December 2015 - Fortune Tellers

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 29 FEATURE TWO MORTGAGE PROFESSIONALS SHARE THEIR VISIONS OF THE FUTURE OF HOUSING FEATURE A s one year comes to a close and another lies before us—a blank slate of unknown possibility and uncertainty—it is natural to reflect on what's passed and speculate what's to come. We asked two loan advisors to share their reflections on the past year and what legacy the current market leaves for the future. Reflections from Dick Lepre Senior Loan Advisor at RPM Mortgage, Inc. O ne relatively recent issue in the housing market is the im- pact of student loan debt on the ability to qualify for a mortgage loan. There is a correlation be- tween people who are at the age where they could buy their first home and people with student loan payments. The $1 trillion-plus in collective student loan debt has the effect of eliminating some would-be home purchasers. The debts I see that most often negate the ability to qualify for a mort - gage loan are car payments and student loans. The message here is: If you have student loan debt and want to buy a new home, then purchase a good used car for cash first. Unless the cost of edu - cation stops increasing as much as it has, student loans could become an even larger impediment to home buying in 2025. For those who have the means to purchase a home (income, credit, and reasonable assurance of job security), deciding whether to buy or rent may come down to economics. The choice depends on the local market. Home and rent prices depend on supply and demand, and the market for rentals does not always move in harmony with the market for homes for sale. Potential home buyers often consider the long-term impact of their decision. If you spend money on rent, it's gone. If you spend money on a home, you own that part of what you spent, which increases your equity. Also, the interest portion of what you spent is tax deductible. However, future changes in the tax code could change the deductibility of mortgage interest. I live in San Francisco. In the past several years, we have seen very large spikes in rents and home prices. This is driven entirely by massive supply/de - mand imbalance. Four years ago San Francisco added 30,000 jobs and 150 housing units. Voters who turned down develop- ments may be the same folks concerned about higher rents. This is a regional problem. Tech companies in the counties south of San Francisco add jobs, but the cities there add no housing. We have "Google buses" moving tech workers from their rentals in San Francisco to their jobs in Silicon Valley. Housing can best be ad - dressed by regional planning. In the period before the Great Recession, there were significant increases in home prices, which made home buying, in part, into a speculative investment. When prices were increasing, specula - tion increased demand, leading to large increases in prices, which then plummeted when the bubble burst. Speculation in housing can create serious problems for homeowners. The natural level for housing starts should be determined by the rate of increase in the population plus whatever housing is lost to scrappage or disasters—historically about 1.5 million units per year. Housing starts began falling in 2007 and are presently at about two-thirds of that level. By 2025, this should return to the normal 1.5

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