The Collected Works of Author and Blogger Larry Roberts

Archive for July, 2015

Interest-only loans won't inflate a new housing bubble if they remain relegated to the fringes where few borrowers use them. Every loan product has its place, even the toxic loans of the housing bubble: Option ARMs, interest-only, reverse mortgages, adjustable rates, high LTV, subprime. All mortgage products serve some borrower’s unique financial circumstances. Contrary to popular belief, exotic loan products were not inventions of the housing bubble. The problem during the housing bubble was the proliferation of these products outside their usual niche caused by the mispricing of risk. If risk were priced properly, these exotic loan products would have been prohibitively expensive, and far fewer borrowers would have used them. Exotic loans become toxic when they escape their specialized…[READ MORE]

Assets that provide periodic cash payments provide the greatest utility to those who want to live a carefree life. Peace of mind is an underrated and undervalued emotional state. Most people choose lives of speculation, competition, and make believe, erroneously believing if they arrive at some destination known as “being rich,” they will have everything they ever wanted, and that will make them happy. It won’t. There is a peace of mind that comes with wealth, but this emanates not from the pile of money, but the cashflow that pile of money gives off. The size of the pile may get bigger or smaller depending on the market winds, but if the cashflow is stable, the size of the money pile is irrelevant: The real wealth is…[READ MORE]

The monthly housing market reports will now be made available for direct download with these weekend posts. If you want access to all reports and the archives, please register with the site and visit the Subscriber's Reports page. Historically,  properties  in  this  market  sell  at  a  9.5%  discount.  Today's  discount  is  15.2%.  This  market  is  5.7%  undervalued. Median  home  price  is  $490,000  with  a  rental  parity  value  of  $560,100.  This  market's  discount  is  $70,100. Monthly  payment  affordability  has  been  worsening  over  the  last  2  month(s).  Momentum  suggests  worsening  affordability. Resale  prices  on  a  $/SF  basis  increased  from  $398/SF  to  $401/SF.  Resale  prices  have  been  rising  for  4  month(s). Over  the  last  12  months,  resale  prices  rose  9.4%  indicating  a  longer…[READ MORE]

The collapse of the Chinese stock market may precipitate a repatriation of capital back to China triggering a selloff in California real estate. The Chinese government and central bankers operate a Ponzi scheme to accelerate economic development to help China catch up to the rest of the world. First, this Ponzi scheme inflates real estate prices, and over the last year, the Ponzi scheme extends to the stock market, which is up over 150%. Unfortunately, since it's a Ponzi scheme, Chinese officials can’t figure out a way to unwind it without devastating their economy, so they keep putting more and more money into it, hoping desperately that it works itself out. It isn't working out as officials hope. This is…[READ MORE]

If mortgage rates rise as expected, home sales will fall as a direct consequence of crumbling affordability. Sometimes predictions are so basic, so simple that dressing them up with detailed analysis is unnecessary. Predicting falling sales in the second half of 2015 is one of those predictions. First, there is a seasonal component to home sales, and sales volumes nearly always peak in June and fall off for the rest of the year, so predicting a slowdown in sales is a low-risk prediction. But not being a coward, I will go one step beyond that, and I predict sales will decline even more than the seasonal factors would explain. So what simple analysis leads me to make this prediction? It's…[READ MORE]

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