The Collected Works of Author and Blogger Larry Roberts

Author Archive: Larry Roberts

Despite legislators and bureaucrats best efforts, the homeownership rate continues to slide. Since the Great Depression, presidential administrations with a cooperative Congress implemented policies intended to maximize the homeownership rate. At the end of World War II, the returning servicemen armed with FHA loans bought millions of new production homes and raised the homeownership rate significantly from the bottom of the depression. Apparently, the new policies were a success. However, the early success was not matched by future increases in home ownership. Once the stimulus provided by FHA loans reached a new equilibrium, the home ownership rate stabilized at about 64% and remained there for about 40 years -- despite ongoing tinkering with financing and other policies. During the mid…[READ MORE]

The cuts to the FHA insurance premium had little impact on sales overall, but more borrowers used FHA insurance. Was the policy a success? Lowering the FHA insurance fees was the right idea at the right time. Due to the losses sustained and expected at the FHA insurance fund, the fees were raised to very high levels, making FHA the new subprime. When first-time homebuyer participation rates hit a three-decade low, I predicted that Pressure would mount to lower FHA insurance fees to revive home sales. Shortly thereafter FHA loan fees were cut in half, and I stated that Lowering FHA insurance fees will spur the housing market. Why was lowering the FHA insurance fee so important? My market studies…[READ MORE]

Since most people no longer fear being priced out, prospective home buyers see high prices as a deterrent rather than an incentive to recklessly jump into the market. Generally, when the price of any good or service goes up, buyer demand at the higher price diminishes because fewer people can afford higher prices. This isn't a particularly difficult economic concept to understand except that housing markets violated this idea repeatedly over the last 40 years. In the past, rising house prices often led to an increase in the quantity demanded, not because more people could afford it, but because buyers became more motivated in order to capture home price appreciation. When prices rise faster than their wages, people can obtain…[READ MORE]

Most feedback I receive from readers is positive, but occasionally someone with an opposing point of view has an emotional reaction and writes me to correct my many misconceptions. I recently ran the post, Responsible homeowners did not lose their homes in foreclosure. In that post I made the case that most foreclosures were caused by overborrowing rather than unemployment or other unforeseeable events. Not everyone agrees with my view of the world, and one reader in particular was incensed enough to write me about it. As with most victim rants, this one points to everyone and everything else to blame for their outcome in life. This woman blames the banks, insurance companies, even the weather for her misfortune. Nowhere…[READ MORE]

School ratings reflect where concerned parents move with their children, not the quality of education a school provides. Parents want to provide their children with every advantage in life. Those students with the best education generally enjoy higher wages and greater life achievement than students from school districts with low achievement scores. Parents react to inequities of our education system by shunning poor performing districts in favor of higher rated ones. Thus real estate values are higher close to better schools. Many parents shopping for a house obsess over the school ratings. They aren't chasing the ratings because of abstract correlations to a better life. Parents seek out these schools because they believe the quality of education is higher and…[READ MORE]

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