The Collected Works of Author and Blogger Larry Roberts

Archive for September, 2014

A federal reserve study concludes weak demand in the housing sector is structural and will not be corrected by low mortgage interest rates. The federal government set up the unemployment reporting procedures to mask the depth of problems with deep recessions. During the Great Depression unemployment hit very high levels because the government counted everyone who wanted a job but didn't have one. During the Great Recession, many people fell off the reported unemployment statistics because after a certain time, the long-term unemployed are deemed to be no longer looking for work even if they are. The sharp decline in the labor participation rate in the Great Recession reflected the large number of people who were unemployed so long they were…[READ MORE]

Home price appreciation and sales volumes in housing markets across the United States stalls out because lenders refuse to make bad loans. The cycle of boom and bust is really over. Lenders steadfastly refuse to make loans to under-served borrower groups to provide the "escape velocity" of previous housing booms because lenders are unable to pass these losses on to investors or the US government. The real estate industry and a compliant financial media portrays this behavior as a hindrance to the housing recovery, but that's dangerous spin. The reality is that lenders are unwilling to make loans they know will go bad, causing them losses, in order to generate transaction income to realtors and homebuilders and to placate left-wing…[READ MORE]

The mortgage and foreclosure debacle of 2008 was cut short by government intervention. A second round of deferred distressed sales is yet to hit the market. Is the mortgage and foreclosure crisis resolved or merely delayed? Most people believe the mortgage and foreclosure crisis of 2008 is behind us, a misperception fostered by a financial media eager to disseminate good news. The common perception is that an improving economy has put people back to work, and those hard-working Americans cured their loans of past-due payments: all is well. Unfortunately, that isn't the reality. While the notion of the noble American borrower dutifully recovering from the perils of the Great Recession is appealing, most borrowers were overextended before the recession hit, and lenders made deals with these…[READ MORE]

To avoid the political backlash of thousands of foreclosures, HUD sold delinquent loans to investors who pushed the borrowers out. Federal officials touted their foreclosure avoidance programs as an alternative that would keep borrowers in their homes. Apparently, paying for a house is no longer requisite for keeping it, just signing some papers and getting a name on title is enough to make the property a sacrosanct family home. Well, as it turns out, foreclosure avoidance programs were merely political cover. Federal officials really didn't care whether or not borrowers got to keep their family homes, federal officials didn't want to be the ones directly responsible for the foreclosures, so they sold off the loans to third parties to let…[READ MORE]

High home prices is hurting new home sales, which may slow homebuilding employment growth and perpetuate economic weakness. In June I reported new and resale home sales slumped in the prime selling season this year. In July I reported the June new home sales numbers plummeted from June's poor showing. Part of the reason for weak sales is ongoing weakness in the economy, and part of the reason is that new home prices are just too high. Potential homebuyers can't afford higher home prices because wages aren't keeping up with price increases. If prices go up faster than wages, and if interest rates don't fall enough to fill the affordability gap, marginal buyers get priced out and sales volume necessarily…[READ MORE]

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