Archive for February, 2014

People change their views on rising house prices. Rather than cheering an endless increase, they worry about another decline. Economists and politicians almost universally accept that everyone wants to see rising house prices. Having written for seven years to an audience of prospective homebuyers, I can attest that some people don't want to see perpetually rising home prices -- at least now while they're shopping for a home. The severity of the last housing bust destroyed the central myth concerning rising house prices: real estate prices do not only go up. Once people realized housing was not the safe investment they thought it was, their enthusiasm for owning declined precipitously -- as it should. The obvious suddenly hit everyone in…[READ MORE]

Jacobim Mugatu, 2/15/2015 To me, this “real estate recovery” has been nothing but a false front, a Potemkin village – the kind that the residents of Rock Ridge built to thwart Hedley Lamarr and his villains from taking over in “Blazing Saddles”. From artificially restricted inventory to unsustainable low interest rates, home prices have bubbled up well past an affordable level for all but those with stratospheric income. The rise of all cash sales – nothing more than money laundering sourced from every corner of the globe – has destroyed real price discovery and the velocity of true market demand. When you listen to those in the real estate industrial complex, none of the aforementioned issues are the cause of…[READ MORE]

Activists plead for reinstatement of the tax break on forgiven debt that expired at the end of last year. The value of the forgiven debt is now taxed as income -- as it should be. Congress likes to provide tax breaks and subsidies to encourage certain activities and dissuade others. There is a simple truth about taxes: any activity that is taxed will diminish, and any activity that is subsidized will increase. Do we want to see more more irresponsible borrowing? If so, then we should forgive debts and fail to tax the free money as income. That's what some activists are proposing. I believe forgiven debt should be taxed, particularly on mortgage equity withdrawal. Did borrowers deserve a tax…[READ MORE]

Home prices rise, but investors pull back, home sales drop, household formation craters, mortgage applications decline, and the federal reserve frets over weak job growth. We won't know whether or not the recovery died last year until the spring numbers come in, but suffice to say, right now, the recovery looks shaky at best. Rising house prices are generally a side effect of a strong economy. A strong housing market recovery would witness rising home sales, rising household formation, increasing purchase applications, rising wages, and employment growth -- not just rising prices. Right now, all we have is rising prices, and the lack of fundamental support is good cause to question the strength of the so-called housing recovery. Anyone who…[READ MORE]

The former political leaders in Irvine, California, squandered $200,000,000, then ordered their partners-in-corruption to cover up the details of no-bid contracts and other political largess. I am not politically partisan; I bash corruption and incompetence from either party. Local politics often renders political partisanship meaningless; for example, political party registration strongly favors Republicans in Irvine, yet Democrats controlled Irvine's city council for many years. When Sukhee Kang took a shot at US Congress last election cycle, the Irvine Democrats couldn’t field a replacement strong enough to keep control. Once Republicans gained control, they embarked on an investigation of the ruling Democrats activities concerning the Irvine’s Great Park boondoggle that blew $200 million. What they turned up is a portrait of…[READ MORE]

Lenders deferred foreclosures in order to increase recovery on their bad loans; however, loss severities on bad loans are increasing faster than house prices go up. Lenders may quicken the pace of foreclosures as home prices level off to minimize their losses. Lenders delayed foreclosures in an effort to liquidate REO and resolve bad loans at higher prices in order to recover more on their bad bubble-era loans. But what if waiting no longer serves their best interests? What happens when high servicing costs and deferred maintenance on the houses collaterlizing these loans causes loss severities to increase faster than house prices go up? In such circumstances, it would be in the lenders best interest to foreclose and get what…[READ MORE]

Lenders' loan modifications temporarily alleviates borrowers' financial distress from oversized mortgages, but the terms of loan modifications increases borrower costs over time. Families feel pressure to sell as the payments on their loan modifications increase, and the rising cost of keeping the property will force more supply on the market. Lenders designed loan modifications to maximize lender profits while giving borrowers feeble hope of clinging to their family homes. Lenders only began granting loan modifications in response to the deluge of defaults that began when subprime borrowers faced resets on their 2/28 toxic loans issued during the bubble. Lenders foreclosed on those borrowers per the lenders prior loss mitigation procedures and swamped the market with foreclosures that pounded prices back…[READ MORE]

By Mr.Burns, 2/9/2014 Who sets the price of gold?  Is the price of gold set or is the price discovered though supply and demand, bid and ask?  If bid and ask, where?  Which market or exchange determines the real price of gold? The answer, as far as I can tell, and that may not be very far, is YES or no or maybe. The price of gold is both set and discovered, and in many different places at different times.  In the past, the largest gold market for the exchange of physical gold and gold futures was the London Bullion Market.  A few years ago an exchange traded fund was launched which enabled gamblers to bet on the price direction of gold. …[READ MORE]

Demolishing the runways of the old El Toro airbase in Irvine created a massive pile of rubble... truly massive. The airport as it looked prior to demolition. The airport as it looks today. Those tiny yellow features at the top of the photo are large pieces of machinery used to break up the rubble. Much of the rubble sits in place where it was broken up, but several very large mountains of rubble have also been pushed up. The sea of debris is amazingly large. And it stretches for as far as the eye can see.[READ MORE]

Lenders engage in a pump-and-dump scheme to recover more on their bad loans and REO. Future buyers must pay bubble-era peak prices and endure a much higher cost of ownership, and they risk submerging beneath their mortgages if prices turn south again. Lenders manipulate market supply to create market excitement and momentum so they can resolve bad loans and sell REO at higher prices in a massive pump-and-dump scheme. Pump-and-dump schemes usually involve thinly traded penny stocks, but the same principal applies to any asset class where the holder of an asset manipulates the market to later sell at a higher price. When its done with penny stocks, the Securities and Exchange Commission cracks down on scammers, but when its…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012