Bernanke Calls for Stronger Regulation of Fannie, Freddie
…
His solution: “Tying the portfolios to a purpose that provides measurable benefits to the public would help to ensure that society in general — not just GSE shareholders — receives a meaningful return in exchange for accepting the risks inherent in the portfolios,” Bernanke said in the text of remarks prepared for delivery by satellite to a gathering of community bankers in Hawaii.
Signing a mortgage document is one of the biggest financial actions you will take in your life. Taking the time to understand what you are getting into is important. I suggest you don’t act until you actually understand what it is you are taking on. And if that takes hours or days of reading and research so be it. Don’t find yourself with remorse for acting without understanding what you are doing with such an important financial decision.
On the Curious Cat Investment Dictionary mortgage page we have defined some common mortgage terms and provided links to some excellent resources from the Federal Reserve and HUD as well as several articles from Business Week, including: Understanding the Mortgage Process from the Federal Reserve and Nightmare Mortgages from Business Week.
Next Stop, Tysons – good article on urban planning and real estate development in Northern Virginia. Urban planning can create excellent real estate development opportunities but it is not easy. It is easy to look around the country and see how poorly planned development has been resulting in huge wastes of time through long commutes. But it is not surprising, smart planning requires long term thinking which is often lacking. Arlington made excellent decisions in the 1960s, 1970s, 1980s, 1990s and 2000s (and I am sure plenty of less than perfect ones too). The wrong decisions could have been made during that process that would have greatly reduced the benefits. Arlington now seems pretty well set and now the path toward smart development is the default position. Still they have challenges.
Fairfax, which borders Arlington, made poorer decisions in the past. Now they have difficult decisions. It will be interesting to see how they can do. Both counties have a huge incentive to push for more subway capacity but we will see if they do it. They can’t wait until the need is urgent. Any plans will likely take decades to bring online. Plans have been floated for many years but still nothing has been decided.
“If we don’t change the old pattern of growth and development, we will continue to get what we have always gotten,” said Gerald E. Connolly, chairman of the Fairfax Board of Supervisors.
It is not going to be a simple process and many years of tough decisions, good management, good planning will need to follow any decisions made now. But the options of clustering high density development seems like the best bet for success to me. One strategy of a real estate investor can be to find a good long term (say 10+ years) play (like Arlington) and invest before the prices skyrocket. Then just sit back as the likely takes place and watch your investment grow.
Arlington now has fairly high housing prices, the question is likely whether they have skyrocketed yet (many say they have – I am not so sure, they are not cheap but for what the potential for the area is they could go much higher). It certainly is not as great an opportunity as it was in 1995. The government sure feels flush – spending over $80 million each for 2 high school in the next couple of years (replacing schools build a few decades ago – school population is actually shrinking not growing)! Real estate taxes have been increasing dramatically each year to pay for more and more spending.
Housing sales drop in 40 states:
While there is no agreed upon definition of bubble bursting, a almost 3% decline certainly can’t be seen as a “bursting bubble” can it?
Again hardly data of bubble bursting proportions.
Related: Coming Collapse in Housing? – Beginning of the End of Housing Bubble? – Colored Bubbles
The main point of this article is the increasing evidence of problems due to loose underwriting for mortgages of the last few years. Mortgage defaults: Latest woe for housing:
The overall mortgage delinquency rate was 4.7 percent in the third quarter, just slightly above the 4.4 percent rate of a year earlier, when it was a historic low.
The problem of loose credit is real and important. But isn’t it really amazing how 4.4% is the historic low for mortgages over a month late? That seems really high too me. Obviously 13.2% for sub-prime loans shows how risky it is to take out such a loan. In my opinion, the delinquency rate for over 90 days late is a more important figure (but these numbers can serve as a leading indicator).
Related: articles on investing – investment dictionary – How Not to Convert Equity
Exurbs hardest hit in recent housing slump:
Average home prices in Loudon County, Virginia, 35 miles outside of Washington, D.C., fell roughly 11 percent in 2006, according to the Northern Virginia Association of Realtors. By contrast, Virginia’s Arlington County, which hugs the nation’s capital, saw a price decline of only about 2 percent.
And, so far there has been no “bust.” As I mentioned previously I did not, and do not, see a “bursting of the real estate bubble” overall.
Related: Beginning of the End of Housing Bubble? – real estate investing articles
Rentometer is a cool interactive web site that maps rental prices near your rental (either as a renter or an investor). The site is new and expanding so the features are a bit limited now but still it is worthwhile and the new features will really make it great (active rental listings…).
Related: Real Estate Investing Articles
I do not believe we will have a huge decline in most housing markets see: Housing and the Economy. Still the article below is packed with great information. Definitely worth reading. Other related posts: 30 Year Fixed Rate Mortgage Rates – Europe and USA Housing Price Boom – How Not to Convert Equity – Beginning of the End of Housing Bubble?
The Coming Collapse in Housing November 17, 2006
by John Mauldin
I am convinced that the housing bubble is gigantic and will burst before long with massive implications here and abroad. In fact, it’s the key to the global economic outlook.
Setting the Scene
House prices in recent years have leaped well beyond their normal relationships to the CPI.
Even when the increasing size of houses–the McMansion effect–is excluded, inflation-adjusted house prices have jumped as never before in over a century.
The booms in Spanish and Irish real estate make the US real estate boom look timid
Cotis from the OECD has acknowledged that several big countries are at risk of a housing downturn: with the USA, France and the UK topping the list. But, given the extreme dependence of both Spain and Ireland on housing, both countries are even more exposed to a sharp correction.
CNNMoney is not exactly intellectual discussion of economic and investing issues but normally it offers fairly good material for the large number of people. Especially those who really don’t want to read Warren Buffett or Brad Setser. Still the following quote in their article, Cashing in on hot real estate is just wrong:
…
San Diego-based certified financial planners Christopher Van Slyke and Terry Green recommend an unconventional plan: taking out a new $500,000 ARM.
Handel and Laport can pay off their existing mortgage before the rate rises and retire their other debts. They can put the remaining $200,000 into stock and bond funds.
To be sure, borrowing against a house to put the proceeds into the market rarely makes sense. But in Handel and Laport’s case it does because so much of their net worth is tied up in their home, and the super-hot L.A. real estate market looks primed for a fall…
They can convert equity that might melt away.
They can what? In no way does increasing their leverage convert equity that might melt away. Any amount of “melting away” will still happen after this increase in leverage – no conversion has happened. They still have a full ownership interest in the real estate. If the value of their house fell $300,000 before or after this supposed “conversion” they would “lose” (on paper) the same amount: $300,000. The investment risk for the house has not changed (for the whole portfolio you could argue it has but that gets complicated and subject to debate).
Read more