The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2012

Assume for a moment that house prices have bottomed. This still isn't certain, but it's looking more and more each day like the bottom is in. The final piece to the puzzle that convinced me house prices weren't going to reverse course came when Ben Bernanke announced the federal reserve was going to purchase $40B per month in mortgage-backed securities for as long as it takes to make housing and employment to come back. Further, to reiterate his commitment to the policy he stated, "We're not going to rush to begin to tighten policy. We're going to give it some time to make sure the recovery is well established." You can't fight the Fed. Basically, the federal reserve is going…[READ MORE]

Each month I publish the OCHN Market Newsletter. It provides the most detailed and accurate view of the housing market available without the realtor spin. I believe potential homebuyers should have the best information possible to make reasonable and rational decisions regarding the purchase of a home. Despite how bearish I have been, my strictly mechanical reports have been issuing strong buy signals since last fall. Now that house prices have turned positive, rents are still going up, interest rates are trending down, affordability is at record highs, and houses are undervalued by historic norms, the report is very bullish. And as I noted recently, I am turning bullish too. Notice the downside overshoot in the chart below. It may…[READ MORE]

I am no longer bearish. I have been an outspoken housing bear for over five years now, but based on recent developments, I have far fewer worries about another catastrophic decline in house prices. The recent changes are as follows: Federal reserve's open-ended commitment to unlimited stimulus for as long as it takes no matter the consequences. Lending cartel's improved control of inventory liquidation. Removal of most barriers for refinancing underwater loans to aid kicking the can to spread out liquidations. These new developments when combined with some older existing policies has finally created the conditions for a manufactured bottom to form. Federal government's suspension of mark-to-market accounting allowing unlimited delinquent mortgage squatting. Federal reserve's zero percent interest rate to…[READ MORE]

The spring rally is over. Every year prices and sales volumes increase from January through August, then they decline for the remainder of the year generally hitting bottom on the last business day in December. The pattern repeats every year, and it's not new or surprising. realtors generally take advantage of this phenomenon to call the bottom every year and to stoke fears of being priced out to generate more spring and summer sales. By fall, many buyers stop looking, particularly those with families who don't want to disrupt their children by moving during the school year. Over the last five years, sales volumes have been extraordinarily low due to the collapse of the housing bubble and the resulting unemployment…[READ MORE]

When it comes to predicting future home prices, nobody really has a clue. It's very difficult to predict when the market is so heavily manipulated and the erratic decisions of a few key players can completely change the outcome. For example, the federal reserve controls the interest rate stimulus, and although they are currently saying they plan to leave interest rates low for years to come, they could change their minds. The supply of REO on the market is completely at the discretion of a cadre of banks colluding to restrict supply to drive prices higher in order to lose less money on their bad loans from the bubble. This is a cartel, and if it begins to break down,…[READ MORE]

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