Larry Roberts real estate writing blog: October 2015

Saturday, October 31, 2015

Real Estate Ruin: Is the 2012 spring real estate price rally going to be cancelled?

Pending sales are up, and economists who use pending sales in their calculations are proclaiming a price rally is in the works. There is one inconvenient fact holding back the bulls: record cancellations. Borrowers are unable to close the deal, and properties are falling out of escrow at...
Is the 2012 spring real estate price rally going to be cancelled?

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Friday, October 30, 2015

Debt Default: No escape velocity as depleted inventory pummeled home sales in 2013

Typically, January is the slowest month of the year for real estate sales. Sales volume rises each month through July or August when it peaks as buyers rush to get into homes before their children start a new school year. When sales volumes decline on a monthly basis during the first half of the...
No escape velocity as depleted inventory pummeled home sales in 2013

OCHN: Are Chinese real estate investors less active in Irvine, California?

With the bulk of new home sales in Irvine, California, selling to Chinese nationals, declining sales there is an indicator of overall Chinese capital flows.

I don’t believe we will see another real estate crash caused by American lenders. Since they mastered the art of can-kicking to keep...
Are Chinese real estate investors less active in Irvine, California?

Housing Market: 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

Thursday, October 29, 2015

Real Estate Loan: Will reflating the housing bubble drive out California"s middle class?

During the housing bubble, the infusion of HELOC spending money stimulated the California economy. The resulting job growth caused wages to rise as employers scrambled to find help to meet the Ponzi demand. One of the biggest hurdles potential employers faced was the enormous cost of housing....
Will reflating the housing bubble drive out California"s middle class?

OCHN: Who cares if Millennials ever buy homes? Baby Boomers

Baby Boomers need Millennial buyers to purchase overpriced homes to fund the Boomers’ retirements.

Have you noticed all the financial media stories about why Millennials aren’t buying homes? Who cares whether or not Millennials buy homes? Shouldn’t the Millennials themselves...
Who cares if Millennials ever buy homes? Baby Boomers

Wednesday, October 28, 2015

Housing Forecast: Should you buy a home, or should you wait?

People read this blog for a variety of reasons. Some like the in-depth coverage of housing issues unfettered by bias and bullshit. Some like the entertaining cartoons and HELOC abuse stories of woe. Some like the market information and cogent analysis of current trends in the OC market. This...
Should you buy a home, or should you wait?

OCHN: Rising mortgage rates will expose housing momentum myth

As mortgage rates rise, home sales will decline, shattering the myth of escape velocity in residential real estate.

In rocketry, escape velocity is the speed required to propel an object into a stable orbit. In a housing market, escape velocity is a rate of price and sales volume increase...
Rising mortgage rates will expose housing momentum myth

Tuesday, October 27, 2015

Mortgage Foreclosure: How strong is the housing recovery, and what could reverse it?

What would make a strong foundation for a recovery? First, a housing recovery should be built on solid job growth — something that isn’t happening. Job growth of high-paying jobs would translate to more mortgage originations and purchases by owner occupants. Since job growth...
How strong is the housing recovery, and what could reverse it?

OCHN: The final wave of foreclosures proceeding briskly

As loan modifications redefault, and as the market can absorb the supply, lenders are finally foreclosing and resolving their bad loan permanently.

A wave of foreclosures flooded the housing market in 2008 and left millions of homeowners underwater. Most people believe the storm surge receded...
The final wave of foreclosures proceeding briskly

Monday, October 26, 2015

USA Foreclosure: To prevent an FHA bailout, lower the conforming limit on GSE loans

In a recent post, I noted that FHA mortgage delinquencies skyrocketed more than 25%. 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 ...
To prevent an FHA bailout, lower the conforming limit on GSE loans

Renter News: Foreign Buyers Rush to Catch Falling Knives

Are foreign cash buyers savvy investors who are taking advantage of low prices to snap up bargains, or are they the fools who purchase overprices assets that natives won’t touch? Often its a little of both. I always enjoy reading Rich Toscano’s writing, and back in 2006, he wrote a...
Foreign Buyers Rush to Catch Falling Knives

OCHN: Is shelter a basic human right, or exclusively for homeowners?

During the housing bust, every effort was made to keep homeowners in their houses. Renters were mercilessly thrown in the street with little or no fanfare.

Our real property system functioned well for centuries with very little change. Prior to the housing bubble, it was widely accepted that...
Is shelter a basic human right, or exclusively for homeowners?

Sunday, October 25, 2015

USA Housing: Would a legislated cap on appreciation quell kool-aid intoxication?

Like California, Great Britain has witnessed several major housing bubbles since the early 1970s. Great Britain has growth restrictions like California, so when prices get overheated, supply can’t come to market to blunt the increases. Once these rallies get started, they are...
Would a legislated cap on appreciation quell kool-aid intoxication?

