Future investor sales will limit appreciation

 ANAHEIM, NEWS
May 222013
 
Future investor sales will limit appreciation

In a normal and healthy real estate market, sales are dominated by owner occupants. These owners accumulate equity through paying down a mortgage and price appreciation, and they execute move-up trades seven to ten years after they buy their starter homes. Unfortunately, that isn’t the market we have today. For the last several years owner occupant sales have been stuck in a holding pattern at 1990s levels. Orange County home resale volume very weak by historic norms, and the only increase in sales volumes over the last couple of years has come entirely from investors. Unlike owner occupants, investors don’t [Read More...]

Corelogic: home price appreciation to wane in 2013

 GARDEN GROVE, NEWS
May 212013
 
Corelogic: home price appreciation to wane in 2013

Despite speculators hopes to the contrary, home price appreciation is expected to slow down in 2013 according to a new forecast from Corelogic. So far the rapid increase in prices is due to a small uptick in demand, entirely from investors, and a dramatic decrease in MLS inventory. Both of these factors are likely to change in ways that limit future price increases. In the short term, prices of any asset are determined by fluctuations in the balance between supply and demand. The manipulation of the housing market by lenders is taking advantage of this phenomenon by restricting supply and [Read More...]

The 10 biggest obstacles to reflating the housing bubble

 BUENA PARK, NEWS
May 202013
 
The 10 biggest obstacles to reflating the housing bubble

The federal reserve in conjunction with government officials are working diligently to reflate the housing bubble. Banks are still exposed to $1 trillion in unsecured mortgage debt, so reflating the bubble is considered necessary to restore collateral backing to lender’s bad loans. Whether or not this is a good idea depends on your perspective. If you’re a renter whose tax dollars are being diverted toward this endeavor, these efforts are not particularly welcome. Renters receive no benefit from this intervention, and the resulting high home prices make it more costly for renters to become homeowners, so it’s a double whammy. [Read More...]

Will homebuilders provide the right homes in this cycle?

 Advertisement
May 192013
 
Will homebuilders provide the right homes in this cycle?

Will they build the right stuff? As the Southern California housing market comes back to life, existing inventory is running low. That means new homes will be built, which is good news for the area’s planners, architects, builders, real estate agents and loan providers. However, who will buy those homes? Recent data indicates the majority of new home buyers will not be the same as those before the recession. Rather, it will be Millennials, and they don’t want the same old features as the previous generation. In its April 29 cover story, Barron’s magazine published, “…Widely dismissed as a lost [Read More...]

Defaulting on your home now includes automatic enrollment into a loan modification program

 NEWS
May 182013
 
Defaulting on your home now includes automatic enrollment into a loan modification program

The desire to push defaulting homes into shadow inventory and keep them off the market is manifesting itself into new programs. Let’s briefly review, remember when banks didn’t want borrowers to default and when the borrower defaulted, banks had very strict guidelines to get out default and back into the good graces of the bank? Banks didn’t even want to publicize the fact they were having defaults or foreclosures to give appearance of financially soundness of their institution. Now banks in conjunction with Fannie Mae and Freddie Mac are giving defaulted loanowners virtually an automatic enrollment into a new loan [Read More...]

Loanowners are in no hurry to list and sell their houses

 NEWS, WESTMINSTER
May 172013
 
Loanowners are in no hurry to list and sell their houses

I postulated that loanowners would begin listing their homes as soon as prices reached near-peak levels when they could get out without completing a short sale. Upon further reflection, I’ve concluded that we may not see many more MLS listings once loanowners are above water. We will certainly see some, and we are seeing some of these WTF listing prices now, but the cloud inventory may remain in the clouds until rising housing costs force these over-extended borrowers to leave. Conversation with a loanowner I recently had an extended conversation with a loanowner who doesn’t make enough money to afford [Read More...]

New report may kill the home mortgage interest deduction

 NEWS, SAN JUAN CAPISTRANO
May 162013
 
New report may kill the home mortgage interest deduction

Home ownership hurts the economy. That’s the startling conclusion of a new report that demonstrates a strong correlation between high rates of home ownership and high rates of unemployment. While correlation may not be causation, the correlation is too strong to be ignored. Whether or not home ownership itself is the cause of unemployment is debatable, but whether it does or not, the report will be useful to politicians who need political cover to scale back the home mortgage interest deduction. I’ve covered the merits of the home mortgage interest deduction in many posts. The bottom line is that the [Read More...]

Can a housing market rally by sustained with fewer homeowners?

 NEWS, YORBA LINDA
May 152013
 
Can a housing market rally by sustained with fewer homeowners?

Historically, in housing markets that displayed robust price increases, the rally was driven by increasing employment and rising wages. This has long been considered a fundamental of all housing price movements. The logic behind this is simple. New jobs need to new household formation which puts greater demands on the available housing stock. Further, rising wages allows these new buyers to bid more for the supply available pushing prices higher. But what happens to a market where home ownership rates are declining? Is it really possible to have a sustained rally in house prices when the traditional fundamentals are absent? [Read More...]

