Larry Roberts real estate writing blog: May 2015

Sunday, May 31, 2015

USA Housing: With depleted MLS inventory, all-cash buyers rule the market

In early 2012 lenders changed their foreclosure policies and opted for can-kicking loan modifications, most of which will fail. This dried up the MLS inventory and caused prices to bottom. Coincidentally, the low house prices and superior returns on rental homes attracted large private-equity...
With depleted MLS inventory, all-cash buyers rule the market

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Friday, May 29, 2015

Debt Default: Successful loan modifications require increasing borrower entitlements

Every successful loan modification undertaken by the GSEs or FHA is paid for by the US taxpayer — paid for by you. The GSEs have already required a $150 billion government bailout, and the FHA is next on the bailout horizon. The losses on these entities that are not recovered are...
Successful loan modifications require increasing borrower entitlements

OCHN: Florida attorney scores free houses for mortgage deadbeats

As attorneys prevail with their statutory claims, tens of thousands of delinquent mortgage squatters will be awarded free housing.

Wouldn’t it be great if you could stop paying your rent or your mortgage and continue to live in your property with no further payments? If I were given the...
Florida attorney scores free houses for mortgage deadbeats

Thursday, May 28, 2015

Real Estate Loan: Think you want consumer debt? Think again...

Warning! Don’t read today’s post if you have a weak stomach or a strong affinity for consumer debt. This is your only warning. Hang on, Alice, as we bolt through the rabbit hole on an adventure to financial Wonderland. Come with me on a fantastic journey to the Great Lakes to s...
Think you want consumer debt? Think again...

OCHN: Are high house prices in Silicon Valley pushing businesses out?

Shortages of both residential and commercial supply forces workers and businesses to flee high-priced California markets for lower prices elsewhere.

California house prices are very high because we endure a chronic shortages of housing. We aren’t in a house price bubble because the two...
Are high house prices in Silicon Valley pushing businesses out?

Wednesday, May 27, 2015

Housing Forecast: How will lenders liquidate their foreclosures?

This year lenders drastically reduced the number of REO they are getting at auction. The numbers are down 62% over this time last year. Further, they have reduced their MLS inventories by nearly 20% from last year’s levels. Apparently, lenders are going to continue to reduce MLS inventory...
How will lenders liquidate their foreclosures?

Mortgage Refinance: Ownership cost: property taxes, insurance, Mello Roos, and HOAs

Today is part 3 in the ongoing series on Ownership Cost: Ownership cost: income, payments and house prices Ownership cost: interest rates and down payment requirements Ownership cost: property taxes, insurance, Mello Roos, and HOAs Ownership cost: taxes and opportunity costs Four Major Variables...
Ownership cost: property taxes, insurance, Mello Roos, and HOAs

OCHN: Poor job and wage growth holds back homebuilders

Homebuilding needs many new jobs with high pay to create demand for more housing units.

Homebuilding usually leads the economy out of recession. The Great Recession did not end with a building boom largely because of overbuilding during the housing bubble. A false price signal triggered...
Poor job and wage growth holds back homebuilders

Tuesday, May 26, 2015

Mortgage Foreclosure: FHA waived 3-year waiting period and prompted millions of strategic defaults

Demand for houses by owner occupants has been anemic for nearly three years after four years of steep and unprecedented declines. Despite the refrain of increased demand from the bottom-calling glee club, the data clearly shows any increase in sales volume and demand this year is entirely due to...
FHA waived 3-year waiting period and prompted millions of strategic defaults

OCHN: How down payment requirements impact house prices

More borrowers qualify of down payment requirements are low, but those buyers are weaker, so the housing market is less stable.

Large down payments are the bedrock of the housing market because large down payments preserve home ownership, reduce volatility in the market, and reduce the risk to...
How down payment requirements impact house prices

Monday, May 25, 2015

USA Foreclosure: Foreclosure prevention laws extended the slump, experts agree

Our real property system functioned well for centuries with very little change. Prior to the housing bubble, it was widely accepted that people borrowed money to buy houses and if they didn’t pay it back according to the terms of the promissory note, the mortgage agreement allowed the...
Foreclosure prevention laws extended the slump, experts agree

Renter News: New families find the houses lost in foreclosure

People get caught up in their empathy with those losing their family homes to foreclosure. Its easy to get sucked in to the emotional stories of victimhood and believe that perhaps we should stop foreclosures. We all forget that the distressed debtor who rented money from the bank to occupy the...
New families find the houses lost in foreclosure

