The Collected Works of Author and Blogger Larry Roberts

Archive for August, 2015

In a cynical example of bad governance, lawmakers created circumstances that will result in a crisis providing them political cover for their actions. Washington is so polarized that politicians need a crisis to get anything done. To that end, politicians created circumstances at the GSEs likely to result in a future crisis that will generate need for political action. Concerned citizens hoping for careful deliberation and a consensus solution (good governance) will be disappointed. Everyone in Washington knows the GSEs must be eliminated because the GSEs can't exist outside government conservatorship. The taxpayer liabilities from backing most mortgage loans are enormous, and taxpayer backing for the GSEs ensures the misallocation of credit. Ed DeMarco prepared for final shutdown of GSEs,…[READ MORE]

A late season influx of for-sale housing inventory caught observers by surprise. Since it's cloud inventory, the weight will not push prices lower. The Orange County housing market has a large number of cloud inventory listings, sellers who can’t reduce their price because they need to pay off a big loan. No matter how much of this inventory comes to market, it won’t put downward pressure on prices because it isn’t must-sell inventory, it’s can’t sell inventory. As mortgage rates rise, potential buyers can’t finance the asking prices these sellers need to complete a sale, leaving an old-fashioned Mexican standoff where neither party can pull the trigger. The market may stall and go nowhere. What are the potential outcomes? It’s…[READ MORE]

One of the primary motivations to buy a house is to provide a safe and stable nest for the family. While working for a homebuilder in my late 20s, I built my own home. At the time I was still single, but I built a home large enough to accommodate a family -- just in case. While I convinced myself the house was a good investment, the emotional satisfaction came from my secret desire to prepare for a family. When I was in my early 20s, I had no desire to be a homeowner, I moved frequently for school, and I had no ties to the communities I was living in. Why would I want to limit my options by…[READ MORE]

Looser loan standards on jumbo loans will increase demand in communities like Irvine, and it may serve to push prices higher. Despite the reflation rally that drove house prices higher, sales volumes over the last few years were well below historic norms as the market slowly transitioned from an investor-dominated market to an owner-occupant one. What the housing market needs is a resurgence of job and wage growth to create more borrowers with the ability to sustain home ownership. Unfortunately, the people who make a living from real estate transactions really don't care whether or not a buyer who borrowers most of the money can sustain home ownership; they care about doing the deal and getting paid. So while the…[READ MORE]

Historically, properties in this market sell at a 0.6% premium. Today's discount is 3.2%. This market is 3.8% undervalued. Median home price is $586,500 with a rental parity value of $595,600. This market's discount is $9,100. Monthly payment affordability has been worsening over the last 3 month(s). Momentum suggests worsening affordability. Resale prices on a $/SF basis increased from $380/SF to $382/SF. Resale prices have been rising for 6 month(s). Over the last 12 months, resale prices rose 2.9% indicating a longer term upward price trend. Median rental rates increased $24 last month from $2,674 to $2,698. The current capitalization rate (rent/price) is 4.4%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

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