The Collected Works of Author and Blogger Larry Roberts

Archive for September, 2011

The economy is being dragged down by massive debts taken on by insolvent households. We have tried loan modifications, and they failed. Voluntary principal forgiveness is not forthcoming, so that leaves only one alternative to purging the excess debt: massive strategic default. Massive default is best way to fix the economy Commentary: Clearing away the debt is the only way forward Brett Arends -- Sept. 12, 2011, 12:00 a.m. EDT NEW YORK (MarketWatch) — You want to fix this economic crisis? You want to put people back to work? You want to light a fire under the economy? There’s a way to do it. Fast. And relatively simple. But you’re not going to like it. You’re not going to like…[READ MORE]

There are too many market indicators. Anyone who has studied technical analysis of stocks quickly realizes there are far too many ways of parsing data, and most of them are useless. As I pondered what I wanted to present to give an overview of the housing market, I considered many ways of looking at the data. I rejected many of the indicators I felt were irrelevant to answer the basic questions buyers have. What do buyers want to know? Most buyers want to know two things: (1) am I paying too much, and (2) are prices likely to go up or down in the future. These are important questions. People asked these same questions in 2006 and came up with…[READ MORE]

As most of you know, I have been operating a flipping fund buying auction properties in Las Vegas and selling them on the local MLS. The business has had its ups and downs, and I have learned a great deal about Las Vegas and operating in the local business culture. One of the reasons I selected Las Vegas was due to my own research on the housing bubble. Prices have crashed well below rental parity to price levels where cashflow investors find the returns attractive just as I have described in many posts going all the way back to my first week of writing for the IHB in What is Past is Prologue: ... market prices enter the range of…[READ MORE]

Equality has power. Rental parity is a powerful price point because the cost of ownership is equal to the cost of rental. Theoretically, buyers should be indifferent at rental parity, but in the real world kool aid intoxication prompts many buyers to bid prices up above rental parity. The true power of this threshold doesn't become apparent until prices fall and owners find themselves paying far more than comparable rentals for properties worth less than they paid. Today's post will be heavy on math, but I want to give everyone a look inside the black box of aggregate rental parity calculations. I use this analysis in Las Vegas to locate neighborhoods with the best rental property deals, but owner occupants…[READ MORE]

Throughout my posts on the IHB, I make references to what I believe is happening in our local housing market. The IHB serves as a valuable market resource to people considering buying Irvine and Orange County real estate. The message for the first nearly 5 years has been simple: don't buy a home yet. Over the last couple of years as the plethora of market props have been removed, the message has evolved to the more nuanced advice: buy below rental parity if you have a long holding time. That advice will remain our mantra over the next few years until conditions in the market change. Why are you afraid to buy? If you have been reading the IHB regularly,…[READ MORE]

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