We have known Jim & Donna Klinge for over a dozen years, having met them in Carlsbad where our children went to the same school. As long time North County residents, it was a no- brainer for us to have the Klinges be our eyes and ears for San Diego real estate in general and North County in particular. As my military career caused our family to move all over the country and overseas to Asia, Europe and the Pacific, we trusted Jim and Donna to help keep our house in Carlsbad rented with reliable and respectful tenants for over 10 years.
Naturally, when the time came to sell our beloved Carlsbad home to pursue a rural lifestyle in retirement out of California, we could think of no better team to represent us than Jim and Donna. They immediately went to work to update our house built in 2004 to current-day standards and trends — in 2 short months they transformed it into a literal modern-day masterpiece. We trusted their judgement implicitly and followed 100% of their recommended changes. When our house finally came on the market, there was a blizzard of serious interest, we had multiple offers by the third day and it sold in just 5 days after a frenzied bidding war for 20% above our asking price! The investment we made in upgrades recommended by Jim and Donna yielded a 4-fold return, in the process setting a new high water mark for a house sold in our community.
In our view, there are no better real estate professionals in all of San Diego than Jim and Donna Klinge. Buying or selling, you must run and beg Jim and Donna Klinge to represent you! Our family will never forget Jim, Donna, and their whole team at Compass — we are forever grateful to them.
As you may know, there is a proposal before regulators to require a minimum of 20 percent down on all residential transactions. If allowed to take effect, the rule would put home ownership out of reach for middle-income Americans. It would take the average family 14 years to save up the down payment to buy a home. We just don’t need more hurdles. So please take time to visit the REALTOR® Action Center to answer the Call for Action and tell Congress this does not work for our industry or our country.
I definitely would not want to see regulation of this type, but really, perhaps we (and realtors) should wish not for easier financing but for much lower prices if it takes 14 years for the middle-income American to save what at any time prior to the past 15 years would have been a very reasonable downpayment for a home.
Whether we see lower prices is beyond me–I can’t imagine that we won’t see flat *real* prices for a very long time while inflation sticks it to bondholders, taxpayers, and others, until sense returns.
“As you may know, there is a proposal before regulators to require a minimum of 20 percent down on all residential transactions.”
Great.
It doesn’t look to me like the NAR has anyones interest but there own at stake in anything, ever.
Just look at the snakes and vermin running that organization.
Just a personal opinion, still allowed (for now) in Obama’s Amerika.
What DOES work are more bailouts.
Call your elected officials today and plead for cash-back purchase financing. It’s good for America and the industry.
Not completely correct.
Once such a down payment constraint was in place, prices would also drop, thus shortening the timeline to reach the 20%.
It was a huge mistake to go off that standard. Lowering the down payment amount over time brought more buyers into the market sooner. However, this was a borrowing-from-the-future tactic, and once you get to zero-down, there is no further way to goose the system for more buyers.
Unless you use ponzi finance and go with cash back at closing and neg-am loans. We did this of course.
Can you imagine what our grandparents would have thought about cash back at closing? The mere idea would have seemed insane to them.
Higher down payment requirements are bad for current home owners, of course, and will make home sales sluggish.
Perhaps the answer is an incremental increase in required down payment size, starting at 9 or 10 percent, and increasing a bit every year.
Most logical people admit that zero-down and neg-am loans created some real problems, in that it brought people into the housing market before they had demonstrated the ability to save money and be fiscally responsible.
What fewer people are willing to admit is that to whatever degree you permit/encourage debt, that is the degree to which you force a population into indebtedness.
If I was king, you would see a 50% down payment requirement. Yes, people would scream hysterically, but only until they saw the results:
* Low home prices
* Being debt free after a 10-year mortgage
* Lots of extra discretionary cash available, and a more secure retirement, since you don’t have 30 years of debt service
The steady lowering of down payment requirements, the lowering of credit standards, and the promotion of debt has been a gravy train for current homeowners, and those in the real estate industry.
But at the expense of impoverishing future generations, who labor under debt loads not experienced by previous generations.
I care about people far too much to want them to be in debt like that. It makes me think of all the educational-industrial advisers and admissions folks who get kids right out of college to sign up for many tens of thousands of student loan debt without explaining the ramifications of carrying that debt.
I support constraints of mortgage debt, even if it is against my own personal financial situation.
I actually support this. 20% down payment is achievable in a few years.
NAR is a gangster organization. Period. At some point I think a competing organization will form to challenge this gangster operation.
