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Usually, There’s At Least One Lender Willing To Lend You More Than You Can Afford To Pay Back

A report from Westword in Colorado. “Fortunately, the real estate game in Denver has moderated in recent months, giving first-timers their best chance in years to find the abode of their dreams. But how do novices get started? And what are the key things they need to know? We reached out to managing broker and owner of RE/MAX Urban Properties Lori Abbey.”

“‘Depending on your income levels and whether it’s a one- or two-person household, there are grants available where sometimes you can come to closing with nothing,’ she reveals. For example, ‘one recent client actually got $1,000 back at closing.'”

“How? The client was a teacher who qualified for two grants — one through the Colorado Housing and Finance Authority and a second via a separate, national program that specifically targets home buyers from her profession. ‘She had to bring less to the table because she was a teacher and ended up being able to close and get $1,000 back,’ Abbey reports. ‘All of a sudden, she owned a home for the first time in her life — and it’s probably worth $40,000 more now than it was when she bought it.'”

“Abbey points out that ‘there’s an additional benefit if a home with a government-backed loan has been foreclosed on. Teachers and officers can buy some of those properties at 50 percent off, and that includes the down payment. There are a multitude of qualifications, but if you meet all of them, it’s a pretty fabulous deal.'”

“According to her, ‘The best way to get $100,000 over three years in Denver is to purchase a home. It’s much easier than trying to save $100,000. You win with tax benefits and you win by gaining equity, which is the same as net worth.'”

“She continues, ‘I recently put in three offers over five days where I was one of five to seven offers — and we won all three of them. These were all three houses listed at $395,000, and we got them for between $403,000 and $408,000. So they were over list, but not by very much. If they’d been up for sale this time last year, there would have been ten to fifteen offers, so that means your chances of winning have gone up by 50 percent. And they would have sold for more over list — $410,000 to $415,000, for sure. The prices are going over by a little less, and there’s a little less competition.'”

From Moneytips. “Some trends fade and then return after a few decades or so, like bell bottoms and tie-dye. Unfortunately, that’s true for financial trends as well as clothing. Higher-risk mortgage lending is on the rise again as consumers stretch to overcome soaring home prices and tight credit requirements.”

“According to data from Inside Mortgage Finance as reported in the Wall Street Journal, approximately 30% of loans that were securitized by the government mortgage backers Fannie Mae and Freddie Mac went to homebuyers with debt-to-income (DTI) ratios of more than 43%. That’s almost twice the amount of such loans issued in 2015. Why does that matter? A 43% DTI is generally considered the upper limit for acceptable risk.”

“The original credit-tightening effort included some relief for low-income borrowers through the qualified mortgage ‘patch.’ Qualified mortgages establish the minimum guidelines for mortgage loans to be purchased and backed by the government, including the 43% DTI limit. The patch established an additional category of qualified loans for borrowers with DTIs greater than 43% but other positive factors mitigating risk.”

“The patch will expire for Fannie Mae and Freddie Mac at the beginning of 2021 – thus, homeowners on the edge of affordability are rushing to buy homes while they still qualify. The Urban Institute estimates that 3.3 million mortgages were originated under this exception between 2014 and 2018.”

“Are we headed toward another housing crisis? Probably not – credit is still far tighter than it was during the creation of the housing bubble, and the securities appear to be properly assessed. You can’t prevent a future housing bubble, but you can decide not to contribute to one. Usually, there’s at least one lender willing to lend you more mortgage funds than you can afford to pay back.”

The Business Observer Florida. “A Miami developer has abandoned plans for a pair of ambitious high-rise condominium projects just outside downtown Fort Myers and is offering two sites for sale for a combined $16.2 million. Brokers say Jaxi Builders’ decision to shed its waterfront land has more to do with product type than market conditions, though, and that the vacant 5.7-acre property might be better received as a site for apartments, a hotel or a combination of the two.”

“Jaxi’s Allure project was perhaps the most ambitious of a handful of residential offerings proposed for downtown Fort Myers in the past five years that were slated to yield some 600 residences. The company’s decision to shed the properties also raises questions about other proposed developments that have yet to begin construction, including Prime Luce, another condo project proposed for First Street. Jaxi Builders Vice President Eduardo Caballero did not return telephone calls regarding the Fort Myers properties, and employees in the firm’s Miami offices declined to comment on the decision to sell and say they have ‘no more information’ on the proposed projects.”

