The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2012

I began writing about the housing market back in February of 2007. Over the last five and one half years, I've covered a lot of ground. Many of my earliest posts serve as a foundation for my philosophy that comes through my daily posts. I know many of you who read this blog have been with me from the beginning, but I have also picked up many new readers along the way. Since we are entering the recovery stage of the market, and since this material will be new to many I plan to revisit many of my old posts over the coming weeks to remind everyone why we inflated a massive housing bubble and what we should learn from…[READ MORE]

Homebuilding usually leads the economy out of recession. The Great Recession did not end with a building boom largely because of overbuilding during the housing bubble. A false price signal triggered excessive homebuilding, and it took five years to work off the inventories. The collapse of the housing bubble saw new home sales and construction fall to the lowest levels ever recorded -- and those records go back to the 1960s. To make matters worse, rather than experiencing a sudden drop and a "V" bottom leading to a new boom, new home sales flat-lined at record lows for five straight years. This basically wiped out the homebuilding industry. A few years ago, I heard the Riverside County manager of KB…[READ MORE]

The housing bust is littered with sob stories about people losing their family homes. As I noted Responsible Homeowners are NOT Losing Their Homes. To see the truth in this statement, one needs to have a clear definition of “responsible homeowner.” A “responsible homeowner” is a buyer who, if they utilized financing, did not stray from the conservative parameters set forth by lenders (prior to the bubble) and financial planners. This includes using a maximum 28% debt-to-income ratio on the mortgage, at least a 20% downpayment and fixed-rate conventionally amortizing financing. Few who fit this definition are going to lose their homes; although, some of them may chose to walk away from the debt because they are hopelessly underwater. The only…[READ MORE]

realtors don't stop finding reasons to buy until buyers have enough. It doesn't matter if the reasons are good or bad, they just needs to be plausible and salable. Today, I want to explore why realtors are responsible for the rubbish they promote. I want to start by saying that there are many good Realtors (deserving of a capital "R"), and they are as dismayed about the practices in their profession as I am. I have the utmost respect for the character of Randy Rector, broker of record for Evergreen Realty, and many other Realtors and brokers have approached me and told me they share many of my frustrations. I am painting bad realtors with a broad brush, and I…[READ MORE]

When consumers take on debt, eventually it's paid off. Debt is not an asset people spend their lives accumulating, at least it's not supposed to be. Paying off debt is a process known as deleveraging. In a growing economy, young people take on debts to buy cars and houses while old people pay off debts. In aggregate, debts should grow at a measured pace. When lenders make debts grow too fast, the economy becomes over-stimulated and debtors become insolvent. When large numbers of borrowers become insolvent, a credit crunch ensues, and the bills come due. This flushes out the Ponzis and mass deleveraging takes place. When economists think about deleveraging, they envision people who got a little overextended tightening their…[READ MORE]

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