The Collected Works of Author and Blogger Larry Roberts

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]

Homebuilders euphoric over Donald Trump and prospects for 2017 Homebuilders believe less regulation and a stronger economy are in store thanks to the election of Donald Trump. Despite being in California where an overwhelming majority of people are Democrats, homebuilders are mostly Republican in California and across the nation. Homebuilding is an entrepreneurial business that chafes at regulation, so it shouldn’t be terribly surprising to see so many Republican homebuilders. Since Donald Trump won the election, it’s also reasonable to expect homebuilder confidence would rise. If Hillary Clinton had won, I don’t believe homebuilders would have been despondent, but they would have expected more of the same — increasing regulations and slow economic growth. When Trump surprised everyone and won the…[READ MORE]

Lenders saved $26 billion by can kicking bad loans in 2016 Negative equity decreased by $26 billion in 2016, saving lenders from potential losses on millions of home loans. Can-kicking works. When lenders first began can-kicking bad loans in 2008, I didn’t believe the policy would succeed, and for the first four years, it didn’t. However, with no viable alternatives, all lenders embraced can-kicking through loan modifications and a permissive attitude toward long-term delinquent mortgage squatting. I believed the policy would fail because it was a cartel arrangement. Each bank gained more by foreclosing and recovering their capital than waiting because prices were still falling, and many banks needed the cash to survive the recession. However, the federal reserve and…[READ MORE]

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]

Page 6 of 383« First...3456789...203040...Last »