Larry Roberts real estate writing blog: October 2014

Friday, October 31, 2014

Debt Default: Delinquent mortgage squatters will miss the recovery rally

If there is any justice in our financial system, delinquent mortgage squatters will face negative consequences for receiving their free ride. Right now, millions of people are not paying their mortgages, and the banks are not foreclosing on them. I paid my rent for the last five years and many...
Delinquent mortgage squatters will miss the recovery rally

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Housing Market: The "wealth effect" is the most dangerous euphemism in economics

Economists look for correlations to infer causations for macro-economic events. Unfortunately, most macro economists fail to look at the individual incentives, the micro reasons, some events occur. What’s even more amazing, or amusing, is how much effort and study they put in to trying to...
The "wealth effect" is the most dangerous euphemism in economics

OCHN: Non-resident homeowners should be taxed heavily

Foreign and non-resident owners who view houses as an investment bid up prices in local real estate markets and price out local residents.

Taxing a commodity or a behavior makes it more expensive, which thereby lowers demand, so if legislators want to see less of some behavior or resource, they ...
Non-resident homeowners should be taxed heavily

Thursday, October 30, 2014

Real Estate Loan: An FHA bailout is paid for by high wage earners

Since most FHA borrowers only put 3.5% down, when factoring in a 6% commission, 2% closing costs, and a declining market, nearly all FHA borrowers over the last five years are effectively underwater. When these borrowers sell or quit paying, the losses will be huge because the capital recovery...
An FHA bailout is paid for by high wage earners

OCHN: Is the housing hangover cure more stimulants or more jobs?

When the interest rate stimulus ended in mid 2013, sales slumped. Does the market need a dose of low rates, or should we wait for jobs to improve sales?

Government officials, lenders, and the federal reserve will do whatever’s necessary to prop up housing prices. Over the last five ...
Is the housing hangover cure more stimulants or more jobs?

Wednesday, October 29, 2014

OCHN: How to save money for a down payment to buy a house

Soaring rents is preventing people from saving for a down payment, but saving is a critical first step to become a home owner.

The biggest barrier to sales today is the lack of a down payment. In the post How restricted for-sale housing inventory saps demand, I demonstrated how stagnant wages a...
How to save money for a down payment to buy a house

Tuesday, October 28, 2014

Mortgage Refinance: Who is Responsible for the Bubble

Who is responsible for the Great Housing Bubble? It is one thing to identify who or what caused the bubble, but it is another to assign responsibility and blame. Borrowers, lenders, investors, and the FED are all responsible; it is only a matter of degree. Irresponsible borrowers are like...
Who is Responsible for the Bubble

Mortgage Foreclosure: Did stopping HELOC abuse kill the economy?

Economists are busy studying the “wealth effect” to determine how important it is to the country’s economic health. Unfortunately, they don’t really understand the mechanics behind what they are studying. The basic assumption economists make is the people spend more of...
Did stopping HELOC abuse kill the economy?

Housing Market: GSEs permit unrestricted strategic default with no financial consequences

Paul Simon wrote There Are 50 Ways to Leave Your Lover. There are many ways people can leave their unwanted properties, but if the debt is recourse, they can’t walk away from the debt as the lender can track them down to force repayment. In fact, zombie debt collection will be a...
GSEs permit unrestricted strategic default with no financial consequences

Monday, October 27, 2014

OCHN: A fixed cost of housing is the best reason to buy a house

Homeowners generally feel more confident in their ability to make ends meet, largely because they fixed their ownership costs long ago.

The need for shelter is basic, often closely followed by the desire for community. In the United States, this often translates into a desire to take on a very...
A fixed cost of housing is the best reason to buy a house

OCHN: A fixed cost of housing is the best reason to buy a house

USA Foreclosure: Federal Reserve willfully ignorant to real cause of MLS listing shortage

Sometime in late 2011 or early 2012, lenders changed their internal policies regarding foreclosure processing on delinquent borrowers. Prior to that time, most major lenders, and in particular the GSEs, were processing foreclosures to reduce the level of shadow inventory and stop delinquent...
Federal Reserve willfully ignorant to real cause of MLS listing shortage

OCHN: Young renters see little or no reason to buy a house

With high prices, a perception of high risk, and little appreciation potential, many young renters see little reason to buy a house.

