I don’t know who can buy a property over 1 M ($911,250, 20% down + $729,000 max Jumbo loan) now? Unless your current house has high equality value and you can sell it before you buy the new one. You also need to have very high income, like the top 5% of the current Arcadins do to afford the mortgage.

You are assuming that first time buyers will be buying houses north of $500K. Most of the people who buy in Arcadia or expenseive cities like South Pas will be buyers moving up from a current house and will be rolling equity from their current home. Most families have dual incomes today. Unless you have very high income, it’s unlikely a single earner will be able to afford a SFH in Arcadia. It’s just the reality of today.

$400,000 loan, and 20% down, $80K, equals $480,000 house.

$400,000 at 6.5% interest 30 year fixed, is about $2300 a month. Add $480 a month of property tax dues. Total liability is $2780.

In order to qualify for $2300 a month mortgage it needs to be between 28% to 36% of your gross monthly income. Most banks are very conservative at 28%. So, at 28%, equals, yearly salary of $98,500.

How many persons make about $100K a year?? Where I work 80% of the employees make about $65K to $75K.

The run-up of house prices were mostly due to very low teaser interest only rates, with no income documentations, and 100% of LTV. It was nothing but greed and reckless lending.

Debt to Income Ratio of 31 percent… You need 2 years of w-2 to prove this out….

Take another 20 to 30% off home prices…

Here is the yahoo chart, it does not look good to me. What do you think of this chart?

finance.yahoo.com/q/bc?s=USDEUR=X&t=5y&l=on&z=m&q=l&c=

I did say that the government wants to protect the value of the dollar.

As for investors in these junk bonds many were foreign, like in Japan, Australia and of course China. Individual participation in these bonds is nonexistant as they are usually sold in lots of $10M. So far about $400B has been written off, lood for another $600B before we call it a day.

I think a 6-8yr drop is in the cards, or about 25-40% in SoCa. Tight lending and higher rates are going to hold back any appreciation for years.

The core problem is that the government did not have enough oversight on the banking industry. They let banks commit fraud when they packaged junk (high risk) home loans into AAA Quality Bonds. That was the lie. If they had labeled the bonds accordingly (some would be almost junk grade) they would not have sold as fast and the demand would have been lower and banks would not have given out stupid loans. Without the stupid loans the homes would have never bubbled.

That is the core issue. The banks committed fraud, plain and simple. It is the falling prices that happened to trigger the bad loans going bad. But if they had true AAA quality loans with 20% down, you would see a lot fewer people walking away. Instead they gave loans for 125% of the value to people who could not afford them. That kind of buyer is going to default.

The fix? Well you can’t give more money to the idiot buyers who could not afford the home in the first place. That is like putting a band-aid on a broken leg.

The fear is keeping the dollar strong. So the government might try something to help lessen the risk on the low quality bonds. A lot of US investors bought these “AAA High Quality” bonds on the assumption they were SAFE. But they were lied to by banks. So the bailout may likely be put in place to protect some of these people. It may appear that they are “protecting the banks” but in reality they are protecting the people who have invested in banks. (Retirement funds, etc.)

In my opinion it’s a positive thing that home prices are falling. I think they need to go back to 2000 levels or less. Cheap housing is the best thing for an economy. It allow people to buy a home that fits their income, which in turn increases the sales of other consumable items. Sure people who bought in the past 5 years may have negative equity, but the same can be said for stocks, cars, and many other items. But you can’t create a policy to protect the few people who bought at the wrong time. There was no bailout for stock investors who bought in the NASDAQ in 2000. It’s a risk you take, so just let the housing market fall and when the low price point is hit the homes will sell again. It’s that simple.

So I hope any bailout is not used for dumb consumers. Nor should any bank that is bailed out be allow to operate again in the future. It should be a FDIC takeover, and when the loans are paid back so is the government. Also, the people responsible for packing junk as AAA quality need a few years in jail. (Seriously, it is white collar crime.)

Remember, the US Government needs to protect the value of a dollar. If the currency collapses we will be in a world of hurt. (And that can happen if other countries consider the US Dollar as unsafe and pull there money out of our banks.) So I think this is the governments plan, at least I hope so.