The Collected Works of Author and Blogger Larry Roberts

Archive for 2014

Most homeowners regret their purchase because they were pushed by agents to buy more home than they could afford without enough research. Buyer's remorse is common, but it's more common in real estate transactions than in other kinds of purchases largely because the agent's people rely on don't represent them very well. Homeowners often realize later they bought the wrong house in the wrong neighborhood because they didn't do the proper research, and their agent pushed them into a quick sale in order to generate a commission with minimal work. One of the main purposes of my writing and the tools on this site is to eliminate buyer's remorse. I believe that if buyers are given accurate data they will…[READ MORE]

The so-called housing recovery milestones include 6-year sales lows, 19-year purchase application lows, and 19-year home ownership rate lows. Recovery? Doesn't the word recovery imply improvement? When people recover from illness, their health improves; shouldn't a housing recovery show improvement in multiple areas, not just price? So far, price is the only indicator of improvement, assuming high prices are better than affordable prices, of course. What does it mean to be bullish on housing? I believe the lender manipulations are going to succeed, and house prices will likely continue to trend higher on very low volume by historic standards. Since I believe prices will continue to move higher, am I bullish? I also believe house sales volumes will remain well…[READ MORE]

A housing recovery generally exhibits higher prices and higher sales volumes; however, after the 2012-2013 rally ended, home sales declined precipitously. Shouldn't home sales strengthen? Wouldn't a housing recovery based on strong fundamentals of job and income growth cause both prices and sales volumes to rise? Well, it isn't happening. Why is that? Most economists and housing pundits succumb to their optimism bias and predicted rising home sales in 2014: Trulia: 2013 was the year of the investor, but 2014 will be the year of the repeat home buyer. Investors buy less as prices rise: higher prices mean that the return on investment falls, and there’s less room for future price appreciation. Who will fill the gap? Not first-time buyers:…[READ MORE]

Lenders lower standards to qualify more borrowers and increase business, a precursor to another bubble, but only if risk is again mispriced. The recipe for a housing bubble takes many ingredients, and loose lending standards are one of them; however, it requires a gross mispricing of risk and enormous capital flows into unstable loans before prices get pushed up into bubble territory. Let's assume for a moment all qualification standards were eliminated and anyone who wanted to borrow money could get a loan, similar to what happened in 2004 through 2006. Would this cause a housing bubble? In my opinion, it would not. It would inflate prices, and it would cause a great deal of downward substitution of quality to…[READ MORE]

Rather than react with excitement and increased urgency, potential homebuyers fear rapidly rising home prices signal a new housing bubble. Does it? California endured three large housing bubbles since the early 1970s. Each one was kicked off by a huge house price rally, inflating prices well beyond any reasonable fundamental measure. From early 2012 to mid 2013, the house price rally was just as steep as previous price surges, but not as long in duration. Cautious home shoppers fear this latest rally may signal yet another housing bubble, but rather than purchase for fear of being priced out forever, buyers wait or decide to safely rent instead. I consider this cautious behavior a great sign for housing. In the past,…[READ MORE]

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