The Collected Works of Author and Blogger Larry Roberts

Archive for August, 2013

The conventional wisdom is that mortgage delinquencies are falling because the economy is improving, borrowers are going back to work, and they are resuming payments on their mortgages. Unfortunately, reality bears little resemblance to this spin. In truth, almost no borrowers resumed making payments according to the original terms of their mortgage. Delinquencies are falling because lenders are offering greatly reduced payments to squeeze a few more dollars out of debtors while everyone waits for prices to rise back to the peak. And despite lenders best efforts to make their loan modification deals too-good-to-be-true, nearly half of those given these loan modifications end up defaulting again. Mortgage delinquencies take a sharp turn up By: Diana Olick | CNBC Real Estate…[READ MORE]

I am a supporter of home ownership -- not loan ownership as it's become perverted into -- but real home ownership free of encumbrances like a hefty mortgage. Most people who achieve home ownership go through a period of indebtedness because few can save enough (or get gifts from relatives) to buy a house for cash. Those that achieve home ownership do so through disciplined repayment of mortgage debt without adding to it to supplement consumer spending via the home ATM. Anyone who plans to stay in one location for five years or more should consider home ownership. It is advantageous to fix one's housing costs with an amortizing fixed-rate mortgage, and over time, between house prices inflation and amortizing…[READ MORE]

It's no secret that I don't think consumer debt is a good idea (See: Think you want consumer debt? Think again…) With the ongoing war on savers waged by the federal reserve, it's been a difficult time to maintain a discipline of saving instead of consuming. However, buried in the new qualified mortgage rules is a loophole that may give those with little or no consumer debt a major competitive advantage when bidding on houses. The new qualified mortgage rules cap overall debt at 43% of gross income. This was in response to the enormous debt burdens exposed when lenders abdicated all lending prudence and gave Ponzis unlimited deb. The back end ratios of the average borrower, not the extreme,…[READ MORE]

Since interest rates suddenly and unexpected rose nearly 35% in a two-month period, the mainstream media and bullish housing market analysts have been busy assuring everyone that rising interest rates would have little or no impact on efforts to reflate the housing bubble. Since this is what most people want to hear, an eager public readily accepted the market spin. Unfortunately, early signs are that rising interest rates are negatively impacting the housing market -- just as anyone with common sense would think they would. Is it rational to think that raising the cost of any commodity 35% in two months would not impact sales? And for financed buyers, particularly those using FHA financing putting only 3.5% down, a 35%…[READ MORE]

The conventional wisdom is it's either a good time to buy or it's a good time to rent, but not both. Rising house prices and rising rents generally favor buying because the owner can lock in a fixed cost of ownership while profiting from appreciation. Falling house prices or stagnant rents generally favor renting because the renter's costs are not escalating while the owners are losing equity. But who gets the upper hand when prices are rising but rents are stagnant? In my opinion, it can be both a good time to buy and a good time to rent, and now is one of those times. House prices are rising, and although appreciation will likely slow significantly from its recent…[READ MORE]

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