The Collected Works of Author and Blogger Larry Roberts

Archive for November, 2015

Paying too much for a house can leave the family with too little disposable income to satisfy other desires or meet important family obligations. Housing is often touted as an investment you can live in. The dual purpose nature provides twice the utility, so people feel comfortable paying twice the price. Buying a home is always an emotional decision. When people fall in love with a property, if either spouse bothers do perform a financial analysis, it's generally biased toward the answer they want to hear. Rather than an objective look at the costs and benefits, the analysis becomes a flimsy justification for an emotional decision already made. Sometimes, that leads to costly mistakes. Live & Learn: Buying a home…[READ MORE]

Lenders must deny mortgages to good borrowers to prevent too many deadbeats from getting mortgages and destabilizing the housing market. Environment is stronger than will power. -- Paramahansa Yogananda When you were in high school, did your parents ever caution you about the company you keep? The people you share common interests with can be either a positive or a negative influence on your decision making. They can lead to to success, or they can lead you astray. When lenders want to evaluate a potential borrower, they don’t interview friends, but they do examine the financial characteristics of a borrower’s life, and they make determinations based on the historical behavior of others with the same characteristics. That’s the whole point…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 23.8%. This market is 5.2% undervalued. Median home price is $306,400 with a rental parity value of $405,700. This market's discount is $99,300. Monthly payment affordability has been improving over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis declined from $172/SF to $172/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 4.2% indicating a longer term upward price trend. Median rental rates increased $6 last month from $1,785 to $1,792. The current capitalization rate (rent/price) is 5.6%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Housing bubble 2.0 is built on stable, fixed-rate mortgages applied to verified wages rather than unstable affordability products applied to borrower lies. The Great Housing Bubble of the 00s was inflated by mortgage affordability products such as option ARMs that allowed borrowers to obtain mortgages more than double the size they could afford using a 30-year conventionally-amortizing mortgage. These toxic mortgage products proved unstable, evidenced by millions of defaults. Lenders followed their standard loss mitigation procedures and foreclosed on delinquent borrowers and resold the resulting real estate owned (REO). Since there were so many of these properties, the MLS supply swelled, and lenders liquidated their inventory at fire-sale prices. House prices were crushed. In 2012 banks went “all in” betting…[READ MORE]

The FHA traded in a viable long-term income stream for some short-term refinance revenue creating potential for future shortfalls to the fund. Supporters of HUD Secretary Julián Castro, a potential VP running mate, gloated over the recent news that the FHA insurance fund swelled to reach it's 2% capital reserve mandate. But the celebration is premature. The FHA insurance fund is not as strong as politicians want to spin it. The FHA became the replacement for subprime lending during the housing bust. It insured millions of loans as prices crashed, and many of those borrowers defaulted and many more are still underwater. With many delinquent loans and collateral values below loan balances, the FHA stands to lose billions. The FHA…[READ MORE]

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