply, that implementing Isakson’s $15k tax scheme 18 months ago would have prevented the meltdown of the financial markets, you’re delusional beyond reason. But, if it helps you to avoid the harsh reality of the right-wing’s philosophy and policies bringing on this financial mess, just keep repeating that mantra, “it’s not our fault… it’s not our fault… it’s not our fault…”
As for where you lay your trust, run with that. The likes of Bernie Madoff, Dennis Kozlowski, Ken Lay, John Thain, et al, count on such vassalage.
Oh, and speaking of delusional – Yes, Icarus, you’ve pegged this one. The big guns of The DNC Attack Machine are now trained on the mortal threat presented by… PeachPundit.com !!! Can’t get a thing past ol’ Icarus.
iLarynx, when Icarus cuts and pastes someone else’s words, he gets to later claim they weren’t representative of all of his views.
But he doesn’t allow anyone else to do that. So don’t ask.
Taft
I thought you were playing with your little green men in the sandbox today. Did you get your milk and cookies?
“If by “around here” you mean PeachPundit, the answer is ‘no,’ thank you.”
There’s something about knowing your audience, but whatever, I doubt you’ll be around long enough to learn that. Had you been around for a while, or if you care to scan some of the archives (doubtful, again, actual research to back up your points doesn’t appear to be your strong suit), you might be a little surprised on the level of detail I’ve written of where the blame does and doesn’t go over this mess, as well as what constructive things can be done to fix it. And other than this post, not one of them is tax cuts.
But that’s O.K. We’ll just stick with the meme that you guys with a D next to your name are being bipartisan, and anyone who dares to say something critical of Paul Krugman, the NYT, or an $800 Billion giveaway misnamed as a stimulus bill is a dilusional right winger.
So let’s count up here, for those that are from around here. I think the vote this week is 1 for tool of the radical left, 2 for ultra-right wing radical, and about 6 (though probably all the same person) for Sheeple. And all those votes from other people’s reaction to the same view I have on this one issue.
Konop. Educate me please. To which “two variables” are you referring that negates the writer’s conclusion?
In the meantime, I’ll point out where you did something quite similar.
You point out that one of the “benefits” of Isakson’s scheme is that it allows people who would not normally be able to get a loan on a house to suddenly qualify for such a loan. Isn’t this a big reason we got into this mess in the first place?
Buyer A does not live paycheck to paycheck and has saved enough money to put 20% down on his house. He is a low risk to the banks because he has managed his finances well and has the wherewithal to make a substantial down payment.
Buyer B has a tighter budget and can only put down 10%. He is a bit of a higher risk to default because his finances give him less wiggle room in the event of a personal financial shortfall.
Buyer C lives paycheck to paycheck, but has managed to save up $5,000 for a house. Normally (for sake of argument), this would only qualify him for a 10% down payment on a $50k house. In recent years, schemes were hatched to get this high risk individual into a home much larger and more expensive than he could afford. Among the dubious tools the real estate and lending industries engaged in was Sub-Prime loans. They helped put a person (using Konop’s example) who would normally only qualify for a $50k house into a house costing $200k. When Buyer C hit hard times and defaulted on his loan, the banks were stuck with the bad loan [but the real estate agents kept their commission
]
But Konop and Isakson want this person who would normally only be able to afford a $50k house, to qualify for a loan on a $200k house. It’s deja vu all over again.
Konop’s own multi-variable conclusion is his claim that:
“From a credit stand point the person now has 10% in the house. Any study will show you defaults are very low in that category. ”
However, “any study” you find, will show that the low default rate on the 10% group is based on those people PUTTING IN 10% OF THEIR OWN MONEY.
When you start using tax schemes to put people into larger houses than they would otherwise be able to afford, you get the same sub-prime-like scenarios that kicked the housing market off the cliff to begin with. The only stimulus seen as a result of this piece of legislation will be, again, to the real-estate agents and their commissions. It doesn’t help home-buyers to put them into homes they can’t afford and it doesn’t help the financial sector to promote shaky loans. All Isakson’s scheme does is to temporarily re-inflate the housing bubble once again.
