Meanwhile, back on Main Street (Part II)...
Home sales are down, after an uptick in July. From the National Association of Realtors:
Nationally, existing-home sales--including single-family, townhomes, condominiums and co-ops--declined 2.2 percent to a seasonally adjusted annual rate of 4.91 million units in August from an upwardly revised pace of 5.02 million in July, but are 10.7 percent below the 5.50 million-unit pace in August 2007.
The problem, NAR says, isn't interest rates (a 30-year fixed-rate cost 6.48% in August, just a smidge higher than the 6.43% it cost in July, and down from the 6.57% of August a year ago), but rather tighter lending standards. NAR president Richard Gaylord:
“The difficulty in obtaining a mortgage increased over past couple months, making it more challenging for creditworthy borrowers to find financing,” he said. “Our hope is that overly tight lending criteria can be loosened with reasonable standards and credit so that sales activity can catch up with demand."
I understand that even decent credit risks are having a tough time getting a mortgage these days, but still, I have to smile at the irony of the idea that looser lending standards are the solution to our problem. Fool me once, shame on me...
Barbara!
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1
There is another piece of this that I haven't seen discussed much and that is - do these potential buyers really have good credit? I have seen a lot of discussion about how the ratings of bonds have been deemed so unreliable as to be irrelevant. Right now, I think FICO scores have the same kind of credibility problem but I haven't heard mention of this.
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2
capitalism is a system that consists of nothing but conflict of interests between the participants.
the game naturally favors the already powerful.
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3
Credit scores are a good proxy for risk on small amounts of debt (CC's, cars etc.) However, once you are talking about hundreds of thousands of dollars credit scores mean less and less. There are other ways of establishing the character of the borrower, than just a credit score.
Down payments are vital in my mind for two reasons. They show a responsible habit of saving and cushion the bank against an early foreclosure. The first is the most important to me, because home buyers need to be responsible and save if they are going to properly maintain the house. They also need to have reserves to make it through a rough patch in life. Since the loan is 30 years long, it should be expected that the borrower will come on tough times at some point.
In short, if you can't save 3.5% for a FHA loan you have no business purchasing a home.
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4
jordanT,
who died and made you the jury and the judge?
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5
i would say jordanT makes a reasonable point even if you perhaps disagree with the specific numbers.
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