This is a window inside the mindset of the 21st century ponzi loanowner.  This is the worst recession in post war history, and home owners that lucky to now have equity in their properties are taking it and gambling in the stock market.  Is paying down your mortgage such terrible financial act to commit?  It shows that a home is not shelter to the Ponzi, but a financial speculation product to use to support their lifestyle.   This  will be new cohort of loanowners that will find themselves with negative equity if mortgage rates have a rapid increase.  This will result in a small echo wave of re-defaults and loan mods for the real estate bubble 2.o.  However, this affect could…[READ MORE]

The reality of our current housing market is simple; banks are limiting the supply, and the few buyers in the market are bidding prices higher; this despite the fact that Orange County home resale volumes are very weak by historic norms. I recently reported how the banks transformed must-sell shadow inventory into can’t-sell cloud inventory by stopping their foreclosures on delinquent mortgage squatters. In the process, Banks have become the largest players in the REO-to-rental space.The current state of affairs favor the bank's interests, so it's unlikely banks will change their policies any time soon. They are content to amend-extend-pretend with repeatedly-failing loan modifications and kick the can while prices go up. Eventually, the loan modification entitlement will be rescinded as…[READ MORE]

The housing markets are abuzz about the REO-to-rental hedge funds buying up properties. The major players in private equity have committed or spent nearly $3.5 billion dollars to buy single-family homes, rent them out, and hold them for appreciation until the housing bubble reflates and they can get out at near-peak pricing. It's a good business model. I operate the same on a small scale myself. What makes the investment really attractive is the combined weight of the federal reserve and government policy working diligently to reflate the housing bubble to ensure these REO-to-rental funds make great returns. It may look like crony capitalism on behalf of these funds, but it's not. It's worse than that. It's crony capitalism on…[READ MORE]

If you listen to the people who benefit most from government housing subsidies, there is never a good time to reduce or eliminate a source of government largess. If you've been reading this blog for very long, you have a finely tuned bullshit detector. Whenever you read the shrill cries of realtors, homebuilders, and high wage earning loanowners lamenting the dire consequences of reducing or eliminating the home mortgage interest deduction, your bullshit detector should tell you to discount whatever they say as the self-serving nonsense it is. The fact that the home mortgage interest deduction is in danger is scaring the bullcrap out of the usual suspects. In truth, the HMID is an expensive subsidy that inflates house prices…[READ MORE]

A lie, if repeated often enough, becomes accepted as truth. The mainstream media is reporting that home sales are strong and demand is robust. Compared to the depths of the housing bubble crash, sales are up somewhat, mostly due to investor demand, but sales are still very low by historic standards, and we're nowhere near a healthy real estate market. If not for the dearth of inventory, the anemic demand wouldn't be pushing prices up at all. Below is a chart from a recent Wall Street Journal article purporting to show sales are doing well. It does tell part of the story. Inventory is way down, and investor sales are up which is causing house price to rise. Unfortunately, the…[READ MORE]

Because prices are rising so rapidly, particularly in California where kool aid intoxication is a cultural addiction, many people are wondering if we are inflating another housing bubble. My answer to that question may surprise you. No, we are not inflating a new housing bubble. It's different this time. It's never different, is it? Well, the last housing bubble inflated prices well above the stable equilibrium of cost of ownership relative to rents based on a foundation of toxic mortgage products, most notably the Option ARM. The current rapid rise in prices is caused by different circumstances, and it's being built on a foundation of stable 30-year fixed-rate mortgages. When the federal reserve lowered interest rates from the bubble-era 6.5%…[READ MORE]