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Brooke Dubuque

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Better opportunities for lowe income families to become home owners.

I’m tired of seeing so many vacant homes sit so long they start to rot. Banks let so many homes that have been foreclosed just sit with no for sale sign in front of them for months even years. When they do that aren’t they losing out on potential money? Why not sell the home for the deficiency amount owed plus 5 grand or rent to own the house based on income. This way the banks still makes money and it gives the hard working low income families a chance to become home owners. Even families who have lost a house before could benefit from this. Let them have a chance at living the “ALL American Dream” of becoming a home owner. So many low income families struggle to live in a two bedroom apartment with no space to accommodate their five person family while a three or four bedroom homes sits vacant that could. I'm not talking about the ones who don't work and live off government assistants but the ones that work and or go to school. They don’t make enough to qualify for loans or their credit scores are a few numbers too low. Why can’t they walk in to bank with say 3 to 5 grand to put down on a home and their monthly payment be based on their income. Have a list of houses they can choose from, of course not a brand new 300,000 homes but foreclosed homes that are move in ready but may need a little work. I know a lot of families who would love to do this and once they were to get a home they would bust their butts to keep it. Even prior home owners who have lost a house before could benefit from this.

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    Oct 2 2012: So much doom and gloom being spread. Everyone wants and expects a "perfect" system. No one on this planet can show any system that was instituted that involved the use by billions of people worldwide as being "fail-safe".

    Used to be (when I was young) if you bought a house with a 30-year fixed mortgage, your monthly payment would not change for 30 years. That made the home purchase an "investment". As you progressed through your life, you could expect your income to increase while your monthly home payment did not. You in effect "made money", and due to inflation by the time you reached retirement age your home was the LARGEST single return on your retirement investment portfolio.

    Then someone came up with the idea that you could "buy now, and pay MORE later" as your income increased. And "The People" bought into that idea. Still an investment? Most economists and investment planners would say, "Huh? Are you CRAZY?".

    What needs to change? Quit buying your PERSONAL homes as an investment. Real estate investing is risky. Your "fortune" can go away as soon as any economy goes into a recession. If the timeing is right (wrong) and you lose all the investment value in your home, you aren't going to be able to retire. Real estate investors NEVER place their own home at risk, nor treat it as the primary investment for their own future. That's what they own all those OTHER properties for.

    Are you going to buy a home to LIVE in? Buy it solely for what it is intended to be...a place for you to live in as a shelter from the elements. Make investments in other areas, and diversify those areas so no one "crisis" causes you to go broke.

    As for all those empty homes out there right now? Don't expect anybody who has them as investments...including the banks...to just start giving them away. The personal owners of all those homes who tried to "get rich quick" buying them as investments, then couldn't pay for them, dumped them back on the banks.
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      Oct 2 2012: Rick, I agree with you that speculation in houses for purposes of investment is something few of us know how to do competently. The last few years of observing the housing market make clear the risk, particularly if one has a short time horizon in view.

      In the old days people used to say one shouldn't gamble more than one can afford to lose.

      I also agree with you that those who hold real estate as investments (for themselves or for shareholders) in their asset portfolios cannot be expected to give them away. Investors are understandably disinclined to buy high and selling low. How eager they are to rid themselves of foreclosed properties depends on what they foresee of future prices in the time horizon associated with their real estate portfolios.
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        Oct 2 2012: It's a bad situation, Fritzie, but the banks are stuck too in certain geographical areas. The housing boom in the Las Vegas area was so huge, when the bottom fell out the Vegas area was one of the hardest hit in the country. Tons of houses were forclosed, but the banks were letting people stay in their "investment" houses for FREE for as long as 12 months...some even longer. There were just too many forclosed properties. The banks didn't DARE put all of them on the open market at the same time for sale...it would have crushed the prices of ALL properties even more. Legitimate home owners who weren't being forclosed would have seen THEIR property values plummet even more. So the banks were forced with a decision to evict only the "higher value" properties and try to sell those first without flooding the market with all the forclosures. "Lesser value" properties were forclosed too, but the banks didn't evict the owners because the last thing the banks wanted were empty houses. It was actually cheaper (and safer) for the banks to leave the current forclosed owners living in the homes for free to "watch over" the properties and prevent vagrant occupation of them or the properties not being cared for. Many owners realized they would get at least 30 days notice to vacate...nobody would show up in the middle of the night unannounced and throw them on the curb...so they just stayed in the houses for free without making any payments. They "made advance plans" for where they would go when they were finally evicted, then did so when the 30 day notice arrived.

