The Collected Works of Author and Blogger Larry Roberts

Will rising mortgage rates lead to housing stagflation? Lower house prices due to higher mortgage rates still result in a higher cost of home ownership. Everyone shopping for a home wants to see lower prices. For most products, paying less for it means the buyer keeps more money to purchase other goods and services, but with houses, this isn’t necessarily the case. Most people borrow a great deal of money to buy a house, often 80% to 96.5% of the purchase price. In fact, the cost of borrowing money is largely what determines how much someone can borrow and bid to buy a house. (See: Your neighbor’s debt creates your home equity) When mortgage rates go up, the cost of…[READ MORE]

Nine percent of US homeowners lost their homes over the last decade The homeownership rate is plunging because the housing bust tarnished the American Dream dream, and a new generation chooses to rent instead. For nearly 100 years, US government housing policy maximized the homeownership rate and the rate of growth in house prices. Politicians characterized homeownership as the best investment a middle-class family could make, and home ownership equates with the American Dream. During the early 00s, on the surface conditions looked great. House prices appreciated rapidly, mortgage equity withdrawal fueled an economic boom, subprime lending provided home ownership opportunities to everyone, and a record number of Americans realized the American Dream. Government officials touted as the success of…[READ MORE]

Government policy should better accommodate renting as a lifestyle choice We need policies that help stabilize tenancy and facilitate renters saving for retirement. The US government treats renters like second-class citizens. Our current policies make it very difficult for renters to stabilize their housing costs or save for a comfortable retirement. Perhaps in an era where homeownership was attainable for everyone, such policies were tenable, but now with coastal states restricting new construction, significant portions of the population simply can’t afford a home. Current government policies irreparably harm these renters. Politicians believe that high rates of homeownership foster social stability because people won’t loot and riot if they feel invested in the community. Social engineering aside, there is one particularly strong…[READ MORE]

Nearly 75% of loan modifications fail within two years Loan modifications always had high failure rates, but modifications since 2014 fared worse than bubble-era loan mods. Every attempted loan modification delays a foreclosure, keeps an overextended borrower in a state of debt servitude, artificially props up home prices, and keeps much-needed supply off the market. Perhaps it wouldn’t be so bad if the attempts to modify loans succeeded at high rates, but the truth is that they don’t. Nearly 75% of loans modified fail within two years. The public good served by these loan modifications is not readily apparent. At first, the banks did this just to survive the downturn. Then it became a political necessity as millions of people…[READ MORE]

Mortgage rates will rise when the Federal Reserve stops buying mortgage bonds The Federal Reserve’s oft-forgotten policy of buying mortgage-backed securities helped keep mortgage rates low over the last several years. The monthly housing market reports I publish each month became bullish in late 2011 due to the relative undervaluation of properties at the time. I was still cautious due to weak demand, excessive shadow inventory, the uncertainty of the duration of the interest rate stimulus, and an overall skepticism of the lending cartel’s ability to manage their liquidations. In 2012, the lending cartel managed to completely shut off the flow of foreclosures on the market, and with ever-declining interest rates, a small uptick in demand coupled with a dramatic…[READ MORE]

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