Larry Roberts real estate writing blog: September 2015

Wednesday, September 30, 2015

OCHN: What distinguishes homeowners from renters? (Hint: It’s not what you think)

What separates homeowners from people who don’t own homes? The answer is not as simple as you might think.

If you go back to antiquity, the person who “owned” a house was generally the strongest warrior who was capable to taking it and holding it against all rivals. Over the last 500 years the d...
What distinguishes homeowners from renters? (Hint: It’s not what you think)

Tuesday, September 29, 2015

OCHN: Housing echo bubble may deflate but not pop

The recent house price rally was financed with stable, fixed-rate mortgages. Stable mortgages make for a stable housing market.

Pundits like to call asset bubbles; it attracts attention and helps make a name for the analyst. Most often they are wrong, but every once in a while, someone calls a...
Housing echo bubble may deflate but not pop

Monday, September 28, 2015

OCHN: FHA insures subprime loans with explicit government backing

If the FHA insurance fund falls short, the US taxpayer will pay the difference. With the FHA insuring subprime loans, as a taxpayer, your money is at risk.

Many mortgage industry observers quipped that FHA is the reincarnation of subprime lending; the facts support this assertion. The FHA has...
FHA insures subprime loans with explicit government backing

Friday, September 25, 2015

Debt Default: Would Mark Zandi have been good choice to run the GSEs?

My hero, Ed DeMarco, is on his way out as head of the FHFA that runs Fannie Mae and Freddie Mac, the GSEs. Ed DeMarco is a tragic figure who showed how difficult it is in Washington to do the right thing (see: Head of GSEs Edward DeMarco faces replacement, unfortunately). His actions in looking...
Would Mark Zandi have been good choice to run the GSEs?

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OCHN: Prime mortgage borrowers caused the housing bust

Prime borrowers using negative amortization loans were largely responsible for inflating the housing bubble, and their defaults lead to the crash.

Most people believe the housing bubble and bust was caused by subprime lending.
It was not.
The housing debacle was caused by a rapid expansion of...
Prime mortgage borrowers caused the housing bust

Thursday, September 24, 2015

OCHN: The prime homebuying season is right now!

September and October provides an abundance of motivated sellers and fewer competing buyers, making it the best time of year to shop for a home.

“It’s always a good time to buy or sell a house“
anonymous realtor
“They deem him their worst enemy who tells them the t...
The prime homebuying season is right now!

Wednesday, September 23, 2015

OCHN: How sleazy attorneys help irresponsible homeowners game the system

When sleazy attorneys help deadbeat homeowners obtain free housing, everyone else pays a price through low housing inventory and higher home prices.

Human interest stories need heroes. We are supposed to feel empathy for the aggrieved party that overcomes tough obstacles or intransigent people...
How sleazy attorneys help irresponsible homeowners game the system

Tuesday, September 22, 2015

OCHN: Training the next generation of foolish Ponzi borrowers

In its simplest form, a personal Ponzi scheme is borrowing money to pay debt service: acquiring new debt to pay old debt. It’s a path to disaster.

Carpe diem — “Seize the Day” — The first Ponzi
Have you ever wondered why people make foolishly irresponsible financial d...
Training the next generation of foolish Ponzi borrowers

Monday, September 21, 2015

OCHN: Rising mortgage rates don"t care about homebuyers" attitudes

Rising mortgage rates are a mechanical limitation that offers no respect to consumers’ attitudes one way or the other.

Buyer psychology matters, but not as much as the math of mortgage financing. Whatever happens to mortgage rates, people will still shop for homes, and they will still...
Rising mortgage rates don"t care about homebuyers" attitudes

Friday, September 18, 2015

Debt Default: Great monthly payment affordability is driving sales

Is buying based on a low monthly payment a good idea? In the past with toxic financing products fouling the market, many buyers used affordability products to borrow much more than they could reasonably afford. Those are the same people who are currently underwater clinging to their loan...
Great monthly payment affordability is driving sales

OCHN: Interest-only mortgages define the Ponzi limit

Interest-only mortgages rest on the border between Ponzi borrowing and safe borrowing, a purgatory on the edge of the abyss of insolvency.

Debts are supposed to be paid off. People forget that simple fact and take on debt as if it is something to be endlessly serviced. Those that embrace the...
Interest-only mortgages define the Ponzi limit

Thursday, September 17, 2015

OCHN: Five ways to reduce taxpayer risk in the mortgage market

Dodd-Frank accomplished much to reduce taxpayer risk, but more should be done to get taxpayers out of the mortgage insurance business.

