The Collected Works of Author and Blogger Larry Roberts

Archive for January, 2017

Investors will supplement down payments in exchange for a share of future profits. Would you make a deal like that? Are there any circumstances under which homebuyers would be willing to share in the upside of home price appreciation? Would you sell an option worth 35% of the upside in exchange for half (10%) of your down payment? You wouldn't have any payments like a second mortgage, and if you sell for a loss, the investor shares in the losses with you. When you reflect on it, the main reason you wouldn't participate is because you believed you will make a fortune on appreciation, and you don't want to share it. Strong arguments can be made for a ten to…[READ MORE]

One man’s mortgage debt is an entire neighborhood’s equity. Higher mortgage rates put pressure on the size of mortgage balances, potentially eroding homeowner equity. When a buyer purchases a house, their purchase sets a standard by which the value of other houses is inferred. When a house sells for a high price, the new sale boosts the value every property in the neighborhood. Of course, as many lamented during the bust, when a house sells for a new low price, the sale drags down neighborhood values as well. When prices rise, neighbors cheer each new high comparable sale because it adds to their net worth, illusory though it might be. Many people enjoy checking their Zillow Zestimate, particularly during a…[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 failed to repay according to the terms of the promissory note, the mortgage agreement allowed the lender to call an auction to regain their loan capital. People obtained homeownership as 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…[READ MORE]

Any legislation or policy that promotes housing production is better than producing no housing at all. In the post, Will building more roads and houses merely increase demand?, I lamented that nimbys managed to turn the solution into part of the problem. They embrace the idea of "induced demand," a belief that providing more roads or housing fails to alleviate supply shortages because it stimulates demand. It's the ultimate weapon against new development because we're damned if we don't build, but we're doubly damned if we do build. The real solution to the housing affordability problem is to provide sufficient supply to meet the needs of the growing economy and population. As long as California creates many jobs but builds few…[READ MORE]

Dodd-Frank should prevent house prices from rising so high that only fools and millionaires can afford them. When house prices rise rapidly and mortgage rates go up, the cost of ownership rises even more rapidly, and realtors stoke fears with “buy now or be priced out forever.” Under these circumstances, it’s easy to get stressed out and worry about what’s outside of your control. I didn’t buy an OC house at the bottom of the downturn. I knew it was a good time to buy, but for a variety of reasons, I was not in a position to buy when the market was ripe. Now that the cost of ownership is 50% higher, I am less motivated to buy a…[READ MORE]

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