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Housing bill 101
Chris Mayer, Professor of Real Estate, Finance & Economics at Columbia University
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Get off our backs. I think those who are frustrated at a bail out may have not accurately grasped the situation and what has happened. We bought our house in 2005. At our end the talk was about getting into the market NOW because if you wait 3 months the $500,000 2 bed 2 bath house you want will be $550,000. And in six months it will be 600,000. Over the six month search we bid on a dozen houses each with a dozen bidders or more.
We had a great broker who stayed on the phone with me for HOURS explaining the loan process. And a shady real estate agent who gave us no advise. We consulted books but had little familial experience to fall back on.
So we finally won a house at 560,000. A nice 2 bedroom 2 bath. With 2 loans at 100% financing both stated income, both 5-1 ARM (adjustable). That's what we were told to do.
We were told that the property values were going up so fast that in three years (based on the loan terms) we would refinance into a standard 30 year fixed.
THAT'S HOW EVERY ONE WAS DOING IT. No one told us or suspected anything different could happen.
Here we are 3 years later. We have made every mortgage, property tax and insurance payment. NO ONE WILL REFINANCE OUR LOAN because our house is now only worth $515,000 and dropping.
There was no way of knowing what was going on at the top of this chain. Who did know? As an individual homeowner I can tell you there is more here to blame than us. There were a whole lot of people who used the house market like Las Vegas. The won a lot of money for a long time and no one knew. And when they lost people started loosing their homes. Maybe some of those people didn't belong there to begin with but to their shoulders deserve to carry the bulk of the burden?
PART TWO: A SOLUTION. Keep as many people in their houses as possible. Because the only way to end this mess is to stop the overflow of inventory onto the housing market. Since we bought this house our family has grown to 4. We need to move. But we are stuck. And we can't sell our house until there stops being for sale signs on my street. YOU CAN'T EITHER. So if you feel uneffected yet, count yourself lucky. But what happens if you needed some of that equity to send your kids to college? What happens if you get sick or injured? What happens if you need to relocate? Or retire? YOU HAVE BEEN EFFECTED. So please STOP POINTING THAT FINGER. It's the least effective thing you can do.
I am being encouraged to invest in an annuity and am not sure of thier pros and cons. I am turning 60 this year, and my advisor thinks I should invest my assets in Prudential's annuity (one is eligible at age 55, with a minimun investment of $10,000). Can you spell out the plusses and minuses of annuities? They sound too good to be true, and I'd like to hear the drawbacks. Thanks
Is there a retroactive credit? My wife and I bought a home in June 2007. We saved for quite some time, and then bought a house for a good deal less than we were approved. It seems as though we did everything right, but it required us to be smart and patient. Now we wonder why there is this huge bail-out, and why we are getting the short straw for being responsible. As I understand it the $7500 0% interest loan is only good for those who bought homes between April 9, 2008, and July 1, 2009. Is there a loan available to us for home improvement?
OK, so Capital Hill wants to help us first time homebuyers make the down payment by giving us a $7500 minimum tax break. I'm confused; just how am I supposed to hand that $7500 to the bank so I can add it to the down payment at the close of the loan? It's a tax break, right? So how does a tax break help people with their down payment?
