The Collected Works of Author and Blogger Larry Roberts

Archive for July, 2013

As mortgage rates increase it will put the mortgage interest deduction question back into focus. This has been a rumor that has circulated for several years.  For the extreme high income earners the mortgage interest tax deduction has a phase scale.  It's called the PEP and Pease tax rules that phases out the mortgage interest for couple earn more than $25o,000 per year.  The PEP and Pease is the first successful attempt to reduce the deduction.  There are other several proposals to phase it out, but it will probably a modification of this law that will pass.  If fact, Congress would have to do is just lower the income threshold and increase the phase out calculation to apply the PEP…[READ MORE]

After writing the post Sell now, mortgage interest rates to keep rising, I received an email from John H. Dolan ([email protected]), Independent Market Maker –CME Case Shiller Futures & Options. He pointed out that sellers who are worried about potential declines in house prices don't need to sell their homes. Instead, they can sell futures contracts (short the market) that will rise in value if the Case-Shiller index goes down. Futures Markets From Wikipedia: In finance, a futures contract (more colloquially, futures) is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed upon today (the futures price or strike price) with delivery and payment occurring at a…[READ MORE]

The recent sudden spike in mortgage interest rates shows no signs of abating; in fact, it is getting much worse. The yield on a 10-year Treasury has moved up from about 1.7% in May to 2.7% today. Since mortgage interest rates and 10-year Treasury rates correspond strongly (they are competing investment alternatives subject to substitution), mortgage rates are also expected to move up a full 1% from their May levels. That translates to a jump from about 3.5% to 4.5%. Yesterday, there was another huge selloff of the 10-year Treasury. Mortgage interest rates may hit 4.75% shortly. Mortgage rates poised to jolt up again July 7, 2013, 3:07 PM ... on Friday, the 10-year Treasury yield posted a large jump,…[READ MORE]

All characters appearing in this work are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. As many of you know, I went out to Las Vegas to purchase rental homes. Back in August of 2010, I wrote the post Buy Las Vegas real estate where I made the case for buying undervalued homes and holding them for cashflow and apprciation. Not long after that, Wall Street also came to believe this was a good idea, and the REO-to-rental business model took off. The activity of investors like me and the Wall Street giants helped form a bottom in the Las Vegas housing market and other markets across the country. To buy a large number of homes,…[READ MORE]

The housing market bottomed in early 2012 due to a combination of restricted inventory, record low mortgage rates, and increased investor participation in the housing market. I thought the rally was a seasonal bounce, and I was not convinced of the durability of this bottom until it became clear the banks were going to kick-the-can forever, and Ben Bernanke pledged to keep mortgage interest rates low for as long as possible. My perception of the power of Bernanke's statement contained a hidden assumption, that the federal reserve would be able to keep interest rates low through continued quantitative easing. I am now calling into question that assumption. Recent events show that the federal reserve is losing control of the long-end…[READ MORE]

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