Monday Morning Quarterback

Monday Morning Quarterback

(Monday, November 17, 2025)

50-Year Mortgages (Part 1)? Last week I wrote about our water crisis. This week I’m writing about our “housing crisis.” Actually, our housing crisis is a two-prong problem: (1) lack of housing, and (2) affordability. To tackle our housing crisis the Trump administration (particularly FHFA Director Bill Pulte) have proposed several solutions. The latest solution is the 50-year mortgage. While on the surface a 50-year mortgage sounds sexy, in reality it’s probably a bad idea for all concerned. Let me tell you why. First, the sole argument for having a 50-year mortgage is that it will lower the borrower’s monthly payments. Yes, that’s true. But let’s look closer. Assume a $400,000 average home in the U.S. with a 10% down payment ($40,000) requiring a $360,000 loan (average in the U.S.) Assuming an interest rate of 6.25% (owner-occupied), the borrower would pay $250 less per month. Nothing to write home about, right? But consider this. Lenders would likely charge a higher interest rate than 6.25% for a 50-year mortgage (as opposed to a 30-year mortgage) because of the greater risk and uncertainty of loans lasting 50 years. So that $250 savings rapidly disappears. But worse, over those 50 years the homeowner will pay a mind-boggling $816,000 in interest, almost double the $438,000 interest paid over a 30-year mortgage, and more than double the original $400,000 purchase price of the house! Ouch that hurts! Worse still, with all that interest paid monthly, there would be less equity build up (because less is being applied to reduce principal). And yes, extending loan terms could lift buyer demand, but that would likely push home prices even higher, erasing any benefit from lower monthly payments. So, all in all, a pretty bad idea. It doesn’t solve lack of housing or affordability.

Part 2 (Housing Crisis). The Trump Administration and Pulte have also proposed several other solutions for the housing crisis, other than the 50-yers mortgage. Some of these proposals may actually be viable:

1. Make All Loans Assumable. Government-sponsored enterprises, Fannie Mae and Freddie Mac could make all their insured loans assumable. That would allow a home seller to transfer their low-interest loan to the buyer. This would be great idea because it would reduce the cost of buying a home and incentivize sellers to put their homes on the market. If homeowners with low interest loans can assume another 3% loan when they buy another home, it frees up inventory. And, of course, more inventory brings down prices.

2. Make Mortgages Portable. With this idea, Fannie Mae and Freddie Mac would allow a homeowner with a low interest loan to transfer it to their next home. This would ease the “lock-in effect” (the reluctance of homeowners with ultra-low mortgages to sell their homes) because a homeowner would be more willing to sell their home and buy another. This would increase inventory and thereby lower prices.

3. Eliminate Capital-Gains Tax on Home Sales. Currently individuals can exclude only $250,000 of the profits on a home sale from capital gains taxes and married couples can exclude the first $500,000. Eliminating this tax altogether would be an incredible stimulus. People would be more inclined to sell if they didn’t face the prospect of a stiff tax.

4. Take Fannie Mae & Freddie Mac Private. The idea here is that if these two pseudo-governmental organizations are taken private, they could conceivably raise enormous amounts of money. If that occurs, they could use those extra funds for affordable housing, which helps everyone.

Homeowners Are the Winners If Trump Ends Capital-Gains Taxes. As describe above, President Trump says he’s eyeing the elimination of capital-gains tax on home sales as a way to coax more people into selling their homes (amid a housing market that’s been frozen for nearly three years by high prices and high interest rates). After being stuck with the same tax rules for nearly three decades, any law change would be a sea change for many homeowners across the country. As you know, home prices have risen sharply over the past few years, even as the housing market has largely stagnated. Many homeowners have ultralow mortgage rates that they are reluctant to give up, and home buyers are frustrated with an unaffordable market. At the same time, many homeowners are reluctant to sell as their homes gain significant value. If they were to sell, they would have to pay taxes on the sale if their profits are steep enough — so the tax bite has kept a lid on housing supply, industry sources say. Eliminating capital-gains tax on home sales “could be a winning issue for Republicans” in the 2026 midterm elections, Greg Valliere, chief U.S. policy strategist at AGF Investments, said in a Wednesday note. “We’ll follow the capital-gains issue closely this winter — it could have a major impact on the sluggish housing industry.” The White House declined to comment. Individuals can now exclude $250,000 of their profits on a home sale from capital-gains taxes, while married couples can exclude $500,000 of their profits. These exclusion limits have been in place since 1997. Profits above that point are subject to capital-gains taxes up to 20%, depending on the rest of the seller’s income. A 3.8% net investment income tax might also apply on the profit above the exclusion, depending on the seller’s income. So eliminating the tax would be a windfall for home sellers.

U.S. Foreclosure Activity Posts Eighth Straight Month of Increases. ATTOM real estate analytics released its October 2025 “U.S. Foreclosure Market Report,” which shows there were a total of 36,766 U.S. properties with foreclosure filings (i.e. default notices, scheduled auctions or bank repossessions) up 19 percent from a year ago. “Foreclosure activity continued its steady upward trend in October, the eighth straight month of year-over-year increases. Starts rose nearly 20 percent, while completed foreclosures were up 32 percent from last year,” said Rob Barber, CEO at ATTOM. “Even with these increases, activity remains well below historic highs. The current trend appears to reflect a gradual normalization in foreclosure volumes as market conditions adjust, and some homeowners continue to navigate higher housing and borrowing costs.” Nationwide, one in every 3,871 housing units had a foreclosure filing in October 2025. States with the worst foreclosure rates were Florida (one in every 1,829 housing units with a foreclosure filing); South Carolina (one in every 1,982 housing units); Illinois (one in every 2,570 housing units); Delaware (on in every 2,710 housing units); and Nevada (one in every 2,747 housing units). Among metro areas with populations of 1 million or more, Tampa, FL posted the highest foreclosure rate in October 2025, at one in every 1,373 housing units. The increase reflects a temporary spike caused by the resumption of data collection in Hillsborough County, which added backlogged records and is expected to normalize in November. Following Tampa were Jacksonville, FL (one in every 1,576 housing units); Orlando, FL (one in every 1,703); Riverside, CA (one in every 1,983); and Cleveland, OH (one in every 2,114). Lenders started the foreclosure process on 25,129 U.S. properties in October 2025, up 20 percent from a year ago. States that had the greatest number of foreclosure starts in October 2025 included: Florida (4,136 foreclosure starts); Texas (3,080 foreclosure starts); our own California (2,685 foreclosure starts); Illinois (1,252 foreclosure starts); and New York (1,165 foreclosure starts).

