The Collected Works of Author and Blogger Larry Roberts

Archive for August, 2012

The people we elect to public office should set a higher standard for conduct than ordinary citizens. If we are to trust them to make laws governing the rest of us, we should be able to rely on them to follow the rules rather than gaming the system to their advantage. Unfortunately, that's not the world we live in. Many California lawmakers got caught up in the mania of the housing bubble, and when their faith in ever-increasing house prices was shaken, their ethics went on sabbatical. Real estate bubble bursts for California lawmakers too In the boom years, several California legislators bought homes but are now having trouble keeping up with mortgages or avoiding big losses. By Patrick McGreevy,…[READ MORE]

Economists and housing market observers pour over sales numbers each month to divine the direction of future house prices. Everyone has their pet theories on whether house prices have bottomed or if there is more pain ahead. Many rely on these numbers as gospel forgetting that these numbers are generated by the actions of people responding to the conditions around them. Change the conditions, and the numbers can change quickly. CA - Foreclosure Outcomes For example, in February of 2012, lenders across the Southwest abruptly stopped processing their backlog of foreclosures, not because they exhausted the supply of delinquencies but because of internal policy changes brought about by the foreclosure settlement with state attorneys general around the country. The story…[READ MORE]

Foreclosure rates are declining across the Southwest. Lenders are slowing foreclosures because they want house prices to bottom and start going up due to a lack of distressed supply on the MLS. This would be a natural occurrence once shadow inventory is eliminated, but right now, this slowing of foreclosures is a contrived policy of a cartel desperately hoping they can force prices to move higher. If foreclosures were declining because lenders were out of delinquent mortgages to foreclose on, we would all be celebrating the housing market recovery. However, lenders are not out of delinquent mortgage squatters to boot out of the houses they are not paying for. In fact, lenders have slowed their foreclosure rates so much, they…[READ MORE]

Conventional wisdom is that foreclosures reduce neighborhood values. It turns out, that isn't the case. It's easy to see why people come to this erroneous conclusion. Properties that go through foreclosure often sell for less than recent comparable sales, particularly after the peak of the housing bubble when values were grossly inflated and ripe for a serious correction. However, it wasn't the foreclosure that caused the discount, it was a motivated seller dealing with a property in poor condition that ultimately caused prices to fall. You wouldn't know it by the huge inventories they currently manage, but lenders are not in the real estate business. They don't profit from the real estate they own. They only obtain real estate when…[READ MORE]

With the serious problems facing the housing market including high delinquency rates creating a massive shadow inventory, a weak economy, tepid demand from owner-occupants, excessive consumer debt, a depleted buyer pool due to credit impairment, and artificially low interest rates, it's a wonder housing prices aren't still heading straight down. The recent uptick in prices is largely due to a successful attempt by the lending cartel to restrict for-sale inventory on the MLS. Without this inventory restriction, prices would almost certainly be headed lower. At some point, the shadow inventory of delinquent mortgage squatters will be cleared out. The liquidation will either lower prices or limit appreciation for a long time while these properties are processed. The big question is,…[READ MORE]

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