April 17, 2006
In the home-buying frenzy, renters could reap bargains: The long-term trend toward ownership is making the 'bubble' look fairly solid. (John C. Weicher, 4/18/06, CS Monitor)
It's worth keeping the rental market situation in mind when reading the next round of stories about the housing bubble. The long-term shift from renting to owning indicates that the bubble is really pretty solid. Mortgage lenders are better able to provide homeownership opportunities. They have the technology to assess risk more accurately, and reach further down in the income distribution to identify reasonable would-be first-time home buyers. These families share the "American dream" of owning their own home.
Posted by Orrin Judd at April 17, 2006 8:23 PM
As homeownership increases, house prices will continue to rise - not every month in every market, but from year to year broadly across the United States. And a substantial supply of rental homes and apartments will be available as well.
Mortgage lenders [...] have the technology to assess risk more accurately, and reach further down in the income distribution to identify reasonable would-be first-time home buyers.
This is true.
However, unreasonable first-time home buyers are also getting loans - no money down, interest-only payments.
No points for guessing how that's gonna end.
My guess is it'll end in a similar matter to what is now happening with non-mortgage debt after the new bankruptcy rules passed. You'll see a lot more of law firms like Express Consolidation and Premier Financial Services try to purchase mortgage loans from lenders at pennies on the dollar and try to set up terms with the borrower to pay off the mortgage in faster, more favorable terms.
Much like what is happening now with consolidations of credit card debt.
I know someone who makes good money from buying up credit card debt -- there's a set price for a bundle -- and then settling it.
Michael: I think of you every time I hear a radio commercial begging people to "break their ARMS" and refinance at a fixed rate, which is pretty much a couple of times an hour every morning and evening.
I heard that ad for the first time today. I noticed it because I was getting tired of hearing the ads for various debt elimination methods (which I have always thought were just euphemisms for bankruptcy or for some sort of financial indenture).