The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2015

The Chinese government is loosening restrictions on the flow of capital, inflating real estate values in California. Is the influx of Chinese money is based on sustainable fundamental factors? I don't think so. In my opinion, this is hot money escaping an inflated and collapsing market, subject to the policy whims of an unpredictable totalitarian government. Chinese capital is an unstable source of investment, and it could reverse course in a moment based on policy changes in China. Most California real estate market bulls and enthusiasts blithely assume the influx of Chinese money will never stop because everyone in China wants to live here, right? Unfortunately, in the real world, for money to leave China, it generally has to pass…[READ MORE]

Only 10% of borrowers with a prior serious delinquency regain access to the mortgage market within 10 years of their default. Hope for a better tomorrow is a basic human need; people who give up hope often become deeply despondent and even suicidal. People look for hope wherever they can find it, and over the last eight years, people who work in real estate, homebuilding, sales, and so on, needed hope for a better tomorrow because the current situation consistently sucked. Anyone out of work over the last several years spent most of their time scouring job boards and résumé spamming job posting sites, and since they were already on the web, most would also check the news for any…[READ MORE]

Today’s 4% mortgage rates represent an artificial transfer of wealth from Generation X, Generation Y, and Millennials to Baby Boomers. Even before the housing bubble created a great deal of false wealth, baby boomers were the recipients of an artificial boost in home prices due to 25 years of falling mortgage interest rates. At least 40% of the value of their homes was created totally by increased borrowing power of subsequent buyers. Consider the following: the chart below shows the monthly cost of ownership from 1988 to 2015, and from 1989-1991 and again from 2011-2013, the monthly cost of ownership was approximately $1,850. Twenty-four years apart, the cost of ownership on a monthly basis was unchanged, yet house prices were…[READ MORE]

Historically, properties in this market sell at a 0.6% premium. Today's discount is 5.1%. This market is 5.7% undervalued. Median home price is $560,800 with a rental parity value of $601,600. This market's discount is $40,800. Monthly payment affordability has been improving over the last 9 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis declined from $375/SF to $374/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 5.9% indicating a longer term upward price trend. Median rental rates declined $16 last month from $2,632 to $2,615. The current capitalization rate (rent/price) is 4.5%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

There is no evidence Millennials are becoming more active in the housing market, but hopeful anecdotes warm the hearts of realtors and homebuilders. Ever since the collapse of house prices and sales in 2007, homebuilders, realtors, and everyone else who depends on real estate sales finds a new Messiah each year that will save the housing market. Each year they are disappointed. For the last two years it was the boomerang buyer, those former homeowners who were supposed to return to the housing market in droves. Of course, they didn't, and the false hope and wishful thinking resulted in dashed hopes for 2014. For 2015 the false hope and wishful thinking is centered on Millennials, those born approximately between the…[READ MORE]

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