Saturday, March 29, 2008

Fall houses!

This little bit of math summed up pretty well why housing prices simply can’t go anywhere but down. Also as a young person who stands to do nothing but gain from this whole debacle it pretty well sums up what I think the government should be doing.

"Take Los Angeles County, where the median price of a house peaked higher than $530,000. With a 6% interest rate and assuming a 10% down payment, the total annual cost of owning such a house would be $35,000 for the mortgage alone and $43,000 if taxes and insurance are thrown in. This would eat up roughly 75% of gross annual income of your median homeowner in the county -- much more than twice the maximum affordability rate used by Fannie Mae and Freddie Mac when making loan decisions. Prices are going to fall one way or another; it’s only a function of time. They simply aren’t sustainable at their current levels."


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