The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2015

Historically, properties in this market sell at a 25.7% discount. Today's discount is 33.3%. This market is 7.7% undervalued. Median home price is $279,800 with a rental parity value of $423,800. This market's discount is $144,000. Monthly payment affordability has been worsening over the last 4 month(s). Momentum suggests worsening affordability. Resale prices on a $/SF basis increased from $181/SF to $182/SF. Resale prices have been rising for 7 month(s). Over the last 12 months, resale prices rose 6.7% indicating a longer term upward price trend. Median rental rates increased $13 last month from $1,860 to $1,874. The current capitalization rate (rent/price) is 6.4%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Debt-to-income lending caps prevent wild swings in house prices based on irrational exuberance, which benefits everyone. Prudent borrowers generally didn't participate in the housing bubble. Those who refused to borrow and spend waste their equity watched with pleasure as their net worth increased, but they weren't impacted by either the rise or fall of house prices. Those who refused to use toxic mortgage financing didn't buy homes and remained renters. Why did many prudent borrowers sit out the housing bubble? Lenders were underwriting loans with debt-to-income ratios approaching 100%, creating a generation of Ponzis. Prudent borrowers were competing with borrowers who were leveraging many times what they could reasonably afford, so unless they were willing to sacrifice quality dramatically, prudent…[READ MORE]

The banking bailouts shouldered by the US taxpayer continue through the government loan guarantees keeping mortgage rates low to support bubble-era prices. Many homeowners held out hope that if they could just keep current on their mortgage long enough, the government would come to their rescue in the form of a mandated bailout program. Part of this fantasy was not just that people could keep their homes, but that they could keep living their lifestyle as they did during the bubble. What few seemed to realize was any government bailout program would be designed to benefit the lenders by keeping borrowers in a perpetual state of indentured servitude. The only group politicians really cared about helping were bankers. Do you…[READ MORE]

If high-paying export industry jobs are eliminated because of the rising dollar, then home sales will suffer due to diminished demand. The fundamentals of housing demand are job and wage growth. Lenders and the federal reserve can manipulate borrowing costs to impact prices, and they can manipulate mortgage qualification standards to create more temporary homeowners, but this chicanery does not represent fundamental support. The powers-that-be already manipulated rates as far as they can push them, and the endless pleas from realtors to lower lending standards fall on deaf ears. The props are played out. Endless market props can mask a weak market for a time, but for the housing market to really improve, the economy needs to produce more jobs…[READ MORE]

Down payment insurance has the potential to address a serious objection of frightened buyers in the wake of the housing bust. Homebuilders rely on high-pressure sales tactics to close every potential buyer that walks in a model center. They have a quick answer to every possible buyer objection, and they are second only to used car salesmen for creating false urgency to close deals. Since the housing bust, new home sales faltered, and homebuilders responded by offering incentives ranging from tricked-out interiors to interest-rate buy downs. But ever since the bust, homebuilder salespeople were unable to overcome buyer's fears about losing their down payments in another crash, particularly since builders sell at nosebleed prices. A new program may solve the…[READ MORE]

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