Larry Roberts real estate writing blog: June 2015

Tuesday, June 30, 2015

OCHN: House prices depend on bank policies toward delinquent borrowers

The house price crash and subsequent bubble reflation was heavily influenced by bank policy.

Most people assume house prices are the result of market forces determined by supply and demand from individual homebuyers and home sellers. The reality is that policies at the major banks, particularly...
House prices depend on bank policies toward delinquent borrowers

Monday, June 29, 2015

USA Foreclosure: Reverse mortgages are a really, really bad idea

I have made mistakes in my life that made me want to go back in time and undo them. Sometimes you can, but sometimes you can’t go back and reverse the damage. Taking on a reverse mortgage is one mistake that is very difficult to undo. I don’t like reverse mortgages. I don’t...
Reverse mortgages are a really, really bad idea

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Renter News: Lowering GSE and FHA loan limits will lower house prices

During the housing bubble rally, the grass was greener and the light was brighter. At higher prices with boundless hope, we reached the dizzying heights of real estate wealth, a dreamworld of unlimited appreciation and personal spending power. Currently our housing market is completely supported...
Lowering GSE and FHA loan limits will lower house prices

OCHN: Loan modification entitlement curtailed as prices rise

Lenders tighten the terms of loan modifications as prices near the peak and lenders have less risk of loss in foreclosure.

When a borrower secures a loan to purchase a house, they negotiate with lenders over the cost of borrowing (interest rate). In the wake of the new mortgage regulations,...
Loan modification entitlement curtailed as prices rise

Sunday, June 28, 2015

USA Housing: Can it be a good time to buy and a good time to rent?

The conventional wisdom is it’s either a good time to buy or it’s a good time to rent, but not both. Rising house prices and rising rents generally favor buying because the owner can lock in a fixed cost of ownership while profiting from appreciation. Falling house prices or stagnant...
Can it be a good time to buy and a good time to rent?

Saturday, June 27, 2015

Real Estate Ruin: B of A gave away free money to loan owners in 2012

B of A is working to obtain maximum public relations value from the settlement agreement. Based on articles like this one, it looks like B of A is the most generous (and stupidest) bank on the planet. BofA to slash mortgage balances by $100,000 or more By Les Christie @CNNMoney March 9, 2012:...
B of A gave away free money to loan owners in 2012

USA Housing: The long-term negative impact of temporary mortgage interest rate stimulus

Banks are in survival mode. They must reflate the housing bubble, or the losses on their non-performing single-family residential loans will wipe them out. In order to reflate the bubble, the banks must keep these properties off the MLS, a task they are currently succeeding at, and mortgage...
The long-term negative impact of temporary mortgage interest rate stimulus

Friday, June 26, 2015

Debt Default: Now is the time to reform the home mortgage interest deduction

If you listen to the people who benefit most from government housing subsidies, there is never a good time to reduce or eliminate a source of government largess. If you’ve been reading this blog for very long, you have a finely tuned bullshit detector. Whenever you read the shrill cries of...
Now is the time to reform the home mortgage interest deduction

OCHN: Flipside of declining homeownership rates: relentlessly climbing rents

As more families eschew homeownership in favor of renting, the cost of renting residential real estate continues to rise.

In the depths of the Great Recession, incomes dropped and many people lost their jobs and many others barely hung on. Ordinarily, such circumstances would cause rents to...
Flipside of declining homeownership rates: relentlessly climbing rents

Thursday, June 25, 2015

Real Estate Loan: GSEs now 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 now permit unrestricted strategic default with no financial consequences

OCHN: Housing prices are expensive, affordable, stable, and boring

Stable house prices with low volatility isn’t very exciting, but it’s the best thing possible for residential real estate.