I hate to crush your self-image, Icarus, but I have no interest in wasting time studying the political philosophy of Icarus. If I were to bother with reading your other posts you might also be surprised to find I might agree with them. Maybe. I don’t know. Don’t really care all that much. This was the post I read, not the others.
You put up a post dutifully sycophantic to Johnny Isakson and I commented on that post. If you left something out that more fully explains or rationalizes your sycophancy, don’t blame me. Does your post stand on its own merit, or not? “Not” seems to be the answer from Icarus.
iLarynx
First the concept of a non equity loan verse 10% down is way different if you understood the credit market.
The affordability is a different concept. The biggest problem in the housing and lending market especially jumbo loans were very little down interest only with balloon after a 3 to 5 year term.
And the mistake which I pointed out years ago is qualifying the person based on an assumed value of a home in hopes the person could afford the payment in the future.
If the banks had followed the 28% rule for payment verse income we would not be facing this problem.
Now with that control back (28% rule) in place a new home loan at 30 fixed mortgage with a good work history and 10% equity is a very low risk loan.
The biggest issue is the down payment. Now do you understand the concept?
A few points before I close up.
Mr. Konop – Using your scenario again, someone who meets the 28% rule who has not saved more than $5k for a house has other financial problems that put him at risk. I put over 20% down on my home so a REAL 10% down doesn’t seem at all unreasonable. I don’t see how artificially skewing the loan towards those at higher risk is helpful.
A good work history isn’t much of a guarantee in this market.
Still looking to be educated on the referenced, “two variables.” I may have to just pass on this one.
Tschuss.
iLarynx,
I usually agree with Icarus, but on one of your last points, I agree with you. The tax credit scheme was bunk and the default rate data does not apply when someone else supplies most of the down payment. This is why banks limit the amount “gift” contributions when closing a loan.
iLarynx
From a risk stand point you made my point.
The difference between the payments on a 30 year fix with 10% down from 20% is not that much.
Do you understand?
Your first risk is can this person afford the payment. Do you understand with the 28% rule it would not be a big issue between 10% down and 20% down?
Your second risk is work history. That is why I said a “good work history”!
Your next risk is if the person with a good history does not have a job post the loan. Your other risk is how fast they will leave the home with out caring about credit. Generally people with a good work history score well in this bucket.
Now logic would tell you a person with north of 10% would be a lot less risky than a nothing down guy buying at the height of the market upside down. Also if had to take the home back via default my equity would be much higher via buying now lowering my write off-risk via a north of 10%. in the deal.
Now obviously 20% is less risky but the gain in market share with a 10% verse the risk this is a no brainer deal.
Class over today!
John,
I do not think you understand his point at all. The difference is not the amount of the monthly payment, it is the amount of his “skin” in the game. Having 0% in, the average borrower, for some crazy reason based on psychology, has little emotional investment in the house. They are likely to just walk away if things get tough.
On the other hand, if you have 20% down, that you worked and toiled to earn, you are much more likely to do whatever you can to keep the property. It makes little sense that there is a difference, since the individuals net worth is effected the same either way, but it is just how people view things.
If someone gets a property with no or little money out of their own pocket, they will not fight for it the same way as if they actually earned the money they use to close.
Doug Deal
I do this for a living and I get the point. As I said the 10% equity does not perform materially deferent than 20% it is all about what you have in the game. And that 10% difference relative to market share game ie stimulus is a solid business decision.
The idea is for the following reasons.
1) It would help stabilize values which helps all of us who own homes
2) His tax credit idea would help with the down payment which helps grow sales while maintaining credit quality
3) It would create jobs for people all involved in the industry
4) It would help stabilize lending if it stops the free-fall of valuations on homes
5) This idea helps consumers directly and not just
business like capital gains.
Icky, please tell me you didn’t just tell iLarynx to click through and read the PP archives. I mean, every post must stand on its own in order to be “debated,” right?
Oh, and Konop: Shut up.
Taft or is it Bill Green
Did you share your cookies and milk with the little green men?
Konop: Shut up.
Yeah, ILarynx, a few more helpful hints.
When you ain’t from around here, don’t have time to get to know anyone here, learn anything about the lowly Peach Pundit, but are eagar to jump in and make hyper-partisan claims, then try to project that others are the partisans, you don’t have much credibility.
