It looks like you're using an Ad Blocker.

Please white-list or disable AboveTopSecret.com in your ad-blocking tool.

Thank you.

 

Some features of ATS will be disabled while you continue to use an ad-blocker.

 

The next recession & the state you live in

page: 4
5
<< 1  2  3   >>

log in

join
share:

posted on Sep, 18 2018 @ 08:43 PM
link   

originally posted by: Aazadan

originally posted by: Edumakated
The problem is that some banks started offering them to Joe Sixpack as an affordability product instead of a financial planning tool. In other words, you can't really afford this home, but if you just make interest only payments it would work.


That's what appears to be happening right now. It's why people who make $100k are buying homes that cost $8 million, and why people who work driving for Uber are buying homes that cost over $1 million in the Bay, which comes out to buying a home worth roughly 25x your annual income (or more for the $100k person).

It strikes me as being very irresponsible, but eventually individual recklessness becomes a communal problem once the banks are left with a bunch of toxic assets again.

The people in these types of arrangements are also those who are most likely to be in a subprime auto loan.


Exaggeration. No one making $100k is buy $8 million homes. Underwriting is way tighter than during the bubble. Dodd Frank codified into law that debt ratios can't exceed 43% (in other words, all your recurring debt plus the mortgage can't exceed 43% of your gross income). So if you make $100k, the most you can qualify for to spend is $4300 across mortgage and other debts. This is known as a "qualified mortgage". You can do "non-qm" loans but even those lenders won't go beyond 50% debt ratios and the rates are through the roof.

Bottom line is that no one getting $1 million loans is unqualified these days. Mortgage quality as never been higher.

The only time you will see someone with low income buying a large house is if they have a lot of assets and can get an asset depletion loan. Someone may be retired and not bringing in a lot of income, but they have a couple of million in the bank.

The only part of the market that is getting iffy is the lower end where you see crappy FHA loans (Granted in CA, this is a $649,750 max mortgage) where you can put 3.5% down and have crappy FICO scores.




posted on Sep, 19 2018 @ 07:05 AM
link   

originally posted by: Edumakated
Exaggeration. No one making $100k is buy $8 million homes. Underwriting is way tighter than during the bubble.


Slight exaggeration, $8 million was based on an asking price for a small apartment (1 bedroom) I saw in SF a few weeks back. However, I do know that one of my coworkers bought a house worth about $4 million 3 years ago in that area. He makes roughly $150k.

And, not housing, but another coworker of mine who makes about $95k and has roughly $60k in credit card debt, plus another $80k in mortgage debt, and $35k in car debt just bought a $100,000 Tesla. Actually, it was closer to $110k since he only got $25 for his old car on trade in. The bank did refuse to give him the loan citing his greater than 40% debt ratio, but Tesla themselves financed it at a higher rate.



posted on Sep, 19 2018 @ 09:11 AM
link   

originally posted by: Aazadan

originally posted by: Edumakated
Exaggeration. No one making $100k is buy $8 million homes. Underwriting is way tighter than during the bubble.


Slight exaggeration, $8 million was based on an asking price for a small apartment (1 bedroom) I saw in SF a few weeks back. However, I do know that one of my coworkers bought a house worth about $4 million 3 years ago in that area. He makes roughly $150k.

And, not housing, but another coworker of mine who makes about $95k and has roughly $60k in credit card debt, plus another $80k in mortgage debt, and $35k in car debt just bought a $100,000 Tesla. Actually, it was closer to $110k since he only got $25 for his old car on trade in. The bank did refuse to give him the loan citing his greater than 40% debt ratio, but Tesla themselves financed it at a higher rate.


Yes, there are $8 million condos and the like in CA, particularly San Fran/Silicon Valley. However, the people purchasing those properties are legitimately wealthy. No one making $100k is buying those homes unless they are sitting on several million and can pay cash. If you assume no debt, and minimal down payment available, the most anyone typically can qualify for is 5x's annual gross income. So if you make $200k, the most you'd qualify for in a mortgage is about $1 million assuming no other debt AND we are pushing debt ratios as high as they can go.

There is a lot of tech money in that area. A lot of cash (or near all cash buyers) due to stock options even though incomes may not necessarily be that high. You also see a lot of family money as well. I'd guess near 50% of the buyers I see purchasing $1 million homes have gifts from parents / inheritances.

As to your over extended co-worker, yes, you see a lot of these idiots especially in CA. Big car leases/payments and stretched to the hilt on their mortgage/rent. Even though they are making decent money, it is still paycheck to paycheck and they have no cushion/savings in case of an emergency. They get laid off and it is game over after one month without a job.


edit on 19-9-2018 by Edumakated because: (no reason given)



 
5
<< 1  2  3   >>

log in

join