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Can First-Time Home Buyers Save the Economy

livescience.com — Last summer, many Americans stayed home. This summer, we might buy one, if the science of economics is better at predicting our emergence from this financial crisis than it was in predicting its onset. The U.S. housing slump is at or near bottom, at least one researcher says, and other predictions of real estate stabilization made by a group...

Who dugg this? Made popular Jun 23, 2009

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  • nhansen, on 06/22/2009, -8/+24nope - cause even with great credit they can't get financing.
  • inactive, on 06/23/2009, -1/+12we got another 4 years before prices go back to 2001 levels. the industrial real estate market is going to get worse. when business estates start rebounding, then things will be good. but that isn't happening anytime soon.
  • Eorster, on 06/23/2009, -3/+13LOL. The science of wishful thinking.
  • monarch00, on 06/23/2009, -0/+9Not true.

    I have great credit and bought a house last December. The first three banks that we walked into offer us loans.
  • JordanTW90, on 06/23/2009, -4/+12No.

    For a simple reason, these first time home buyers are no better than the many who bought homes during the last bubble. The $8000 tax credit allows you to put the tax credit down as a down payment. With FHA requiring just a 3% down payment (the tax credit is 10% of the home's value up to $80000) anyone can now buy a home. A 10% down payment, most banks would love to have you.

    I ran the numbers. A 3% down payment on a $80,000 home would mean a total of a $77,600 loan. At 6.5% over thirty years that's a $490 monthly payment. So after the down payment of $2400, the borrower is left with $5600 in cash. Should they lose their job, they have only 11 months before their money is gone.

    11 months. That's enough time for a temporary boom, prices to nearly explode, and the whole house of cards to happen again....
  • inactive, on 06/23/2009, -5/+13HI MY NAME IS PATTY AND I'M YOUR AGENT!

    I'm going to speak really loudly and excited about whatever over-priced piece of cr@p house I try to shove down your throat! Did you notice my makeup and perfume? I put WAY too much on. It's my way of trying to cover up the 45 pounds I gained after I have birth to my kid. My husband then lost interest in me and now has sex with Thai hookers when he goes on business trips for his WIlly Lomanesque sales trips! Can I interest you in this split-level Colonial which has gone 500% in the past six months? The markets fueled by low interest, interest only loans which will entrap you like an 18th century negro south of the Mason Dixon Line- hi, I'm Patty!
  • DommoOrigato, on 06/23/2009, -2/+9I'm a recent engineering grad, and I'm having a hell of a time finding a job. In the meantime I'm going to continue working at the local wally world to make ends meat.

    Frankly, until the economy picks up to the point where jobs are actually available, and to where a house isn't a liability(e.g. your job doesn't require you to move/can sell said house), then I don't see people buying houses.
  • faskippy, on 06/23/2009, -0/+6Yep. Meanwhile, all you could get for $80K in Cali and lots of other places is a dirty look. The storage sheds can't be had for less than $500K.
  • Bloodwine, on 06/23/2009, -0/+6My mother is a real estate agent. She said that house prices are more affordable now and she has more fiscally responsible people coming forward and wanting to own real estate, but that it is very hard to buy used properties right now in her area.

    For what ever reason, banks who own the current loans are being weird about appraisal amounts and other issues, pretty much nixing a lot of deals that would otherwise go through. She has one couple who has $50k to put down, but the secondary on the loan thinks the house is being under-appraised so they are throwing monkey wrenches into the sale. So the curent homeowner is going to have to declare bankruptcy because he can't sell his home, which means the secondary bank gets no money whatsoever. Who runs these banks?!
  • williepepper, on 06/23/2009, -5/+10That's wonderful.

    Here we go....again....

    buying ***** we can't afford.

  • Sansui, on 06/23/2009, -0/+4I was strongly considering buying a house this year, but have since decided not to. I've been saving diligently, and in a year I should have enough for a 20% downpayment for a reasonably nice house.

    Tax credit was tempting.... until mortgage rates shot up again, and until I found out about a little thing called "mortgage insurance". Between the rate volatility and the PMI, I was looking at 200-250 month more than I had expected.