62% of delinquent loans are more than 90 days past due

 MISSION VIEJO, NEWS
May 142013
 
62% of delinquent loans are more than 90 days past due

Lenders created a kinder, gentler euphemism for their stupid bubble-era loans; legacy loans. The word legacy has a regal connotation conjuring up images of revered ancestors and royal traditions. In reality, label is being applied to some of the most unconscionably stupid and irresponsible loans ever underwritten. What lenders call legacy loans should be called cancer loans because they are a malignant tumor on the balance sheets of lenders everywhere. Since the credit crunch of August 2007, lenders clamped down on their foolish underwriting standards. The stopped making all sorts of loans nobody would ever repay. Unfortunately, that also meant [Read More...]

House prices nearing affordability limits in many markets

 HUNTINGTON BEACH, NEWS
May 132013
 
House prices nearing affordability limits in many markets

Thanks to record low mortgage interest rates, monthly payment affordability is very high. In fact, it costs the same on a monthly payment basis to own a house in Orange County as it did in 1989 (see chart below). This allows buyers to raise their bids on the limited inventory available. This is highly desirable for the banks who want to recover as much as they can on their bubble-era legacy loans. Existing homeowners are not complaining. There is a limit to how much buyers can raise their bids. Gone are the days of liar loans, so now borrowers much [Read More...]

New mortgage rules are coming!

 NEWS
May 112013
 
New mortgage rules are coming!

The long awaited and new Fannie Mae and Freddie Mac mortgage rules are coming out. In fact the Qualified Residential Mortgage (QRM) is due out very soon. Before this recent home price spike this would have been huge news. It’s still big news but many of these homes being purchased in the last several months are not using Fannie or Freddie mortgages. And many of these homes are being purchased with down payments of greater than 30% or even all cash. When this cycle cools and supply and demand are once again allowed to work these mortgages will have a [Read More...]

The housing bears are rightfully frustrated

 NEWS, SANTA ANA
May 102013
 
The housing bears are rightfully frustrated

House prices are rising rapidly, and the conditions creating this rally will persist for the foreseeable future. Prices will continue to rise until affordability becomes a limitation, or cloud inventory makes its way to the market, and even then prices will continue to rise, just less rapidly than they are today. As long as prices are financeable and supply is limited, buyers will bid up prices on the available housing inventory and prices will keep going up. This sounds like the ideal set of circumstances for continued price appreciation, so why are the housing bears still roaring? Because its a [Read More...]

Mortgage lending standards remain prudently restrictive

 MISSION VIEJO, NEWS
May 092013
 
Mortgage lending standards remain prudently restrictive

realtors, homebuilders and others who profit on real estate transactions hold the false belief that lenders are holding back the market with tight lending standards. It’s an easy position to hold for those who have no risk of loss when loans go bad. The reality is that lenders are not willing to make bad loans anymore because if the do, they will lose money — which is how it should be. Lenders are supposed to be the adults looking over real estate transactions. After all, it’s mostly their money being used to fund the purchase. During the housing bubble lenders [Read More...]

Irvine’s Great Park boondoggle blows $200 million

 LA PALMA, NEWS
May 082013
 
Irvine's Great Park boondoggle blows $200 million

What happens when you give politicians $200 million with no accountability? They blow it. So it was with the money the City of Irvine extracted from developers to create the Great Park. So far, the City has brought in about $250 million, yet only about 15% of the park is developed, and what’s out there doesn’t look like $250 million worth of facilities. Most of the money was simply wasted. Irvine taxpayers paid for a park and all they got to show for it is a balloon, over-hyped and over-priced conceptual plans, and a giant pile of runway rubble. Dream [Read More...]

The federal reserve is inflating a bubble in the apartment market

 FULLERTON, NEWS
May 072013
 
The federal reserve is inflating a bubble in the apartment market

Financial bubbles are inflated by investors who pile into an asset class with flawed assumptions. In most cases, these investors have unrealistic expectations for future appreciation and wouldn’t want to own the asset based on its cashflow alone. Such is the case with stocks, bonds, land, houses, tulips, and even gold. At some point, investors question their original assumptions on appreciation and start to sell. Of course, this causes any appreciation to stop, and even more speculators decide to exit. Further selling causes prices to fall which prompts even more selling that culminates in complete market capitulation and a crash [Read More...]

What would Watt do as the new head of the GSEs?

 NEWS, SANTA ANA
May 062013
 
What would Watt do as the new head of the GSEs?

What would Jesus do if he were in charge of the GSEs? “And Jesus went into the temple of God, and cast out all of them who sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves, And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves.”—Matthew 21:12-13 So what will Representative Mel Watt do if he is put in charge of the GSEs? Will he make it a den of thieves by reducing principal [Read More...]

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