Archive for January, 2017

Social scientists contend providing more roads and houses leads to "induced demand" and fails to alleviate shortages. The recent presidential election illuminated the problem of confirmation bias, particularly when emotional, political issues are involved. We all want to believe we are rational beings who make decisions based on solid facts and sound reasoning. The truth is that our decisions are often irrational based on faulty reasoning with a self-selected group of facts. One party's fake news is another party's gospel Truth. Take for example the decision to buy a home. Many analytical people convince themselves they want a particular home because the deal makes sense. Perhaps the house is selling below comps, or below rental parity, or it's in an…[READ MORE]

With no rigid cap on front-end DTIs, those with no consumer debt could borrow more to finance a home purchase. It’s no secret that I don’t think consumer debt is a good idea (See: Think you want consumer debt? Think again…) With the ongoing war on savers waged by the federal reserve, it’s been a difficult time to maintain a discipline of saving instead of consuming. However, buried in the new qualified mortgage rules is a loophole that may give those with little or no consumer debt a major competitive advantage when bidding on houses. The new qualified mortgage rules cap overall debt at 43% of gross income. Legislators enacted this provision in response to the enormous debt burdens exposed…[READ MORE]

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