The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2014

Borrowers face rising costs on FHA loans and the lower limits on what they can borrow, reducing the size of the borrower pool and increases the cost of debt. This will hinder efforts to reflate the housing bubble. I recently reported on how the FHA lowered the boom on Coastal California housing markets. A lower FHA loan limit affects houses priced in the $650,000 to $800,000 price range because borrowers looking to borrower more than $625,500 must use jumbo financing, which usually requires at least 20% down and higher FICO scores. Previously, a potential buyer of a $765,000 home only needed a $35,250 down payment to complete the sale. Now that buyer must come up with $153,000, and they are…[READ MORE]

The federal reserve is tapering its purchases of mortgage-backed securities. This may drive up mortgage interest rates and cause housing markets in more sensitive markets like Coastal California to feel pain though lower sales volumes and perhaps lower prices. If mortgage interest rates go up and incomes do not, borrowers will not be able to borrow enough to support today's prices. In June of 2013, rising interest rates killed the bubble reflation rally that began in early 2012; prices stopped going up, and transaction volumes declined to levels lower than witnessed in 2012. If mortgage interest rates move even higher, sales volumes will decline further, and it may begin to erode pricing, although a crash is unlikely given the nature…[READ MORE]

Lenders want to pass interest-rate risk on to unsuspecting borrowers while working within the confines of the new qualified mortgage rules. Although some borrowers claim to understand the risks, if their bets prove wrong, most will petition for bailouts, and they have every reason to expect to get one. For every good law, shysters find a loophole. Bankers proved, time and again, they will develop "innovative" loan products, designed to generate fees, which borrowers invariably fail to repay because disguised somewhere in the terms, a provision causes loan payments to increase, the borrower can't afford the new payment, and the borrower defaults. The new qualified mortgage rules attempt to reign in the worst of these abuses, but on the margins,…[READ MORE]

The NAr wants to overstate the current month's readings and downward revise the previous month's readings because it always makes the current month look like it's increasing. The National Association of realtors lies about market data; it doesn't just exagerate or consistently repeat honest mistakes -- it lies -- knowingly and purposefully. Back in early 2011, I reported the National Association of realtors caught lying about home sales. Later, Reuter's reported Existing home sales to be revised down from 2007, and ZeroHedge noted US Housing Market Was Artificially Inflated By 14% In 2007-2010 NAR Reports. The NAr would like everyone to believe these were "honest" mistakes and that this corrupt trade organization intended to provide accurate data, but they merely made a…[READ MORE]

The housing bubble pulled forward a generation of buyers; the housing bust cost these buyers their homes and their good credit, removing many of them permanently from the housing market. Lenders succeeded in manipulating market prices by restricting supply; however, for a true recovery in housing, the market requires resurgent demand from first-time homebuyers and move-up buyers. These two groups are typically the largest source of housing demand, with the first-time homebuyer the bedrock of the housing market; without first-time homebuyers, no move-up market exists. The first-time homebuyer market propels upward by job growth and household formation; when the economy is strong and creating good-paying jobs, young people form new households and use their new income to bid for real…[READ MORE]

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