        The Las Vegas area is still behind the power curve on forclosures. It is actually cheaper (and safer) to rent out here yet than to purchase a new home. Landlords of older fixed-rate mortgages on houses for rent are taking monthly rent payments of just enough to pay for THEIR monthly mortgage on the rental properties...they can afford to. That forces apartment rental prices lower to remain competetive.
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    Oct 2 2012: There are thousands of ways to make all of this happen. The problem is when Carter and Clinton made the banks accept unqualified people for home loans the end was in sight. Joe makes $3,000 a month has four kids, owes on a car and has alimoney payments due each month. The bank lets him into a loan, the governments forced them to do. so now Joe has a 1,500 house payment, 500 car payment and a 700 alimoney payment. The bank knew he would never be able to make these payments and this was a poison loan. So the bank keeps the house as a total loss and deducts it every year. They will make money over time. If they sell it at a loss it is a one time deal and they get to make the tax claim only once and declare the sell money as a gain. That would not be in the best interest of the bank.

    In the end it is all about money .... politics .... and buying votes at the expense of almost everyone else.

    When the government comes out with a "great deal" count your fingers and hide your wallet. Again, there is no such thing as a free lunch. After you vote it is a done deal you can not take back later. Politics the great American CON game you are betting your life and future on.

    All the best. Bob.
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      Oct 2 2012: Bush didn't help Bob. "It was President Bush in 2002 who stated that a high down payments are a big barrier to first time owners. During “A Home Of Your Own” conference on May 17, 2002 President Bush urged Congress to use taxpayers money to interfere in the market place by lowering down payments for those that cannot afford to buy a home." (Jesse Livermore,wtffinance.com).
      A sudden big boost in demand creates a shortage in supply and prices rise accordingly. Then your scenario happens. Agreed?
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        Oct 2 2012: Agreed. QE3 is here now to further compound the issue.

        Always good to hear from you. Bob.
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    Oct 1 2012: The market value of homes is expected to rise. The restored value might not reach pre-depression levels, but the hope is they will increase sufficiently to save all the folks who owe more on their home than the home would sell for. If that happens low-income people will not be able to budget for home ownership. Only if home values remain depressed will your idea work. As the holder of a mortgage about twice what my home is worth I hope the necessary conditions for your idea to work do not prevail. Nothing personal.
    • Oct 1 2012: "Only if home values remain depressed will your idea work."

      Exactly: the banks are hoping that one day they can fetch much more money for those homes or the land they were built on (this is partially a self-fulfilling prophecy because not selling means more scarcity which means higher prices). The bubble has burst and now it's time to inflate it again... Why work for a living when you can just create artificial scarcity and sell stuff overpriced right before the bubble bursts again?
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      Oct 1 2012: "expected" by whom? i expect them to fall even lower.
      • Oct 1 2012: The banks disagree with you (in the medium or long term), otherwise they wouldn't be sitting around while prices fall, they'd try to sell as many homes as quickly as possible.

        @below

        I don't give them much credit, but they do expect it and may end up fulfilling their own prophecy by creating artificial scarcity (as they've done before).

        P.S. I think most bankers pre-2008 knew the bubble would burst someday, they were just betting on getting rich(er) before then, most succeeded. The mistake people make is that they think bankers and CEOs give a sh*t about what happens to their corporations, after they've already gotten their multi-million bonuses and severance package.
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          Oct 2 2012: in 2007, banks and "financial experts" agreed that house prices will rise forever. i would not give them too much credit.
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          Oct 2 2012: Not all of them agreed, Krisztian. Way before 2007, when investment banks were de-regulated, many economists (financial experts) raised the flag about it not being a good idea. Keep in mind, the housing market collapse threat to the economy was not only a problem of regular bank mortgages, but also a problem of investment banks and the companies that insured those investments, like AIG.