The norm in California housing over the last 40 years has been extreme volatility. We had one stretch in the mid 1990s when prices were closely tethered to...
Housing prices are expensive, affordable, stable, and boring

Wednesday, June 24, 2015

Housing Forecast: Foreclosures are NOT hurting America"s children

As the crash in house prices continues the number of families displaced from their homes increases due to foreclosure, short sales, and strategic default. Since the foreclosures generally lead to an involuntary property eviction, many former loan owners are upset by the consequences for...
Foreclosures are NOT hurting America"s children

Mortgage Refinance: Neighbors stealing from neighbors: HELOCs make a comeback

When people are victims of theft, they usually work to remedy the situation so the theft doesn’t happen again. If a thief breaks into someone’s house, the homeowner installs better locks or alarm systems to avoid a future loss of property or worse. However, when the crime is more...
Neighbors stealing from neighbors: HELOCs make a comeback

OCHN: Moratorium on mortgage defaults would solve housing crisis

Is the crisis in housing due to toxic mortgage products or people refusing to pay their mortgage obligations?

Have you noticed that eight years after housing collapsed and three years after housing bottomed, people still refer to housing as being in a crisis? As long as millions of delinquent...
Moratorium on mortgage defaults would solve housing crisis

Tuesday, June 23, 2015

Mortgage Foreclosure: Here comes the kool aid: HELOC abuse projected to rise

Our economy depends on Ponzi borrowing to the point that the government actually encourages this behavior despite the fact that millions lost their homes because of it. The ability to freely access and spend home equity creates moral hazard. It encourages over-borrowing and overpaying. It was...
Here comes the kool aid: HELOC abuse projected to rise

OCHN: "Months of Supply" is worst indicator of housing market activity

The “months of supply” indicator has little or no predictive power and often gives a false impression of the strength or weakness of the real estate market.

The “months of supply” is a measure of market absorption, providing a reading of how fast homes are selling...
"Months of Supply" is worst indicator of housing market activity

Monday, June 22, 2015

USA Foreclosure: Detailed review of changes to California foreclosure law in 2012

The California legislature passed the so-called Homeowners’ Bill of Rights, and Jerry Brown has indicated he will sign it into law. So how does this new law change the foreclosure process? Let’s take a closer look. Calif. Legislature OKs homeowners’ bill of rights Marisa Lagos...
Detailed review of changes to California foreclosure law in 2012

Renter News: Fannie Mae and Freddie Mac should be dismantled in favor of private lending

Should the government provide loan guarantees to subsidize home ownership? The arguments in favor of government subsidies all come down to putting people into homes they cannot afford in a free market. The theory is that homeowners care more for their properties and community and are less likely...
Fannie Mae and Freddie Mac should be dismantled in favor of private lending

OCHN: Taxpayer backing for the GSEs ensures the misallocation of credit

Subsidized credit is the process of taking credit from worthy borrowers and providing it to unworthy borrowers.

I always find it interesting when writings from many years ago resonate through the ages as if they were written yesterday, like the writings of Frédéric Bastiat, a 19th century F...
Taxpayer backing for the GSEs ensures the misallocation of credit

Sunday, June 21, 2015

USA Housing: Janet Yellen completely missed the housing bubble

Economists and forecasters are wrong most of the time. The ones that last the longest learn to revise history and make it look like they were right when, in fact, they were dead wrong. Managing perception and reputation is more important that actually being right or wrong. Many support Janet...
Janet Yellen completely missed the housing bubble

Saturday, June 20, 2015

Real Estate Ruin: Are OC rents a bubble due to pop?

Rents have been rising in Irvine and in Orange County since early 2010 when we began to pull out of the recession. The trick is to identify the reason for this increase. If it’s due to a recovering economy, then the recent rent increases are normal and sustainable; however, if it’s...
Are OC rents a bubble due to pop?

Friday, June 19, 2015

Debt Default: Orange County home resale volume very weak by historic norms

A lie, if repeated often enough, becomes accepted as truth. The mainstream media is reporting that home sales are strong and demand is robust. Compared to the depths of the housing bubble crash, sales are up somewhat, mostly due to investor demand, but sales are still very low by historic...
Orange County home resale volume very weak by historic norms

Housing Market: Promoting financial innovation will result in future housing bubbles

With house prices bottoming, lenders are less risk adverse because they know rising prices reduces losses when loans go bad. As a result, lending standards will soon begin to loosen up on the fringes as lenders will take on marginal borrowers in an attempt to underwrite more loans. This is a...
Promoting financial innovation will result in future housing bubbles

OCHN: Big losers in real estate buy negative cashflow investments

Negative cashflow investments are generally a losers game. The only path to success is for rapid appreciation that often fails to materialize.