Saturday, October 24, 2015

Real Estate Ruin: Despite optimism, signs point to ongoing market weakness

Everyone seems to believe the market bottom is in. Investors are buying up cheap homes in beaten down markets, Calculated Risk called the bottom, sentiment among realtors has turned positive, and the mainstream media is flooded with optimistic spin about housing. But have we really hit the...
Despite optimism, signs point to ongoing market weakness

OCHN: San Bernardino County Housing Market Report: October 2015

Historically, properties in this market sell at a 25.7% discount. Today’s discount is 33.3%. This market is 7.7% undervalued.
Median home price is $279,800 with a rental parity value of $423,800. This market’s discount is $144,000.
Monthly payment affordability has been worsening...
San Bernardino County Housing Market Report: October 2015

Friday, October 23, 2015

Debt Default: 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

OCHN: Prudent borrowers embrace the 43% debt-to-income cap

Debt-to-income lending caps prevent wild swings in house prices based on irrational exuberance, which benefits everyone.

Prudent borrowers generally didn’t participate in the housing bubble. Those who refused to borrow and spend waste their equity watched with pleasure as their net worth...
Prudent borrowers embrace the 43% debt-to-income cap

Housing Market: 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?

Thursday, October 22, 2015

Real Estate Loan: Mortgage lending standards continued to tighten in 2013

Realtors, builders, mortgage brokers, basically anyone with a financial interest in a real estate transaction is complaining that lending standards are too tight. From the beginning of these complaints four years ago, it’s all been complete bullshit. Lending standards were completely...
Mortgage lending standards continued to tighten in 2013

OCHN: The ongoing housing bailout: taxpayers own 50% of all residential mortgages

The banking bailouts shouldered by the US taxpayer continue through the government loan guarantees keeping mortgage rates low to support bubble-era prices.

Many homeowners held out hope that if they could just keep current on their mortgage long enough, the government would come to their rescue...
The ongoing housing bailout: taxpayers own 50% of all residential mortgages

Wednesday, October 21, 2015

Housing Forecast: REO-to-rental investors will restore balance to the housing market

Statistics across most markets show rents are going up. The monthly OC Housing market report has shown steadily declining prices and steadily increasing rents over the last two years. Resale prices are falling because loan owners are being forced out of homes they can’t afford, and the...
REO-to-rental investors will restore balance to the housing market

OCHN: Declining export employment weakens housing demand

If high-paying export industry jobs are eliminated because of the rising dollar, then home sales will suffer due to diminished demand.

The fundamentals of housing demand are job and wage growth. Lenders and the federal reserve can manipulate borrowing costs to impact prices, and they can...
Declining export employment weakens housing demand

Tuesday, October 20, 2015

OCHN: Down payment insurance a potential boon to homebuilders

Down payment insurance has the potential to address a serious objection of frightened buyers in the wake of the housing bust.

Homebuilders rely on high-pressure sales tactics to close every potential buyer that walks in a model center. They have a quick answer to every possible buyer...
Down payment insurance a potential boon to homebuilders

Monday, October 19, 2015

OCHN: Housing inventory abundant at prices buyers can"t afford

Overall housing inventory is not low, but the inventory available at prices buyers can afford is artificially low.

Starting in late 2008, lenders began deferring foreclosures to stem the tide of REO flooding the housing market during a time when buyers were few and far between. This slowed the...
Housing inventory abundant at prices buyers can"t afford

Saturday, October 17, 2015

OCHN: Riverside County Housing Market Report: October 2015

Historically, properties in this market sell at a 18.5% discount. Today’s discount is 22.9%. This market is 4.3% undervalued.
Median home price is $307,600 with a rental parity value of $405,100. This market’s discount is $97,500.
Monthly payment affordability has been worsening over...
Riverside County Housing Market Report: October 2015

Friday, October 16, 2015

Debt Default: 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?

OCHN: Low house prices are important to stable economic growth

Low house prices make for lower debt service payments that benefit the economy as money money is freed up to circulate and buy goods and services.

Low house prices are good for the economy because low house prices make for low loan balances and less debt-service. When borrowers have excessive...
Low house prices are important to stable economic growth

Thursday, October 15, 2015

OCHN: Potential homebuyers can"t save for down payments with high rents

Renters forced to pay higher rents don’t have the income left over to save for a down payment; thus housing suffers.

When bankers examined the common characteristics of borrowers who defaulted on their loans during the housing bust, they noticed that down payment was strongly correlated...
Potential homebuyers can"t save for down payments with high rents

Tuesday, October 13, 2015

OCHN: Contrarian investing in cashflow real estate a strategy for success

Contrarian investing requires a good analysis and the faith to act on it.