The US taxpayer insures over 70% of the mortgage market through the GSEs and FHA. This is an unacceptably high level of exposure, particularly given the...
Five ways to reduce taxpayer risk in the mortgage market

Wednesday, September 16, 2015

OCHN: Los Angeles County rents rising at 7% annual rate

In LA County, the rate of rental rate increase now exceeds the rate of home price appreciation. Both exceed the rate of wage growth.

It costs too much to live in California because the chronic shortages of housing supply inflates California house prices and rents. Starting in the 1970s with...
Los Angeles County rents rising at 7% annual rate

Tuesday, September 15, 2015

OCHN: America"s children were NOT harmed by foreclosures

How children react to foreclosure depends mostly on how their parents deal with the situation.

Millions of families were displaced from their homes due to foreclosure, short sales, and strategic default. Since the foreclosures generally lead to an involuntary property eviction, many former loan...
America"s children were NOT harmed by foreclosures

Monday, September 14, 2015

OCHN: Housing fundamental value analysis: 6% mortgage rates kill appreciation

Fundamental value analysis predicts tepid home price appreciation as mortgage rates rise to historic norms. Will it prove a powerful tool, or a dismal failure?

I began writing publicly about housing issues in February 2007 on the Irvine Housing Blog, but I was a frequent commenter on housing...
Housing fundamental value analysis: 6% mortgage rates kill appreciation

Friday, September 11, 2015

Debt Default: The bearish case for another leg down in housing

It’s a difficult time to be a housing bear. The chorus of cheerleaders in the financial media are keen to report on the supposed strength in housing, and locally prices are going straight up. Given those realities, are the rantings and ravings of housing bears just noise to be ignored?...
The bearish case for another leg down in housing

OCHN: Bankers were the terrorists of the housing bust

The 9/11 terrorists killed several thousand people, but banking terrorists destroyed the lives of millions, and they are still in power.

Millions of families lost homes during the housing bust, and most of those families hate the bankers who threw them out of their family homes; however, that...
Bankers were the terrorists of the housing bust

Thursday, September 10, 2015

OCHN: Liar loans: Mortgage securitization disaster 2.0

Securitizing liar loans will work out well for early adopters, but as these loans proliferate, they destabilize the market and lead to disaster.

If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it.
W. C. Fields
Were liar loans an...
Liar loans: Mortgage securitization disaster 2.0

Wednesday, September 9, 2015

OCHN: Housing market is NOT strong enough to handle higher mortgage rates

The housing market can’t absorb a sudden or large increase in mortgage rates without major declines in sales and perhaps even decreases in prices.

In response to the housing bubble and bust, Congress passed the Dodd-Frank financial reform. These new mortgage regulations will prevent...
Housing market is NOT strong enough to handle higher mortgage rates

Tuesday, September 8, 2015

Mortgage Foreclosure: Despite rising prices, Orange County still more than 20% undervalued

Each month I publish the OCHN Market Newsletter. It provides the most detailed and accurate view of the housing market available without the realtor spin. I believe potential homebuyers should have the best information possible to make reasonable and rational decisions regarding the purchase of...
Despite rising prices, Orange County still more than 20% undervalued

OCHN: Irvine home prices surpass housing bubble peak

House prices in Irvine, California, reached the peak of the housing bubble, providing equity and relieving many underwater homeowners.

The federal reserve in conjunction with government officials reflated the housing bubble to restore collateral backing to lender’s bad loans. Whether or not t...
Irvine home prices surpass housing bubble peak

Monday, September 7, 2015

USA Foreclosure: Practical advice for today"s prospective homebuyers

Usually when you come across a homebuying advice article, it’s a puff piece put out by realtors. These articles usually emphasize the emotional aspects of buying a home, ignore the troubles and potential downside, and try to create urgency to motivate buyers to act. In other words,...
Practical advice for today"s prospective homebuyers

Renter News: Borrowers default on first mortgage and keep second mortgage current

At a basic level, each of us wants the safety and security of an ordinary world of predictable surroundings and routines. The real estate and mortgage world we live in today is a surreal landscape of failed loan programs, ever-tightening credit standards, and uncertainty about the future of real...
Borrowers default on first mortgage and keep second mortgage current

OCHN: Housing bubble thieves were ordinary people

The real thieves of the housing bubble weren’t the big players, the real thieves were the family next door.