L.A. Caps Rent Increases in Historic Vote. Landlords take heart, it could have been worse. In a historic 12-2 vote on Wednesday, the Los Angeles City Council decided to cap annual rent increases. Updating the Rent Stabilization Ordinance formula to set the annual increase of rent to 4% for roughly 650,000 units across the city. Previously, the formula to set rent was 60% of the Consumer Price Index, but now it is being increased to 90%. Additionally, the ruling will allow an additional 2% increase for landlords who cover utilities. Nithya Raman, chair of the council’s Housing and Homelessness Committee, ahead of the vote, said, “Extraordinary rent increases are driving people out of the city.” The RSO covers apartments built on or before Oct. 1, 1978, and lawmakers have spent months debating how to best alleviate residents from additional rent-related burdens. While also taking into account how to best balance the needs of housing providers. Raman said, “What we have before us right now is an opportunity to make L.A. more affordable, because when people can afford to stay in Los Angeles this entire city thrives.” Landlords and advocates against the measure say the updated formula will make it more expensive to provide housing. To relieve any additional burden to landlords, they are also putting into effect an increase in funding for “Mom and Pop” landlords. Owners with 2-10 units will receive support for repairs and rehabilitation. Most Angelenos are renters, and more than half spend more than 30% of their income on paying rent. With 1 in 10 residents using 90% of their income to cover rent.

Home Sellers Have A ‘Tough Pill To Swallow’ This Fall. The cold feet so many buyers are feeling reflects the current vibe of “uncertainty” in today’s housing market. Buyers are worried about their job security as the labor market shows signs of weakness, and they’re concerned about the future of the economy. On top of that are concerns about overpaying for a home. Home sellers, as a result, are facing a frosty reception from buyers. Properties are spending more days on the market, and fewer are selling over list price compared with a year ago. Consequently, existing home sales remained at a low level, rising only slightly in September, as most buyers stayed out of the market. The slight increase is “not a breakout, but certainly a welcome trend,” Lawrence Yun, chief economist at the National Association of Realtors, said in a press call on Thursday. He expects home sales to perk up as mortgage rates drop. Redfin estimated that there were many more home sellers than buyers in September. Nearly 2 million sellers were competing for 1.4 million buyers across the nation. The gap between buyers and sellers was far more pronounced in Sun Belt markets like Austin, Texas, and Fort Lauderdale, Fla. In Austin, 17,400 sellers were vying for attention from 7,600 buyers, for instance. The 30-year mortgage rate averaged 6.17% according to Mortgage News Daily. The 30-year is at the lowest level since mid-September, before the Federal Reserve’s September meeting. Even though rates plummeted over the course of September, sales of existing homes rose nationwide by just 1.5% in September from the previous month, according to the NAR, to a 4.06 million pace. That’s the number of homes that would be sold over an entire year if sales took place at the same rate in every month as they did in September. The numbers are seasonally adjusted. The pace of sales met expectations of economists surveyed by Dow Jones Newswires and the Wall Street Journal, who had forecasted home sales to increase to a 4.06 million pace in September. Overall, existing home sales reached a seven-month high in September. Sales were also up 4.1% from last September. But the rate of canceled home sales also picked up, according to separate Redfin data. About 15% of the home sales that went under contract in September were canceled, which translated to about 53,000 home-purchase agreements. Among the 50 most populous metropolitan areas in the U.S., cancellations were most common in Tampa, San Antonio and Atlanta.

Basic Training Investing Boot Camp. Saturday, December 13, 2025, 9:00 am to 6:00 pm, will be our semi-annual Basic Training Boot Camp. Everything you ever wanted to know about real estate investing but were afraid to ask. Iman Cultural Center, South Hall, 3376 Motor Avenue (between National and Palms), Los Angeles, 90034.The cost of the Boot Camp is $149.00 per person if paid before December 6, 2025. Ther after the prices increases to $249.00. (Gold Members and former Boot Campers can attend for FREE, but still need to register.) So don’t wait to register. Plus free parking. Please register at our website: LaRealEstateInvestors.com.

This Week. Looking ahead, investors will continue to watch for additional information about tariffs and monitor comments from Fed officials for hints about monetary policy later in the year. With the end of the government shutdown, investors will be waiting for the schedule for the release of government economic reports. The detailed minutes from the October 29 Fed meeting will be released on Wednesday. Existing Home Sales will come out on Thursday.

Weekly Changes:

10-Year Treasuries: Flat 000 bps

Dow Jones Average: Fell 100 points

NASDAQ: Fell 300 points

Calendar:

Wednesday (11/19): Housing Starts

Wednesday (11/19): Fed Minutes

Thursday (11/20): Existing Home Sales

For further information, comments, and questions:

Lloyd Segal

President

Los Angeles County Real Estate Investors Association

Lloyd@LARealEstateInvestors.com

www.LARealEstateInvestors.com

310-792-6404