The Collected Works of Author and Blogger Larry Roberts

Archive for April, 2013

Typically, January is the slowest month of the year for real estate sales. Sales volume rises each month through July or August when it peaks as buyers rush to get into homes before their children start a new school year. When sales volumes decline on a monthly basis during the first half of the year, it's often a troubling sign for the real estate market. Sales volumes declined in March, and it is a sign of a problem in the housing market: a lack of inventory. Why Home Sales Stalled in March By Nick Timiraos -- April 22, 2013, 11:46 AM Sales of previously owned homes fell by 0.6% in March from February, causing some analysts to second guess the…[READ MORE]

Kool aid is flowing again. Last week, I read the following comment that encapsulates the religious faith of most Californians, Besides, OC real estate has been and will continue to be desirable. It’s also very cyclical and I knew there would be another cycle coming much sooner than the bears predicted. This place has never had “flat” home prices… ever. Apparently this commenter had faith in the successful efforts of market manipulators and the herd behavior of California buyers. The last year has done much to reaffirm the faith that was sternly tested by a 40% decline. The problem with blind faith is that it doesn't ask "why." Faith just accepts things as is and doesn't demand an explanation. Unfortunately,…[READ MORE]

Economists are busy studying the "wealth effect" to determine how important it is to the country's economic health. Unfortunately, they don't really understand the mechanics behind what they are studying. The basic assumption economists make is the people spend more of their liquid savings when assets they own increase in value. This basic assumption is flawed. In my opinion, The “wealth effect” is the most dangerous euphemism in economics. What happens in the real world is not an increase in spending of savings, but an increase in Ponzi borrowing based on inflated asset values. It’s the behavior that lead so many to foreclosure as I document daily. The wealth effect is help the economy doesn’t need. Carl Case and Robert…[READ MORE]

What was the tagline for Jaws 2? "Just when you thought it was safe to get back into the water".  Eminent Domain is the seizing of private property at market rates for public use for example roads, schools, and other infrastructure.   Robert Shiller is to my surprise, a proponent of using eminent domain.  How is purchasing a mortgage which is a security agreement between the lender and the borrower qualifies as a public use?  Eminem domain just a backdoor way to force a principal balance write down on a mortgage by using local government's police power.  The principal reductions completely let's the borrower off the hook and encourages additional moral hazard type behavior.  Oh, and the new term is…[READ MORE]

Monday, in the post Can the Fed reflate the housing bubble without negative side effects?, I discussed the various market distortions resulting from the federal reserve's zero-interest-rate policy. The inflated asset values are byproducts of the fed's actions, but with respect to housing, the distortion of market prices is what the federal reserve wants to happen. To make the stimulus have good effect, lenders stopped foreclosing on delinquent mortgage squatters and hoped to bait them into temporary loan modifications with the carrot of rising home prices. The slowdown in foreclosures caused the MLS inventory to evaporate. The result of the federal reserve stimulus and the lack of MLS inventory is a supply of homes that fails to meet current demand.…[READ MORE]

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