The Collected Works of Author and Blogger Larry Roberts

Archive for August, 2015

It's difficult to imagine paying more for a single parking space than most houses are worth, but some urbanites do. Like any form of real estate, the sales prices of parking stalls are subject to the laws of supply and demand. If the demand is high and the supply is low, bidders compete with each other for the available spaces and bid prices up. If prices rise high enough, it becomes economical to build more parking garages to add to supply, but in places where adding new supply is difficult or impossible, there is nothing stopping prices from going as high as buyers are willing and able to push them. Luxury parking spaces are not generally bank financed unless the…[READ MORE]

The United States inflated a massive housing bubble in the early 00s that burst painfully and upset the housing and retirement plans of three generations. Last year I wrote A Brief History of the Housing Bubble, and for anyone wanting a more detailed recap, you can download my 2008 book on the subject. The Great Housing Bubble was a true financial mania, and today, I want to recall the psychology, or as I described it, Southern California’s cultural pathology. With any financial mania, large groups of people come to hold erroneous beliefs about the current and future value of an asset, and they act on this belief -- an action that generally means buying into an overheated bull market. While…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 22.2%. This market is 3.6% undervalued. Median home price is $305,200 with a rental parity value of $387,400. This market's discount is $82,200. Monthly payment affordability has been worsening over the last 3 month(s). Momentum suggests worsening affordability. Resale prices on a $/SF basis increased from $170/SF to $171/SF. Resale prices have been rising for 5 month(s). Over the last 12 months, resale prices rose 3.8% indicating a longer term upward price trend. Median rental rates increased $22 last month from $1,733 to $1,755. The current capitalization rate (rent/price) is 5.5%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

The housing ladder has many levels, and the first step above homelessness and shelter life is to live in cheap and often unsafe motels. Everyone wants to move up to better housing accommodations. Despite a few frugal outliers, most people spend most of their lives enjoying the highest quality of housing they can afford. Years ago I toured the Tijuana subdivisions of URBI. One of the homes was a 288 SF single-family detached home -- basically a cozy, free-standing two-car garage. When I asked one of our guides who bought such a house, he beamed with pride and said the buyers were generally families moving out of the squalor of the shanties. These new homeowners were thankful to have working…[READ MORE]

The lingering effects of the housing bust still distort market action eight years after the crash. One thing most real estate market observers do agree on is that our current market conditions are not normal. But what is a “normal” market anyway? A normal market would be characterized by a steady or increasing values for each of the following: home ownership rate, home sales, first-time homebuyer participation, purchase originations new home construction, and household formation Perhaps one or two of these metrics may be low or declining due to unusual and short-lived circumstances, but a healthy, "normal" market would see strength in these areas. Unfortunately, we witness the following: 20-year lows in home ownership 6-year lows in home sales 30-year…[READ MORE]

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