Comments on: Why Prices Will Continue to Fall http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html Redfin Los Angeles Sweet Digs Sun, 22 Nov 2009 17:43:07 -0800 http://wordpress.org/?v=2.8.1 hourly 1 By: l.a.guy http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html/comment-page-1#comment-11184 l.a.guy Sat, 12 Apr 2008 04:47:06 +0000 http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html#comment-11184 <i>L.A. Guy, I’m beginning to strongly suspect that you are an agent.</i> Not an agent, but I have bought 5 houses in the past 20 years and have managed to profit from 50-100% on all of them. So I do my homework and have a pretty good understanding of real estate. <i>Anyway, it’s not MY formula; it’s a common one that lenders USED to use before they loosened things up. And the 1/3 of gross income formula is higher than it used to be; it used to be 1/4.</i> I'm not disagreeing with the formula, I am disagreeing with your interpretation of it. $1,800 <b>is</b> a lot of money, nevertheless it's 1/3 of $5,400, the amount you would need in order to meet the criteria. Obviously I'm speaking in generalizations, because if you had bad credit the requirements might look a lot different. <i>Just because a lender tells you you CAN qualify for a certain loan doesn’t mean you SHOULD.</i> I totally agree. :-) L.A. Guy, I’m beginning to strongly suspect that you are an agent.

Not an agent, but I have bought 5 houses in the past 20 years and have managed to profit from 50-100% on all of them. So I do my homework and have a pretty good understanding of real estate.

Anyway, it’s not MY formula; it’s a common one that lenders USED to use before they loosened things up. And the 1/3 of gross income formula is higher than it used to be; it used to be 1/4.

I’m not disagreeing with the formula, I am disagreeing with your interpretation of it. $1,800 is a lot of money, nevertheless it’s 1/3 of $5,400, the amount you would need in order to meet the criteria. Obviously I’m speaking in generalizations, because if you had bad credit the requirements might look a lot different.

Just because a lender tells you you CAN qualify for a certain loan doesn’t mean you SHOULD.

I totally agree. :-)

]]> By: Cindy Allen http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html/comment-page-1#comment-11181 Cindy Allen Sat, 12 Apr 2008 02:54:39 +0000 http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html#comment-11181 L.A. Guy, I'm beginning to strongly suspect that you are an agent. Anyway, it's not MY formula; it's a common one that lenders USED to use before they loosened things up. And the 1/3 of gross income formula is higher than it used to be; it used to be 1/4. And a lot depends how much other debt you have. An $1,800 mortgage payment is a very large payment for someone making $64,000 a year. What about taxes and insurance? What about repairs, maintenance, and your car payment? Not much margin for error. Just because a lender tells you you CAN qualify for a certain loan doesn't mean you SHOULD. My husband and I once were told we QUALIFIED for an $800,000 mortgage. We had no intention of taking on that kind of debt. I cannot believe that anyone would. But of course they do. L.A. Guy, I’m beginning to strongly suspect that you are an agent.

Anyway, it’s not MY formula; it’s a common one that lenders USED to use before they loosened things up. And the 1/3 of gross income formula is higher than it used to be; it used to be 1/4. And a lot depends how much other debt you have. An $1,800 mortgage payment is a very large payment for someone making $64,000 a year. What about taxes and insurance? What about repairs, maintenance, and your car payment? Not much margin for error.

Just because a lender tells you you CAN qualify for a certain loan doesn’t mean you SHOULD. My husband and I once were told we QUALIFIED for an $800,000 mortgage. We had no intention of taking on that kind of debt. I cannot believe that anyone would. But of course they do.

]]> By: l.a.guy http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html/comment-page-1#comment-11177 l.a.guy Sat, 12 Apr 2008 02:17:07 +0000 http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html#comment-11177 While I agree housing prices will continue to fall, your logic regarding a $300K house requiring an income of $100K is wrong. The "rule of thumb" is that the mortgage payment shouldn't exceed 1/3 of your gross income. Realistically if you're buying a home for $300K today you'll need to put down 20%. (Although there is an FHA program at 3%) But let's say you were financing all $300K on a 30 year conventional loan at 6%, your monthly mortgage payments would be about $1,800. So you would need to gross $5,400 per month or $64,800 per year. That's a long way off from $100K. But yes, broadly speaking, until the median income can pay for the median price home, prices have got to keep coming down. While I agree housing prices will continue to fall, your logic regarding a $300K house requiring an income of $100K is wrong.

The “rule of thumb” is that the mortgage payment shouldn’t exceed 1/3 of your gross income.

Realistically if you’re buying a home for $300K today you’ll need to put down 20%. (Although there is an FHA program at 3%) But let’s say you were financing all $300K on a 30 year conventional loan at 6%, your monthly mortgage payments would be about $1,800. So you would need to gross $5,400 per month or $64,800 per year. That’s a long way off from $100K.

But yes, broadly speaking, until the median income can pay for the median price home, prices have got to keep coming down.

]]> By: Cindy Allen http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html/comment-page-1#comment-11088 Cindy Allen Wed, 09 Apr 2008 17:30:02 +0000 http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html#comment-11088 Hi, Phyllis: From a comsumer standpoint, it does seem likely that homes still have further to fall, considering how few people can afford to buy right now. It comes down to supply and demand. Of course, some of the coastal markets are still doing well. Where do you sell? Hi, Phyllis: From a comsumer standpoint, it does seem likely that homes still have further to fall, considering how few people can afford to buy right now. It comes down to supply and demand. Of course, some of the coastal markets are still doing well. Where do you sell?

]]> By: Phyllis Harb http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html/comment-page-1#comment-11074 Phyllis Harb Wed, 09 Apr 2008 12:51:42 +0000 http://blog.redfin.com/losangeles/2008/04/why_prices_will_continue_to_fall.html#comment-11074 I wish I had your crystal ball ;-) I really don't know if prices will continue to go down. I think we are at or near bottom... but when showing property to clients, a lot of the homes I am showing are vacant, which is a bad sign. Maybe you are correct.... I wish I had your crystal ball ;-) I really don’t know if prices will continue to go down. I think we are at or near bottom… but when showing property to clients, a lot of the homes I am showing are vacant, which is a bad sign.

Maybe you are correct….

]]>