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California to lend 20% down payments with 0% interest for homebuyers
- yuppie_scum 4y ago“When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said. That could be a lot of money someday if you stay in the house long enough.
- arcticbull 4y agoIt's also setting up terrible incentives for the state to continue to see houses appreciate instead of making them more affordable. This makes wholesale housing reform even less likely than it already is, the state government is just getting its beak wet. Instead of you know, building more houses so that houses can be affordable instead of a good investment. Wanting housing to be both affordable and a good investment is a fantastic example of 'no take only throw' economics.
- deleted 4y ago[deleted]
- hgsgm 4y agoLol it's not a loan, the state is literally buying equity in the property, same as a VC does. CA is now a REIT.
- nomel 4y agoIs it safe to suspect that home prices, in CA, are going to sit 20% higher than they would, otherwise?
- SketchySeaBeast 4y ago20% + whatever 5% over 30 years (37%?) works out to be.
- hgsgm 4y agoPerhaps higher because some people already could afford part of a down payment, but yeah. Can't pass rent control, but can pass giveaways to landlords.
- arcticbull 4y ago> Can't pass rent control, but can pass giveaways to landlords. Rent controls do nothing to make houses more affordable at the limit, since prices reset to market any time someone leaves. They just make the market less efficient. Only adding more houses makes houses cheaper. Tons of the world's least affordable markets are already rent controled. Rent controled apartments in SF aren't cheaper. Neither are ones in Ontario. I can't really find any evidence they work at all. [edit] Here's a study I found on the effects of rent control in SF. > Leveraging new data tracking individuals’ migration, we find rent control limits renters’ mobility by 20 percent and lowers displacement from San Francisco. Landlords treated by rent control reduce rental housing supplies by 15 percent by selling to owner-occupants and redeveloping buildings. Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law. [1] [1] https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20181289 https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20181289
- guepe 4y agoMontreal has like 30 or 40 years of rent control. The downside is landlords don't invest in renovations. It does make montreal the most affordable large city of NA. So in theory I'm sure you are right, in practice it's not what is observed.
- arcticbull 4y agoNot exactly, because it only helps them make their down payment. The magnitude of their loan continues to be primarily defined by their income, which this program does not change. But yes, it will make houses more expensive. Not 20%, but some quantity by increasing the pool of competitors for the same fixed supply.
- yamtaddle 4y agoNah, the program had a fixed budget and it's already used up. So, some amount higher, maybe, but not 20%.
- dragonwriter 4y ago> Is it safe to suspect that home prices, in CA, are going to sit 20% higher than they would, otherwise? No, because its not available to all buyers, its income-limited, and funding limited.
- deepakhj 4y agoThe program already ran out of money. $300m for 2300 buyers. https://www.latimes.com/california/story/2023-04-08/california-has-already-run-out-of-cash-to-help-first-time-home-buyers-heres-what-happened https://www.latimes.com/california/story/2023-04-08/californ...
- mech987987 4y agoAverages out to roughly $130,000 per buyer. Assuming those are all at 20%, then average home purchase price is about $652,000.
- taf2 4y agoInteresting according to zillow: "The average California home value is $718,687, up 0.7% over the past year and goes to pending in around 31 days."
- hgsgm 4y agoPresumably, like PPP, all the giveaways went to friends of friends of people in government while the common people got frozen out.
- mbgerring 4y agolol, really? I got $16k in PPP loans without breaking a sweat. I spent all of ten minutes filling out forms. What are you talking about?
- Uw7yTcf36gTc 4y agoHe’s talking about people getting $10 million plus. Not the scraps like you and I.
- jollyllama 4y agoThe last big money grab (PPP "loans") was easy pickings for fraudsters. I'm guessing this will happen here too.
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- mech987987 4y agoCalifornia is really creative at finding ways to spend money.
- paulcole 4y agoI tend to think that's the point of having a government. Edit: While I appreciate the downvotes, can someone tell me why my thinking is wrong?
- Johnie 4y agoMay 2022 "With California budget surplus projected at $97 billion, Newsom proposes driver rebates, more reproductive health funding" https://www.capradio.org/articles/2022/05/13/newsom-california-budget-proposal-may-2022/ https://www.capradio.org/articles/2022/05/13/newsom-californ... Jan 2023 "After 2 years of massive surplus, California is facing a $24B budget deficit" - https://www.capradio.org/articles/2022/11/16/after-2-years-of-massive-surplus-california-is-facing-a-25b-budget-deficit/ https://www.capradio.org/articles/2022/11/16/after-2-years-o...