The Commercial Observer. “Currently, California has increasingly become a tale of two states, with housing more plentiful for both the very wealthy and low-income, but gutted when it comes to the middle class. ‘We aren’t creating enough attainable housing. I’m not even talking about affordable housing,’ said Shlomi Ronen, founder of Los Angeles-based Dekel Capital. ‘I think we’re good at building affordable housing for low-income [folks]. We’re good at building luxury housing. What we lack is housing for the middle-of-the-road person that has a decent [paying] job and wants to be able to live in the city.'”

“Larry Kosmont, CEO of Manhattan Beach-based Kosmont Companies concurred. ‘The issue that we’re facing in California is portrayed as a housing issue, but to me it’s also a jobs issue. For the most part, we’re just creating jobs that pay $15 an hour in this economy or at the very high end because of the tech industry and at some level the creative industry in California. What we’re not creating is the middle range of jobs [for people to] afford the middle range of housing,’ Kosmont said, which in California averages around $500,000 to $800,000, depending on the county. ‘If we could create—‘poof!’—[the] 3.5 million units that we are short, we [still] wouldn’t have 3.5 million buyers who could afford the pricing on those houses.'”

From The Mortgage Reports. “There’s never been a better time to buy a home — at least not in the last three years. According to a new analysis from First American, national housing affordability has finally increased, marking the first time in three years it’s seen a jump.”

“As Mark Fleming, First American’s chief economist, explains, ‘What began as a modest shift toward a buyers’ market in six cities last month has expanded into a national shift in affordability.’ First American’s analysis shows that 15 of the 44 biggest metros have seen ‘real’ home prices decline.”

“The biggest dips in real home prices were seen in San Jose, California (with prices down 7.6 percent); Seattle (-6.4 percent); San Francisco (-4.4 percent); Portland, Oregon (-3.9 percent); and Los Angeles (-3.1 percent). At the state levels, Wyoming, West Virginia, Louisiana, Alabama and Oklahoma saw the biggest dips. ‘ Given the trend nationally, it’s no surprise that more markets experienced falling real house prices,’ Fleming said.”

This Post Has 41 Comments
    1. I can remember a time when Westword was an edgy, artsy, cool alternative publication. Man how times have changed – just another REIC mouthpiece now.

  1. there goes more pension risk if there is a downturn in the housing market – and people start defaulting. Welcome to leverage
    ——
    “Real-estate investment trusts that buy residential home loans increased their mortgage-bond portfolios by almost 28% to $308 billion over the 12 months through March. It was the largest stockpile in a half-dozen years, according to an analysis of 15 REITs by industry research group Inside Mortgage Finance. Annaly Capital Management Inc. and AGNC Investment Corp., the two biggest companies in the sector, drove the majority of the growth.
    REITs are publicly traded entities that invest in all types of real estate and pass most of their profits along to shareholders via dividends. They typically fund investments by raising capital in the equity and debt markets, including through short-term financing, and they use leverage to amplify their bets.”

    “Yet some analysts worry these vehicles are putting more of the mortgage market into the hands of leveraged firms with minimal oversight. Some of the more risky mortgage REITs went bust during the last financial crisis. The last boom time for this sector, in 2013, prompted calls for increased regulatory supervision, but they didn’t result in any new regulations.”

  2. Sorry, not buying from a “flipper”.

    (Remainder of post edited, out of decency in public)

  3. I missed yesterday’s thread, but regarding bariatric surgery and weight loss: There’s a kidney doctor in Toronto (Jason Fung) who argues that bariatric surgery — which causes weight loss and “cures” diabetes Type 2 — is nothing more than surgically forced fasting. So the doc is prescribing intermittent and prolonged fasting to his diabetes type 2 patients. Their diabetes is greatly modified and the patients lose weight. Yeah, most doctors think he’s a quack. But fasting is a lot cheaper and less dangerous than surgery. Probably won’t work over 6 weeks tho.

