The Collected Works of Author and Blogger Larry Roberts

Archive for July, 2015

 Coastal California real estate will be among the most susceptible to problems with affordability due to rising mortgage rates. Mortgage rates went down from 2007-2009 because it was necessary to save our banking system -- or at least to save the assets of the idiots in charge. Lenders inflated a massive housing bubble based on debt, and the total amount of debt created was far greater than what incomes could support. Since there was no way borrowers could reasonably make payments, it was necessary to lower the payments significantly in order to prevent delinquencies from getting any worse than they did. In 2006, the payments on a mortgage at 6.5% mortgage rates consumed well over 60% of a borrowers gross…[READ MORE]

Expanding credit makes lenders and realtors more money in the short term, but it invariably leads to inflated house prices and a market collapse. The real estate cycle that culminated in the parabolic rise in prices during the Great Housing Bubble was the result of a series of solutions to short-term problems that led to a major catastrophe. Imagine a housing market where prices are affordable and everyone owns a house that wants to. This would be a stable baseline condition similar to what existed from the 1950s to the 1970s. Under these conditions, when an improving economy created more jobs or higher wages, homebuilders responded by providing more supply, and house prices maintain a stable balance between income, rent,…[READ MORE]

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