The Collected Works of Author and Blogger Larry Roberts

Family homes shouldn't be viewed as an investment or a commodity When people view homes as an investment rather than a family home, prices become volatile, and it disrupts people’s financial lives. Homeowners love it when houses go up in price; after all, it makes them rich. During a home price rally, the bulls intoxicate with greed and obsess about owning real estate as an investment. However, once houses become an investment, the prices of houses begin to behave like an investment, and volatility enters the system. Houses should not trade with the volatility of a commodities market because it causes more harm than good. Price volatility is a very disruptive feature in a housing market: the upswings are euphoric, and…[READ MORE]

Residual land value and the politics of theft Politicians and special interest groups utilize increasingly sophisticated ways of confiscating the wealth of private landowners. The resale value of a house in California is only loosely tethered to construction costs. While homebuilders won’t construct a house if they can’t sell it for enough to recoup their costs, once house prices rise above construction costs, the key variable that fluctuates most radically is the residual land value. Land value is a residual calculation, meaning it’s calculated by determining the market sales price and subtracting off all the costs of production. Since land residual is determined by whatever is left over, rising market prices fall entirely to the bottom line, and any increases in costs come…[READ MORE]

Services for the homeless are an attractive nuisance Good climate, good services, and a chronic shortage of housing combine to create an intractable problem with homelessness in California. What is the minimum level of housing quality people are entitled to? If you pose that question to Coastal California residents, many will cite their needs for a large single-family detached house with granite counter tops — and they believe they are entitled to it. For me, I’m just thankful I am not homeless. Have you ever thought about what you would do if you faced homelessness? How would you tackle the problems of daily life without stable shelter where you can store your possessions or control your environment? If I were…[READ MORE]

New loss mitigation practices will prevent future house price busts Future housing busts will be busts in sales volume, not in price. When lenders make loans, they far prefer borrowers to repay those loans; in fact, their entire business plan relies on it. As long as borrowers are current with their payments, lenders are happy and making money. When borrowers don’t make their payments, the end result is a distressed sale. If there are enough of these, market prices go down dramatically, causing significant lender losses. Lenders know this too, so when distressed loans become an overwhelming problem, they devise can-kicking methods including loan modifications, mark-to-fantasy accounting, and when all else fails, they simply allow the delinquent borrowers to squat without paying…[READ MORE]

The good, the bad, and the ugly reasons people buy homes People buy homes for many good reasons, and many bad reasons too. The need for shelter is basic, often closely followed by the desire for community. In the United States, people borrow prodigious sums to buy real estate to satisfy this need, whether it’s good for them financially or not. Basic human emotions drive the activity in real estate markets. Most people buy because their family circumstances push people toward ownership at different times. Some are fortunate, buy at the bottom of the real estate cycle, and earn an enormous windfall. Some are not so fortunate, buy at the peak, and leave after a foreclosure, destitute and angry. The…[READ MORE]

Page 2 of 3791234567...203040...Last »