Thread: Inconvenient Truth: Not All Can Qualify for Home Ownership

American Dream

Inconvenient Truth: Not All Can Qualify for Home Ownership

By John Lillpop
Sunday, October 11, 2009

Given the meltdown of the financial markets and the bursting of the home price bubble, Americans need to accept a new truth:

Not everyone is eligible for the American Dream.

In much the same way as that sleek new $200,000 Lamorghini is not within my financial means, so it is that some Americans do not make enough money, or have enough cash saved, to purchase a home.

Others have poor credit, too much debt, insufficient income, or lack satisfactory employment history and stability.

To those who believe that they are entitled to a home, a notion fostered by socialists like Nancy Pelosi and most Democrats, another harsh truth needs to be remembered:

Nowhere in the Declaration of Independence, the U.S. Constitution, or the Bill of Rights, are taxpayers obligated to provide anyone with a 3 bedroom, 2 bath home and attached garage. Regardless of race, nationality, or other hardship.

Home ownership is not a Constitutional right!

Home ownership is not a Constitutional right!

Unfortunately, federal bureaucracies, under pressure from the Democrat Party and liberal Republicans, have taken a greater interest in promoting minority home ownership statistics than in assuring that mortgages written for qualified borrowers are sound and secure.

Once again, “progressiveâ€

Forced diversity always seems to come back to bite us.

From personal experience, a down-payment on a property was an average of 20 percent of the purchase price, and the banks required documentation that an applicant's mortgage payments would not be more than 33 percent of their monthly income. Banks started getting greedy with the negative amortization loans, and then went really nuts under GWB's push for homeownership for everyone: along came the no documentation liar loans. Here illegally, no problem as long as you have an account in our bank. Earn $9 per hour and want to buy a home for $600,000--we get the property if you can't pay the mortgage and it will keep appreciating with no end in sight. Yeah, right!
I was talking to an old gentleman years ago, trying to explain to him that if there was a property at $100,000, I could put down only $20,000 and buy more properties I would be able to rent to cover the mortgages. Nope, he said, he would take the $100,000 and pay cash for the property. How right he was.

With all due respect, I think Lillpop is wrong on this one. In a capitalist society, the price of something is what the market will pay. We had an artificially inflated housing market for a while there, as exotic financing instruments enabled speculation and flipping, thus driving up the price of homes for everyone. Fiancing was made available to people who wanted to own a house, and I don't blame them for trying, especially if they were trying to raise a family. I do, however, frown upon those who didn't do the math and run 'worst case' calculations for ARMs. Those folks deserved to get bit. At the height of the boom you could still insist on 30 year fixed rate. You could still get a mortgage assistance program to cover the down.

For years, my real estate agent friend assured me that I should expect my home to appreciate at around 10% per year. But wait! People's incomes were overall stagnant during that time. Can we all say together, "Bubble"!!!

The exotic financing instruments may have made some minorities home owners, but they also enabled the speculators and flippers. The price of housing artificially rose, and now has come tumbling down. This adjustment will play itself out for at least another 5 years in my opinion. If you have modest homes in a working class neighborhood, and you want to sell them because you can't get enough in rent, you will need to lower your price and work with a buyer. That's the invisible hand in action. I think this guy has a lot of pertinent things to say about the housing boom and bust: http://patrick.net/housing/crash.html

I blame the banksters, not the minorities, for the housing bubble and crash. The banksters get taken care of no matter what. No-down loans are not a problem if they buyer is able and willing to make the payments. Collateral means nothing if the banks guess wrong about the future value of the property (remember, it's worth what people can and will pay, not a penny more). Right now a huge percentage of American home mortgages are under water. Minorities didn't do that. We will just have to apply tincture of time till this works out.

I would much rather pay taxes to keep a family in a house than to keep a bankster in a mansion. They are the ones who dreamed up this version of Ponzi scheme.