- BrianHenryIE 4y agoThe more recent news is that they have run out of money. > 'Unprecedented' demand: $300 million set aside for home loan assistance program gone in 11 days https://www.msn.com/en-us/money/realestate/unprecedented-demand-300-million-set-aside-for-home-loan-assistance-program-gone-in-11-days/ar-AA19Jlu1 https://www.msn.com/en-us/money/realestate/unprecedented-dem...
- veec_cas_tant 4y agoFound this part really interesting: >Evans said the new loan program has a shared equity program. “When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said.
- ng12 4y agoSounds like throwing gasoline into the fire. Housing prices are high because of supply and demand... so CA wants to use taxpayer money to increase demand?
- tasubotadas 4y agoAbsolute madness
- elcritch 4y agoThe best way to “defend” NIMBY-ism while feeling good you’re helping the poor and downtrodden.
- foogazi 4y agoOPM to “help” subsidize one class to buy from the other one
- theironhammer 4y agoAnd subsidize property speculators. The problem needs to be solved on the supply side not demand side.
- zbyte64 4y agoIt only applies to first time homebuyers. That's not fuel for property speculators.
- darth_avocado 4y agoThis is exactly what it is. If you can’t afford the down payment, how can you afford the mortgage?
- yamtaddle 4y agoSeriously. I'm a much bigger fan of government intervention in markets than, I think, most on this site, but this program just seems insane. "House prices are too high—let's raise demand rather than address supply!" LOLWUT? > "I thought the program was genius," said Scott Evans, executive vice president of Cross Country Mortgage, describing what he thought when he first heard about the new loan program. Mortgage dude likes having more clients. Shocking. > “When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said. Wow. This gets even weirder. At least I guess this means they'll likely make money on the whole thing, but I'm not sure I love a state government being an outright investor in private homes.
- deleted 4y ago[deleted]
- mastax 4y agoThe day after this article was published, the program ran out of money after helping "more than 2300" homebuyers. https://www.calhfa.ca.gov/homeownership/bulletins/2023/2023-03.pdf https://www.calhfa.ca.gov/homeownership/bulletins/2023/2023-...
- yieldcrv 4y agoBtw funds were depleted from this almost immediately, and nobody that signed up for this was processed. People that were already closing on a home and in that agencies system were first in queue to flip over to this programme Everyone else will have no time to identify a place, sign up etc
- burlesona 4y agoUnfortunately, the way financialization works, we should expect this to lead to a bump in home prices that roughly perfectly offsets the increased buying power created by this financial instrument. The only long-term solution to affordable housing is abundant supply.
- walkhour 4y agoSomeone said a few posts ago housing can't be affordable and a good investment. This is just madness, house prices are guaranteed to go up and affordability is likely to increase zero.
- joecot 4y agoPumping government money into private markets always works this way. A good example of this is the TV digital converter boxes, when we switched the airwaves from analog to digital. Those boxes were only 10 or 15 bucks or so. But then the government gave everyone vouchers for 40 bucks for a converter box. So, guess what? All the converter boxes were 40 bucks, or more. Because they could be. It was free money. The money would've been far better used by the government just giving the converter boxes directly.
- jspaetzel 4y agoA handout to sellers in a buyers market
- ApolloFortyNine 4y agoThis seems suspect no? I agree the amount you need to out down is too much right now (floating 100k plus for a down payment), but making it essentially require 0 down sounds like you seriously run the risk of 08 part two, where it will be very easy to lend to people who actually can't afford it, or aren't financially responsible enough to handle it. Lending half of a down payment or some other percentage would sound much safer.
- jmerz 4y agoShot, meet chaser: https://www.kpbs.org/news/local/2023/04/10/california-first-time-home-buying-assistance-program-runs-out-of-money-within-two-weeks https://www.kpbs.org/news/local/2023/04/10/california-first-... I appreciate this as an anti-inequality measure, but it feels like in California low/med income buyers are being outpriced by a lot more than 20% of a down payment. "We can fit 18 million groups into 14 million units of housing, as long as we pay 20% of the cost" feels like a really last ditch housing policy.
