The Collected Works of Author and Blogger Larry Roberts

Archive for 2017

San Francisco Metro Housing Market Report: March 2017 Double digit rental rate increases are driving rapid home price appreciation in San Francisco. Historically, properties in this market sell at a 24.1% premium. Today’s premium is 11.4%. This market is 12.7% undervalued. Median home price is $828,000, and resale $/SF is $532/SF. Prices rose 7.0% year-over-year. Monthly cost of ownership is $3,815, and rents average $3,406, making owning $408 per month more costly than renting. Rents rose 8.2% year-over-year. The current capitalization rate (rent/price) is 3.9%. Market rating = 8  [READ MORE]

Are house prices really too high? Houses feel expensive because an unusually large percentage of the payment is going toward principal amortization. For the last few years, my monthly housing market reports rated most communities across Southern California highly, suggesting it’s a very good time to buy a house. Yet despite this dispassionate review of the math, most people who actually shop for a house feel like prices are way too high. Why is that? Well, house prices are high. The federal reserve in conjunction with government officials reflated the housing bubble to restore collateral backing to lender’s bad loans. The housing bubble that peaked in 2005/2006 witnessed house prices 20 years ahead of their time. Reflating the housing bubble…[READ MORE]

Irvine Housing Market Report: March 2017 Historically, properties in this market sell at a 22.3% premium. Today’s premium is 11.3%. This market is 11.0% undervalued. Median home price is $778,900, and resale $/SF is $434/SF. Prices rose 5.0% year-over-year. Monthly cost of ownership is $3,589, and rents average $3,214, making owning $374 per month more costly than renting. Rents rose 4.3% year-over-year. The current capitalization rate (rent/price) is 4.0%. Market rating = 9[READ MORE]

Know when to fold 'em https://www.youtube.com/watch?v=Jj4nJ1YEAp4 Several years ago, I was playing craps in Las Vegas when the shooter went on a long, long run. After about 40 minutes without rolling a seven, I had about $750 I took off the table in front of me, and I had about $500 still sitting on the table from the numerous times I pressed my bets or let it all ride. In the middle of the pandemonium at the table, I had a funny feeling. Despite the euphoria around me, I felt it was time to leave. Before I could think more about it, I found the words coming out of my mouth, “Please, take down all my bets.” Some of the…[READ MORE]

Should we worry about declining borrower standards in mortgage lending? Lenders lower standards to qualify more borrowers and increase business, a precursor to another bubble, but only if risk is again mispriced. Let’s assume for a moment all qualification standards were eliminated and anyone who wanted to borrow money could get a loan, similar to what happened in 2004 through 2006. Would this cause a housing bubble? In my opinion, it would not. It would inflate prices, and it would cause a great deal of downward substitution of quality to get a property, but it wouldn’t necessarily create a housing bubble as long as loans were based on verifiable income and reasonable debt-to-income ratios on conventionally amortizing mortgages. The loose…[READ MORE]

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