The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2014

The Chinese inflated a real estate bubble more than ten times larger than the United States. Bursting this bubble could destabilize the world economy. I recently asked what would happen if the Chinese housing bubble burst. The implications for Coastal California's real estate market is enormous as a crash in Chinese real estate would not just remove a component of local demand, it could turn Chinese buyers into desperate sellers. My sanguine attitude about the ability of lenders to maintain pricing through inventory restriction would change if desperate Chinese sellers began putting must-sell inventory on the market. The problems in China go beyond our little niche in the real estate world. A deflating housing bubble in China could destabilize their…[READ MORE]

If new mortgage rules will prevent housing bubbles, prudent fence-sitters have no urgency to buy for fear of being priced out of the housing market. The real estate industry hates homebuying fence-sitters. Those who make their incomes on real estate transactions aren't concerned about whether or not buyers are ready to buy or if they can sustain ownership; transactions are income, and the real estate industry wants more transactions, irrespective of how this may impact anyone else. Fence-sitters are a group of potential homebuyers who for a variety of reasons are not ready to buy today -- they are capable of buying, and they may plan to buy in the not-too-distant future, but for now, they are content to rent…[READ MORE]

The federal reserve began tapering bond purchases in December 2013, and the US economy shrank at a 2.9% annual rate in the first quarter of 2014. Coincidence? The federal reserve works to minimize the damage caused by economic downturns by stimulating the economy during recessions to prevent widespread price deflation and prevent widespread unemployment. People debate the efficacy and desirability of the federal reserves policies of central planning and interventionism, but the policy is supported by politicians and bankers while the public is largely oblivious to what goes on. When the Great Recession began in 2008, the federal reserve lowered the federal funds rate to zero; since it couldn't lower interest rates any further, the federal reserve began buying longer…[READ MORE]

With fewer investor purchases of single-family homes, the supply of single-family home rentals diminishes causing rents to rise. Investor purchases of single-family homes provided demand during a period when owner-occupant demand was weak; when combined with restricted MLS inventory due to increased loan modification efforts, investor purchases helped the housing market bottom in early 2012. One of the big stories of 2014 is the sudden and dramatic decline in investor sales because prices were pushed too high to meet their return requirements. The decrease in investor purchases also means the flood of single-family rental supply abruptly stopped, and as the existing inventory is absorbed this year, the rental market will tighten, and single-family home rents should begin to rise. The…[READ MORE]

Dashing hopes of academics that Americans were turning to small condos at transit stops, Americans are buying very large homes again. For years, academics in planning circles touted the rise of the small, high-density housing alternatives near mass-transit hubs. While this product might be the future of housing, it won't be due to any preference by Americans for smaller digs. People will substitute down to smaller properties conveniently located near mass transit, but they will do this because the more desirable McMansions in the suburbs will become too expensive. Builders aren't concerned with what academics think they should build; builders will provide whatever product buyers in the market want. Right now, the only group of buyers with the cash and…[READ MORE]

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