Archive for September, 2014

Anger and hatred toward the banks earned during the housing and economic collapse of 2008 is still strong. Special thanks to Sean O'Daniels, When most people buy a home, they borrow money. When prospective borrowers gain loan approval and final funding, most are thankful the lender enabled them to acquire the property they wanted; few question whether or not the loan was a good deal. Most borrowers go through the lending process like cattle processed for branding. They do whatever they're told and sign whatever they need to sign in order to get the property. Most borrowers assume that if millions of other borrowers go through the same process it must be okay; they feel comfort in the safety of the herd. But…[READ MORE]

The Federal Reserve preserved bad debts to mask insolvency in the US banking system; thus more money flows to banks and less money stimulates the economy. People stimulate economic activity when they borrow money and spend it. Politicians like debt growth and spending for the economic stimulus it provides; however, lenders like debt growth for a different reason; to a lender the initial loan is a sale, so lenders celebrate along with politicians, but lenders look forward the borrower's interest payments because interest is income to lenders. Unfortunately, while politicians and lenders celebrated the initial loan and it's subsequent economic boost, only lenders celebrate the ongoing debt-service payments. Politicians should decry the debt service payments because interest money comes out of the local economy and travels to a lender's coffers;…[READ MORE]

Shadow inventory didn't go away, it merely changed form, and it's impact on the market, and it's threat to the market, is bigger than ever. This post is the foundation of my current thinking on the future of the housing market. Since it's so important, I felt this holiday was a good time to revisit the important concepts contained herein. Cloud Inventory According to Zillow about 20% of mortgage borrowers are underwater. If you factor in sales commissions and transaction costs, the number is closer to 40%. When you reflect on it, what does an underwater borrower really own? They don’t have any equity, and since their underwater, even if prices go up, they still won’t have any equity. Perhaps…[READ MORE]

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