Way to stop housing speculation. My idea for Obama.

Discussion in 'Economics' started by KINGOFSHORTS, Jan 3, 2010.

  1. Why not start a House Exchange Commission and enforce the same Margin requirements on home speculators.

    Not on the primary residence, only on extra homes purchased.

    ie. You have to put down initial 50% down to buy a speculative flip home.

    Regulation H, when a trader buys a speculative home on margin, key levels must be maintained throughout the life of the trade. First off, a bank cannot extend any credit to accounts with less than $20,000 in cash (or equivalent home equity). Second, the initial margin of 50% is required for a trade to be entered on the housing market. Finally, the maintenance margin says that an equity level of at least 25% must be maintained. The investor will be hit with a margin call if the value of house falls below the maintenance margin.

    Should the market value of the houses in your margin account decline below minimum maintenance, you will be required to deposit more cash or titles to your other homes including primary residence with equivalent equity required or sell some of the homes in your portfolio in order to bring your account back to the initial margin requirement. If you are unable to do so, Bank XXX may be required to sell all, your homes to meet the initial requirement. Margin trading of homes for the purpose of flipping entails greater risk and is not suitable for all investors.

    Long Positions Initial Margin Requirement Minimum Maintenance Requirement
    Condos 100%
    New McMansions The greater of 50% 50%
    Homes in well established neighborhoods in good areas The greater of 50% 30%
  2. Overzealous Government career bureaucrats created the problem with housing in the first place. You actually believe more government involvement fixes the problem?

    How about we have less government involvement, and we go back to playing by the rules - such as 20% down on all first mortages. Anything less requires the borrower to carry PMI.

    - Spydertrader
  3. idiots. With the frictional costs, wide bid/ask spreads,commissions, carrying costs, opaque non fungible over the counter market with limited price discovery why the heck entertain such speculation?

    Better off trading SPY., selling credit spreads (put spreads etc..)
  4. Why not? we have to follow Reg-T when taking margin, speculating on homes with borrowed money is no different than speculative trading.

    1929 people borrowed on insane margin which caused a huge market bubble and burst. and margin rules had to be put in place.

    The housing bubble is similar to what happened to traders who bought on margin in the late 20s'
  5. why was this thread opened, do you realize obama doesn't give a shit about you or your country? he's enjoying the fame and game while it lasts
  6. jprad


    Which is exactly Spyder's point. By lowering the lending standards you ended up with a speculative housing bubble.

    Loose credit always ends up in a bubble.
  7. Then whoever takes charge.

    Housing as a speculative instrument is bad for the long term economy.
  8. no matter how bad it seems or is, housing speculation will never end, there is actually a new round of real estate bubble starting to emerge, we are the next UK
  9. The US housing system is meant to be inefficient and prone to bubbles, otherwise it would likely create a kind of deflation over time (you would only see this of course if the fed were not involved in an endless cycling of monetary expansion)....

    A legitimate alternative would challenge the bubble /blow-up scheme that banks in the US have been operating under for the ages - look at 1982... same thing happened in the US, banks were bankrupt. Bailed out by the taxpayer, whom rightfully should have been owed a cheaper home on account of the fact that their lender banks were bailed out, but not the homeowners..

    Soros' idea which he got from the Danish, which is in use
    and seems to be much more effective is shown in the link below:


    Once again, inefficiencies in the Market are the illegitimate children of flawed monetary policies.
    #10     Jan 3, 2010