Town Square

California legislators want to help you buy a house with down payment, 'shared equity'

Original post made on Jun 16, 2022

California legislators propose a $1-billion-a-year down payment program for first-time buyers, given the high cost of housing and rising mortgage interest rates, in exchange for a partial stake.

Read the full story here Web Link posted Thursday, June 16, 2022, 12:09 PM


Posted by JustAWorkingStiff
a resident of Another Mountain View Neighborhood
on Jun 16, 2022 at 3:59 pm

JustAWorkingStiff is a registered user.

This initiative may not age very well.
Rising interest rates/mortgage rates will be negatively impacting housing prices
Using Government money (e.g tax payer money) to help a few people buy houses is likely not
a good idea. (Although I am sure it makes a lot of people *feel* good.) Plus in a low mortgage rate environment is would only ad to demand, driving up prices.
Missing from the article is how the Federal Reserve Bank was buying $50 billion in mortgage backed securities every month, and suppressing mortgage rates artificially. This allows people to bid up housing prices (geez, with rates this low, let's bid $50K higher). This is ending, and it will be instructive to see the effect on housing prices (likely negative).
Net/Net: It is interesting to watch as our politicians twist themselves into a pretzels to try to do something good. But ignore economic realities. And ignore the elephant (s) in the room
Those elephants include 1) Artificially low mortgage rates which create too much demand and drives prices higher (this is declining as per events on Wed June 14 as per Federal Reserve Chairman's Jerome Powell and other supporting event too numerous to enumerate) 2) Too much demand (e.g. we live in a high demand area with high paid tech workers)- many of whom are being asked to come back into the office 3) The land itself is so expensive that it often requires the scraping of old building to put more modern up to date apartments that can bring in more revenue and margin to support the price paid for land 4) The additional costs of regulations, fees, paperwork - this doesn't get enough recognition. There is a cost to maintaining compliance. But the attitude is often "it is just a little bit". A little bit adds up.