The Collected Works of Author and Blogger Larry Roberts

Archive for April, 2016

If an institution is too big to fail, then it must not be allowed to take innovative risks because the potential consequences for the economy are dire. Innovation entails risk. Any profitable business venture that is widely known to be successful is rife with competitors, so profit margins compress until nobody sees an opportunity worth exploiting. New profit centers are created by innovation, but innovation carries a heavy cost as most innovative start-ups fail. When an institution becomes large, it becomes very difficult for them to innovate. Bureaucratic inertia, entrenched ideas, and groupthink all tend to stifle innovation. Usually it's safer for large companies to innovate by purchasing a small, successful start-up and scaling their idea. When an institution becomes…[READ MORE]

Generation X was hurt more than the Baby Boomers or the Millennials by the housing bust because many Generation Xers lost their starter homes, and many others are still trapped in them. The Baby Boomers lost their retirement savings. The Millennials can't afford to enter the housing market. While both the Boomers and the Millennials were damaged by the housing bust, the generation most impacted was Generation X---my generation. If circumstances were different, I might have participated in the housing mania. Most of my cohorts did because the housing mania corresponded to the period in the lifecycle of Generation X where they were most likely to become homeowners. They overpaid for the Baby Boomer's houses, and since many Generation Xers…[READ MORE]

[caption id="attachment_45296" align="alignright" width="270"] 4.2.7[/caption] IRVINE, Calif., April 1, 2016 – OC Housing News Los Angeles County Housing Market News April 2016 Historically, properties in this market sell at a 9.5% discount. Today's discount is 15.8%. This market is 6.3% undervalued. Median home price is $513,100 with a rental parity value of $609,000. This market's discount is $95,900. Monthly payment affordability has been improving over the last 2 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $413/SF to $415/SF. Resale prices have been rising for 11 month(s). Over the last 12 months, resale prices rose 8.3% indicating a longer term upward price trend. Median rental rates increased $2 last month from $2,658 to $2,661. The…[READ MORE]

California has a major cultural “religion” that cuts across traditional denominational lines: the religion of real estate and faith in rapid home price appreciation. Religious conviction provides meaning, hope, and joy to billions of people. Faith is belief by choice, generally in the absence of evidence, but sometimes even contrary to evidence. Most of the people on earth embrace a belief in a pleasant afterlife in some form. California is a melting pot of different cultures and a variety of beliefs. It's not uncommon to hear several languages spoken in public places and to interact with a wide variety people following different religions. One thing that unites Californian's is an acceptance of the myriad cultural backgrounds and belief systems. Another…[READ MORE]

Dodd-Frank created the Consumer Financial Protection Bureau that prevents the finance industry from ripping off its customers. More importantly, Dodd-Frank saves homeowners and taxpayers from another painful housing bust. In the past, whenever home affordability became a problem, lenders would come up with some innovative toxic loan product, allowing people to buy homes they really couldn’t afford, renewing the cycle of Ponzi lending and borrowing. During the bubble from the late 80s, adjustable-rate interest-only loans became common, and prices rose to the limit of affordability these products created. During the housing bubble of the 00s, prices reached a ceiling in late 2003, but lenders “innovated” again and originated and securitized option ARMs, pushing prices up to unsustainable levels. To prevent…[READ MORE]

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