The Collected Works of Author and Blogger Larry Roberts

Archive for June, 2016

Riverside County housing market report: June 2016 Historically, properties in this market sell at a 18.5% discount. Today's discount is 27.8%. This market is 9.2% undervalued. Median home price is $316,500 with a rental parity value of $442,300. This market's discount is $125,800. Monthly payment affordability has been improving over the last 4 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $179/SF to $181/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 $24 last month from $1,886 to $1,911. The current capitalization rate (rent/price) is 5.8%. Rents have been rising for 12 month(s). Price momentum…[READ MORE]

When asset values rise and stay up, that's considered prosperity. When asset values rise and then fall, that's considered a bubble. What will happen with housing tomorrow? Nobody wants to overpay for a house. From 2006 to 2011, anyone who bought a house anywhere in the United States paid more than they would have if they had waited until March of 2012. Of course, it isn't practical to time the bottom tick of any financial market, so prudent buyers with an understanding of value, look at key benchmarks to determine when prices are too high or too low. The benchmark I favor is rental parity. Rental parity represents a crossover point where renting and owning have an equal monthly cost.…[READ MORE]

Previous loan modifications and old HELOCs face resetting to higher rates and recasting to full amortization likely leading to further loan modification. In the heat of financial distress during the depths of the recession, many people asked their banks for unilateral loan term modifications in favor of the borrower. Ordinarily, banks would never consider such a request, but since so many borrowers were distressed, and since foreclosure would result in a loss of original capital, many lenders offered these distressed borrowers deals to keep them paying. Borrowers thought they were getting a deal. Many enjoyed reduced payments, and since fees, charges, fines, and other garbage was clandestinely added to the loan balance, borrowers only saw the benefit and ignored the…[READ MORE]

Ireland chose to preserve the unsustainable mortgage debt from their housing bubble a decade ago. As a result, nearly half the adult population of Ireland are lifelong debt slaves. When the service on existing debt exceeds the borrower's capacity to make payments, the borrower is insolvent. The limit of insolvency is also known as the Ponzi limit because once this threshold is crossed, the only way borrowers pay their debts is through additional infusions of borrowed money. Every dollar loaned to a borrower beyond the threshold of solvency, beyond the Ponzi limit, is a dollar lost by the lender -- unless lenders find "innovative solutions" to preserve the debt for another day, which is what Irish lenders accomplished when they…[READ MORE]

New supply in Irvine blunts rent increases while the rest of Orange County experiences rapid rent growth. It's no secret that we lack sufficient housing to meet demand in Orange County. The lack of supply causes people to put ever-larger percentages of their income toward housing, bidding up rent. At the low end of the housing ladder, it forces families to double and triple up in poor quality housing. Many people leave the area for lack of housing. While there are signs that politicians may finally move to do something about the problem (See: Governor Brown’s housing affordability proposal could actually succeed), any real relief will be years and years away. In the meantime, rents keep going up faster than…[READ MORE]

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