    And I guess some homes are eligible for no money down *without* PMI, but I don't think any houses I'd like to buy in my area qualify for that.

    So screw you tax credit... I'm going to simply continue saving until I can put down a responsible downpayment.
  • mkvenner420, on 06/23/2009, -1/+5No, it only starts the lending cycle all over again, and with all the stipulations that means nowadays, it'll leave us in the same situation a generation down the road, only with a bigger defecit. system is broke people, let's find a new way...

    btw, what's this I've heard of Islamic law forbidding muslims from practicing lending with interest? Pretty sure I read in Time somewhere that U.S. banks had to come up with an alternate lending scheme for muslims to use in lieu of simply being permenant-renters...

    link anyone? maybe this is an example of a decent alternative to the practices of predatory lending that got us here in the first place.

  • fauxbro, on 06/23/2009, -0/+4No....I am currently employeed at an engineering firm as a structural engineer, and i'm sitting on the fence because I'm not too sure that i will have a job in 3 weeks. also for the "green shoots" crowd. Let's say we did loose approximately 50% of the wealth in the economy. That means we have to have 100% growth to be at the previous levels. Who honestly believes that in the next 6 months to a year we'll be back at the same levels...which by the way were predicated on credit and tricky account and huge debt levels
  • faskippy, on 06/23/2009, -0/+4Well, if "AT LEAST ONE RESEARCHER" says it, it MUST be so.

    Giving a tax credit doesn't mean you have money for a down payment. And it doesn't take away the fact that unemployment is up to record levels. And it doesn't mean the banks will loan you the money. And it doesn't do away with the fact that despite the governments twisted reporting hides the true and increasing foreclosure rates.

    When the government "rescued" the mortgage giants from the imploding bubble that they BOTH created, they came out and said they were, in essence, rescuing the homebuyers in danger of losing their homes. The fact is, what happened was that they came to an agreement that mortgage cos. would halt forclosures for a period of two (2) months, so they could try and figure out what the hell to do about the situation. So, immediately following the bailout, foreclosure nos. fell! Looks good for the "market", makes the phony baloney bailout look good (temporarily), makes Obama look good (to anyone who believes anything they hear), and slows down the critics while the crooks catch their breath.

    Then, lo and behold, the 2 months is up, and not only do all the postponed foreclosures hit the books, so do the ones that have been added during that time, and the newly due ones. Aaaand they're off and running again. Foreclosures were back, and at record levels. Same disaster, different day.

    There is no "savior" in the white house. Most members of congress couldn't understand this mess if they wanted to. The ones who do understand it are in the employ of the corps who designed it and are profiting from it, and they are the ones who are "guiding" congress and the wh on the "delicate art of recovery" It is what it is no matter how you dress it up. Math doesn't lie. You can't keep subtracting and come up with more.
  • alarchy, on 06/24/2009, -0/+4Unfortunately it was probably because you were self-employed, and they determined your income wasn't stable enough to be the sole borrower. Sorry.
  • drudebaker, on 06/23/2009, -3/+6Nope - they are still priced out of affording a house in most markets.
  • CanIGetAWitness, on 06/23/2009, -1/+4I don't think the Onion asks questions and if they did, the would use the proper punctuation.
  • BinaryDelt, on 06/23/2009, -0/+3You obviously have no idea what you're talking about, says my approved mortgage application.
  • TheUngod, on 06/23/2009, -0/+3I got preapproved 2 weeks ago for plenty. I had no trouble at all.
  • megaton, on 06/23/2009, -0/+3I'll report back next week when I know for sure, but I have REALLY bad credit (damaged by errors) that I BARELY got back above minimum level, and it looks like I'll be able to find financing, too.
  • megaton, on 06/23/2009, -1/+4Where are homes $80,000? Michigan and California?
  • alarchy, on 06/23/2009, -0/+3You can't get 100% financing anymore, but you can still get a loan with 5% down - my fiance and I just closed on our first home a week and a half ago (4.875% with no points...).