Real estate investors during the housing bubble put their money to work on faith. There is no logical reason to believe house prices only go up. In...
Big losers in real estate buy negative cashflow investments

Thursday, June 18, 2015

Real Estate Loan: 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: Signatory debt is bad; asset-backed debt is good

Some forms of debt are better than others.

I make no secret of my disdain for the behavior of bankers during the housing bubble. I’m not so extreme that I consider all borrowing and lending to be evil; however, I draw a clear distinction between what I consider good debt, useful for economic e...
Signatory debt is bad; asset-backed debt is good

Wednesday, June 17, 2015

Housing Forecast: The fear of homelessness is the basis of America"s economic system

Modern American culture can trace its roots on the North American continent to pioneering English settlers. Life on the frontier is harsh, and each family unit is self-reliant. In a frontier society, if people didn’t work, and if they didn’t produce their own food and shelter, then...
The fear of homelessness is the basis of America"s economic system

Mortgage Refinance: Future loan terms determine future home prices

One of my earliest posts in May of 2007 was about the impact future loan terms have on future home prices. Most people just assume house prices always go up. Their faith was shaken by a precipitous decline over the last six years, but once the bottom is securely in the rear-view mirror, kool aid...
Future loan terms determine future home prices

OCHN: Dodd-Frank prevents lenders from inflating another bubble

If lender lobbyists don’t roll back Dodd-Frank, the new mortgage rules will prevent future housing bubbles.

Everyone wants to buy a home and see it go up in value. Most people assume the greater the increase the better because they don’t want to believe there is a natural limit to home p...
Dodd-Frank prevents lenders from inflating another bubble

Tuesday, June 16, 2015

Mortgage Foreclosure: Is the home mortgage interest deduction really at risk?

Do we really need to give high wage earners a huge tax break as an encouragement to take on excessive debts? That’s what the home mortgage interest deduction really does. If the deduction were eliminated, home values in areas like Orange County populated by high wage earners would drop to...
Is the home mortgage interest deduction really at risk?

OCHN: realtors expound shoddy analysis to create a false sense of urgency

realtors are more interested in generating false urgency than helping buyers make a sound decision that’s best for their family.

When a realtor talks, at some level you know that most of what they say is bullshit. They aren’t necessarily liars that intentionally make false...
realtors expound shoddy analysis to create a false sense of urgency

Monday, June 15, 2015

USA Foreclosure: Keith Jurow: House prices in New England crashing in 2012

The amend-extend-pretend policy of America’s banks is most pronounced in New England, particularly New York where the lenders live. There have been very few foreclosures despite high default rates, partly because the judicial foreclosure process in these states is log-jammed, and partly...
Keith Jurow: House prices in New England crashing in 2012

Renter News: Beyond personal greed, house price inflation is bad

For readers of this blog, the editorial that follows will not cover new ground. For the wider readership in California, what follows is pure sacrilege. Bursting our bubble Why do we continue to think that rising home prices are a good thing? By Michael Kinsley — February 15, 2011 If...
Beyond personal greed, house price inflation is bad

OCHN: Has real estate kool-aid returned to California?

Are the bulls back for good? Can real estate only go up forever (again)?

The housing bubble was first and foremost a financial mania. People held obviously foolish beliefs as absolute truths, and they would vigorously defend their foolish ideas even after the bust when the folly was exposed for...
Has real estate kool-aid returned to California?

Sunday, June 14, 2015

USA Housing: Another appalling example of bail-out mentality ruining America

Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall. All the king’s horses and all the king’s men Couldn’t put Humpty together again. Have you ever wondered why we tell out children such ghastly stories? I remember how I felt when I first heard and comprehended that...
Another appalling example of bail-out mentality ruining America

Saturday, June 13, 2015

Real Estate Ruin: OC Housing News market rating system: Where is it safe to buy?

I developed the OC Housing News Market Newsletter to provide information on the local housing market useful to potential homebuyers. I believe people make good decisions when given good information.We all know the information provided by realtors on the housing market is manipulated to motivate...
OC Housing News market rating system: Where is it safe to buy?