The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2015

Some forms of debt are better than others. I make no secret of my disdain for the behavior of bankers during the housing bubble. I’m not so extreme that I consider all borrowing and lending to be evil; however, I draw a clear distinction between what I consider good debt, useful for economic efficiency, and bad debt, useless and unproductive that results in misallocations of capital and human suffering. Surprisingly enough, the line separating the two is clear and easy to calculate and quantify. Signatory versus asset-backed debt Not all debt is created equal. asset-backed debt is collateralized by a cashflow-producing asset. The income stream is being used to repay the debt with interest, and if for some reason the…[READ MORE]

If lender lobbyists don't roll back Dodd-Frank, the new mortgage rules will prevent future housing bubbles. Everyone wants to buy a home and see it go up in value. Most people assume the greater the increase the better because they don’t want to believe there is a natural limit to home price appreciation determined by income growth. During boom times, people blithely assume the magic appreciation fairy doles out free money with no end in sight; however, that free money was created by the last buyer in the neighborhood establishing a new comparable sales value for everyone. Everyone cheers the new comparable sale while the last borrowers who set that value struggle with payments on a huge mortgage, sometimes not…[READ MORE]

realtors are more interested in generating false urgency than helping buyers make a sound decision that's best for their family. When a realtor talks, at some level you know that most of what they say is bullshit. They aren't necessarily liars that intentionally make false statements, they are bullshitters, people who make statements without regard to the truth, usually to manipulate behavior for self-serving reasons. realtors don't care about truth. realtors want only one thing: to generate the largest commission possible with the least amount of time and effort. Bullshit helps reach their goal because bullshit smooths over all objections by telling people what they want to hear. The Credibility Continuum The credibility of anyone’s opinions relies on the history…[READ MORE]

Are the bulls back for good? Can real estate only go up forever (again)? The housing bubble was first and foremost a financial mania. People held obviously foolish beliefs as absolute truths, and they would vigorously defend their foolish ideas even after the bust when the folly was exposed for all to see. During the 00s, blogs were popular to the point of being a fad, and many people enthusiastically participated in the conversations in the comments on posts, a tradition we carry on here now. One of the most prolific commenters on many of the blogs, but particularly the OC Register blog was a commenter known by several aliases, but most widely known as Truthi. Truthi would spam the…[READ MORE]

Historically, properties in this market sell at a 9.5% discount. Today's discount is 16.9%. This market is 7.4% undervalued. Median home price is $479,600 with a rental parity value of $569,000. This market's discount is $89,400. Monthly payment affordability has been improving over the last 8 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $394/SF to $396/SF. Resale prices have been rising for 3 month(s). Over the last 12 months, resale prices rose 8.9% indicating a longer term upward price trend. Median rental rates increased $11 last month from $2,501 to $2,513. The current capitalization rate (rent/price) is 5.0%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

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