The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2013

For people who purchased properties in California, a non-recourse state, and never refinanced, lenders cannot come after them seeking to recoup their losses on a foreclosure. For those who live in recourse states, or California loanowners who refinanced, the situation is quite different. Lenders still have the right to pursue these borrowers for the deficiency, unless they agreed to a short sale in California after July 15, 2011. Most borrowers walked away thinking the debt was extinguished. While it was detached from the property, borrowers are still legally liable for any shortfall on the lender’s books. Lenders haven’t done much to collect on these old debts so far. Most lenders reason that they couldn’t get blood from a turnip, so…[READ MORE]

Housing inventory nearly always bottoms on January 1 and increases steadily until July or August. In early 2013, inventory bottomed at levels 50% to 90% below normal depending on the market. This shortage of inventory, engineered by lenders, forced buyers to compete over the remaining for-sale homes. This made nearly every sale a multiple offer situation, and as buyers became more frustrated, they also became more aggressive. Finally, in April and May of 2013, aggression gave way to complete stupidity as buyers bid 15% to 20% over recent comps with all-cash or heavy cash offers and waived their appraisal contingencies. Even if these buyers believe prices will continue to rise 10% or more a year (which they likely won't), paying…[READ MORE]

Housingwire was the first to jump on the implications of this story.  Standard & Poor's upgraded the credit of the US federal government, which is pretty amazing considering it's in debt for almost $17 trillion and growing very rapidly.  One of the criteria for the upgrade was the better than foretasted financial condition of Freddie Mac and Fannie Mae, which is interesting because they are technically not part of the government, but rather just assets owned by the government.  Obviously, the potential revenue (at least for the time being) is going to influence the decision on the privatization of the Government Sponsored Enterprises. Fannie and Freddie help brighten America's credit outlook By Jacob Gaffney June 10, 2013 • 8:47am Nearly…[READ MORE]

Rising house prices are supposed to be driven by robust growth of high paying jobs. This drives household formation, and the high wages allows buyers to borrow large sums to drive up prices. This demand creates a shortage in housing as households compete with one another for the available housing stock. This prompts homebuilders into action to provide more supply to meet the demand. Those are the conditions that drive sustained price increases. Obviously, that isn't what's happening today. Gains in Home Prices Driven by Unsustainable Forces Despite the Increase in Prices Over the Last Year, Weakness Persists in the Housing Market The press is buzzing with news of year-on-year gains in housing prices, but a look under the hood…[READ MORE]

The current housing market price rally is largely being fueled by investors competing for restricted inventory. Both the banks that are restricting the inventory and the investors who are buying it are counting on selling these properties to owner-occupants who are willing to pay higher prices for a place to shelter their families. Conventional wisdom is that a resurgent economy and low mortgage rates will bring owner occupants back to the housing market with a willingness and ability to pay higher prices. But will it really work out that way? As proof that the current market rally is entirely fueled by investors, the chart below shows total home sales versus purchase applications. As you can see, purchase applications have been…[READ MORE]

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