If we ever reclaim our sanity as a nation, we might require banks to keep their home loans for at least half the life of the loan. Banks could set whatever down payment requirements they want.
Making banks hold the loan would change a lot of stuff for the better. Of course, home sales would slow down. Probably a lot, until the new normal took hold.
I am not for regulating such a program–I feel it should be up to the lenders. Lender’s rates really should be more reflective of RISK. They should be offering substantially lower rates to those with larger downs payments, and be offering substantially higher rates for loans with lower down payments. In today’s rates, maybe 90% LTV = 7.25%, 80% LTV 5.75%, 70 LVT 4.0% 50% LTV 3.0%–less risk, lower rate! Give those who are aving some incintive to save. Who is defaulting today that plunked-down 50% or greater, even if they bought in 2005-2006?
“Lender’s rates really should be more reflective of RISK.”
There is NO RISK with securitization.
Securitization is just another shake and bake scam.
This is one of the big reasons we’re in the mess we’re in.
This is wonderful news and will make a stronger market in the long run,
I agree with Jack’s remark to have 50% down:
* Low home prices
* Being debt free after a 10-year mortgage
* Lots of extra discretionary cash available, and a more secure retirement, since you don’t have 30 years of debt service
In addition, it would make homeowner to think twice about walking away so easily. With 50% down or even 20%, homeowner have too much money vested in the house to walk away. Bank should support this because they won’t loose so much money either when people decide to walk away. If anything the bankster gang even more.
You need a poll Jim: How many current homeowners put down 20% or more when they bought their home? I bet the percentage is in the single digits.
Another poll might be: How many people put down 20% or more on their FIRST home?
Wow, one would think someone at the NAR would figure out that lower prices will mean more sales and then more income… (oh, and the advantage of actually selling in a market that it rational and not screwing your clients.)
Jim, you may be the only smart realtor out there, you should run for NAR president.
How many put 20% down before 2000 / after 2000?
“How many put 20% down before 2000 / after 2000?”
How many could afford to put 20% down?
I heard if you know the “right” people you can get a waiver. ha ha
For once, I find myself agreeing with the NAR.
Now is not the time for interjecting personal morality into the home financing process; you cannot put Pandora back in the box. Like the pillsbury doughboy, you push somewhere and it pops back out somewhere else; and not likely where you want it to (prices).
The reality is that prices are very sticky.
More likely, you’d get “alternative” financing that is non-collateralized and at much higher rates…
People would be in general less mobile for quite a bit longer (a weakness for competitiveness in a global economy).
Rents would be higher relative to prices… probably a LOT higher since we’re restricting lots of home buyers. This would make it the perfect time for landlords to gouge (with rising demand and stable supply). This is a “rich get richer” scenario.
Yes, prices will fall, but we’re never going back to the 1960s in California; it’s over, deal with it, and find solutions that work NOW, not then.
Be careful what you wish for. You might just get it.
Chuck
I put 20% down in 2008 for a house. I think everyone should otherwise it’s like having a non-recourse margin acccount (and we all see how that ended).
Prices will not collapse if 20% is required. There just will be significantly fewer real estate transactions which is precisely what the NAR does not want to see.
Economically speaking, it would encourage less housing turnover and strengthen community infrastructure investment once people live in their homes for longer – so I’m all for it.
I would not make 20% mandatory. Instead, what I’d like to see is all lenders required to carry the mortgages they issue on their own books for at least 5-10 years before they’re allowed to sell them. That should be sufficient to force banks to set realistic down payment requirements based on the risk they’re willing to take with their stockholders’ money.
GeneK,
I agree.
Yes, I like free enterprise – let the banks do what they want, within a proper structure. How about a law that makes them keep their low-down-payment loans for 5-10 years, or for the duration?
If they want/need to sell loans, they would only be selling those with the bigger down payments, so those buying them won’t get duped as easy.
The NAR is talking their book. It’s all in the vig. Each hand in the transaction got a piece and the government loved it because it brought in more money. Wild markets are great, until the party stops. The party has stopped.
The Sky is falling. Its not true that a 20% down payment would put home ownership out of reach for middle income Americans. The market would adjust to the new rule and home price would drop until the demand for housing would be restored. Doh! I wish NAR would take an Econ 101 course.
