The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2013

When the restriction of MLS inventory caused the housing market to bottom, prices were well below their historic relationship between the cost of ownership and the cost of rental. The undervalued condition didn't last long as the 18 month rally from March of 2012 to September of 2013 coupled with the interest rate surge of June 2013 dramatically decreased affordability in the Orange County housing market. From the time prices began to rise, the big question overhanging the market is what would happen to sales volumes and pricing when the market was no longer undervalued. I speculated that appreciation would dramatically slow down, but I also figured that momentum might carry the market higher, particularly since such a high percentage…[READ MORE]

Since the 1920's the suburbs have grow with after the invention of the car and demise of the family farm.  I like and loved growing up in the suburbs, but I wish there was little more open spaces and few more farms.  Core cities have some advantages, but you always have higher criminal activity and a lack of your private space unless you are rich. Because there was so much speculation construction  in 2000's the growth in the suburbs has slowed somewhat, this is just a pause until population growth catches up.  But, so some reason Sam Zell thinks nearly 100 years of growth is going to reserve itself. 'End of suburbia' may nearly be upon us: Sam Zell Young…[READ MORE]

I have written about amend-extend-pretend since early 2009 when government regulators relaxed accounting rules and ushered in the era of mark-to-model accounting (AKA mark-to-fantasy). This accounting rule change allowed banks to report the value of a loan based on statistical modelling rather than on current market prices. Since the banks can use whatever bogus assumptions they want in their accounting models, it quickly devolved into a way for banks to disguise losses they will inevitably take. Mark-to-model accounting allows banks to report higher book values than the free market would pay for their assets. This in turn allows them to report capital reserves in excess of what they really hold. This puts them in compliance with capital reserve ratios and…[READ MORE]

Reflating the housing bubble requires copious quantities of cheap debt. Soon to be Fed Chair Janet Yellen's loose monetary policies will likely keep the spigots of cheap money flowing into the economy, much of this directed specifically at housing through the federal reserve's $45B monthly purchases of mortgage-backed securities. Yellen's penchant for printing money provides the best opportunity for those desiring reflation of the housing bubble. If Yellen continues to embrace the policies of Ben Bernanke, which seems likely, she will print too much money for too long. I wrote about this problem in How the federal reserve’s printing money impacts housing: Icarus and endless quantitative easing Rising interest rates will hurt the banks by making it more difficult to…[READ MORE]

I liked being a housing bear. If you don't participate in a financial mania, you see the insanity for what it is, and although nobody likes a Cassandra, as the financial mania loses its grip on the masses, those lone voices of reason shine through. Some of the most rewarding moments from the housing bust came when people thanked me for saving them hundreds of thousands of dollars and many sleepless nights. The memory of those thank yous keeps me going, and it reminds me that I have a unique way I can contribute and better people's lives. I am cautious by nature. I have a good bullshit detector, and I'm and not blinded by foolish optimism and wishful thinking.…[READ MORE]

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