The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2014

Condominium investments go bad, and sometimes the property can't be rented out to cover the expenses. Owners can't sell and can't rent, so they lose, lose, lose. I don't like speculating on investments with negative cashflow, particularly in real estate. If the purchase does not go as planned, the negative cashflow relentlessly drains your income, and in some circumstances, you simply can't get out. During the Great Housing Bubble, many speculators tried to make money through trading houses. The vast majority of these traders were not professionals but amateurs who thought they could be professionals. Most amateurs ended up losing money because they did not understand what it takes to be successful in a speculative market. The public adopts a…[READ MORE]

Contrary to conventional wisdom, low mortgage interest rates locked-in by today's buyers will not dissuade them from selling in the future. Housing economists point to the specter of rising interest rates as a deterrent to future move-up home sales, reasoning that the higher cost of ownership will provide a strong disincentive for move-up buyers to list and sell their homes. The idea rests on a faulty hidden assumption: that house prices will be higher when mortgage rates rise. Further, the idea fails to consider the equity-building power of loan amortization. Homebuyers are unprepared for reality of rising interest rates, but so are housing economists. Today's buyers who are locking in low mortgage rates will set the prices in the move-up…[READ MORE]

In the prime of the home selling season, new home starts and existing home sales both retreated, a sign of ongoing weakness in the housing sector. Sales are not supposed to slump in May or June. The prime home selling season generally peaks in July before slowing to a seasonal low on December 31. The last time home sales hit a weak patch in the prime selling season was 2011 after the expiration of the tax credits pulled demand forward in 2010 and left the market bereft of buyers. Prices fell in 2011 and on into early 2012, but with the diminished MLS inventory, price declines are unlikely, but continuing slow sales is nearly certain. May brings no sign of…[READ MORE]

The US housing market stabilized with low interest rates, low MLS inventory, low owner-occupant demand, and high but affordable house prices. The norm in California housing over the last 40 years has been extreme volatility. We had one stretch in the mid 1990s when prices were closely tethered to rent, but other than that house prices were either in a bubble or over-correcting to the downside. For the most part, the rest of the US did not participate in the wild price swings characteristic of California, but starting in 2003, financial innovation in housing finance brewed up a toxic concoction of unstable mortgage products that inflated a massive housing bubble and a deep over-correcting crash. Prior to the housing bubble,…[READ MORE]

Lawrence Yun of NAr is a paid industry shill who offers optimistic forecasts and spins housing market data for the National Association of realtors. Can the credibility of the National Association of realtors fall to less than zero? Lawrence Yun, chief economist for the NAr, is following in the footsteps of the thoroughly discredited David Lareah, working diligently to reduce the already low credibility of the NAr to less than zero by continually spinning market data and offering optimistic housing market forecasts that frequently prove completely incorrect. He was recently interviewed by the San Jose Mercury News about the potential for a housing bubble in the Bay Area. Today's post embellishes that original interview by asking and answering the questions…[READ MORE]

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