Archive for May, 2012

I have enjoyed being a renter over the last five years. I moved several times being a renter, and I never felt anchored or chained to any housing situation.  I rarely stressed about paying my rent, and I never once fretted about the decline in the value of my property. Further, I never worried about my prosperity being hindered by some bank refusing to extend me a Ponzi loan. Being a renter has caused me to pass many of my peers on the basis of my net worth -- though small, mine is still positive. Renting is the future of housing. Potential buyers will be sidelined for several more years while they repair their credit and accumulate enough savings to…[READ MORE]

Timing the housing market is important. Pundits make predictions all the time, and mostly they are wrong. It's rare to find an analyst who has the foresight to see a change in the market and the courage to act on their insights. Mark R. Kiesel, a Pimco fund manager, is one such analyst. Back in 2006, he posted For Sale and Still Renting on Pimco's site (no longer there), a detailed analysis of the housing bubble and the reason for his choice to sell his home and rent. He later chose not to buy in the fake bottom of 2009, again due to his own analysis of the housing market. Now, Mr. Kiesel is putting his money where his mouth…[READ MORE]

Last week I profiled the Stonegate community of Santa Maria. This week we take a look at the photos, floorplans, and costs of the Stonegate community of Santa Clara.   Stonegate is an Irvine Company Village located northeast of Woodbury bounded by Sand Canyon Avenue, Portola Parkway, Jeffrey Road, and Irvine Boulevard. Stonegate has easy access to Highway 133 which provides speedy access to I-5 and I-405. The entire Village is far enough from the major freeways to be very quiet, particularly locations distal from the bounding arterial streets. The only problems with traffic or noise comes from the steady stream to garbage trucks driving up Sand Canyon and down Portola heading to the Bee Canyon landfill. The landfill itself…[READ MORE]

One of the more esoteric debates on the fundamental value of houses centers on whether or not houses appreciate faster than the overall rate of inflation. Nobody who isn't kool aid intoxicated believes house prices rise much more than the level of inflation because intelligent people understand trees cannot grow to the sky. If house prices consistently went up in value faster than price or wage inflation, over time, people would lose their ability to afford to buy houses because debt-to-income ratios would have to rise to accommodate the higher prices. No, this debate is whether or not prices rise slightly above inflation or not at all. The reason this debate is important is because if you project forward off…[READ MORE]

Economists particularly enjoy calling the inflection points in the market. Much fanfare surrounded Calculated Risk's calling the bottom back in March. He may or may not be proven correct. The data on falling inventory certainly suggested a bottom was in the making, and even if he is later proven wrong, I doubt the real bottom will much farther down. Further with the delays in reporting on Case-Shiller, it won't be known until more than a year from now when the decline from this fall and winter's drop is tallied. He will be correct for at least a year. One way or another Calculated Risk's bottom call will be right enough to suffice even if it isn't perfect. Kudos to him…[READ MORE]

I have long contended that rental parity is the fundamental value of houses. Whenever values differ significantly from rental parity, up or down, reversion to the mean is inevitable. Buyers should be aware of rental parity because paying more than rental parity significantly limits a buyers options. First, such a buyer cannot rent the property to cover the bills, so if they had to move, they either must sell the property or endure an indefinite period of negative cashflow. Since paying more than rental parity also means overpaying, there is significant risk to the buyer that they may not be able to sell in the future for enough to break even thus forcing them into a negative cashflow situation or…[READ MORE]

Through a combination of falling prices and low down payment mortgages, many buyers of the bear rally of 2009 find themselves underwater. When you figure in the transaction costs of selling a home, the numbers are really grim. Despite the negative circumstances, few of this buyer cohort will strategically default. Most are only slightly underwater, and since most also have a cost of ownership at or below rental parity, it's more costly for them to rent, so most will stay put and wait out the remaining decline. Insight: Falling home prices drag new buyers under water By Tim Reid Thu Apr 26, 2012 1:12pm EDT (Reuters) - More than 1 million Americans who have taken out mortgages in the past…[READ MORE]

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