    Problem is, a lot of young adults have very little savings and/or tons of debt coming out of college. But, if you have the down payment you'll likely get approved with credit scores of 650 or above.
  • fauxbro, on 06/23/2009, -0/+3yeah when you add the PMI+insurance+real estate tax+ homeowners association dues. it adds up. Not too mention utilities. I think 20-30% would get that principle mortgage payment down and then it'll make it reasonable. I think i'm about a year from buying.
  • smoger, on 06/23/2009, -0/+3just got mine for 3.5% down with no problem at all. at settlement the loan officer was discussing loans with another realtor.. she said there are special programs even for those under 650
  • methdwman3, on 06/23/2009, -0/+3Nope. not true. Even with just OK credit, my hubby and I were approved at a nice rate.
  • seks03, on 06/23/2009, -2/+4Nope...

    If you buy now you will regret it later, do what I'm doing, rent a house if you don't want to be in an apartment ... place all of your savings in foreign investments or in precise metals, This will perserve your purchasing power and can possible increase it as the dollar continues to fall.
    A $100 in silver today may go for $150 in 2 years.... this is better then putting your money in a back which only pays you a small amount of interest which wont even beat the rate of inflation. As long as you overcome the fear of buying foreign investments or in precise metals you will see the benefits.
    I'm planning to cash in my investments and sell my metals come 2012--->2014 and pick up a house for dirt cheap.

    Also everyone should know that when the housing market hits bottom it will not skyrocket up right away, it usually takes 10 years for prices to start to recover so you don't have to worry about missing the bottom, that is unless you fall into a coma.
  • my10cent, on 06/23/2009, -1/+3Are you kidding me? I aint buying any houses in this ***** economy, people who do qualifies as morons in my book.
  • MrBoy, on 06/23/2009, -1/+3The reality is first time home buyers other than 20 year old's that have not spent any time accumulating these ridiculous entries on these reports kept by 3rd parties called credit scores, are unable to participate. I make more than 90% of the average salary I'm 100% debt free and pay my bills in full on time every time and have for years. I'm also eligible for a V.A. Loan that covers the majority of the loan by government backed collateral. Guess what, I can't buy a house. I know I'm not alone and this is the reality, hold on to your horses because the bigger crash is less than a year away. Decent people can not buy homes. Who would want to make a long term financial commitment to a system that says a person like me that works hard pays his bills owes no one anything is a financial risk. HAHA!
    Recovery my ass, another massive FAIL.
  • covertbadger, on 06/23/2009, -0/+2"So what exactly is wrong with using data compiled by the FED?"

    Nothing's wrong with it. I simply find it amusing that a school which holds as one of its most fundamental tenets that fiat currency and money supply inflation are the cause of all the world's ills has to go running to the Fed to get any data for predictions. I guess this is a side-effect of the fact that Austrian theory prefers to rely on verbal haranguing rather than actually producing its own data.

    "But you missed the main point about Garrison's theory of the trade cycle."

    I didn't miss the main point, I simply didn't find it very interesting and declined to comment on it.

    "As far as the "Austrian propaganda", I guess you chose to discount the fact that the Austrians are the only school that predicted the great depression and every recession since."

    Yes, quite. It has also predicted about 500 recessions that never happened. cf: Paul and Schiff, who have been yelling about financial apocalypse since the 80s, and then when after 20 years they get something right they get praised as financial seers. It's EASY to predict recessions when you do it every damn week - even a stopped clock is correct twice a day.

    "But maybe you prefer the propaganda of Krugman who when caught up in his own lies, continues to deny them as described in the following"

    Nice strawman, *****. Where did I say I preferred Krugman? Or am I right to assume that you simply threw that in there as a way to get another mises link posted? Pathetic.
  • alarchy, on 06/23/2009, -0/+2I prefer to put all my money in imprecise metals and foreign liabilities.
  • smoger, on 06/23/2009, -1/+3they qualify as opportunists in mine.
  • Elranzer, on 06/23/2009, -0/+2Funny, but sad (for multiple reasons)...
  • methdwman3, on 06/23/2009, -0/+2Just closed on a house last month. If you can afford to buy now, you should.
  • faskippy, on 06/23/2009, -0/+2I'm so glad I paid mine off. I won't even buy a new truck. I'll just fix what I have if I need to, and stay out of debt, thank you.
  • Elranzer, on 06/23/2009, -0/+1Just assuming that someone is going to buy your metals...
  • alarchy, on 06/23/2009, -0/+1Well I sure hope someone could find a job in a year, but maybe I'm just that "optimistic" about our economy.

