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Old 09-23-2008, 08:29 PM   #21
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What will it take to fix things?
Equilibrium pricing . . . ta-da (although I think someone else already claimed the Nobel for that little discovery).
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Old 09-23-2008, 08:35 PM   #22
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Al Gore?
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Old 09-24-2008, 10:23 AM   #23
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I don't follow this. In the olden days, bankers figured that you could handle a mortgage payment of about 25% of your income. The median income for a family of four is about $70,000. This converts into a 30 year loan of $247k at 6% or $235k at 6.5%. Sale prices would be about 125% of this if you're making a 20% down payment. So this is a market value for houses that median income families could afford.

Anybody with a steady income and a history of paying bills on time could qualify for a loan on these terms.



.
I'm not sure how back your "olden days" goes, but in the olden days, there were no credit cards, nor were there cable bills, day care, car leases, cell phone bills; all the things I like to call "monthlys'". The things that never get paid off. In other words, you may have a good job (whatever the heck that means anymore?), but still not be able to qualify for a home loan because you have a late pay or two on your cell phone bill. The olden days didn't have credit scores.
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Old 09-24-2008, 11:32 AM   #24
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I'm not sure how back your "olden days" goes, but in the olden days, there were no credit cards, nor were there cable bills, day care, car leases, cell phone bills; all the things I like to call "monthlys'". The things that never get paid off. In other words, you may have a good job (whatever the heck that means anymore?), but still not be able to qualify for a home loan because you have a late pay or two on your cell phone bill. The olden days didn't have credit scores.
Okay, my personal "olden days" go as far back as the mid-70's when I bought my first house for 10% down, with private mortgage insurance, and a fixed 9% 30 year loan. It cost 2x my annual salary. People had credit cards and day care. People borrowed money to buy cars. We didn't have cell phones, but we did get bills from Ma Bell. I didn't have a "late pay or two" on any of my "monthlys".

I don't see any financial evidence that it's harder for people to live within their means in 2008 then it was in 1976, with the exception of housing. I believe that house prices have gone up faster than incomes, and that's the correction in prices that needs to occur.

It's possible that people today are more willing to go into debt so they can "have it all, right now" than they did then. So when they get to the point of buying a house (often the last big purchase) they are already over-extended. But I don't know how to prove or disprove that.
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Old 09-24-2008, 11:55 AM   #25
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Oh it's much tougher to live within your means, because people consider so many more things to be necessities. In the mid 70's, you may have had a couple of tv's, but you didn't have a computer and laptop. You didn't have a cell phone or the bills that went with it, including texting which according to my kids is mandatory, and the Blackberry. If you had kids then, you didn't have nearly the kid's fees you have now for every activity they're involved in because as kids, we just went outside and played (sheesh I'm sounding old). With the computers you also have your internet bill, and with the tv's you must have cable. And as you point out, you must have it and you must have it now, so just add it to the credit card. Oh, and don't forget about the family vacations. Gotta take the family to Disney World before they get too old to appreciate it, and don't forget the cruises. In my neighborhood, I was shunned because I didn't buy my kids a horse! And as I mentioned, way back in the 70's, they didn't have credit scores. You met with your banker and explained how you could afford the loan, and there was a chance you knew the banker personally.

Oh yeah, and in my city, houses have definitely not risen much in value. Welcome to Texas.
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Old 09-24-2008, 12:02 PM   #26
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Oh it's much tougher to live within your means, because people consider so many more things to be necessities. In the mid 70's, you may have had a couple of tv's, but you didn't have a computer and laptop. You didn't have a cell phone or the bills that went with it, including texting which according to my kids is mandatory, and the Blackberry. If you had kids then, you didn't have nearly the kid's fees you have now for every activity they're involved in because as kids, we just went outside and played (sheesh I'm sounding old). With the computers you also have your internet bill, and with the tv's you must have cable. And as you point out, you must have it and you must have it now, so just add it to the credit card. Oh, and don't forget about the family vacations. Gotta take the family to Disney World before they get too old to appreciate it, and don't forget the cruises. In my neighborhood, I was shunned because I didn't buy my kids a horse! And as I mentioned, way back in the 70's, they didn't have credit scores. You met with your banker and explained how you could afford the loan, and there was a chance you knew the banker personally.

Oh yeah, and in my city, houses have definitely not risen much in value. Welcome to Texas.
So I guess the solution is just go through this process every 30 years or so?
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Old 09-24-2008, 12:18 PM   #27
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I'm buying me a big 'ol mattress and pulling out the stuffing so at least I'll know where some of my money is. Half I'll fill with cash, half with shotgun shells.
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