The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2013

During the housing bubble, the infusion of HELOC spending money stimulated the California economy. The resulting job growth caused wages to rise as employers scrambled to find help to meet the Ponzi demand. One of the biggest hurdles potential employers faced was the enormous cost of housing. Potential employees from out-of-state were faced with selling their $300,000 homes to buy a $750,000 comparable home if they moved to California. Many decided not to make the move for this reason. A $20,000 raise sounds enticing until you consider housing will cost $40,000 a year extra to enjoy the same standard of living. Inflated house prices causes two problems for California. First, as described above, it creates a barrier for middle class…[READ MORE]

Realtors, builders, mortgage brokers, basically anyone with a financial interest in a real estate transaction is complaining that lending standards are too tight. From the beginning of these complaints four years ago, it's all been complete bullshit. Lending standards were completely abandoned during the housing bubble as all the parties allowed greed to overcome their better judgement. Any return to sane standards was going to require tightening -- a lot of it. The market first reacted to a huge wave of defaults by tightening standards suddenly and violently in a massive credit crunch in August of 2007. This effectively dried up funding for the most toxic loan products and caused loan balances to plummet. The lower loan balances translated to…[READ MORE]

Real estate appreciation is religion in California. Ever since the first bubble in the 1970s enriched a generation, everyone in California sees owning a home as a short cut to riches. The bubble of the 1970s saw dramatic price reductions in some areas and a lingering stagnation in others. Prices did not fall to previous levels of affordability, and learning nothing from that downturn, Californians quickly inflated another bubble in the late 1980s that peaked in 1990. The downturn from that bubble was a little deeper and a little longer, but Californians were undeterred in their faith in real estate wealth. When prices finally bottomed out in 1997, Californians waited a few years, but they they inflated a truly massive…[READ MORE]

The mainstream media is obsessed with making people believe the housing market has bottomed. Even if it requires spinning negative news, they write as if they have a duty to bolster consumer confidence. I think market reporters have a duty to the truth, whatever that truth might be. To do less than that, to spin the news like a two-bit realtor, is a disservice to those who may rely on the news for important decisions about purchasing a house. I think much of the mainstream media's coverage of the housing market is wrong, and when they resort to intentionally spinning bad news, it's downright shameful. Let's take a look at some recent headlines regarding delinquencies: National Mortgage Delinquency Rate Down…[READ MORE]

Affordable house prices are the best economic stimulus. Housing costs make up the largest proportion of a households monthly budget (besides taxes). If this amount were smaller, if it made up a smaller portion of a household's monthly budget, then they would have more money to spend on other goods and services and stimulate the local economy. It isn't rocket science; it's just common sense. However, greed and shortsightedness cause many to desire house prices that increase in price rapidly and attain levels of affordability that price most out of the market. Eventually such extremes lead to a crash, but since so many profit for the short time prices shoot skyward, people deny the possibility of a crash and let…[READ MORE]

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