    1. I’ve followed Dr. Fung for a while. He has an interesting insight to fasting and it’s effects on the body.

    2. Intermittent fasting is en vogue right now. There is probably something to this. A huge RCT is being conducted at University of Utah and IMed. I will be interested in the outcome. Having said that, bariatric surgery is the only intervention that has proven to work for permanent weight loss. Yes, there are some outlier stories out there of “diet & exercise” and will power. It seems like diet and exercise are good for health, but insufficient for weight loss. Only surgery really has consistently shown the ability to turn the tide once BMI gets past a certain threshold. The problem is that many people look at this as a moral failure or view it as something only for someone on “My 600 Pound Life” and this prevents people from realizing the beneficial effects of lower blood triglycerides, lower stress on joints, changes in the hormonal system, no hunger, etc.”

      Intermittent fasting early results are intriguing and by all means I think it is worth a shot. But the studies show that yo-yo dieting is worse for many people. I worry that IF is one of a long line of failed interventions that leads people to give up because they “couldn’t stick to the program.” I don’t think there is any comparison as to effectiveness vs bariatric surgery with IF at this point. If more data comes out to prove me wrong, I’ll gladly change my mind.

      1. There is a reason that the world’s religions have prompted fasting for thousands of years

      2. Yes, there are some outlier stories out there of “diet & exercise” and will power

        Any animal that eats a little less and works a little more will lose weight, no? Permanently removing part of the digestive system seems to have some parallels to the modern debt donkey phenomenon; same income yet impoverished. If you then need to increase again, wouldn’t you be rather screwed?

        1. Any animal that eats a little less and works a little more will lose weight, no?

          That is what traditional diet orthodoxy has been. And it isn’t working. It’s also what the soda industry would have people believe as they try to market “balance your intake” to deflect culpability for type 2 diabetes and obesity on individuals’ poor choices.

          The problem with these energy-restricted diets is that they don’t work over the long-term. Short term almost anyone can shed pounds. But the long-term adherence and failure rate of most diets is abysmally low. It’s a mug’s game.

          I recommend “Why Weight Loss Surgery Works When Diets Don’t” as a primer in the NYT. Very good introduction to the topic.

          1. I remember reading a cheeky, sarcastic comment in a Runner’s World article on the subject of diet and weight loss. The comment was this: “The solution to weight loss is simple guys. Duct tape! Just duct tape your mouth. Don’t overthink it.”

          2. Weight Loss Surgery Works When Diets Don’t

            I have no doubt that removing part of the digestive system results in weight loss. One of my friends did this and she shriveled up like a prune. Of course short term diets don’t stick and neither do short term stints of sobriety or financial prudence.

          3. “Why Weight Loss Surgery Works When Diets Don’t”

            A morbidly obese woman at one of our accounts got the gastric surgery around six months before she retired. The result was constant farting so bad that the hallway in their area smelled like someone clean-skinned a beaver. I couldn’t understand why maintenance didn’t hang an exhaust fan on her office window.

      3. Evidently, IF — i.e. 8-hour eating window — works only for relatively healthy people. The more damaged you are metabolically, the more drastic the fast has to be. Yo-yo dieters, morbidly obese, moderately obese for a long time, Type 2 diabetics etc need to go into a pattern of longer and deeper fasts 36-72 hr or more, for months.

        When simple IF doesn’t work for the very obese, IF may well be ditched, which is too bad. Dr. Fung wisely said that obese patients will need a lot of mental and emotional support to stick with this type of program.

        1. In a word, yes. People got fat on a diet of high-fructose corn syrup, seed oils, and, possibly most importantly, snacking between meals and at night in front of the TV. Poor countries don’t have any of that (but they’re catching up).

      1. This person Janine is a real beauty she rides a scooter from her bedroom to her bathroom she cant walk and so many enablers to bring her massive amounts of junk food. None of these morbidly obese people cook their own food , but she stammers cries has the worst mental block ever…. …but in the end she does loose over 400 lbs…..

        yes it is junk food Kuwaitt rich as —- people are fat fat fat but American Samoa is the worst https://www.youtube.com/watch?v=dJs1B-s-Dnk

  4. Where are interest rates going? Lee Adler thinks they are going to rise in mid July:

    http://wallstreetexaminer.com/2019/05/treasury-yield-curve-interpretation-is-like-freuds-interpretation-of-dreams/

