Thus, the real question we face as a society is why is it that the price of 60 million urbanized acres is increasing at such a rapid rate when we have at least 1000 million acres of crop and forest land we could develop? Is it due to simple supply restrictions in New York and San Francisco? My guess is that it is not: What is going on with land and housing reflects something fundamental about the way we engage in production. It seems we need to focus our production in cities to exploit our comparative advantage of the production of services. Thus, over the next 20 or 30 years, I expect land and housing to be a good investment. It's just the next three years that are in question.That said, over the next few years house prices are going to fall. The reasons are straightforward: A large class of borrowers that had access to mortgage credit just two years ago can no longer get a mortgage; down payment requirements have increased; and the jumbo-conforming spread has widened. This is terrible news for house prices and homeowners. Any regulations or outcomes that make it harder or more expensive for households to obtain mortgage credit will put downward pressure on house prices. The reason is that as mortgage credit becomes harder or more expensive to obtain, the number of households that can afford any given house falls. So prices must fall to clear markets.
I think this pretty much gets it right.
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FBR (fbr.com) has been putting out a lot of press releases lately pushing out the results of their "studies." One that caught my attention was that the new driver for housing prices is not mortgages, but rather unemployment and the general state of the economy. They don't bother to say how they arrived at this conclusion, nor do they look at the obvious -- which is that *mortgages* have been dragging us down. The senior management looks like an entire graduating class from Goldman Sachs, and their CIO apparently dabbled in physics and economics as an undergrad.
ReplyDeleteA. Nony Mouse
David lindahl scam reports that the most common way to buy a property with no money down is to use owner financing. This occurs when the current owner agrees to finance either all or some part of the purchase price, instead of getting the cash now.
ReplyDeleteYou’ll be surprised how many people own their properties free and clear, and are willing to finance the entire amount or a good portion of the mortgage. Usually, though, you will be getting secondary financing from the owner. That means you will get the majority of the money from another source, like a bank, and the seller will give you the rest in the form of a second mortgage.