The Collected Works of Author and Blogger Larry Roberts

Archive for March, 2015

Chinese house prices fell considerably in February. Is this the first leg down in what will become an epic financial catastrophe? The Chinese government and central bankers ran a Ponzi scheme to accelerate real estate development to help China catch up to the rest of the world. Unfortunately, since it was a Ponzi scheme, they couldn't figure out a way to unwind it without devastating their economy, so they kept putting more and more money into it, hoping desperately that it would work itself out. At some point long ago, China developed enough housing stock and commercial properties to meet the needs of its citizens, but since they depended so heavily on continued development to sustain their economy, they kept…[READ MORE]

Assuming we don't have another recession, homebuilding will take another two or three years to regain full strength. I reported in 2012 that the same policies that served to eliminate distressed inventory from the MLS also served to revive homebuilding. Homebuilders provide must-sell inventory, so they need a vibrant resale market with a chronic lack of supply to sell into. A glut of foreclosures and weak demand is not a favorable set of circumstances for homebuilding. At first low MLS inventory was a boon to homebuilders, but housing market manipulations give homebuilders false signals, so Orange County homebuilders oversupplied the market, and as it turned out, reflating the housing bubble hurts homebuilders, rather than helps them. It wasn't until early…[READ MORE]

Rumors of a surging real estate market are greatly exaggerated. I recently asked, Did the OC housing market come alive in February 2015? Anecdotal reports of surging buyer demand looks similar to the frenzy at the beginning of 2012 -- or so local agents would like everyone to believe. The fact is the market was very weak in January, and the anecdotal reports of a resurgence in February may be more wishful thinking than market reality. If the market is so hot right now, why is for-sale inventory up 45% while sales are down 3.6%? Wouldn't the opposite be the case if demand were surging and days on the market were declining? Many of these new listings will be cloud inventory…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 24.8%. This market is 6.2% undervalued. Median home price is $290,500 with a rental parity value of $384,800. This market's discount is $94,300. Monthly payment affordability has been improving over the last 10 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis declined from $165/SF to $164/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 5.4% indicating a longer term upward price trend. Median rental rates increased $0 last month from $1,691 to $1,691. The current capitalization rate (rent/price) is 5.6%. Rents have been rising for 9 month(s). Price momentum signals rising rents over the next three…[READ MORE]

What would you do if you were really, really angry at your bank? Losing a home in foreclosure really makes some people angry. I realize that's not exactly a news flash, but the manifestations of that anger are truly remarkable, particularly when you consider the borrower has some responsibility for this negative outcome. I contend that Lenders Are More Culpable than Borrowers in the housing debacle. Apportioning blame for the housing bubble has become a polarized political issue. The Left wants to portray the evil banks as taking advantage of hapless borrowers thus entitling these borrowers mortgage relief or absolution for strategic default. The Right points out the responsibility borrowers have for their own behavior and wants to bail out…[READ MORE]

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