Housing.com News, Analysis & Opinion: Friday Housing News

Duncan noted that some home buyers may resort to adjustable rate mortgages (ARMs) which initially have lower borrowing costs.

“As fixed rates rise, ARMs will become a bigger factor,” said Stephen LaDue, president of Affiliated Mortgage of Wauwatosa, Wisconsin. “The rate of increase in home values will slow or will start to stagnate,” he said.

Now wait a second. Wasn't the preponderance of ARMs and their bretheren what fostered availability of home loans in the first place? Why would they become more popular as rates go up and lenders become more gun-shy? And why would you risk an adjustable-rate mortgage with home values slowing down? You're effectively paying more for less.

If you believe NAR, 2005 is continuing to be a record year for home sales, but even they concede that 2006 may see a cooling off of the trend:

NAR President Al Mansell of Salt Lake City said some easing in home sales is expected in 2006. “The rise in mortgage interest rates is likely to have a slight braking action on the housing market, and the upside of that is it would help to bring the market closer to balance between home buyers and sellers,” he said. “As a result, there should be a cooling in the rate of price growth – on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid.”

Looking at stats like these from Palo Alto, I think people are either getting out while the getting's good, watching the prices fall and their fortunes along with them, or hoping against hope that they somehow won't be "included" when the bubble bursts. Or maybe I'm totally wrong and Cali will continue to be the fulcrum of a housing boom that makes the gold rush look like a poker game with a two-dollar buy-in.

There's a brewing surge of opposition to the Supreme Court Kelo vs. New London decision, which held that state and local governments could seize private property for a specific use in development, even if the property in question wasn't "blighted" or scheduled for demolition. In this case, it was basically a justification to bulldoze peoples' homes in order to build shopping malls and bring in tax revenue.

The level of opposition to this decision was staggering across the board, and in a rare moment of sanity, the House has passed a bill that denies using eminent domain powers for private property development, and prevents doing so unless relocation costs are paid to the owners whose property is seized.

I think the market frenzy of the last few years has blinded many buyers to the fact that a house is more than a wealth-building tool. You have to live there. That means taking into consideration everything from local land use, to property tax, to environmental regulation, and yes, to seizures and foreclosures. I also think many homebuyers look at decisions like Kelo or Federal wetlands regulation (Scheduled to come before the Roberts Court this term) and think this isn't relevant to them. "Nobody expects the Spanish Inquisition!"

Finally, this isn't really relevant to real estate, but I have to take a swipe at Treasury Secretary John Snow, who visited China this week and exhorted the virtues of consumer spending and using credit to a thriving, cash-centric Chinese market. Like the article says, spend more, borrow more, and save less. Here's the money quote:

Second, they hope that increased financial sophistication in China will lead to higher consumer spending, which, in turn, could reduce the huge trade imbalances that China is building up with the rest of the world.

So spending with plastic and getting yourself into debt is "more financially sophisticated." Hmmm...now, where have I heard that before?

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The big news today is that mortgage rates have topped 6 percent. The MSNBC article flat-out admits that the low rates were what spurred the housing boom and kicked us out of recession. Somehow I doubt that'll work this time. The killer quote: Duncan noted that some home buyers may resort to adjustable rate mortgages (ARMs) which initially have lower borrowing costs. “As fixed rates rise, ARMs will become a bigger factor,” said Stephen LaDue, president of Affiliated Mortgage of Wauwatosa, Wisconsin. “The rate of increase in home values will slow or will start to stagnate,” he said. Now wait a second. Wasn't the preponderance of ARMs and their bretheren what fostered availability of home loans in the first place? Why would they become more popular as rates go up and lenders become more gun-shy? And why would you risk an adjustable-rate mortgage with home values slowing down? You're effectively paying more for less. If you believe NAR, 2005 is continuing to be a record year for home sales, but even they concede that 2006 may see a cooling off of the trend: NAR President Al Mansell of Salt Lake City said some easing in home sales is expected in 2006. “The rise in mortgage interest rates is likely to have a slight braking action on the housing market, and the upside of that is it would help to bring the market closer to balance between home buyers and sellers,” he said. “As a result, there should be a cooling in the rate of price growth – on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid.” Looking at stats like these from Palo Alto, I think people are either getting out while the getting's good, watching the prices fall and their fortunes along with them, or hoping against hope that they somehow won't be "included" when the bubble bursts. Or maybe I'm totally wrong and Cali will continue to be the fulcrum of a housing boom that makes the gold rush look like a poker game with a two-dollar buy-in. Caveat emptor or caveat venditor? We shall see. There's a brewing surge of opposition to the Supreme Court Kelo vs. New London decision, which held that state and local governments could seize private property for a specific use in development, even if the property in question wasn't "blighted" or scheduled for demolition. In this case, it was basically a justification to bulldoze peoples' homes in order to build shopping malls and bring in tax revenue. The level of opposition to this decision was staggering across the board, and in a rare moment of sanity, the House has passed a bill that denies using eminent domain powers for private property development, and prevents doing so unless relocation costs are paid to the owners whose property is seized. I think the market frenzy of the last few years has blinded many buyers to the fact that a house is more than a wealth-building tool. You have to live there. That means taking into consideration everything from local land use, to property tax, to environmental regulation, and yes, to seizures and foreclosures. I also think many homebuyers look at decisions like Kelo or Federal wetlands regulation (Scheduled to come before the Roberts Court this term) and think this isn't relevant to them. "Nobody expects the Spanish Inquisition!" Finally, this isn't really relevant to real estate, but I have to take a swipe at Treasury Secretary John Snow, who visited China this week and exhorted the virtues of consumer spending and using credit to a thriving, cash-centric Chinese market. Like the article says, spend more, borrow more, and save less. Here's the money quote: Second, they hope that increased financial sophistication in China will lead to higher consumer spending, which, in turn, could reduce the huge trade imbalances that China is building up with the rest of the world. So spending with plastic and getting yourself into debt is "more financially sophisticated." Hmmm...now, where have I heard that before?