People are basically honest and will do the right thing if given the chance. However, people are also opportunistic, and if encouraged and enabled to steal, many ordinarily good...
Housing bubble thieves were ordinary people

Sunday, September 6, 2015

USA Housing: The economy of the 00s: a Ponzi scheme based on housing debt

The headline of today’s post is not news to anyone who reads this blog very often, but for many, including some academic economists, this basic understanding comes only after years of study of the aftermath. Perhaps I expect too much of academics. They are supposed to be very smart people,...
The economy of the 00s: a Ponzi scheme based on housing debt

Saturday, September 5, 2015

Real Estate Ruin: Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

The frenzy over the possibility of a bottom in the housing market needs to be tempered by the reality of the current market situation. Despite relative affordability, sales volumes are low and declining, resale prices are still falling, we have a huge overhang of supply in shadow inventory, and...
Sales down, prices down, shadow inventory abundant, and Shiller says prices may never recover

Friday, September 4, 2015

Debt Default: Can the Fed reflate the housing bubble without negative side effects?

Economists say there is no free lunch. Apparently, those economists don’t work at the federal reserve. Interest rates are near record lows, and the federal reserve has been printing money to buy $40 billion a month in mortgage-backed securities to reduce mortgage rates further and provide...
Can the Fed reflate the housing bubble without negative side effects?

Housing Market: Low MLS supply hurting sales but boosting prices

The reality of our current housing market is simple; banks are limiting the supply, and the few buyers in the market are bidding prices higher; this despite the fact that Orange County home resale volumes are very weak by historic norms. I recently reported how the banks transformed must-sell...
Low MLS supply hurting sales but boosting prices

OCHN: Was quantitative easing a boost to housing or the economy?

Quantitative easing boosted the economy to the degree liquidity was a limitation; however, with debt deflation the real problem, QE didn’t accomplish much.

The federal reserve sets policy in meetings of the Federal Open Market Committee (FOMC), a group of bankers. The FOMC sets target...
Was quantitative easing a boost to housing or the economy?

Thursday, September 3, 2015

Real Estate Loan: What is the minimum level of housing quality people are entitled to?

If you ask many middle-class loanowners in coastal California, and they will tell you that they are entitled to a 2,000+ SF detached single-family home pimped out with pergraniteel — and they will really mean it. The sense of entitlement in coastal California is appalling to anyone viewing...
What is the minimum level of housing quality people are entitled to?

OCHN: The glass half-full housing recovery

Is it wiser to view a depressed market that’s improving as weak or recovering?

Since early 2012 when housing prices stopped going down, I characterized the price rally as a reflation of the old housing bubble rather than a price recovery. IMO, the crash was the price recovery because the...
The glass half-full housing recovery

Wednesday, September 2, 2015

Housing Forecast: Pimco fund manager who sold at the peak bought a house in 2012

Timing the housing market is important. Pundits make predictions all the time, and mostly they are wrong. It’s rare to find an analyst who has the foresight to see a change in the market and the courage to act on their insights. Mark R. Kiesel, a Pimco fund manager, is one such analyst....
Pimco fund manager who sold at the peak bought a house in 2012

Mortgage Refinance: A reasonable compromise to extend the Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act, a law temporarily amended the federal tax code to allow mortgage debt on a principal home that is canceled by a lender through a loan modification, short sale or foreclosure to escape taxation as ordinary income, is set to expire on December 31. The...
A reasonable compromise to extend the Mortgage Forgiveness Debt Relief Act

OCHN: The ability-to-repay rules prevent irresponsible lending

Qualified mortgage standards and the ability to repay rules provide a rigid framework designed to prevent lenders from irresponsibly inflating another painful housing bubble. The rules as drafted should achieve the desired effect.

The housing bubble inflated because lenders underwrote huge...
The ability-to-repay rules prevent irresponsible lending

Tuesday, September 1, 2015

Mortgage Foreclosure: Why the housing crash is far from over

I am no longer bearish. I have been an outspoken housing bear for over five years now, but based on recent developments, I have far fewer worries about another catastrophic decline in house prices. The recent changes are as follows: Federal reserve’s open-ended commitment to unlimited...
Why the housing crash is far from over

OCHN: Timing the housing market properly saves buyers big money

Those who buy when houses are undervalued come out far ahead of those who buy at the peak of the housing cycle.

When I developed the OC Housing News Report, one of the biggest challenges was to develop a rating system that would time the housing market to maximum advantage. As we’ve all seen o...
Timing the housing market properly saves buyers big money