- nrmitchi 4y agoThis is throwing fuel on the fire, not only by increasing demand in an already supply-constrained environment, but by the government of california committing $300M to fairly-directly invest in residential real estate. It's also not entirely clear what happens to the state's "20% cut of appreciation" if the home value drops. I suspect the state isn't going to take a haircut off their initial loan amount.
- teaearlgraycold 4y agoThe headline I wanted to see: California to spend $300 million building new housing by retrofitting commercial real estate
- int0x2e 4y agoIsn't this a prefect recipe for a super-bubble? When you help people with the down payment this much, wouldn't basically everyone try to apply to enjoy appreciating property values, driving demand and prices ever higher, and even worse - with relatively little commitment to follow through if the economy gets choppy? With the down payment, at least you have some skin in the game, but with this program, for the first 5-10 years you would probably see your mortgage mostly as a rent alternative...
- pcurve 4y agoMore patchwork solutions a la healthcare style that adds more complexity for ordinary people. When people couldn't afford to actually use health insurance due to high deductibles, what did the gov't do? Come up with HSA and HRA programs. This is yet another giveaway to landlords and ways to prop up housing market that is one a decline.
- akeck 4y agoHeh. So, we did a similar two loan structure back in 2004. It got us into the house, but paying both loans at once was stressful for several years until the family income finally caught up enough to provide a comfortable margin of safety.
- rich_sasha 4y agoI wonder what would happen if instead the state spent the 300m on building houses and selling them, say, 10% below market price or sth. Well I guess you can build a fair few houses for that money. In this programme it was funding 20% of the house rather than 100%, but the 100% also includes the markups of the various business doing the building. Meanwhile, not only do you end up with more houses, diluting the price down, but also neighbouring sellers / developers need to compete with the state cheapo houses, bringing prices further still. Of course the other thing that happens is that because housing is a localized Ponzi scheme, local residents are aghast (understandably to me) because after years of saving to buy a house, the state devalues their property. Though maybe if you spread out the housing... Now I'm just thinking aloud.
- NotYourLawyer 4y agoLending money indiscriminately so people can buy houses they can’t afford? 2008 is calling, it wants its terrible idea back.
- matt3210 4y agoThis is a wealth transfer from the tax payers to the landed gentry
- web3-is-a-scam 4y agoAh yes, because clearly the way to fix a housing crisis from outsized demand and insufficient supply is to give even more people access to cheap debt. This is so unbelievably stupid, I can't help but wonder if this is actually on purpose to make the problem worse. This type of thing makes me think of a corollary to Hanlon's Razor: given enough time to try to solve a problem, sufficiently stupid people are indistinguishable from evil.
- pcurve 4y agoSo if home appreciates from 500k to 600k and I sell the house, the gov't gets to keep $20k (+ the $100k they loaned) What happens if it goes down from 500 to 400k?
- coliveira 4y agoThis madness in the US is feeding property speculation. The responsible thing to do is to use this money to build more housing, so prices will fall or at least remain at the same level.
- paxys 4y ago> “When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said. So instead of fixing housing speculation, this is just a roundabout way for the state to get in on it.
- muzz 4y agoThis is eventually a subsidy to the sellers (while the program is in effect)
- sakopov 4y ago> State lawmakers had set aside $500 million for the program as part of the 2022-23 budget. But a looming fiscal shortfall led Gov. Gavin Newsom to propose a 40% cut, so when CalHFA launched the program late last month, it was allocated only $300 million and expected to assist about 2,300 home buyers. What a circus.
- PaulDavisThe1st 4y agoI hope that CA does not follow the UK down the path of absolutely fucking insane policies to try to hide the utterly insane state of their housing market(s). The UK has policies like this (utilized by my niece to buy an apartment in London): buy 60$, rent 40% ... since you're only buying 60%, the downpayment requirements drop, so more people qualify. But wait, won't they have to pay rent as well as the mortgage? Why yes, they will indeed. But doesn't that mean that their monthly payments are still essentially unsound, as they would have been if they had bought 100% ? It certainly does, which is why this plan requires government backing to exist in the first place.
- friend_and_foe 4y agoUnless you increase supply it's not going to do anything.
- dogma1138 4y agoHelp to buy ruined the housing market in the UK and especially London. This is so fucking stupid…