The Collected Works of Author and Blogger Larry Roberts

Archive for December, 2012

It looks like the bottom-callers of 2012 were right. Continued interference in the mortgage market by the federal reserve lowered mortgage interest rates to record low levels. Plus, changes in policy at the major banks held back the tide of foreclosures and greatly restricted the MLS inventory. Demand was up slightly, mostly due to investors as owner-occupants remained absent from the market. First-time homebuyer participation fell to very low levels. The small uptick in demand, fueled by record low interest rates, and the dramatic decline in for-sale inventories caused prices to bottom in 2012. It isn't how the bottom callers thought it would happen (most predicted a surge in demand), but being right for the wrong reasons is good enough.…[READ MORE]

People form strong attachments to their homes. Walking away is never a decision they take lightly. We can discuss the pros and cons and come up with our own beliefs and attitudes about it, but the turnover of our housing stock caused by the housing crash will be very painful for those who go through it. Ruthless default or accelerated default? I write often about hidden premises buried within the arguments writers make. These distinctions are important, and unless we uncover our fallacious beliefs, we make erroneous judgments and carry false beliefs. I have written many times about strategic default, and in my last post on the subject, I uncovered something new. There is no accepted definition of strategic default. Lenders…[READ MORE]

Real estate investors during the housing bubble put their money to work on faith. There is no logical reason to believe house prices only go up. In fact, there have been two prior periods in California's recent history where house prices did, in fact, go down. However, with kool aid intoxication, otherwise known as faith-based investing, reality is ignored. If you truly believe house prices only go up, no price is too high, and you don't have to worry about a backup plan if house prices don't go up. There is only one viable backup plan when a speculative play on appreciation does not pan out: renting the property until you get out at breakeven. For some people, this was…[READ MORE]

Californian's believe house prices go up by magic. Real estate appreciation is religion in California as people blindly accept the Truth of never-ending price increases. Few question current prices or wonder why current pricesgo up as most fool themselves with wishful thinking, cockeyed optimism, and kool aid intoxication. Most people do not understand real estate prices -- they think they do -- every Californian is an expert on real estate, after all, we have about half a million realtors, but few people really understand markets. Motivated by greed, blinded by ignorance and enabled by lenders, borrowers inflated The Great Housing Bubble. A foundational understanding of house prices and housing markets is critical. From 2003 onward, with exception of those who…[READ MORE]

Satire is often more revealing than detailed explanations. The pathology of a collection of beliefs becomes apparent when the natural end result of a group of people acting on those beliefs is an absurd contradiction and an obviously unsustainable state. The following is a satirical essay written from the point of view of a desperate homeowner trying to sustain the Ponzi Scheme of the Great Housing Bubble: The California Social Contract You fence-sitters are failing to fulfill your part of the California Social Contract. Your failure to continue buying homes is disrupting the social order, and it is causing those of us who bought before you psychological, emotional and financial damage. It is time for you to get off the fence…[READ MORE]

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