    For what it's worth, FHA loans can't be taken out on expensive houses (the bust was caused by people buying way over what they could afford, with 100% down ARMs and balloon loans) and all lenders (should be) thoroughly checking employment to make sure someone isn't working some temp job.
  • Zippo, on 06/23/2009, -0/+1If you're in a position to do so, then do it... housing is definitely cheaper. Then spruce up your home and raise its value.

    If you're not in a position or it's questionable, then don't. This economy is the way it is because of people buying ***** they can't afford.
  • smoger, on 06/23/2009, -0/+1the ability to use the 8k as a down payment is brand new. I bought my house in April and that wasn't the case yet(but i recall mention of it during my settlement in late may).

    you're also assuming that EVERY SINGLE new homebuyer will lose their jobs and remain unemployed.
  • robparis, on 08/28/2009, -0/+1This plan is garbage. Has anybody read the FAQs?
    http://robparis.blogspot.com/2009/08/home-buyer-ta ...
  • z33Tec, on 06/23/2009, -0/+1Precise metals?
  • z33Tec, on 06/23/2009, -1/+2FHA requires 3.5% down. You don't get the $8k back until next year when you file your taxes or before August 1st this year if you file an addendum.

    You can't use the $8k as a down payment since you won't get the money until after you already have the house. FHA's requirements are also more strict these days as they check your bank statements and make sure you have the cash well before closing. It's also dependent upon income/debt ratio, credit score, etc.

    FWIW, I am in the process of buying my house right now with an FHA loan and should be closing in about a month.
  • Elranzer, on 06/23/2009, -0/+1And you wonder why the banks are going out of business one after another...
  • mikedoth, on 06/23/2009, -0/+1Or DC area!?
  • somberlaine, on 06/23/2009, -0/+1I would add that the appraisals are extremely conservative these days especially on homes to be financed thru FHA loans. The appraisal saved me 10K. I closed last week.
  • JordanTW90, on 06/23/2009, -0/+1Not at all.

    But only an unemployment rate twice the average has already done plenty of damage.
  • rudsud, on 06/23/2009, -0/+1Close on a new house next month. 100% USDA financing with no PMI. There are good deals out there depending on where you live. A little nervous about the debt though :(
  • faskippy, on 06/23/2009, -0/+1Pfft. How much under $500K? Wait, did you just say $500K?? Half a million dollars? I lived there for a long time, not so long ago, and have family still there. Are you talking homes or condos, and if homes, then I'd like to know what the hell these things you speak of look like.
    That mentality is what is wrong.
  • inactive, on 06/23/2009, -0/+1Silver is not a precious metal, it is an industrial metal. The price is currently dropping like a stone, as you would expect from a metal whose price is almost solely governed by the worlds industrial demand. When eventually the worlds economy picks up again you'll wish you'd put your money in stocks or money market funds instead, as their gains will far outstrip those of a resurgent silver.

    You need to stop believing all the gold bugs propaganda about so called precious metals.
  • Rememberthe0511, on 06/24/2009, -0/+1LOL LOL XD
    how dumb is that?!
    Starting in the 90's and then heavy in the early 00's interest rates on homes were brought way down in order to get people who would not normally buy a house, to buy a house. This created the housing bubble that is now bursting and how we are asking the question can new house buyers save us?
    DUMB.
  • LeepII, on 06/23/2009, -0/+1No.

    When I drove by the Newark commercial port last weekend there were NO ships in it, NONE at all. If bulk ordering is that low, things are going to get a hell of a lot worse before they get better.
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