The Collected Works of Author and Blogger Larry Roberts

Archive for December, 2014

The free money offered during the housing bubble turned many good people into thieves. People are basically honest and will do the right thing if given the chance; however, people are also opportunistic, and if encouraged and enabled to steal, many ordinarily good people will go down the wrong path: Lenders led many astray. During the housing bubble, lenders were desperate to loan money in what they thought were low-risk, high yielding investments. The advertising to entice homeowners to become loanowners was both effective and too-good-to-be-true. The housing bubble turned many good people into thieves. Most were petty thieves who merely gamed the system to get free money. This same group now feels completely justified asking for principal reduction as…[READ MORE]

America's largest banks engage in anti-competitive practices to drive up the price of housing, and rather than crack down, the government encourages it. Unfettered capitalism has its drawbacks. The two most notable among them are key issues in the housing bubble and bust: Ponzi schemes, and monopoly price fixing. Ponzi schemes are destructive because they create artificial demand for goods and services based on unsustainable growth in investment or debt. A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than…[READ MORE]

Due to the volatile nature of California house prices, timing the housing market is something every buyer must consider and understand. California house prices are notoriously volatile. A combination of restricted inventory due to regulatory constraints and foolish optimism enabled by equally foolish lenders propels house prices to unsustainable heights; owners periodically endure painful crashes. Fortunately, the new mortgage rules change how real estate markets work, and these rules should prevent future housing bubbles; however, since the housing market is now very interest rate sensitive, we are still likely to see price fluctuations -- both up and down -- in the California housing market. Timing the housing market is more important than ever. I first wrote about the importance of…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 22.1%. This market is 3.6% undervalued. Median home price is $291,500 with a rental parity value of $376,800. This market's discount is $85,300. Monthly payment affordability has been improving over the last 5 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis declined from $165/SF to $165/SF. Resale prices have been falling for 3 month(s). Over the last 12 months, resale prices rose 10.9% indicating a longer term upward price trend. Median rental rates increased $0 last month from $1,697 to $1,697. The current capitalization rate (rent/price) is 5.6%. Rents have been rising for 6 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Evaluating rental parity would provide a check and balance preventing comparable sales from getting overvalued. I have long contended that rental parity is the fundamental value of houses. Whenever values differ significantly from rental parity, up or down, reversion to the mean is inevitable. Buyers should be aware of rental parity because paying more than rental parity significantly limits a buyers options. First, such a buyer cannot rent the property to cover the bills, so if they had to move, they either must sell the property or endure an indefinite period of negative cashflow. Since paying more than rental parity also means overpaying, there is significant risk to the buyer that they may not be able to sell in the…[READ MORE]

Page 1 of 6123456