We put 20% down on our first home. And yes, I put 20% down on the home I just bought last November. And yep, that newest mortgage was sold within 24 hours…
We put more than 30% on our first home in CV so it’s very achievable. We didn’t go drive all new cars, go out and eat everyday and waste money on toys. We only did that after we bought our home and have been saving for our investment property in Carlsbad.
So I don’t get how people can claim it’s not achievable at all. You need to make sacrifices.
Compulsory 20% DP will never happen, just this weeks invisible monster. The nation is comprised of more then just rich white people.
First house 5% down; second one 20%; third 30%; forth all cash. Yeah we moved a lot for the last 18 years. Now I am renting and saving in the hope of buying all cash when the time is right.
“Instead, what I’d like to see is all lenders required to carry the mortgages they issue on their own books for at least 5-10 years before they’re allowed to sell them.”
You could split the difference, and only allow the resale of mortgages with 20% equity.
Enough with the mindless regulation. Why 20%? Why not 5, 10, 30, 50, 17.24325%? How did they come up with the number besides pulling it out of a hat? Let the lenders decide the right number, but if they get it wrong, they are on their own, no taxpayer paydays.
“It would take the average family 14 years to save up the down payment to buy a home.”
Based on what exactly?
Dear NAR, if you’re going to spout stuff, then back it up with real supporting factual data. This just makes me go…hmm
I am very interested in how this was arrived at; because that suggests (to me) the average family has lost financial ground. Perhaps, a condition of flat earnings in an overall inflationary environment, and/or there is some serious financial disorder, and/or the cost of housing has significantly inflated past historical data.
I agree with you bubblenerd. Unfortunately I have zero confidence that bailouts won’t occur if no-down or low-down loans go sour en masse. Look at what history has shown us.
Much as I despise regulation, if I am forced to choose between mandating minimum downpayments or bailing out Wall St./banksters with trillions of dollars, I have to grimace and choose regulation.
>That should be sufficient to force banks to set realistic down payment requirements based on the risk they’re willing to take with their stockholders’ money.
GeneK | May 19th, 2011 at 9:44 am
Trouble with this idea is unless there is a massive shift in overall regulation of derivatives (ha ha ha ha ha, right), like credit default swaps, banks will simply pass on the risk of the remaining % they have to hold and we’ll be back where we started from.
Of course, there are myriad ways of getting around a 20% downpayment requirement too, like the way builders do it (give you the money and add it to the total cost). No way of reducing the risk of taxpayers sucking it up and continually bailing out the banks is going to work without real regulation. Period.
>“It would take the average family 14 years to save up the down payment to buy a home.”
Then they sure as hell shouldn’t be buying a house. Are they buying a million dollar house on 40k salary or something? Wasn’t that determined to actually be a bad idea, or did the NAR fall and hit their heads really hard.
Where did they pull 14 years from, for FSM sake? $1000 a month saved for 14 years is $208k at 3% interest. That’s 58k more in cash than a house would cost at 30 years amortization at the same payment level.
These people should be picking up trash on the highway rather than running a national organization.
it took me nine years as a single person to save 20% +closing costs, starting from age 21 (actually, I started saving a few years earlier, but wasn’t thinking about using the money to buy a house until I got my first job out of college). It’s good to have a long term goal when you’re 21.
I agree with Jack. Of course saving up for 20% is out of reach right now, but that’s because the current inflated prices are reflective of a market that requires very little from a buyer. We’ve pulled demand forward for so long with low down payments to get everyone into a home, that we no longer have a concept of what a home would cost under traditional lending. We would be far better off with cheaper prices in the long term, than using credit to make homes “affordable”. We need to stop maintaining the housing wealth of past generations on the backs of future borrowers, which is only accomplished by pushing them into 30 years of unsustainable debt.
Although, I disagree that 20% should be mandatory, but in my opinion the government shouldn’t be backing any mortgages 20% or not. Let the lenders suffer the consequences of their lending instead of socializing losses, and be allowed to fail if they make too many risky loans based on nontraditional standards. But in my mind lenders would revert back to 20% if the government weren’t backing the loans.
The 10 percent down payment worked for at least 20 years without a problem. I bought my house this way.
20 percent is just an excuse to bypass touching the affirmative action subprime “third rail”. I don’t see it happening for exactly that reason.
Let the banks lend with whatever guidelines that they set for themselves….with two caveats:
1) Whatever they securitize must have clear information on what the base lending standard was for that security.
2) Any losses of non-securitized loans must be absorbed by the bank. Yes, even if they go down. No taxpayer money.
When did common sense start sounding like crazy talk?