OCHN: realtors hire an actress to convince us they are "real"

Only the National Association of realtors could come up with something this stupid, this ironic, this hypocritical: they hired an actress to pretend she is realtor in order to convince us that realtors are “real.”
Elizabeth Banks Tries To Put The ‘Real’ In Real Estate For Rea...
realtors hire an actress to convince us they are "real"

Sunday, May 24, 2015

USA Housing: Typical sources of housing demand largely absent

For a true recovery in housing, the market needs resurgent demand from first-time homebuyers and move-up buyers. These two groups are typically the largest source of housing demand. The first-time homebuyer is the bedrock of the housing market. Without first-time homebuyers, no move-up market...
Typical sources of housing demand largely absent

OCHN: Las Vegas cashflow property offering

I am offering one or more property for sale from my Las Vegas property fund. I want to buy these properties myself, but the GSEs will not fund a non-arm’s length transaction for an investment property, so I must sell them. However, I will offer to buy back any of these properties...
Las Vegas cashflow property offering

Friday, May 22, 2015

Debt Default: Mistaken beliefs about sustainable appreciation drove housing bubble demand

This won’t come as any surprise to regular readers of this blog, but a new paper confirms the erroneous beliefs about sustainable home price appreciation drove much of the demand from the housing bubble.Many people who believe in the wisdom of the markets subscribe to the efficient markets...
Mistaken beliefs about sustainable appreciation drove housing bubble demand

Housing Market: Las Vegas: a case study in successful housing market manipulation

When housing bears made their case back at the peak of the housing bubble, they made assumptions about the application of the rules — rules that were subsequently changed. By the old rules, which served us for hundreds of years, when borrowers defaulted on their loans, banks were supposed...
Las Vegas: a case study in successful housing market manipulation

OCHN: April 2015 home sales pummeled by rising mortgage rates

If mortgage rates are allowed to rise, the spring 2015 housing rally will be canceled.

Back in February of 2013 when mortgage rates were near record lows, I wrote that future housing markets would be very interest-rate sensitive, despite assurances to the contrary from most...
April 2015 home sales pummeled by rising mortgage rates

Thursday, May 21, 2015

Real Estate Loan: New Qualified Mortgage categories are confusing until you look at this table

These new proposed rules are more than just guidelines, they have liability consequences for the lenders under the new Dodd-Frank. Qualified Mortgages are much more than just redefined Fannie Mae and Freddie Mac loans. If fact, I thought Qualified Mortgages were only going pertain to GSE l...
New Qualified Mortgage categories are confusing until you look at this table

OCHN: How mortgage interest rates affect homeownership costs

Low or falling mortgage interest rates are better for housing costs than high or rising rates.

From a consumers point of view, higher interest rates are bad because borrowing money becomes more expensive. All things being equal, higher mortgage interest rates make for a higher cost of ownership...
How mortgage interest rates affect homeownership costs

Wednesday, May 20, 2015

Housing Forecast: The case against another catastrophic housing market crash

In my view, the housing market here in Orange County is entering a three to five year period of spring rallies and fall declines with prices likely to flatten. The low end may appreciate while the high end will likely come down. That makes me somewhat bearish, certainly not bullish, but neither...
The case against another catastrophic housing market crash

Mortgage Refinance: Ownership cost: interest rates and down payment requirements

Today is part 2 in the ongoing series on Ownership Cost: Ownership cost: income, payments and house prices Ownership cost: interest rates and down payment requirements Ownership cost: property taxes, insurance, Mello Roos, and HOAs Ownership cost: taxes and opportunity costs Four Major Variables...
Ownership cost: interest rates and down payment requirements

OCHN: Will rising wages boost house prices?

House prices can only rise if wages go up, interest rates go down, or supply is restricted. Will we finally see rising wages in 2015?

Yesterday I wrote about the importance of wages for house prices. Assuming mortgage interest rates are stable (probably a poor assumption), then for house prices...
Will rising wages boost house prices?

