A weekend topic starting with Honolulu Civil Beat in Hawaii. "Since the pandemic began, veterans and service members have been utilizing Department of Veterans Affairs home loans at historically high rates. Dropping prices and legislation that loosened restrictions on VA home loans have both contributed to a nationwide boom in troops and veterans using their benefits. That’s making an impact in Hawaii, historically an expensive housing market. In Honolulu, VA loans from April 1 to June 30 were up 206% from the same time last year. That marks the largest increase for a major metro area in the United States."

"The VA itself doesn’t give out loans, but issues guidelines and guarantees loans that qualify under the program. The loans can be used both for purchasing and refinancing homes. In Honolulu VA loans for refinancing have increased 403% so far from last year. 'Pretty much every veteran is refinancing right now because they’d be stupid not to,' said Elias Halvorson, a Honolulu VA loan specialist and Air Force veteran."

"Every county in the U.S. has a conforming loan limit, which is a cap on the size of a loan that the federal government will guarantee. Loans above this limit are known as 'jumbo loans.' Until recently, if a home price was over the county loan limit the buyer had to make a 25% down payment. In 2019 the conforming loan limit for a single family unit in Honolulu was $726,525. The Blue Water Navy Vietnam Veterans Act of 2019, which took effect at the start of 2020, eliminated home loan limits."

"With the new legislation, VA Loans don’t require mortgage insurance or down payments even if a loan is over the county limit. That’s a big deal in Hawaii, one of the most expensive housing markets in the nation. 'Those two things make taking out a loan much more possible,' said Halvorson."

"Last year housing prices for a family home on Oahu hit a record high. But according to Zillow, Honolulu home values have declined 1.8% over the past year and Zillow predicts they will fall 3.4% within the next year. Halvorson noted that when it comes to housing prices, a drop of a few percent makes little difference in a place like Texas where home values tend to be lower. But in Hawaii, even a slight fluctuation can mean thousands of dollars."

"'What’s interesting and exciting is that millennial veterans are really driving this increase in Honolulu,' Birk noted. Purchases by millennial veterans in Honolulu are up 22% from last year, while millennial veteran homeowner refinances are up 659%. Millennials by and large have struggled to enter the housing market. 'Younger service members are able to just because of this opportunity that they’ve earned,' Birk said."

From WAMU on Maryland. "Some homeowners in Prince George’s County are grappling with the current recession while still mired in debt from predatory home loans from the last recession. The 2008-2009 subprime mortgage crisis left thousands of homeowners in Maryland — which was third in the country for foreclosures — strapped with loans that were initially low before ballooning dramatically."

"Black homeowners — particularly in Prince George’s County which was hardest hit in the state for foreclosures — were often targeted for these loans. Many didn’t find out about the high cost of the loans until receiving a notice for intent to foreclose, years after the housing crisis had supposedly ended. And when they try to seek help to avoid foreclosure, they’re mostly told to get a hard-to-obtain modification or declare bankruptcy."

"Experts with the county’s NAACP says that a large majority of the more than 3,000 foreclosure cases in 2019 were due to subprime loans. The county reached its peak in foreclosures in 2010 with more than 12,700. Maryland still remains high on the national list for foreclosure, even though there’s a moratorium on evictions for government-backed mortgages."

"Zalee Harris, 63, spent almost a decade trying to save her home. She bought her Temple Hills’ home with her husband in 1988, when they were newly married and first-time home buyers. Later in 2006, they refinanced the house with their lender, HSBC. The couple didn’t realize they couldn’t afford the ballooning mortgage payments until 2010. For the first two years of their loan, their monthly payment was about $2,600. Then the interest rate almost doubled, and, by 2008 they had a balloon payment of more than $8,500 a month."

"'We found out then that we was in trouble,' Harris said. It wasn’t until 2014 that the couple received a notice with intent to foreclose. 'The court proceeded with the foreclosure,' she said. 'The judge rubber-stamped the whole process.'"

"In 2017, they hired Attorney Phillip Robinson to help them with their case pro-bono. A year later, they lost their case in circuit court and got an appeal. By early 2019, they were getting eviction notices. Harris says she already saw many of her friends and neighbors get evicted and didn’t want to go through the same process. The couple moved to a rental house in Charles County just south of Prince George’s. They lost their appeal in August of 2019 even with evidence showing that the bank didn’t have the Harris’s note or right to foreclose on them, according to Robinson."

The Wall Street Journal. "Federal Reserve officials’ promises to hold interest rates very low for a long time could pose a dilemma once the pandemic is over: how to deal with the risk of asset bubbles. Those concerns flared when Dallas Fed President Robert Kaplan dissented from the central bank’s Sept. 16 decision to spell out those promises. The Fed committed to hold short-term rates near zero until inflation reaches 2% and is likely to stay somewhat above that level—something most officials don’t see happening in the next three years."

"'There are costs to keeping rates at zero for a prolonged period,' Mr. Kaplan said in an interview. He added that he worries such a commitment 'causes people to take more risk in that they know it’s much less likely that they’re going to be able to earn on savings.'"

"The question of whether the Fed should raise rates to prevent bubbles from forming has long vexed officials. Mr. Kaplan’s concerns show how the lack of consensus could one day sow doubts over the central bank’s ability or willingness to follow through on the new lower-for-longer rate framework Fed Chairman Jerome Powell unveiled last month."

"Financial-stability concerns motivated Boston Fed President Eric Rosengren to vote against three separate interest-rate cuts last year. He has warned for years of potential excesses building in commercial real estate that would worsen a downturn, a prophecy he worries the pandemic will fulfill. 'People reach for yield in commercial real estate when interest rates get quite low, and you start doing riskier projects, and when the economy hits a shock—in this case, it was a pandemic—it means that big losses are going to likely occur,' Mr. Rosengren said."

From Forbes. "A recent column by CNN markets reporter, Paul La Monica, wrote of housing as an 'undeniable bright spot' that’s 'holding up' the U.S. economy. La Monica gets it backwards. Housing is consumption. It’s the opposite of abstinence. Nothing against putting a roof over one’s head, but the simple truth is that housing is not investment. The purchase of a house isn’t going to help hatch the next Microsoft, or the next Grail meant to discover cancer well before it spreads."

"While the act of saving expands the capital base for entrepreneurs eager to change how we do things, the purchase of housing logically shrinks it. When we buy a house we consume, as opposed to save, thus limiting the amount of resources that entrepreneurs can potentially access. Progress stalled."

"Worse is that top realty executives are starting to exhibit hubris. Recently one exulted that housing supply at present is like the supply of 'toilet paper' back when the lockdowns began. Oh dear…."

"Those in the realty business mistakenly believe that housing consumption drives the economy. So does La Monica. Both are incorrect. Consumption doesn’t power economic growth; rather it’s a consequence of it. Think about it. Savings and investment are what boost productivity, and it’s obviously our production that enables consumption. Call consumption the harvesting of past economic growth."

"Nothing against housing. It’s an essential market good. We must have roofs over our heads. But the consumption of what shelters us will not rush the future into the present. Housing’s exuberance is a perilous sign, not a positive one."