The Collected Works of Author and Blogger Larry Roberts

Archive for 2014

When a HELOC recasts to a higher payment, borrowers default at rates four times larger than normal. The housing market bottom of 2012 was engineered by policy at the major banks. Millions of borrowers stopped making payments, and rather than foreclose on them, lenders decided to modify loans and get whatever payments they could from borrowers and wait until house prices recovered. Since the alternative for lenders was insolvency, they didn't have much choice; can-kicking became the policy of necessity. Politicians eagerly embraced lender can-kicking, and some legislatures mandated it. Borrowers desperately pleaded for can-kicking, and lenders needed to comply for survival, which is why it really happened. If lenders had foreclosed on all the delinquent mortgage squatters and liquidated…[READ MORE]

Historically, properties in this market sell at a 25.7% discount. Today's discount is 33.8%. This market is 8.2% undervalued. Median home price is $257,400 with a rental parity value of $391,600. This market's discount is $134,200. Monthly payment affordability has been improving over the last 6 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $171/SF to $172/SF. Resale prices have been rising for 3 month(s). Over the last 12 months, resale prices rose 18.8% indicating a longer term upward price trend. Median rental rates increased $0 last month from $1,772 to $1,772. The current capitalization rate (rent/price) is 6.6%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

This post was originally posted in early 2011, but the information is timeless. For readers of this blog, the editorial that follows will not cover new ground. For the wider readership in California, what follows is pure sacrilege. Bursting our bubble Why do we continue to think that rising home prices are a good thing? By Michael Kinsley -- February 15, 2011 If President Obama could ask for one gift from the economy — one statistic that turns unexpectedly rosy — what would it be? If Americans in general could choose one change in their financial situation, what would they choose? I suppose Obama would choose a decline in the unemployment rate. But a close second for Obama, and quite…[READ MORE]

I used to be thankful for affordable housing for everyone, but then lenders reflated the housing bubble with the government's blessing. The agents of denial seem bent on failing to learn the lessons of the housing bubble, or worse yet, they want to learn the wrong lessons. We are setting up a system where actions have no consequences, money is for the taking, and the bills get passed on to the prudent and law-abiding. All under the watchful eye of our bought-off politicians who will tell us the plundering of our nation's wealth was for our own good. In my opinion, government has no place in setting market prices. We need regulations to ensure markets are transparent, contracts are enforceable,…[READ MORE]

Lenders profit from consumer debts, politicians gain finance industry donations, and borrowers run personal Ponzi schemes. What could go wrong? Macro-economists focus on their financial models and behavior in the aggregate, and they intentionally ignore the incentives and moral implications of decisions made by the individuals who compose the aggregate. A Ponzi borrower is not an irresponsible thief gaming the lending system in the eyes of a macro-economist; instead, the Ponzi is seen as a stimulant to economic growth and a valuable feature of the financial system. As long as they all don't flame out at the same time, the irresponsible behavior of individuals has a positive aggregate effect. Economists study the “wealth effect” to determine how important it is…[READ MORE]

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