The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2012

When the housing market nears the bottom, despair dominates. Prices have fallen for five straight years and hover at 10-year lows, and real estate is out of favor as an investment class. Evidence of the market's despair crops up in articles extolling the virtues of renting. Articles about renting were common from 1994 to 1996, and at the time, renting was a good idea; prices had been falling, and there was little reason to believe they would be going up soon, just like today. However, in the big picture, people who bought in 1994 to 1996 were rewarded. They suffered for the first year or two of ownership, but when prices bottomed in 1997, the contrarians who bought early found…[READ MORE]

It's no secret that I don't particularly like the practices of the NAr. They consistently embarrass themselves and their members by putting out false and misleading data and press releases. Credibility comes from telling the truth, even when that truth may be unpopular or contrary to one's own interests. The NAr has consistently lacked credibility as they have proven unwilling to say anything negative about the prospects for real estate despite a massive decline in sales volumes and resale prices. They consistently told buyers to purchase homes as sound investments when prices were inflated and falling. From 2007 through 2011, prices were too high in most markets to warrant purchasing for cashflow investment purposes, and with falling prices, there was…[READ MORE]

Last fall the major banks all increased their foreclosure activities. Some banks may feel they are strong enough to take the necessary write downs, and B of A appears to be desperate for cash. Perhaps in anticipation of the Robo-signer settlement deal or perhaps out of a desire to clear out the shadow inventory, for whatever the reason, lenders are increasing foreclosure rates everywhere. Foreclosures on the Rise Again Published: Thursday, 16 Feb 2012 | 12:04 AM ET By: Diana Olick CNBC Real Estate Reporter After a year-long reprieve from rising foreclosures, the numbers are going up again. One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a…[READ MORE]

Loan owners with big incomes believed house prices were going up forever. They bought houses they could barely afford because they believed the additional cost of ownership over renting would provide them with a return on their investment. Buying a house was part utility through providing shelter and part investment through capturing rapid appreciation. Of course, the actions of buyers willingly overpaying for houses drove prices higher in a self-fulfilling prophesy. Like all Ponzi schemes, it went on until the supply of greater fools was exhausted and lenders stopped enabling the insanity. Now that high-end loan owners are accepting the fact that their brilliant investment was folly, many of them are choosing to dump their investments. When the investment no…[READ MORE]

Anyone who has read my writing before knows I don't think principal forgiveness is a good idea. I believe principal forgiveness is the worst policy option because foreclosure Is a superior form of principal reduction. I don't think I am being cynical when I say that the Obama administration is pushing principal forgiveness in an attempt to buy votes. Any economic benefit the policy may have is outweighed by the moral hazard it creates and the unfairness of the distribution of benefits. The most irresponsible borrowers obtain the greatest benefit from this policy. By rewarding them and buying their votes, we are letting the Ponzis take over. If we let the Ponzis run our political system, we will all be…[READ MORE]

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