I realize you have problems with the concept of credibility, having to back the “most ethical congress in history”, and the administration of change that bars lobbyists from key positions, except for those that it hires lobbyists for. The one that says its patriotic to pay taxes, unless you want to run the Treasury Department. Or if you think a car and driver are just normal gifts between friends.
And I find it a bit ironic that your party believes being a “community organizer” is qualification to be President, yet you drop in to our community to impart your opinion as if we’ve all been sitting around waiting for it, while demeaning the very blog you decided to spend some of your obviously oh so important time on. But then again, you believe it’s OK for ACORN to sign up people to vote named Mickey Mouse and Donald Duck, so long as you get your carton of cigarettes at the end of the day.
So, congratulations. You’ve made your attempt to strike down at those who would dare to question the NYT, or speak postively of a Republican that isn’t following the Democratic party’s sole rule for “bipartisanship” – follow in lockstep.
Thank you for gracing us with your presence, but everyone here is now dumber for reading your posts. I award you no points, and may god have mercy on your soul.
Like I could be dumber.
Dash, I love the way you’ve quickly slid into the role of a GOOD PP-eer to give us the clever repartee.
Konop
From a risk standpoint you are avoiding the very point you attempted to make. At no time did I claim that the 20% or the 10% level of down payment was an undue risk.
In YOUR scenario that YOU presented, the issue was someone who was not capable of saving the minimum 10% for his home, but was only capable of saving 2.5% for their home. The supposed “benefit” of Isakson’s tax plan as per Konop, was that the government would then step in and give the illusion that this person’s risk was that of someone who had saved 4 times the amount of money than he actually had.
KONOP – If the average loan is about 200k now that means a person needs 20k for the down payment. And with a 15k credit they would only need 5k. to buy the home.
My inclusion of the 20%, 10%, and less than 10% levels of down payment was used to illustrate that there are gradations of risk, and that the lower the level of down payment, the greater the risk.
Feel free to insert a condescending, “Do you understand?” here.
Your focus on down payments in the 20%-10% range when the issue, as you framed it, is actually about those loans between 10% and 2.5% is, to use your words, “a major 101 mistake in his or her analysis.”
KONOP – First the economist made a major 101 mistake in his or her analysis. Anyone who ever took the course research methods knows you cannot compare a different set of variables and use them in your conclusion.
You have now, repeatedly used multiple variable sets to draw you conclusions (e.g. 10%-20%DP Risk = 2.5%DP Risk), the very thing that you accused the writer of in the original article that I linked to. You still have not backed up your assertion against the writer of that article, so I can only conclude that your claim was made in error.
Your fall-back that “a good work history” is to be included in the calculations of risk, is also weak. As I previously noted, and as you apparently disagree, someone who has a good work history, even a great one, working at the same job for 10 years, making good money, yet has only managed to save $5,000 towards the down payment on a house, has other money management problems that put them at high risk. The Isakson plan, as you describe it, puts this person with poor money management skills at the same risk level as someone who has managed their money more skillfully.
I’ll try to simplify my scenario so that it’s easier to understand. Forget “Buyer A” as he has distracted Konop from Konop’s own point.
Buyer B has worked at Acme for 10 years making $50k/year and has managed his finances during that time to save $20k for a down payment on a $200k house.
Buyer C has worked at Acme for 10 years making $50k/year and has managed his finances during that time to save $5k for a down payment on a $200k house.
Does Konop think that Buyer C, with help from Isakson, is an equal credit risk to Buyer B?
Again, under the Konop/Isakson scenario, this scheme skews the the numbers in such a way that it makes someone who quite likely is not qualified, and should not qualify, for a loan on a $200k house, appear as though they are. THIS is a big part of what got us into the housing mess to begin with.
Konop says he “does this for a living.” Does that mean he’s a real estate agent? If so, he should do well under the Isakson scheme. Real estate agents don’t have to care if the home buyer defaults 3 months after closing. They still get their sales commission check. But the home buyer is out of his home and the bank is saddled with a bad debt while the real estate agent keeps his commission. The real estate agent is concerned with churn – making sales on houses. What happens to the house and loan after the sale, doesn’t affect their bank accounts one iota. This explains why those with ties to the real estate industry (e.g. Isakson) would be pushing this scheme so hard.
