The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2015

With the bulk of new home sales in Irvine, California, selling to Chinese nationals, declining sales there is an indicator of overall Chinese capital flows. I don't believe we will see another real estate crash caused by American lenders. Since they mastered the art of can-kicking to keep supply off the MLS, they managed to reflate the old housing bubble. It's very likely they would employ this same technique to prevent any future house price collapse caused by loan delinquency. However, despite the huge influence lenders have on the market, they don't control all the supply. If there is any issue that has real potential to drive real estate prices down, it’s the possibility of foreign buyers, particularly the Chinese,…[READ MORE]

Baby Boomers need Millennial buyers to purchase overpriced homes to fund the Boomers' retirements. Have you noticed all the financial media stories about why Millennials aren't buying homes? Who cares whether or not Millennials buy homes? Shouldn't the Millennials themselves be the only ones who care whether they rent or whether they own? Shouldn't the choice be one for them to make in consideration of their own lifestyles, needs, and goals? Who benefits from a concerted effort to cajole Millennials into buying houses? Besides Millennials themselves, only two major groups of people care about Millennial homebuying: real estate industry professionals, and Baby Boomer homeowners. People in the real estate industry that make money on transactions -- homebuilders, lenders, realtors --…[READ MORE]

As mortgage rates rise, home sales will decline, shattering the myth of escape velocity in residential real estate. In rocketry, escape velocity is the speed required to propel an object into a stable orbit. In a housing market, escape velocity is a rate of price and sales volume increase necessary to sustain an increase in demand required to push prices higher for the long term. Escape velocity is the elusive dream of real estate pundits, a group who doesn't understand what it was or why it disappeared (probably forever). In previous real estate cycles (pre Dodd-Frank), as prices went up and buyers were priced out of the market, lenders responded by offering affordability products toxic mortgage financing terms. As affordability…[READ MORE]

As loan modifications redefault, and as the market can absorb the supply, lenders are finally foreclosing and resolving their bad loan permanently. A wave of foreclosures flooded the housing market in 2008 and left millions of homeowners underwater. Most people believe the storm surge receded as lenders ran out of delinquent borrowers to foreclose on, but nothing could be further from the truth. In reality, lenders merely delayed processing millions of foreclosures by can-kicking bad loans in hopes that rising prices could bail out both the bankers and the homeowners with an equity sale. For the most part, this policy worked. Distressed properties disappeared from the MLS, and fueled by record low mortgage rates, prices rose briskly once the supply…[READ MORE]

During the housing bust, every effort was made to keep homeowners in their houses. Renters were mercilessly thrown in the street with little or no fanfare. Our real property system functioned well for centuries with very little change. Prior to the housing bubble, it was widely accepted that people borrowed money to buy houses and if they didn’t pay it back according to the terms of the promissory note, the mortgage agreement allowed the lender to call an auction to get their money back. Housing was an earned reward, not an entitlement. The basic dilemma is simple, most people don’t have the cash to buy a house, and it would take them most of their adult lives to save for…[READ MORE]

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