The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2017

Rising mortgage interest rates will slow home price appreciation Higher mortgage interest rates will reduce future loan balances; thus today’s homeowners will not experience the home price appreciation enjoyed by previous generations. Many would-be homeowners rush to the market to lock in low mortgage rates out of fear of being priced out forever. Nervous buyers fear that if they wait, they will fail to get a place of their own. Due to our chronic shortage of homes, there is some basis for this fear, but potential buyers considered the ramifications of that occurrence, the fear would evaporate. If today’s homebuyer were to be priced out tomorrow, they probably wouldn’t be alone in that predicament. In fact, if a great many…[READ MORE]

Chinese government decree prohibits investment in foreign real estate State Administration of Foreign Exchange requires all buyers of foreign exchange to sign a pledge that they won’t use their $50,000 quotas for offshore property investment. It’s really happening. The outflow of capital from China prompted the decree to stop Chinese Nationals from investing money in offshore real estate. In several posts I describe the twin threats to the US housing market: rising rates, and reversal of flow of foreign capital. Rising mortgage interest rates will affect the entire housing market, but a reversal of flow of foreign capital will most strongly impact coastal housing markets. In particular, if the influx of Chinese capital were to stop coming in and actually…[READ MORE]

Top ten ways to protect taxpayers against future mortgage bailouts More than eight years after the government took over mortgage finance, the US taxpayer still insures the bulk of the loans in the housing market. Prior to the collapse of the housing bubble, when lenders foolishly loaned money to people operating personal Ponzi schemes, it was theirs to give — and to lose. But when the losses overwhelmed our banking system, the government took conservatorship of the GSEs, and they backstopped the largest banks with our too-big-to-fail guarantees. With those two steps, the government now assumes nearly all risk of loss in the US mortgage market. With taxpayers absorbing future losses through explicit and implicit guarantees, lenders have no reason…[READ MORE]

Expect low for-sale house inventory for many more years For the missing MLS inventory to return to the market, borrowers need debt forgiveness, and house prices need to move even higher. I advise buyers to be sure they plan to live in the same place for at least two or three years for prices to rise high enough for them to sell and cover the sales costs. In a normally appreciating market like we have today, it still takes seven to ten years for prices to rise high enough to pay the costs and leave a first-time homebuyer with the 20% equity needed for the down payment on a move up. The breakeven barrier of two or three years keeps…[READ MORE]

Raising California's minimum wage won't help workers much Competition for limited housing stock will prompt low-income workers to allocate any pay raises to securing better housing, enriching landlords. Advocates for raising the minimum wage aspire to help. Many working-class Americans barely subsist earning minimum wage — and some only survive living in appalling conditions. Advocates of raising the minimum wage believe forcing employers to pay more will put more spending money in the pockets of low-wage workers and improve their quality of life. Many advocates for eliminating the minimum wage are industry shills paid to peddle lies so employers can exploit workers without paying them a livable wage. However, many advocates for freezing the minimum wage or eliminating it completely also…[READ MORE]

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