The Collected Works of Author and Blogger Larry Roberts

Archive for 2013

The federal reserve in conjunction with government officials are working diligently to reflate the housing bubble. Banks are still exposed to $1 trillion in unsecured mortgage debt, so reflating the bubble is considered necessary to restore collateral backing to lender's bad loans. Whether or not this is a good idea depends on your perspective. If you're a renter whose tax dollars are being diverted toward this endeavor, these efforts are not particularly welcome. Renters receive no benefit from this intervention, and the resulting high home prices make it more costly for renters to become homeowners, so it's a double whammy. If you're a homeowner, it's a very welcome government intervention. It costs homeowners nothing, and they get all the benefits.…[READ MORE]

Will they build the right stuff? As the Southern California housing market comes back to life, existing inventory is running low. That means new homes will be built, which is good news for the area’s planners, architects, builders, real estate agents and loan providers. However, who will buy those homes? Recent data indicates the majority of new home buyers will not be the same as those before the recession. Rather, it will be Millennials, and they don’t want the same old features as the previous generation. In its April 29 cover story, Barron’s magazine published, “…Widely dismissed as a lost generation with few job prospects, towering student loans, and a bleak future, the so-called Millennials, most of whom have reached…[READ MORE]

The desire to push defaulting homes into shadow inventory and keep them off the market is manifesting itself into new programs.  Let's briefly review, remember when banks didn't want borrowers to default and when the borrower defaulted, banks had very strict guidelines to get out default and back into the good graces of the bank?  Banks didn't even want to publicize the fact they were having defaults or foreclosures to give appearance of financially soundness of their institution. Now banks in conjunction with Fannie Mae and Freddie Mac are giving defaulted loanowners virtually an automatic enrollment into a new loan modification process.  So, why is it opposite from a few years ago, because it's in the best interest of the…[READ MORE]

I postulated that loanowners would begin listing their homes as soon as prices reached near-peak levels when they could get out without completing a short sale. Upon further reflection, I've concluded that we may not see many more MLS listings once loanowners are above water. We will certainly see some, and we are seeing some of these WTF listing prices now, but the cloud inventory may remain in the clouds until rising housing costs force these over-extended borrowers to leave. Conversation with a loanowner I recently had an extended conversation with a loanowner who doesn't make enough money to afford the house he currently owns. We talked about his situation and options, and here is what he told me. First,…[READ MORE]

Home ownership hurts the economy. That's the startling conclusion of a new report that demonstrates a strong correlation between high rates of home ownership and high rates of unemployment. While correlation may not be causation, the correlation is too strong to be ignored. Whether or not home ownership itself is the cause of unemployment is debatable, but whether it does or not, the report will be useful to politicians who need political cover to scale back the home mortgage interest deduction. I've covered the merits of the home mortgage interest deduction in many posts. The bottom line is that the HMID does nothing to improve home ownership rates, it inflates the values of houses in neighborhoods dominated by high wage…[READ MORE]

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