No more 30 year mortgage?

Question

http://finance.yahoo.com/news/Fixing-Housing-Crisis-Time-To-cnbc-1256002211.html?x=0&sec=topStories&pos=8&asset=&ccode=

An interesting article. Would it help or hurt the investment world if the government completely walked away from the housing industry?

Kevin C. · Answer

Changes alluded to in the article (shorter terms, higher rates, pre-payment penalties, kill interest deduction) would make housing less affordable. Banks would win with higher fees, government would win with increased tax revenue - the average Joe would lose. Talk about reducing the potential buyers pool, but on the flip side, cash buyers and those that could afford shorter terms would make out like bandits. I could see a huge increase in the need for rental homes if any of that played out - could be advantageous for certain investors.

Mitch Kronowit · Answer

We can't simply raise rents. If we could, we would have done it by now. If the housing industry moves to shorter duration home loans, like 15 year mortgages, then yes the payments will go up, but not by double. The higher payments can't always get passed on to the renters, especially for the homes "grandfathered in" with 30 year loans - how can we compete? The end result would likely be rock-bottom interest rates and/or another free-fall in home prices to make the payments comparable to the 30 year note. Sorry I'm not more lucid here... still waking up. :mrgreen:

Ali Samana · Answer

I am also currently in the process of getting a 30 year fixed loan. I have not had any problems, although it is more challenging than it used to be.

Kevin C. · Answer

I've never had a problem getting 30 yr fixed rate loans. Just spoke with one of the lenders I work with and it wouldn't be a problem today either. Even if an ARM was offered, no one says you have to take it.

Dale Osborn · Answer

Try and get a 30-year fixed rate from a Lender today. They probably get higher commissions by pushing ARMS and that is a large cause of the situation we are in now.

Dustin Gott · Answer

There was a segment on CNBC this morning that will be continuing tomorrow I believe about this exact topic. I didnt listen real carefully but they were saying we have much better financial technology that would benefit the buyer and lender and greater acknowledge specific situations people would be in.

Ali Samana · Answer

Mitch, I agree with you in either the home prices would fall or being a home owner (or Investor) would become extremely expensive. In either case, I would think current investors (with cash reserves) would win big.

Rich Weese · Answer

I love the rental market! It just keeps getting better where I am. 100% full in all sfrs( around 50) and 3% in a 154 unit building. Oh- Stuff is starting to move in FL. My storage facility went up over 7% in rents and occupancy in June. Only happens when crap is changing hands. I see rents going yp. Rich.

Ali Samana · Answer

Bill, If they do away with the 30 year mortgage, what impact would it have on REI? I would imagine less people would be able to buy homes thus putting more renters in the market. I would also think it would raise rents to cover the additional cost of financing thus creating more cashflow for people with 30 year financing on their properties. Any thoughts?

Bill Gulley · Answer

Oh wow, everyone has issues! Sounded to me as if the author of that article was pretty close to the banking industry. Nothing would be sweater than having a repricing opportunity every three years to ensure that the lenders earned the available equity established as interest! Talk about the bank owning your properties! As he suggested newer products, what new product, you either finance long term or for a shorter term, what else could he have implied? In many ways what we have going on now is very much like the land grabs of the depression years. Anotyher point was that the US lagged in homeownership, yes, because in Europe and Asia, land has been owned for hundreds of years by the same families, single family markets in Germany are very slow. The US is still new and there are many social reasons why per capita, we lag in real property ownership. It would be nice for government to get out of many aspects of the industry, but to get out completly would be a disaster for most Americans. But then, I'm not sure that's where the push is, shoring up middle income Americans, it's more like what's best for the corporate and world interests. Hmmm, Later, Bill