Archive for 2012

A big part of the bullish sentiment toward real estate is the believe that former owners who lost their houses in foreclosure will return in droves to mop up the supply of shadow inventory and push prices higher. But what if they don't come back? What if they were so burned by the experience that they choose a lifetime of renting instead? A recent study from the federal reserve suggests this may be the case. Almost 75% of those who lost their homes to foreclosure may never return, and if they don't the so-called recovery may be much weaker than the bulls expect. Credit Access Following a Mortgage Default By William Hedberg and John Krainer -- October 29, 2012 Borrowers…[READ MORE]

Based on their recent behavior, it's safe to conclude the government and the banking cartel believe they can resolve all their ills through loan modifications and short sales. Despite a huge shadow inventory of delinquent loans, lenders have slowed their foreclosure processing, and they show no signs of picking up the pace despite the recent increase in delinquencies likely caused by people opting for a free ride. I believe lenders will ultimately be forced to push out committed squatters in a foreclosure, but I also believe that lenders will also try and fail at every other alternative first. The push for loan modifications Lenders have good reasons to pursue loan modifications. If these failing programs could be made successful, they…[READ MORE]

The current real estate market is the most heavily subsidized and manipulated in US History. More than 90% of loans used to buy real estate in the US carry direct government guarantees. The federal reserve embarked on an unprecedented policy of buying mortgage-backed securities to artificially lower mortgage interest rates on the government-backed loans. Add to that the manipulation of the market by the banking cartel which engineered a 60% reduction in available housing inventory, and it becomes obvious that we navigate a housing market which has little or no semblance to a free market. In Barack Obama's second term, he can guide policymakers in one of two directions. Either he seeks to reduce the government's manipulation of the housing…[READ MORE]

Renting Versus Owning Renting versus owning is both an intellectual decision and an emotional one. The intellectual decision is first and foremost a financial analysis of the comparative cost of renting versus owning. The cost of a rental can be determined fairly easily as there are usually a number of comparable properties on the market to establish a realistic rental rate for any given property. Of course, it is easy to justify in one's mind a comparative rent that is higher than the market will bear. A house someone is in love with will almost certainly rent above market in their minds. Also when looking at similar products the rental rates may not be realistic in the marketplace. It is…[READ MORE]

Everyone knew this was coming. The FHA needs a bailout. When the final tally of losses at the FHA come in, everyone will act surprised. Nobody paying careful attention to what the FHA is doing will be shocked. They are absorbing the losses the banks could not by insuring loans with low down payments in a declining market. No private lender or mortgage insurer would do this because the losses would put them out of business. Instead these losses will be absorbed by the US taxpayer — by you. FHA has been the lender of last resort since its inception. It was started in 1934 during the depths of the Great Depression to provide mortgage lending at a time when private…[READ MORE]

When I developed the OC Housing News Report, one of the biggest challenges was to develop a rating system that would time the housing market to maximum advantage. As we've all seen over the last few years of constant government manipulation, its very hard to pick the exact bottom, and although it looks like the bottom was earlier this year, that is not yet certain. Changes in government or banking policy could easily result in more foreclosures finding their way to the MLS causing prices to fall again. Despite these challenges, there are certain key indicators one can look for to evaluate market timing. I discuss these at length on the market report sign up page. In short, the best…[READ MORE]

Many markets in Orange County barely corrected during the bubble collapse. Many of the most desirable markets are already selling for more than peak values due to the stimulus intended to revive the rest of the national market. This will be the story over the next few years as some markets inflate mini-bubbles in reaction to stimulus while some markets languish under the weight of shadow inventory liquidations. Over time, the substitution effect will kick in and the markets will reestablish the equilibrium they once had prior to the housing bubble. Of course, that assumes politicians stop stimulating and manipulating the housing market at some point -- an assumption that may be proven false. Nobody who isn’t kool aid intoxicated…[READ MORE]

In late 2011, the valuation metrics in the OC Housing News Report became very bullish. Due to low interest rates and slowly deflating prices, the cost of home ownership relative to rent fell far below historic norms. In other words, it was much cheaper to own than is usually is. Despite the falling prices, the valuations were attractive, and this report began issuing strong buy signals. Those that trusted that advice bought at what appears to be the bottom of the market. Only time will tell if the spring 2012 bottom is durable. In spring 2012, lenders dramatically slowed their foreclosure processing and disposition in order to create a shortage of properties on the MLS and stop the decline in…[READ MORE]

The bubble collapse was rife with denial caused by false rumors of homeowner bailouts. Many homeowners held out hope that if they could just keep current on their mortgage long enough, the government would come to their rescue in the form of a mandated bailout program.  Many such programs were attempted, but if their stated goal was to keep loanowners in the properties they occupied, these programs were a dismal failure -- thankfully. If they had succeeded, the moral hazard would have served to inflate an even more massive housing bubble in the future. Moral hazard is central issue in housing bust. Part of the bailout fantasy was not just that people could keep their homes, but that they could…[READ MORE]

In the lead up to our presidential election, I noted that the housing bubble creates no-win political situation for either presidential candidate. As a result, both Obama and Romney have been largely silent on this important issue. It was absent from the debates, and with the exception of a sketchy housing plan that lacks fresh ideas from Romney, housing has been ignored by both candidates. In a final effort to bring pressure on the candidates to acquiesce to his wishes, a prominent realtor (if there is such a thing) has released a scathing attach on both candidates for failing to embrace his self-serving agenda. Special Series: RE/MAX's Dave Liniger Makes a House Call(ing) Out Andy Beth Miller - 10-/31/2012 Recently,…[READ MORE]

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