The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2015

Historically, properties in this market sell at a 25.7% discount. Today's discount is 33.9%. This market is 8.2% undervalued. Median home price is $260,500 with a rental parity value of $393,600. This market's discount is $133,100. Monthly payment affordability has been improving over the last 9 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis declined from $173/SF to $172/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 10.1% indicating a longer term upward price trend. Median rental rates declined $3 last month from $1,754 to $1,751. The current capitalization rate (rent/price) is 6.5%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

The move-up market will not get the hoped-for boost from the reflated housing bubble because the move-up equity flowed instead to the banks. In past real estate boom and bust cycles, lenders were forced to write down bad loans, foreclose on the houses, and liquidate their inventory for whatever they could get -- which is why the bust nearly always overshoots fundamentals to the downside. This time around, the problem was so severe that following the market-cleansing process of the past would have displaced another 10 million families and bankrupted the banking system, so another solution was implemented: lenders kicked the can with loan modifications. The short-term, visible effect of this solution was that millions of borrowers stayed in homes…[READ MORE]

The Republicans are correct and appropriate to point out that the policies of the GSEs have potential to put the American taxpayer at risk. Nobody wants to see a repeat of the previous housing bubble. Lenders, loanowners, and the politicians that pander to them all celebrate the reflation of the old bubble, but they hope it's done on stable terms this time around to prevent a major crash. In the aftermath of the housing bust, lawmakers correctly identified the causes of the housing bubble and crafted the Dodd-Frank law to restrict or ban the lending practices that lead to the housing bubble. Interest-only and negative amortization loans are restricted (effectively banned) because these loans don't qualify for the safe-harbor provisions…[READ MORE]

Rising mortgage rates will reduce sales volumes on new construction and prompt builders to offer more incentives and prevent them from raising prices. Homebuilding usually leads the economy out of recession. The Great Recession did not end with a building boom largely because of overbuilding during the housing bubble. A false price signal triggered excessive homebuilding, and it took five years to work off the inventories. The collapse of the housing bubble saw new home sales and construction fall to the lowest levels ever recorded — and those records go back to the 1960s. To make matters worse, rather than experiencing a sudden drop and a “V” bottom leading to a new boom, new home sales flat-lined at record lows…[READ MORE]

Consumer Financial Protection Bureau launched a controversial mortgage interest rate checker to protect customers from rate-gouging lenders. The more information consumers have, the better decisions they make. When I launched the new system on this site that provides detailed cost of ownership information, I did that to provide consumers more information of higher quality than they can find elsewhere to help them make better housing decisions. One of the important decisions people have to make when house shopping is which lender to use for the transaction (assuming they aren't paying cash). Many people don't shop their lenders, and as a result, they end up paying higher interest rates or endure higher fees. The much-maligned Consumer Financial Protection Bureau developed a…[READ MORE]

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