Tuesday, May 19, 2015

Mortgage Foreclosure: Fed buys mortgages to keep interest rates low

Forecasting interest rates is very difficult. I haven’t had much success at it. The first challenge is to figure out what the market would do if left to its own devices. With the plethora of variables in play, that’s no easy task. Further complicating the problem is the federal...
Fed buys mortgages to keep interest rates low

OCHN: How borrower income effects payments and determines home values

Borrower income and mortgage rates determines how much buyers can borrow for a home purchase, making borrower income a major component of market prices.

Since this is the prime season for real estate sales, many people come to this site for basic information on homebuying and the market. Today,...
How borrower income effects payments and determines home values

Monday, May 18, 2015

USA Foreclosure: Are rising house prices and low-cost Ponzi debt necessary for an economic recovery?

Everyone is focused on making house prices go up. Banks need higher house prices to recover the capital they put into trillions of dollars of toxic mortgages. Loan owners need house prices to go up to avoid damaged credit from a short sale or foreclosure. Home owners want to see house prices go...
Are rising house prices and low-cost Ponzi debt necessary for an economic recovery?

Renter News: Timeshares are the worst real estate investment

Timeshare or fractional ownership has been around since the 60s, but is was during the 90s this industry really took off. Wikipedia defines Timeshare as follows: A timeshare is a form of ownership or right to the use of a property, or the term used to describe such properties. These properties...
Timeshares are the worst real estate investment

OCHN: 250,000 HELOCs due to recast in Orange and LA Counties

In the next four years, 250,000 of HELOCs are due to recast in Los Angeles and Orange counties.

Lenders mastered kicking the can when millions of borrowers stopped paying their debts. Rather than foreclose on delinquent borrowers, lenders collectively decided it was in their best interest to...
250,000 HELOCs due to recast in Orange and LA Counties

Sunday, May 17, 2015

USA Housing: Low down payment loans becoming a thing of the past?

During the housing bubble there were plenty of private mortgage companies underwriting low down payment loans, but they stopped after the bubble burst. Then after the burst low down payment FHA loans grabbed huge share of the mortgage market. The FHA standards were lowered and conforming limits ...
Low down payment loans becoming a thing of the past?

Saturday, May 16, 2015

Real Estate Ruin: realtors fighting against losing commissions on REO rentals

As most regular readers know, I believe the National Association of realtors frequently tells self-serving lies. They try to portray their actions as serving the market or the interests of loan owners, but their first priority is themselves and generating commissions. When the interests of the...
realtors fighting against losing commissions on REO rentals

Friday, May 15, 2015

Debt Default: What"s the difference between speculation and investment?

I write often about investment and compare that to what I consider speculation. I originally wrote this post on the subject more than five years ago, but since I have picked up many new readers along the way, I felt it was time to revisit this important topic. Speculation or Investment? Real...
What"s the difference between speculation and investment?

Housing Market: DeMarco prepares for final shutdown of GSEs

Of all the people who’ve played a role in the housing bubble and its aftermath, the one who continually impresses me is Edward DeMarco, conservator for the GSEs. He is a career bureaocrat who was placed in charge of the GSEs when they were taken into conservatorship in 2008. He has ...
DeMarco prepares for final shutdown of GSEs

OCHN: One of the last housing bears roars "not if but when"

Mark Hanson believes the reflated housing bubble will also pop. I think we won’t see any significant price deflation going forward.

The housing bears have not completely gone away. Zero Hedge, Keith Jurow, and Mark Hanson remain bearish, and they provide some of the most compelling...
One of the last housing bears roars "not if but when"

Thursday, May 14, 2015

Real Estate Loan: 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: High housing costs push Millennials out of California

Young people and lower-income households can’t afford the high house prices in California, forcing many to move out of state.

Yesterday I provided an update on the local housing market. The data in my reports show the market is relatively affordable, but this affordability is not spread...
High housing costs push Millennials out of California

Wednesday, May 13, 2015

Housing Forecast: Financially Conservative Home Financing

In my first post, I said I was financially conservative. What does that mean with respect to financing a home purchase? It occurred to me that exotic financing terms are not exotic anymore. Interest-only, adjustable rates, and negative amortization have become so ubiquitous that nobody seems to...
Financially Conservative Home Financing

Mortgage Refinance: Ownership cost: income, payments and house prices

I revisited my post on Rent Versus Own where I talked about the cost of ownership. Many of the questions people have about our Cost of Ownership analysis are related to the various cost inputs and how they impact values. Therefore, I want to take each of these costs and talk about them in more...
Ownership cost: income, payments and house prices