          And the general public itself exhibited a hypocracy about their beliefs on whether it was good or bad. On one hand, many people were totally against "big business" being unregulated that way, and would insist that "big business" be totally regulated by the government. While at the same time, they insisted that they themselves did not want "government" to regulate their own lives.

          It still exists today. Depends on which side of the issue you are on, I guess.

          In any case, I personally know MANY home owners who were educated enough to see the coming downfall of the housing market...and these people were just "average citizens" not holding positions in politics or "big business". They sold their homes "for the profit" while the runaway inflation prices were still good. When the bottom fell out of the market, they already had their profits. Some are still renting houses to live in, because in some geographical areas it is still cheaper and makes more economical sense to rent than to buy even a foreclosed property at the current prices being offered. They are investing in other areas other than real estate right now, and would probably buy a house again when it makes sense to, where in many geographical areas it doesn't make sense to yet.
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        Oct 2 2012: Here in the Southwestern U.S. home prices are beginning to climb. Many say it is because the bottom-feeder investors have sensed the bottom and are starting a buy-low frenzy so they can rent the homes to the bitter people who lost theirs in the crash. Whatever the cause, prices, and sales, are trending upward here locally. I would not be surprised, Krisztian, if there is an aftershock and your expectations are realized. But I really want to get above water on this place so I can sell it and NEVER buy another one!
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          Oct 2 2012: house prices were inflated by government money creation. normally, prices would fall back to normal in one year. but this time, the fed continues to pump air to the cracked bubble to keep it somewhat inflated. if they stop it at any time, the bubble collapses.
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        Oct 2 2012: My thread on QE3 speaks to this point.
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        Oct 2 2012: Perhaps Ms. Dubuque's idea would work if the government stopped meddling in the housing market so we could return to a "normal," as you call it, free-market paradigm. The key word, as usual, is "if". I think Jesse Livermore at WTF Finance.com says it well: "An asset class can still be artificially overpriced despite having dropped from its all time high. Instead of asking why the housing market crashed, it is much more valuable to ask the question of what created the housing bubble in the first place. To financial historians not surprising, the very variables that made the housing bubble possible are now part of the solution to “fix” the real estate market. More anti-free market policies, more Government interference to continue distorting the markets…".
        Like I said, what are the odds that the government will stop meddling?
        • Oct 2 2012: Bubbles are just good business, an easy way to make a lot of money very quickly, with or without the government interfering. Bubbles have been around for centuries and are here to stay. It's just such a simple mechanism that exploits human greed and the guaranteed incomplete knowledge of the market (and itsfuture state). Capitalism has its flaws and even Adam Smith acknowledged that. I can understand people believing that capitalism is the least worst of systems tried so far, but I have no sympathy for the (mostly American) drones who religiously worship infallible capitalism as the cure to all ills.
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    Sep 29 2012: Much of the problem stemmed from owning houses in the first place, because a mortage guarantees an obligatory set of payments for 5-10-15-20 years, something which the economy can't guarantee (thus foreclosures).

    Here in England, one of our last remaining positives were the council housing systems (where a large portion of the country rented government housing inwhich the profits were redistributed through social and economic budgets.
    When people were then able to purchase, all of that profit went, then the economy collapsed at the present era, now a large percentage of those very houses are:
    1. Foreclosed
    2. Purchased and rented out at prices significantly higher than what the Government would have done.

    What would be ideal would be for the Government to generate a back bone, demand the bail-outs to be paid back and take the empty houses as partial payment, which could then be rented out, meaning that, in an economic climate like this, people wouldn't be liable with most of the burdens that owning a home can bring
    (mainly as no one even owns the home for decades).