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Old 02-13-2018, 12:22 PM   #41
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Some 'economists' say that excessive tax cuts cause bubbles. I guess we will see.
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Old 02-13-2018, 12:52 PM   #42
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Some 'economists' say that excessive tax cuts cause bubbles. I guess we will see.
Who?
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Old 02-13-2018, 01:06 PM   #43
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Funny how we can change the subject so quickly and waffle on about movies and books that "Really" do not have anything to do with what I was asking / observing.

I am just concerned that there "May" be a bunch of folks out there that can be convinced to "bite off more than they can chew" with respect to a home loan. Especially Veterans and those that are being offered 100% mortgages. It was the Phrase "Your House/Home is your Bank" That got me concerned. There are a lot of Gullible people out there, and there are plenty more than are looking to take advantage of them.
SWR - no one changed the subject. The movies and books being referenced are *absolutely* tied to your OP. You know, 2008, when everyone was giving away homes for nothing down and giving away HELOC loans for amounts larger than your home value. It’s exactly the same.

However, we are a LONG way away from another mortgage-related bubble.

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Old 02-13-2018, 01:11 PM   #44
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When the Big Short was published I asked DD what she knew of Michael Burry. She said he is smart, very smart, but his investing style and personality don't make him a good fit as an investing partner in a VC.
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Old 02-13-2018, 01:17 PM   #45
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& actually the "housing crisis" was as much about the investment industry gambling on things like credit default swaps and synthetic collateralized debt obligations (CDOs.) IOW, greed. And greed is wired into the human condition by Darwin, so never say never.
I thought it was caused by people not paying back the mortgages they took out? I wonder if the people continued to pay their mortgages, if the 'crisis' would have ever occurred?

It is a bit harder to take a mortgage out now, which is a good thing.
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Old 02-13-2018, 01:18 PM   #46
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Who?
Well, the staff of the Economist magazine for example. The headline is "Running Hot" and the subhed is "America's Extraordinary Gamble." https://www.economist.com/printedition/2018-02-10

The articles "Running Hot" and "The Great Experiment" are worthwhile.

And @SWR, I mentioned "The Big Short" precisely because it is completely on topic. I think that few people realize how complex that crisis was. It has very little to do with the quality of the loans and everything to with how they were packaged and sold. See the movie and then read the book.
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Old 02-13-2018, 01:23 PM   #47
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FWIW:
Bought first house in 1999 with -3% down payment i.e. loan was 103% of the purchase price.
Second home in 2003 with 10% down
Third home in 2012 with 20% down.

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Old 02-13-2018, 01:32 PM   #48
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Regarding the OP, that was the last crash. From my rudimentary view, bubbles precede crashes. It seems as if every bubble is different. So what will the bubble be this time?
Some 'economists' say that excessive tax cuts cause bubbles. I guess we will see.
Maybe it is the bubble in bond prices over the past 10+ years that is headed for a crash?

We do not have excessive tax cuts, so it will no be that. Letting people keep more of their own money is a better euphemism than tax cut.

I agree it may be the tax credits that can cause a price bubble. People are given money that they never had in the first place, and that could cause inflation. When you give people money and they do not know what to do with it, it can certainly cause issues. For an example, look at the excesses of the professional athletes...
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Old 02-13-2018, 01:35 PM   #49
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Well, the staff of the Economist magazine for example. The headline is "Running Hot" and the subhed is "America's Extraordinary Gamble." https://www.economist.com/printedition/2018-02-10
Um, as I read the article the only tax cut reference I saw was this:
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Thanks to the recently enacted tax cuts, America is adding a hefty fiscal boost to juice up an expansion that is already mature. Public borrowing is set to double to $1 trillion, or 5% of GDP, in the next fiscal year. What is more, the team that is steering this experiment, both in the White House and the Federal Reserve, is the most inexperienced in recent memory. Whether the outcome is boom or bust, it is going to be a wild ride.
Is there something else I missed? If not, how do you draw this conclusion:

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Originally Posted by timo2 View Post
Some 'economists' say that excessive tax cuts cause bubbles. I guess we will see.
from that?

