Archive for December, 2013

Borrowers will pay taxes on forgiven mortgage debt starting next year. Ordinarily, the IRS considers forgiven debt a form of income, which it is. In 2007 Congress passed the Mortgage Foreclosure Debt Forgiveness Act which allowed borrowers who short sell their houses to avoid taxation on forgiven debt. Many borrowers availed themselves of this tax break and extricated themselves from a bad housing situation. In the future, borrowers in similar circumstances will owe enormous tax bills if they receive any mortgage debt forgiveness. End of mortgage-fix break could mean big tax bills By Les Christie @CNNMoney December 6, 2013: 10:14 AM ET NEW YORK (CNNMoney) A tax break for struggling mortgage borrowers ends Jan. 1 and that could mean big…[READ MORE]

Late Friday afternoon, in an attempt to bury an important story, the department of Housing and Urban Development (HUD) directed the Federal Housing Administration (FHA) to lower loan limits in high-priced markets. On January 1, 2014, borrowers will be limited to $625,500 loans in Coastal California. This surprise move will affect houses priced in the $650,000 to $800,000 price range. Borrowers looking to borrower more than $625,500 must use jumbo financing, which usually requires at least 20% down and higher FICO scores. Previously, a potential buyer of a $765,000 home only needed a $35,250 down payment to complete the sale. Now that buyer must come up with $153,000, and they are subject to much more stringent qualification standards. This will…[READ MORE]

High-end properties were once immune to foreclosures.  These loanowners had little fear, compared to a loanowner in the Inland Empire that had a much greater chance of a foreclosure action by the bank.  This recent change in bank foreclosure policy is an indication of confidence by the banks that the cloud inventory is now completely under control, at least for the time being. HIGH-END FORECLOSURES UP 61 PERCENT YEAR-TO-DATE IN 2013 Overall U.S. foreclosure activity is down 23 percent year-to-date through October 2013, but foreclosure activity on properties in the $5 million-plus value range is up 61 percent from the same time period in 2012. Defaults in that range were infamous, however defaults in that range they seem to rarely materialize into…[READ MORE]


Luxury Villa with Incredible Garden and Pool, Minutes to Beach, Ocean View Have you been thinking how to build a luxury home? This is a great opportunity to gather some ideas we are offering you our splendid home with an incredible resort style garden. Wonderful accommodations for 1 or 2 families, or a group of friends, it sleeps 9 adults comfortably, some memory foam mattresses and a baby pack and play are also available. With views towards the hillside and the ocean, sitting on the deck surrounding the back of our home you can enjoy incredibly breathtaking sunsets. You can check out my site to know the patio essentials I added to my patio to make it one of the best…[READ MORE]

Some say the world will end in fire,Some say in ice.From what I’ve tasted of desireI hold with those who favor fire.But if it had to perish twice,I think I know enough of hateTo say that for destruction iceIs also greatAnd would suffice. Robert Frost Back in early 2009, I posed the question Will the market perish in fire or in ice? The housing market faced the band-aid dilemma: Is it preferable to remove a band-aid quickly and endure a brief moment of intense pain, or is it better peel off a band-aid slowly and endure less pain but over a much longer period of time? Graph from 2009: More than a theoretical and philosophical mind game, the band-aid dilemma was…[READ MORE]

Lenders prefer to underwrite loans and pass the risk to others thus avoiding consequences for shoddy work. Housing advocates want unqualified borrowers to receive loans even if many borrowers won't repay them. Both lenders and housing advocates agree that the Dodd-Frank financial reform law blocks their agenda, so they formed a coalition to lobby the agencies responsible for implementing this law. These responsible agencies capitulated to the coalition in an example regulatory capture. Wikipedia defines Regulatory Capture this way: Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with…[READ MORE]

Stories about foreign buyers circulate periodically in the mainstream media. The plot is always the same: foreign buyers loaded with cash are buying houses as an investment. The nationality changes from time to time, but the narrative is always the same, and the implied urgency to buy before a foreigner buys your dream home is always present as well. In October of 2010, I published Foreign Buyers Rush to Catch Falling Knives. In August of 2013, the OC Register published Foreign investors buying homes in O.C. And today's featured article is another in that genre. One statistic is consistent in these articles; foreign buyers represent between 5% and 7% of the housing market. These stories imply the number of foreign…[READ MORE]

Traditionally, mom and pop investors owned and managed single-family homes as an investment. Large institutions stuck with large apartment complexes, which were easier to manage. When house prices fell due to the housing bust, cash returns on single-family homes increased so much that it was wiser for institutions to buy homes earning 6% or more instead of buying apartments where they might earn 4% or less. Thus, institutional buyers entered the housing market with billions of dollars and helped form a bottom in house prices. The rising tide of prices caused by institutional buying did not lift all boats. These buyers followed strict deal underwriting criteria that focused their efforts on specific property types in certain areas. If an area…[READ MORE]

The Great Park in Irvine will end up with 4,606 more houses than originally approved, and it will lose 410,000 in commercial space. As a result, FivePoint Communities will receive a tremendous windfall, perhaps even enough to compensate for dramatically overpaying for the property at the peak of the housing bubble. Irvine City Councilman Jeff Lalloway extorted FivePoint for several last-minute financial concessions to compensate for Irvine’s Great Park boondoggle that blew $200 million. FivePoint stood to profit hundreds of millions from the approval of more homes, so they were happy to oblige Mr. Lalloway's requests. In the end, the reflating housing bubble bailed out bad decisions from both parties over the last ten years. Great Park go-ahead: Developer's plan…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012