Obama’s mortgage plan details released – How will it affect San Mateo?
Today the Obama administration officially released the details of their mortgage rescue plan. This is a plan that really focuses on loan modification. I do not think this would affect troubled San Mateo homeowners very much and this is why.
First of all, lets do some simple math. The median household income in San Mateo County is $80,000 to $90,000. Granted, this is pretty high compared to the rest of the country, but the median housing price was around $800,000 during the peak. From what I have seen, a lot of these troubled homes were financed with 80/20 first and second mortgages and the mortgages are conservatively $4000 a month. Additionally, the property taxes on a home valued at 600k to 800k would be $600 to $800 a month. When you throw in insurance and maintenance the final cost is even higher. For a family earning $90,000 a year, 31% of their monthly gross income would be $2325, which means to keep their home their mortgage has to be reduced to $1500 a month. I think that is just laughable.
Now that the median price in San Mateo County has slid under $500,000, it would be plain stupid to pay property taxes on the basis of $800,000 and keep an unaffordable mortgage. So I really do not think Obama’s plan will affect the sliding prices here in San Mateo very much. Prices were just way out of reach for normal folks, and they need to fall. Most people I know that live here in the county have not had huge pay raises in the last couple years, and the current housing prices are still out of reach for many. I have said this many times before and I will say it again. The housing market wil only recover when prices come in line with income, and all of these government efforts to keep people in unaffordable housing situations are just a waste of time and money.
For the troubled homeowners out there, I suggest that you squat in your home as long as you can because banks are really slow to foreclosed these days. You can work on a short sale or tell the bank to produce the original mortgage note. This will give you a few months of free housing. Forget about keeping your overpriced shack because it is not worthwhile in the long run. Your credit can recover in seven years, and there is no point in paying a $800,000 mortgage at $4,000 to $5,000 a month when you can rent the same house for half that price.
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5 Responses to “Obama’s mortgage plan details released – How will it affect San Mateo?”
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Wow, I can smell the vitriol from here!
1- Do you think that the median earner is the median buyer? 50% of San Mateo residents rent. The 50% that own tend to have higher incomes than those that rent. The median income of homeowners is more than the median income of the total population.
2- For people with no skin in the game, ie 80% first, 20% second, walking away might be a good idea. But for those who sank considerable downpayments into their properties, it doesn’t make sense to take the credit hit to save 50-100K.
3- Inflation. If you think that we aren’t headed into serious inflation, then you aren’t paying attention. In the 7 years that it takes for your credit to be repaired, prices will likely rise 25-30% from the current nadir. That assumes a 3% annual inflation rate. If inflation hits 8%, there would be a 70% increase in prices in the same period.
In short: your bitterness has limited your analysis. Either that or you are rooting the market down with the intention to buy and profit at others misfortune. Either way, it’s not very becoming.
As to point one, I know that a lot of San Mateo residents are renters. However, I think that the median buyer should have a median income. Historically San Mateo has been an affordable area where the average teacher could afford a home. It simply got out of line in the past decade or two.
Sure, I agree that people with a significant downpayment should probably stay in their homes if they are able to afford their payments. However, a lot of the homes listed on this site has owners that are not able to make payments any longer. If their downpayments are already gone then why should they go through the stress of blowing every cent on a home they cannot afford?
As to inflation, I’m not sure what will happen and I’m not sure if housing price increases will actually beat inflation. In the late 80s after the housing crash of 1990/1991 housing prices stayed flat for years on end. Personally I think the housing market will not recover very much in 7 years. We will see, though. In those 7 years I am betting that the people that stop paying their mortgages may end up beating inflation if they invested the money they save wisely in the stock market right now since the markets are really low right now. However, that would be up to the family’s money management and it is not guaranteed.
Finally, I’m not bitter. I’m just writing what I believe. My husband and I make more than twice the median income and we could afford a home here, but we choose not to.
In reading about the bailout for home owners, I found this tid bit that hadn’t been discussed very much: The lower interest rate available through the Obama plan is ONLY GOOD FOR FIVE YEARS. The time frame to people to take advantage of this will expire in June of 2010, and so, will we find outselves in this place again in June of 2015? I find the stimulus plan ridiculous anyway, but with this info, are we postponing the inevitable? Again? The bottom line is: The housing bubble made people want to buy homes they could NOT afford, not then, not now, not in 5 years.
The thing that most people do not realize is this: We live in a supply and demand economy. Populations will continue to grow and people will continue to need a home. If you rent, good for you. Maybe you can earn 10 percent in the market but when the next big wave hits and you’re wondering why home prices are double what they were, you’ll be wondering the same thing “why are home prices so high?”. You’ll be hoping for a failure in the market so you can get in at the bottom and that will be your life long attitude. Owners will be sitting pretty owning homes when the next wave comes. Supply and demand. It’s business 101.
help! i was in an adjustable 1st and 2nd with first ranklin and a year ago i refied with us bank ,i was told i would only have a first at 6%. now my income in rv sales has dropped from 60k to 24k so with 609 a mo to $22,500 in cc debt and 2 car loand totaling$691 a mo. so i spend a day on the phone with us bank to be told i dont have a mortgage ,i have a home equity loan and therefore do not qualify for the presidents offer,and since im in rv sales.no help-since may not get better?