The Collected Works of Author and Blogger Larry Roberts

Archive for September, 2013

The housing bust losers portrayed themselves as victims and heroes. Their whining got the attention of opportunistic politicians like California Attorney General Camilla Harris who used this issue to political advantage. When Attorneys General from a number of states reached an agreement with the major banks in early 2012, many housing advocates loudly proclaimed a great victory for homeowners. When I first read through the details of the settlement agreement, it was apparent to me that the banks greatly benefit from foreclosure settlement while borrowers were left out in the cold. About a month later, the general public and mainstream media caught on to this fact. By then everyone hated the mortgage settlement, except the banks. A few months later,…[READ MORE]

The rumor came out that FHA would need a bailout and experts said nonsense.   Their "expert" opinion didn't even last 48 hours. FHA is mandated to maintain a reserve fund for the mortgages that they insurance.  Just as a reminder FHA is government backed insurance agency for low down payment loans for first time homes buyers. After the bubble popped and defaults started occurring, the reserve fund, which had more than enough money in 2007, started to run dry.  FHA needed many new borrowers that would pay mortgage insurance premiums which help to replenish the FHA reserve fund.  To accomplish this conforming limits were increased and credit scores qualifications were loosen to attract a larger pool of  borrowers.  Even if…[READ MORE]

During the housing bubble, house prices became very inflated relative to rents and incomes. Basically, there was no justification for prices, only wishful thinking and delusion about the "new paradigm." In response to the collapse of the housing bubble, the federal reserve lowered interest rates to allow borrowers to finance the same bloated mortgage balances of the bubble, but this time, the loan terms are stable. However, that still leaves us with house prices that are greatly elevated by historic measures of price-to-income or price-to-rent. So what really defined affordability? Is it the ability to make a stable monthly payment, or it is the price relative to historic measures? My monthly housing market reports take the view that stable monthly…[READ MORE]

Like California, Great Britain has witnessed several major housing bubbles since the early 1970s. Great Britain has growth restrictions like California, so when prices get overheated, supply can't come to market to blunt the increases. Once these rallies get started, they are self-perpetuating. They go on until Ponzis implode and lenders take away the punch bowl. Unlike California realtors, estate agents in Great Britain recognize that house price volatility creates volatility in their income in addition to causing a great deal of pain and hardship on ordinary citizens. Rather than lobbying for more volatility and endlessly higher prices as realtors in the US do, estate agents in Great Britain lobby for constraints on appreciation and stable house prices. It's quite…[READ MORE]

Everyone has an opinion on how rising mortgage rates will impact housing. Most of what you read in the mainstream media is wishful thinking from those who want to inspire buyer confidence in an uncertain market. The words of Pollyannas doesn't educate anyone, but it does give people who are looking for assurance more than insight exactly what they are after. Most analysts agree that rising interest rates will reduce the buying frenzy. That much is clear (See: realtors lament low demand, low supply, and collapsing first-time homebuyer market). However, analysts are divided on the long-term impact of rising rates. What Rising Interest Rates Mean for Home Prices By Nick Timiraos -- September 20, 2013, 8:00 AM It’s a hotly…[READ MORE]

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