Sacramento Real Estate Blog

Many of the folks who are on the long-haired hippie side of the political spectrum like me will tell you that they’re pretty angry like this guy at Phil Graham for calling us a “Nation of Whiners”.

In my case, at the same time that I notice that we’re becoming a nation of poorer people than we were, I find myself trying to find some ways to “tighten my belt” and live a bit more frugally.  I’ve ordered Vonage, and I’m working on paring down my electric bill, for example.  If you’re interested in doing likewise, you might find reading Mr. Electricity to be very informative and an entertaining read, as I did.

So you might say I’m getting in touch with my inner poor person.

I remember him from back in the days when my wife and I were newly married and I’d just left grad school.

There he is again.  Hello!

Actually truth to tell I’m doing better now than I did then (market downturn notwithstanding), but now I’m more fussy.

Fiscal Responsibility

Beneath my lovable liberal exterior, I sometimes think I have the makings of a true conservative.  While I recognize that on one level, artificially low interest and an unregulated banking system are behind the housing crisis (i.e., blame it on the Chimp in the White House), on another level I see how often we as individuals cause our own suffering, and recognize a lot of the rhetoric on either side of any real estate related issue as rather bizarre.

Take, for example, Jim Wasserman’s recent article on the likely impending ban on Nehemiah.  Wasserman quotes people who believe that ending the program will “harm prospects for recovery in the housing market”.

Yet why does the housing market need a recovery?  Remember 2004?  The atmosphere then was reminiscent of an episode of Oprah with a car giveaway, only instead of cars, everyone in the national “audience” got a loan.  “You get a loan!  Yes and you get a loan!  And you’re getting a loan!”  Now with Nehemiah going away, there goes our most recent incarnation of NO MONEY DOWN.

Is that a bad thing?  Are we saying it will harm the market to not be able to provide 100% LTV?  (That’s Realtor® talk for “Loan To Value” — 100% LTV means NO MONEY DOWN).

Mom And Dad Financing

How did people buy homes in the 1990s?  That’s when my wife and I bought our house.

Wherever did we get that chunk of money to afford the down payment or closing costs we needed?

Oh yes, Kathy’s mom and dad.

We were fortunate to buy in a time of expanding prices, but we also had the good sense to buy below the upper limit of our comfort zone and to get a fixed rate loan.  (See Buying a Home? Be Conservative!)  Even if we’d had an adjustable rate mortgage in a time of declining prices, however, what would having some of mom and dad’s money in the mix have done to our willingness to default?  I’m guessing it would have made it harder to walk away from the home than if our ownership of the home was 100% based on the kindness of strangers.

Here’s an underwriting quiz:  Why are interest rates generally lower when the down payment is higher?  Did you say because there’s less risk of default?  Go to the head of the class!

Oh, Market, Won’t You Please Recover By An Amount That’s Just Right?

Everyone — especially Realtors® — would like the market to “recover”.  But what we really want is to have our cake and eat it, too!  Wasserman quotes one supporter of Nehemiah as saying “Without programs such as this, it will put the American dream of homeownership in jeopardy for a lot of first-time lower-income home buyers.”

So we want to keep Nehemiah because we want lower-income home buyers to be able to buy, and so the market will recover.  But wait a minute.  If the market recovers, doesn’t that mean that prices will go up again?  Won’t fewer lower-income home buyers be able to buy if that happens?  Nobody bought a single family home from me in 2004 for $121,000, but someone bought a single family home from me this year for $121,000.  Doesn’t the market recovery “put the American dream of home ownership in jeopardy for a lot of first-time lower-income home buyers”?

If we want poor people to buy houses, isn’t it better if prices go down even more?  That way more poor people can buy them!  As a side benefit, more people will be poor, so my inner poor person will have more playmates!

No, clearly that’s not exactly what we had in mind.

What We Really Want The Market To Do

• We want high loan-to-value loans so everyone can buy a house with NO MONEY DOWN, but we don’t want people to default on their mortgages.
• We don’t want to increase government spending, but we want NO MONEY DOWN available in combination with federally guaranteed mortgages.
• We want NO MONEY DOWN so poor people can afford houses, so that prices will go up for the rest of us, because having poor people buy houses with NO MONEY DOWN won’t impact the default rate later.  Honest.  The check’s in the mail.
• The poor people who don’t buy today while we want the poor people to buy houses will just have to wait another twenty years for the market to go up and then come down again, because we really want the market to go up, up, up.
• Why do we want the market to go up, up, up?  Well, Realtors® like me want it because the commissions are bigger!  But everyone else who’s a Good American and Not a Terrorist wants it because the chances are pretty good that we’re living beyond our means, and rising home equity is the theatrical mist on which the illusion of our standard of living is projected.
• Oh, yes, and let’s not forget.  While the market is going up, up, up, we want homes to stay affordable for first-time lower-income home buyers.