    ‘Now I want you to think about this. As of Friday, the Treasury’s cash balance had dropped to $246 billion. The Treasury has spent $177 billion of its cash hoard is LESS THAN A MONTH!’
    ‘At this rate, it will be out of cash by the middle of July!
    Then what?
    Congress will raise the debt ceiling and Trump will sign it. The Treasury will start borrowing hand over fist again. It will need to repay the internal accounts it has been raiding. It will need to rebuild its cash account. The market will get hit with a torrent of new debt. Hundreds of billions in new paper. And this time, not enough cash to absorb it. Then what will happen to yields?
    Think about it.’

    http://wallstreetexaminer.com/2019/05/new-fed-qe-lite-starts-in-october/

    ‘The Fed will start new QE Lite in October. It will reinvest up to $20 billion per month in maturing and prepaid Agency and MBS holdings. But it will not buy more GSE and MBS. Instead, it will buy Treasuries directly from Primary Dealers.’

    Maybe this means that T-bill yields will decouple from household borrowing rates. Could be bad for the housing ‘market’.

    1. Well, if he’s joined at the hip to David Stockman, it might lead you to think he’s one of the more extreme bears out there, but the argument presented here is compelling.

      1. the argument presented here is compelling.

        That the Fed buying T-bills with funny money will make the rates go up?

        1. It is a complicated situation. If the fed supports T-bills and not MBS then it might create an imbalance between the two and the market must balance the equation by making MBS more competitive by raising borrowing rates in MBS. This is a theory. But if the Fed does not buy MBS and makes T-bills more valuable, then who is going to buy MBS?

  5. Let’s see, they are claiming now is the best ever time to buy.

    Heard this before?

    I think tomorrow might be better. Records set all time. Wow, what an amazing time to be alive!

    Pass.

  6. So teachers in Denver get a half-price sale on housing? They better be taking that $$ out of their pension. Or at least getting a cut of that sweet equity she’s bragging about.

    1. teachers 6% raise 3 years in a row in fairfax county
      “poor” get tot reti9re at age 55 w 75% of pay
      average 90k

  7. Deport the illegals.

    Poof! Lots of affordable housing. Traffic jams lesson. Schools start to function. Hospital wait times drop. Room in the jails. Etc.

    #####

    “‘If we could create—‘poof!’—[the] 3.5 million units that we are short, we [still] wouldn’t have 3.5 million buyers who could afford the pricing on those houses.’”

  8. “…‘I think we’re good at building affordable housing for low-income [folks]. We’re good at building luxury housing. What we lack is housing for the middle-of-the-road person that has a decent [paying] job and wants to be able to live in the city.’…”

    The City of Goleta, California (just northwest of Santa Barbara) is suing developer City Ventures for pricing new Winslowe Homes condos above prices agreed upon between the two parties so that the area’s middle class could afford them. Construction of the development’s final phase is suspended for the time being.

    See photos and a link to the full news story at Santa Barbara Residential Real Estate News — May, 2019

    Barb
    Santa Barbara Bubble (sbBubble.com)

  9. “According to her, ‘The best way to get $100,000 over [the past] three years in Denver is to purchase a home. It’s much easier than trying to save $100,000. You win with tax benefits and you win by gaining equity, which is the same as net worth.’”

    LOL desperation setting in

    1. Ok Lori, let me know when “homes” start depositing dividends and interest in my bank account. Will send over my account and routing numbers ASAP. Thx.

  10. “The patch will expire for Fannie Mae and Freddie Mac at the beginning of 2021 – thus, homeowners on the edge of affordability are rushing to buy homes while they still qualify. The Urban Institute estimates that 3.3 million mortgages were originated under this exception between 2014 and 2018.”

    Today’s exceptionally qualified borrower, tomorrow’s foreclosure crisis victim…

  11. ‘The best way to get $100,000 over three years in Denver is to purchase a home. It’s much easier than trying to save $100,000’

    Why not buy 5?

    1. Don’t be casting shade, Mr. Jones. Suzanne’s research confirms this is a no-lose investment. “You guys can do this!”

  12. “Are we headed toward another housing crisis? Probably not – credit is still far tighter than it was during the creation of the housing bubble, and the securities appear to be properly assessed.

    What a crock. Some days I can’t wait for the Great Reset to hit.

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