-- Connecting the dots between our economy, government and business --
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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It’s determined by debt ratios. If a buyer household can document around 30% of income to meet mortgage payments, they qualify for a vanilla mortgage loan. High property tax RATES make a big difference in monthly payment obligations. (Property taxes are typically escrowed and included in total monthly mortgage payments). EXAMPLE: a $300,000 home with typical mortgage (30 year, 5%) and Chicago’s typical~2% property tax RATE*=$2152 monthly payments. (P-tax=$5500). A $300,000 home in Woodstock IL at 3.6% property tax rate* requires a monthly payment of $2519. (P-tax=$9900). A $300,000 home in America, with ~1% property tax rates (and assuming ZERO… Read more »
The FHA will let borrowers stretch their front end DTI ratio to 40% and their back end to 50% if the have a credit score over 580 and some cash reserves. Otherwise, for the low money down crowd, 31% on the front end, 43% on the back end.
Fannie Mae lets borrowers go up to 50%.
We Are All Subprime Borrowers Now
https://www.wsj.com/articles/BL-MB-2515
There’s a huge lag in housing numbers that people need to understand. It’s particularly important when higher interest rates start hurting sales and, maybe, recessionary forces. First these numbers are from May. Second, as some executives from Pulte the home builder explained to me once years ago, any given month’s home sales activity is actually a function of what was happening several months earlier. Great weather and a great market drive lots of people out looking. But if they see something they like it takes a few months for them to sign and close. And whether a good month happens… Read more »
There’s a pattern where housing prices plateau, maybe creep up a little, right as the number of houses sold starts its free fall. That’s when inventory rises as speculator scum (flippers, air B&Bers, faux-land barons) heads for the exists. Prices are sticky on the way down so it takes a while of very slow home sales before prices start to reflect the falling prices. Then when it is evident that prices are tanking, sellers freak out and delist their properties, because they can’t sell at a loss due to mortgage balances, or whatever, and the lack of homes for sale… Read more »
The word in the trenches is that housing, throughout most of the country, is about to begin a download free fall with little support below. Foot traffic, sales, contracts, mortgages, all of it has slowed down dramatically, and today’s second rate hike is going to be the wooden stake in the heart of this market. This is happening all around the world. Even more Australian builders have gone insolvent in the past few weeks. China has major problems too – in China, you start paying your mortgage as soon as you go under contract to buy new construction, unlike here,… Read more »
May was the top of market – these numbers are meaningless . Going forward you will see much different trend numbers
Watch the non-bank lenders who are in trouble. They were 48% of the market in 2008 and now they’re 68%! These lenders depend on creditors for all their money, and only hold tiny cash balances. This was identified by the Fed in 2018 as a growing problem, but of course, nothing was done. They are not regulated like banks and are a huge risk to the overall economy that no one in talking about.