The only mention of a "bubble" is in regards to Fed policies, nothing about tax cuts:
Quote:
What will determine how this gamble turns out? In the medium term, America will have to get to grips with its fiscal deficit. Otherwise interest rates will eventually soar, much as they did in the 1980s. But in the short term most hangs on Mr Powell, who must steer between two opposite dangers. One is that he is too doveish, backing away from the gradual (and fairly modest) tightening in the Fed’s current plans as a salve to jittery financial markets. In effect, he would be creating a “Powell put” which would in time lead to financial bubbles. The other danger is that the Fed tightens too much too fast because it fears the economy is overheating.
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Old 02-13-2018, 01:40 PM   #50
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@bobandsherry, believe what you like. I have no interest in arguing.
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Old 02-13-2018, 01:57 PM   #51
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@bobandsherry, believe what you like. I have no interest in arguing.
There's no "belief" involved and not looking to argue. However you shared article that supposedly confirmed that excessive tax cuts caused bubbles. I didn't see anything that backed that opinion. Sounds more like you now came to same conclusion.
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Old 02-13-2018, 01:58 PM   #52
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Would it not be inviting trouble giving a 100% mortgage?
A home without equity is just a rental with debt. I could write a book.
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Old 02-13-2018, 02:18 PM   #53
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A home without equity is just a rental with debt. I could write a book.
I think it is called “ having skin in the game”
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Old 02-13-2018, 04:59 PM   #54
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I think it is called “ having skin in the game”
Yep, no problem. There are plenty of organizations that give first time buyers down payment assistance money. And the sellers can give some money to help the buyers with their closing costs.

There will be plenty of "skin in the game"...
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Old 02-13-2018, 05:31 PM   #55
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For me, the book was far better than the movie. But others may differ on that!
I agree. I read a lot of books about the 2008 crisis. "Too big to fail", by Aaron Sorkin, On the Brink , by Hank Paulson, Stress Test by Tim Geithner. The Big Short was by far my favorite because Micheal Lewis has an amazing talent to take complicated subjecst from the analytics of baseball to collateralize debt obligations and make them understandable and dramatic.
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Old 02-13-2018, 05:40 PM   #56
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I think it is called “ having skin in the game”
I'm more concerned that those who buy have the means to pay. Keep the market healthy and they'll have "skin in the game" when their property value increases.

As long as they can make the payment, and with hopes of seeing their home value go up, they'll continue to make payment.
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Old 02-13-2018, 06:33 PM   #57
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In the space of about 30 minute I saw 4 advertisements for 100% Mortgages and Home Loans. Using statements like "Your House is your Bank". Some directly targeting Veterans. Not to mention the persistent "Reverse Mortgage" solicitations. Aren't these 100% loans what got us into trouble in the first place? I thought there were rules in place to prevent this from happening again.
Long term real estate prices show a cycle of 15-ish years from peak to peak. Here's a truncated version, couldn't quickly find a data series that began earlier than 1980.
https://www.economist.com/blogs/grap...daily-chart-20.

I've been "in the business" since 1985 and there were different factors contributing to the declines. Oil price declines in TX in the early 80's, reduction in defense spending hit CA and the NE in the early 90's, along with S&L speculation. Several factors contributed to the easy credit leading to 2007-8 debacle.

One factor I believe was present in what I have seen is the easing of lending terms and the belief that it's "different now." Different only in details, the outcome is the same.

As an unpaid prognosticator, I think "the real estate market" is heating up, but hasn't reached the frothy stage yet. I expect that will happen over the next couple of years.

I am seeing substantial increases in construction activity in my corner of the Redneck Riviera, but existing home sales and prices haven't yet gotten silly.
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Old 02-13-2018, 07:01 PM   #58
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Personally, I think 20% is a reasonable down payment.

I'm expecting a lot of flack for that statement. I know what I think, and why. I'd be interested to hear other perspectives.
I bought my home with 0% down. 20% would’ve been over $60k, which would’ve taken years of renting and scrimping, plus the cost of an additional move in my life. How awful! Perish the thought!
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Old 02-13-2018, 07:29 PM   #59
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Regarding the tax cut / bubble discussion, some economic folks will point to the tax cuts of 1924/26, 1981, and 2001/03 as proof of the bubble /crash scenario. Google it as you wish.

Because economics is so nebulous, it is subject to discussion of course.
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Old 02-13-2018, 07:30 PM   #60
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I bought my home with 0% down. 20% would’ve been over $60k, which would’ve taken years of renting and scrimping, plus the cost of an additional move in my life. How awful! Perish the thought!
However, when mortgages become "easy" ( low-to-zero down, low interest rates, balloon mortgages etc) that boosts the selling prices, by a lot. So it fuels the bubble.
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