I avoided buying a house during the housing bubble because my analysis of the monthly cashflow showed it was more advantageous to rent than to own. With prices rising rapidly, I was told I was a fool, a cowardly fool who...
Contrarian investing in cashflow real estate a strategy for success

Monday, October 12, 2015

OCHN: Future home equity gains from amortization rather than appreciation

When mortgage rates are low but rising, equity growth comes through amortization rather than appreciation.

Equity is the cash value stored in a owner’s house. Many people assume equity is the difference between what a house is worth and what they owe on it, but this overstates the reality...
Future home equity gains from amortization rather than appreciation

Saturday, October 10, 2015

OCHN: Los Angeles County Housing Market Report: October 2015

Historically, properties in this market sell at a 9.5% discount. Today’s discount is 12.8%. This market is 3.3% undervalued.
Median home price is $510,000 with a rental parity value of $590,000. This market’s discount is $80,000.
Monthly payment affordability has been worsening over...
Los Angeles County Housing Market Report: October 2015

Friday, October 9, 2015

Debt Default: The Eminent Domain of mortgages proposal is rearing it"s ugly head again

What was the tagline for Jaws 2? “Just when you thought it was safe to get back into the water”. Eminent Domain is the seizing of private property at market rates for public use for example roads, schools, and other infrastructure. Robert Shiller is to my surprise, a proponent of u...
The Eminent Domain of mortgages proposal is rearing it"s ugly head again

OCHN: Homeownership is dead

The hopes for a recovery in the homeownership rate fade as people forming new households choose to rent instead.

For over 100 years, government administration policy favored homeownership. Politicians believe homeowners are more invested in local communities, so they are less likely to commit...
Homeownership is dead

Thursday, October 8, 2015

OCHN: Homes as ATMs made housing bubble and crash worse

Unrestricted mortgage equity withdrawal provides incentive for buyers to bid up house prices to create equity they can borrow and spend.

Bubble thinking is rampant, and the primary reason for its persistence is that people want the free spending money houses provide. The huge financial reward ...
Homes as ATMs made housing bubble and crash worse

Wednesday, October 7, 2015

OCHN: When should pundits admit their mistakes?

Is it better to be widely known as a permabear or permabull? Or is it better to change with the times and gain credibility through correctness?

Pundits who issue forecasts want to be right, and they want to be acknowledged as being right. In the world of punditry, credibility is everything, and...
When should pundits admit their mistakes?

Tuesday, October 6, 2015

OCHN: California"s Inland Empire is not a housing bubble

House prices in California’s Inland Empire are at or below their stable relationship between the cost of ownership and the cost of rent.

After the devastating collapse of house prices in 2008-2012, buyers are rightfully wary of buying into another bubble. After watching their neighbors...
California"s Inland Empire is not a housing bubble

Monday, October 5, 2015

OCHN: Five measures necessary to reduce government mortgage loan guarantees

The US taxpayer insures most of the mortgages in the United States today, exposing you and me to trillions in potential losses in a future housing bust.

Prior to the collapse of the housing bubble, when lenders gave free money to loan owners, it was theirs to give — and to lose. But when the l...
Five measures necessary to reduce government mortgage loan guarantees

Saturday, October 3, 2015

OCHN: Orange County Housing Market Report: October 2015

4.2.7
Historically, properties in this market sell at a 0.6% premium. Today’s discount is 3.6%. This market is 4.2% undervalued.
Median home price is $597,800 with a rental parity value of $629,100. This market’s discount is $31,300.
Monthly payment affordability has been worsening...
Orange County Housing Market Report: October 2015

Friday, October 2, 2015

Debt Default: Low MLS inventory was a boon to homebuilders

Monday, in the post Can the Fed reflate the housing bubble without negative side effects?, I discussed the various market distortions resulting from the federal reserve’s zero-interest-rate policy. The inflated asset values are byproducts of the fed’s actions, but with respect to...
Low MLS inventory was a boon to homebuilders

OCHN: Are real estate "pocket listings" a good way to sell homes?

Are properties for sale but withheld from the MLS, so-called pocket listings, a viable way to sell real estate or a seller ripoff?

A for-sale property that is not listed on the MLS is a “pocket listing.” Sellers, particularly famous sellers, who don’t want legions of potential...
Are real estate "pocket listings" a good way to sell homes?

Thursday, October 1, 2015

OCHN: Top five ways to sabotage the housing market

To sabotage the housing market, remove homeowner equity and raise borrowing costs. The result is a collapse of the move-up market and very low sales.

Sometimes to find the best solution to a problem, examining how the problem could be made worse reveals options and perils that might otherwise...
Top five ways to sabotage the housing market