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    • Mon Jun 30th 14:28 PM | Rating: 0 0
      Commented on:
      Endless Winter for New Home Sales
      It ALWAYS comes down to the individual, who as a group make up our economy. Where are all the products you buy made? How many times did you decide to buy from a local store rather than a national chain, even at a slightly higher cost? How many times did you decide to buy something you weren't sure you could really afford on credit? How often did you REALLY think about the consequences of your actions? And most importantly, how many people in the US thought JUST LIKE YOU? I think our current economy, culture, and place in the world speaks the answer, both good and bad. There are specific outcomes determined by specific actions, why do we act so surprised when they manifest?
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    • Sun Apr 27th 10:23 AM | Rating: 0 0
      Commented on:
      The Impending Mortgage Crisis
      To clarify the interest rate discussion between jcrash and I:
      Without a doubt, according to our modern understanding of mathematics, a 50% increase in interest rate (4 to 6%) will increase the interest paid by 50%!!!
      True, it will not increase it 50% exactly if you are paying regular (principle and interest) mortgage. However, in the first 5 years of your mortgage, you are paying mostly interest for sure! Since we are talking about people who have bought in the last five years, and/or people who are paying interest only mortgages, this is quite relevant!
      Dont believe me? Check out the math for yourself:
      1st months monthly payment on a 100K 30yr mortgage at 6%= $599.55
      Principle=$99.55 interest= $500.00
      1st months monthly payment on a 100K 30yr mortgage at 4%= $477.42
      Principle=$144.08 interest= $333.33

      Ratio of interest paid at 6% vs 4%= 500.00/333.33= 1.5= 50% more!
      If you pay an interest only mortgage your payment absolutely increased by 50% when you went from 4% to 6%.
      If your are paying a classic P+I loan your payment still increased by by 25% ($599.55/$477.42)= about 1.25.

      I agree that a ratiometric equation may not be precise, but my point holds true: Interest rates determine raw buying potential more than anything else. However, despite lower interest rates in previous years, allowing more buying power, housing is still far less affordable that it has ever been due to price increases.


      "This is incorrect "regarding the interest rate discussion jcrash started:
      Simply put, a 6% interest rate will pay 50% more interest than a 4% interest rate- and will effectively increase the house payment by 50%."

      If you used simple ratios based on interest rates, your numbers are all off. Obviously a 1% rate loan does not have half the payment of a 2% rate loan. Bad math, my friend."

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    • Thu Apr 24th 15:48 PM | Rating: 0 0
      Commented on:
      The Impending Mortgage Crisis
      regarding the interest rate discussion jcrash started:
      Simply put, a 6% interest rate will pay 50% more interest than a 4% interest rate- and will effectively increase the house payment by 50%. So the interest rate is the main determinant. When you factor that in by simply using the 1976 interest rate and OFEO affordability index as your starting point, and moving through all the years (I plotted it in an excel spreadsheet but I can't display the graph) what you find is this:
      House affordability (the lower the number the better)
      1976= 100
      1980= 77
      1984= 70
      1988= 92
      1992= 132
      1996= 118
      2000= 115
      2005= 217
      2008= 282

      So even adjusted for interest rates, house affordability is at an all time low.

      View article »
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