People can obtain shelter in one of two ways: they can rent, or they can own. Each method of possessing real estate has its advantages and drawbacks, and the rent...
Young renters see little or no reason to buy a house

Sunday, October 26, 2014

Loan Mod Default: Man refuses to sell house he couldn"t afford, complains about foreclosure

We’ve become so accustomed to foreclosures on underwater homes that we forget that’s not how it used to be. Foreclosures have always been part of the system, and prior to the housing bust, foreclosures happened to people who had equity in their properties. Foreclosures happen because...
Man refuses to sell house he couldn"t afford, complains about foreclosure

USA Housing: Award-winning realtor fouls competing house with dead rats

When people get greedy or desperate, they sometimes do foolish things. A recent LA Times article detailed the atrocious behavior of two landlords — a realtor and her husband — who terrorized tenants to induce them to move out so the landlords could make a quick buck. They cut holes...
Award-winning realtor fouls competing house with dead rats

OCHN: Riverside County Housing Market News: October 2014

Historically, properties in this market sell at a 18.5% discount. Today’s discount is 21.5%. This market is 3.0% undervalued.
Median home price is $290,100 with a rental parity value of $369,500. This market’s discount is $79,400.
Monthly payment affordability has been improving over...
Riverside County Housing Market News: October 2014

Saturday, October 25, 2014

Ponzi Debt: HELOC Abuse Grading System (redux)

HELOC abuse is one display in many of the properties I profile each day. I made my point about HELOC abuse years ago, and I originally wrote today’s post back in early 2010. No matter how many of these I profile, many readers, including myself, find these stories interesting. It’s...
HELOC Abuse Grading System (redux)

Friday, October 24, 2014

Debt Default: Allowing delinquent mortgage squatting causes more strategic defaults than crashing prices

Ever since the housing bust began, banks have been caught between a rock and a hard place. On one side, if they foreclose and liquidate their inventory, prices plummet which prompts underwater borrowers to strategically default. The downward spiral of strategic default is in clear evidence in...
Allowing delinquent mortgage squatting causes more strategic defaults than crashing prices

OCHN: Have lenders purged the Ponzis?

Delinquency rates on consumer loans hit a record low as lenders can-kick legacy loans and tighten standards to eliminate Ponzis.

The financial media is abuzz with talk about tight credit and how it must be made looser to stimulate lending and the economy. This chatter, plus lender’s...
Have lenders purged the Ponzis?

Housing Market: Lenders will target near-equity squatters for future foreclosures

Banks are letting delinquent borrowers squat rather than foreclosing on them and booting them out. At first, it was a self-preservation measure by the banks taken out of desperation when the first wave of foreclosures caused prices to crash. However, now the banks are content to allow squatting,...
Lenders will target near-equity squatters for future foreclosures

Thursday, October 23, 2014

Real Estate Loan: People with second mortgages and HELOC faced tough times

HELOC abusers and lenders face day of recast reckoning Home equity lines of credit (HELOCs) were the favored tools of Ponzis during the housing bubble. These were used like a credit card with an ever-expanding credit balance that didn’t need to be paid back because the house was paying for it. M...
People with second mortgages and HELOC faced tough times

OCHN: Regulators capitulate to lending industry lobbyists

Aligning two sets of mortgage rules established for different purposes, regulators provide room for lenders to make bad loans without risk retention.

In a complete victory for lending industry lobbyists, the Qualified Residential Mortgage rules match the Qualified Mortgage rules. The Dodd-Frank ...
Regulators capitulate to lending industry lobbyists

Tuesday, October 21, 2014

Mortgage Foreclosure: Faith in home price appreciation is religion in California

Kool aid is flowing again. Last week, I read the following comment that encapsulates the religious faith of most Californians, Besides, OC real estate has been and will continue to be desirable. It’s also very cyclical and I knew there would be another cycle coming much sooner than the bears p...
Faith in home price appreciation is religion in California

Housing Market: Rising prices stoke fears of kool aid intoxication

Everyone wants to make money for doing nothing. Learning about investing takes time and effort, and the results are far too slow to satisfy most people. Plus, you have to sell the investment and pay taxes on the gains. It’s too much hassle. Real estate is so much better. Everyone is...
Rising prices stoke fears of kool aid intoxication

OCHN: Are the GSEs returning to subprime lending?

Mel Watt announced a number of changes designed to loosen the credit box and stimulate lending. This doesn’t mean a return to subprime.

Those of us who watched the housing bubble and bust and detailed it’s causes are greatly concerned about returning to the disastrous lending...
Are the GSEs returning to subprime lending?