The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2014

Housing hits another weak patch as investors balk at high prices. Will housing see another decline similar to 2008 or 2011? Ever since house prices began a steep, deep, and unprecedented decline in 2008, the government, lenders, and the federal reserve have changed policies and applied stimulus of various kinds to reverse the decline and reflate the previous bubble in order to restore collateral backing to bubble-era home loans to preserve the solvency of our banking system. Each manipulation and policy change managed to pull demand forward and prompt buyers to act sooner than they otherwise would at price points higher than they otherwise would. When the stimulus was removed, financial gravity took over, and prices went lower. The latest…[READ MORE]

Lenders retreated to the normal, safe and prudent lending standards of the 1990s in the wake of the housing bust. Lending standards don't evolve through a process of innovation; they move in cycles. Lending standards start from a position of stability, and over time, competition drives lenders to lower standards and experiment with riskier loan programs until the entire system becomes unstable. Then some economic disruption, or as happened in 2007, large numbers of borrowers default, and the entire system crumbles, a credit crunch ensues, and lending standards retreat to the stable levels where they started. Despite how obvious and predictable this cycle is, the lending industry repeats their mistakes every few decades. In the latest go-round, lenders touted their…[READ MORE]

Historically, properties in this market sell at a 0.6% premium. Today's discount is 0.8%. This market is 1.4% undervalued. Median home price is $565,300 with a rental parity value of $569,900. This market's discount is $4,600. Monthly payment affordability has been improving over the last 3 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $372/SF to $375/SF. Resale prices have been rising for 8 month(s). Over the last 12 months, resale prices rose 8.7% indicating a longer term upward price trend. Median rental rates increased $16 last month from $2,600 to $2,616. The current capitalization rate (rent/price) is 4.4%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

The market for homes over $10M is very thin, yet some entrepreneurs believe they can operate this as a viable business model. Will it last? A sustainable business is one that delivers value to customers in good times and in bad. Failed business models litter the real estate landscape. Subprime lending is a model that succeeds only when times are good and house prices rise steadily. Real estate sales is a business that attracts flocks of new agents when times are good, and most go back to what they were doing before when times are bad. Flipping works best when times are good, but rehabbers who deliver value can make a good living in most market conditions because they install…[READ MORE]

Baby boomers need Millennials to buy their houses at inflated values to fund the boomer's retirements. Who cares whether or not Millennials buy homes? Shouldn't the Millennials themselves be the only ones who care whether they rent or whether they own? Shouldn't the choice be one for them to make in consideration of their own lifestyles, needs, and goals? Besides Millennials themselves, only two major groups of people care about Millennial homebuying: real estate industry professionals, and baby boomer homeowners. People in the real estate industry that make money on transactions -- homebuilders, lenders, realtors -- they want millennials to buy homes for obvious, self-serving reasons. The often overlooked group of interested parties is the baby boomers who want to…[READ MORE]

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