The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2013

A few years ago there were news reports that Fannie and Freddie would directly sell their inventory to large investors consisting of enormous blocks of single family residences in hundreds if not thousands per transaction.  In fact, there were a couple of pilot programs.  However, it seems like the hedge funds are purchasing REO's and short sales listed on the market.  This has driven out the small investor due to the deeper pockets of these hedge funds.  Small investors might have hundreds of thousands while hedge funds have billions, it's a David versus Goliath.  They will purchase homes at 5% to 7% over list if they really focused on deploying capital in a give a area. This drives up prices…[READ MORE]

One of the most ridiculous features of the housing bubble rally was when buyers would write emotional letters to sellers to try to make their offers stand out in the crowd. In 2004 in particular as the Option ARM permitted buyers to raise their bids to ridiculous levels, competing bids well over asking price prompted sappy letters to appeal to a seller's emotions to get the deal. Now, with the federal reserve lowering interest rates below 3.5%, we face a similar infusion of affordability allowing buyers to raise their bids. The tight supply engineered by the banking cartel is causing the buyers to bid over ask again as they compete for the few properties available. The return of the ass-kissing…[READ MORE]

Everyone active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks go “all in” betting on success of loan modifications to resolve their prior bad loans. In the interim, delinquent mortgage squatters are enjoying their free ride. It's unlikely that conditions will change in 2013. Foreclosures are likely to be fewer in number, not because the banks lack delinquent borrowers, but with the disincentives to foreclose and the new constraints from the Homeowners Bill of Rights, lenders will opt to permit squatting and allow a few short sales for those delinquent borrowers willing to gracefully exit their properties. Despite the falling foreclosures, California recorded…[READ MORE]

As I review the housing numbers each month, I see local housing prices rising quickly and no return of inventory to blunt the increases. Given those conditions, it's likely that prices will continue to rise in 2013, perhaps significantly. What's somewhat surprising to me is that my purely mechanical rating system continues to show improvements in market timing. I thought that rising prices would reduce affordability and cause the ratings to drop. That isn't what's happening. The declining interest rates have more than offset the rise in prices. In fact, housing affordability as measured by the monthly cost of ownership was at the lows for the year in November and December of 2012. There is still plenty of room for…[READ MORE]

When Congress took on the task of regulating the excesses of the mortgage industry, it ostensibly wanted to prevent a recurrence of the housing bubble. To that end, they passed the Dodd-Frank finance reform. One of the provisions of Dodd-Frank was to establish a "qualified mortgage" that establishes the parameters of what constitutes a "safe" mortgage product unlikely to cause another housing bubble. To this end, they solicited advice from various sources to come up with an appropriate set of standards. In Preventing the Next Housing Bubble, the final chapter of the book, I addressed what it would take to prevent another catastrophe like we witnessed over the last decade. It has a series of parameters similar to the recently…[READ MORE]

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