Thanks for the “education,” Professor Konop. But I think I’ll skip your class at Peach Pundit University and start my weekend early.
Wow, Icarus. Way to stay on topic.
Let’s review the main points of your last post:
Ad hominem.
Ad hominem.
Ad hominem.
Rambling idiocy.
Ad hominem.
Ad hominem.
Boy, I really understand the benefits of Isakson’s tax scheme so much better now. You’re quite an intellectual tour de force, Icarus. It wouldn’t surprise me if you were captain of your debate team at Billy Bob Middle School. Peach Pundit and the GOP must be… so proud to have you on their side, fighting their battles, spreading the word about what Republicanism is all about. And doing so in such an articulate, masterful and compelling way. Bravo, Icarus. Bravo.
But clearly, I’ve ruffled your feathers by not responding in a way that would sufficiently stroke your ego. Maybe a “megga-dittos, Icarus” would have made you happy? Or maybe it’s simply the fact that I’m “not from ’round here” and the intrusion of outsiders into your xenophobic little clique gets you agitated. Perhaps “Dueling Banjos” would be a fitting theme song for Peach Pundit.
Anyway, the very fact that Icarus supports the Isakson scheme tells me more about the plan’s merit than mere words can convey.
Again, Icarus, Bravo.
Ad hominem.
Ad hominem.
Ad hominem.
Rambling idiocy.
Ad hominem.
Ad hominem.
Oh, the ironing.
I wonder if he’s getting paid with smokes or liquor today.
Who cares whether he’s getting paid in liquor or smokes?
There’s going to be plenty of folk’s grateful for that extra $13 a week instead of a new home.
iLarynx
I am not a real-estate agent I am in the financial service industry.
Obviously you and the economist who have never made a loan or extended credit in your life know more than me. I have only been in the business for 20 years.
The concept of risk verse reward is very difficult for some people. Business may not be the best life choice for you.
ilarnx
YOU SAID
You have now, repeatedly used multiple variable sets to draw you conclusions (e.g. 10%-20%DP Risk = 2.5%DP Risk), the very thing that you accused the writer of in the original article that I linked to. You still have not backed up your assertion against the writer of that article, so I can only conclude that your claim was made in error.
I am sorry you cannot think on your own and I will you one more time.
READ THIS REAL SLOW AGAIN!
First the concept of a non equity loan verse 10% down is way different if you understood the credit market.
The affordability is a different concept. The biggest problem in the housing and lending market especially jumbo loans were very little down interest only with balloon after a 3 to 5 year term.
And the mistake which I pointed out years ago is qualifying the person based on an assumed value of a home in hopes the person could afford the payment in the future.
If the banks had followed the 28% rule for payment verse income we would not be facing this problem.
Now with that control back (28% rule) in place a new home loan at 30 fixed mortgage with a good work history and 10% equity is a very low risk loan.
The biggest issue is the down payment. Now do you understand the concept?
NOW CONNECT MY SECOND POST TO THE FIRST CONCEPT FROM YOUR QUESTION!
From a risk stand point you made my point.
The difference between the payments on a 30 year fix with 10% down from 20% is not that much.
NOW I WILL CONNECT IT FOR YOU!
Do you understand the risk of a nothing down loan with a balloon payment above what a person can afford in 3 to 5 years is way more risky than a 30 year fixed payment the person can afford?
Now if a person owns more than 10% of their home and has a stable job and can afford the payment can you understand the risk would not be much more if they 20% equity?
Do you get any person running a correlation between balloon payment style lending with no qualification of affordability of future payment against a 30 year fix based on affordability would not be very smart.
CLASS OVER!
sorry
… I will HELP you ….
I wouldn’t worry too much about it John.
They killed Isakson’s tax credit in the conference committee. That means that iLarnyx will be let go now that his job is done, but at least he has extended unemployement benefits and a 60% COBRA subsidy to make sure he doesn’t have to worry about being productive for the remainder of the year.
What does all this have to do with Spacey Gracey?
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