We agree that residential home sales in most areas will be anemic, but we disagree on the reason. Demographics are the biggest, single determinant in residential real estate; look at what all the Levittowns sprouting up in the 50s and 60s did to our nation and its economy. I don’t understand why you insist on ignoring demographics? The Baby Boomers will continue to drive our economy. The next 25 years will be all about retirement housing, medical costs, elderly care, assisted living expenses and facilities… It will be a buyer’s market for young couples looking to start a family. (Unless we import millions of young foreigners.)

We agree on the time bomb of municipal debt. It’s already started blowing up in the most profligate communities. There are going to be A LOT of unhappy cops, firemen, teachers and sanitation workers and you are right, property taxes in large urban areas will likely skyrocket before the whole pension ponzi scheme collapses.

…which could probably be construed as a tax of sorts conforming to your “…game over, man. Game over” hypothesis lol.

…regardless, even when you’re coterminous with the fall of a civilization, you gotta live somewhere lol.

Since I never used it, I can’t speak from experience.

Of course, the reason for the killer PMI rate has been the default experience due to CRA Policy.

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In my youthful Hawaiian days, the universal drill for the locals was to have mom and dad advance the down payment — under the table if required. (typ.)

Then the kids would qualify for conventional finance.

(The inflation of the 1970s caused Hawaiian real estate to get even crazier than it already was.)

As their ‘rent’ (mortgage nut) was fixed, the locals soon had enough cash flow to pay off mom and dad — if this was necessary. This money was turned around and used to set up child #2.

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The problem today is that for the next two generations, real estate is going to be a dead asset.

It will no longer be possible to profit by shorting the dollar via a traditional mortgage, at least not easily.

What’s going to trip home owners / owers is loss of cash flow/ their job. This will happen at previously unheard of tempos.

One should expect even municipal civil service jobs to be on the bubble. (Vallejo blues… Chapter Nine all over the place.)

Payroll is such a huge part of all government budgets that when the crunch comes, layoffs are always epic.

I give you Russia, circa 1998. Not only did Moscow stiff retirees, it laid off staff, soldiers, generals, defense contractors… the works. ALL of these souls had been protected — as best possible — until that moment.

The end game is ALWAYS out of the blue — and abrupt.

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Residential real estate is CERTAIN to be hammered because:

1) 0-care flat-lines the First Time Home-buyer. The bottom rungs to the property ladder have been blown away.

a) To even be a FTH your income has to be above 0-care subsidy levels.

b) Everybody above that level has an embedded TAX built into their 0-care outlays. It’s the steepest for young healthy adults with children. The VERY citizens that buy their first home.

c) Even if the “employer pays” the above impact still holds.

i) Employers never pay for employee benefits, they must be earned; otherwise you’re fired/ laid off/ demoted.

ii) The 0-care tab will result in said employer rolling back nominal (W-2) wages or cancelling any inflation adjustments and any performance raises.

Out my way, CraigsList blue collar ads show that $5-$7 per hour has been rolled back — across the board — for new hires. The old hands are being laid off, mostly. If they are held on it’s because they’ve earned a wage bump — and 0-care is that bump.

2) Property tax authorities ALWAYS go crazy taxing away when the end times come. In ancient times, this impulse ended in revolution or social collapse. (Rome, China, India)

a) Unlike all other forms of wealth, land and structures are easy to spot and slow to move. Consequently, such asset tax revenues are easy to trap.

b) The need for civil service payoffs/ wages never abates. It just keeps ramping away. But since the sector is large, and efficiencies impossible, the end game is fast upon.

3) The general hammering in discretionary real estate (McMansions) shuts down fat tax revenues.

a) Sales taxes…

b) Income taxes…

c) Property development fees…

Run away spending and taxation cripple economic output… which at some point takes out the entire government.

We call that a revolution.

The problem is that less-than-20%-down buyers have to pay exorbitant PMI.

Which – in our case – means more than a 30% increase in our monthly payment. For the life of the loan (apparently this has changed from previous).

Now that’s still less than we’ve paid for rent …and in a nicer (and yes, larger) house.

And. Once we have a 20% equity stake, we’ll re-fi. (Our monthly will drop by over $400 per at that point …and be significantly less than we’ve ever paid for rent.)

So. What would be the effect on the real estate market if PMI was something reasonable?

And on buyers’ ability to do 15 or 20 year paper? And on freeing that money to turn back into the local economy? Or even into savings?

On a national scale, I bet that’s “real money” too lol.

A house isn’t an “investment” in my world.

“Ya gotta live somewhere.”

For years many investment firms gave huge bonuses to their employees for signing up all these new mortgagees and for bundling and selling off loans. They knew what they were doing. They knew many of the borrowers would default. They knew the paper they were passing on would be rendered worthless in a massive default.

Then, when the collapse happened they kept those bonuses and we tax payers bailed their companies out and “ate” the bad mortgages. I’ve never defaulted on a mortgage, and I never got a huge bonus for signing folks up to a bad mortgage, but I was stuck with the tab when the bill came due.

And auto loans are doing the same thing as mortgages; offering longer terms, rather than shorter. This is voluntary, by the lenders. It used to be 5 year auto loans were absurd. Now you can get 10 year loans. On an automobile! The goal of a lender is to find the precise, maximum monthly payment you can make without defaulting, and keep you making that payment as long as possible.

Look at the credit card industry, or student loans. In both cases minimum payment amounts are structured to keep interest payments coming in as long as possible. Creditors don’t want borrowers buying down principal. It’s more work to find new borrowers than to keep the “customers” you already have on the hook, in perpetuity.

I don’t understand why 30 -year paper is a problem for investors. With all the bundling and transferring that goes on today that should not be a deterrent. For the most part, investors like to have guaranteed interest payments coming in as long as possible, especially on a secured loan. It’s steady, monthly income on an asset you don’t have to pay taxes on, or insure, and if the borrower defaults you have an asset that’s almost always worth more than the outstanding principal on the loan.

With the modern borrower’s mindset, even if loans were capped at 15 or 20 years folks would simply do home equity loans, or re-mortgage to fund fancy, private colleges for their progeny and take exotic vacations, etc. Look at the recent boon of reverse mortgages.

Look at how popular auto leasing is. Folks would rather lose money to have the status of possessing something, even if that possession is ephemeral.