The Collected Works of Author and Blogger Larry Roberts

Archive for May, 2013

In the 1990's and early 2,000's it was the policy of the US government to increase home ownership rates and endorse the general idea that everyone should own a home. It wasn't even framed as a right or left issue since both Presidents Clinton and Bush pushed this 100% home ownership goal.   In addition, in the early 2,000's the Federal Reserve, Freddie Mac, and Fannie joined in and changed their policies to accommodate this goal.  Of coarse, this led to an enormous amounts of  subprime lending, affordability products, and ultimately the bursting of the housing bubble. Not only was this a bad policy, because of the all the bad loans with billions in tax payer loses, it actually bad economic…[READ MORE]

In the short term, a lack of consumer spending is keeping the economy down. Of course, everyone looking for a quick fix decries the lack of consumer spending and blames the consumer for our woes. It isn't the consumer's fault they were given too much debt during the housing bubble. All this excess debt is causing consumers to delverage. Some are succumbing to their debts and declaring bankruptcy to get a fresh start. Some are walking away from their mortgage obligations and waiting for their lender to put them out of their homes -- and their debts. Some are dutifully paying off the excesses of the credit orgy of the 00s. The first two groups, the ones that declared bankruptcy…[READ MORE]

Appraisers are supposed to be impartial third-party arbiters of value. If appraisers do their job right, prices can't get out of control and rise too rapidly. For quite a while, this system worked. However, probably on instruction from lenders, appraisers are now "hitting the number" and ceasing to be a brake on home price appreciation. Lenders want prices to go up. Appraisers are ostensibly there to protect lenders and buyers by ensuring loans and prices are in line with prevailing values. However, since lenders do want prices to go up, they aren't coming down on appraisers when the appraised value has little or no bearing on reality. At this point, as long as prices are moving higher, banks don't feel…[READ MORE]

In a normal and healthy real estate market, sales are dominated by owner occupants. These owners accumulate equity through paying down a mortgage and price appreciation, and they execute move-up trades seven to ten years after they buy their starter homes. Unfortunately, that isn't the market we have today. For the last several years owner occupant sales have been stuck in a holding pattern at 1990s levels. Orange County home resale volume very weak by historic norms, and the only increase in sales volumes over the last couple of years has come entirely from investors. Unlike owner occupants, investors don't accumulate equity for a move-up purchase. Most hold the property for a while, collect some rent, and sell when they…[READ MORE]

Despite speculators hopes to the contrary, home price appreciation is expected to slow down in 2013 according to a new forecast from Corelogic. So far the rapid increase in prices is due to a small uptick in demand, entirely from investors, and a dramatic decrease in MLS inventory. Both of these factors are likely to change in ways that limit future price increases. In the short term, prices of any asset are determined by fluctuations in the balance between supply and demand. The manipulation of the housing market by lenders is taking advantage of this phenomenon by restricting supply and forcing the demand from buyers to be concentrated on fewer properties thus bidding up their value. This can only continue…[READ MORE]

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