A fresh outbreak of mortgage delinquencies won't cause a crash in housing. As long as supply continues to be restricted and the percentage of all-cash purchases is high, prices simply won’t go down. Sales volumes may continue to decline, but prices will remain suspended where more buyers can’t afford them unless something changes at the banks and they begin approving more short sales or foreclosing on their delinquent borrowers rather than modifying their loans. In the post Is San Francisco, the most overvalued US housing market, going to crash?, I challenged housing bears to construct a realistic scenario where house prices crashed. The good people at Patrick.net had a lengthy discussion on the topic, and many scenarios were considered; however,…[READ MORE]

Today's house prices align with rents. Any significant increase in prices, if not matched by a commensurate increase in rents and incomes, will push the market into new bubble territory. The house price rally from February 2012 to June of 2013 reflated the old housing bubble to the degree possible without beginning a new one. Record low interest rates made house prices relatively affordable, and buyers used these low rates to leverage themselves fully to bid up prices on scarce inventory. In May 2013 when interest rates rose from 3.5% to 4.5%, the reflation rally abruptly stopped as the ceiling of affordability crashed down upon market participants. Since that time, house prices have stabilized at the the limit of affordability…[READ MORE]

Mortgage equity withdrawal was a common method of supplementing family income during the housing bubble. This form of Ponzi financing is responsible for a majority of today's foreclosures. When housing activists blather on about keeping good people in their homes, they conjure up images of dutiful workers experiencing temporary problems paying their purchase-money mortgages. While that may have applied to some small fraction of foreclosures years ago, the reality is quite different from the rosy picture painted by activists. It's easier to get behind relief efforts when activists portray the person obtaining relief as a productive, honorable person who fell on hard times. It's more challenging to arouse bailout sympathies among the productive masses when reality reveals the recipients of…[READ MORE]

Qualified mortgage standards and the ability to repay rules provide a rigid framework designed to prevent lenders from irresponsibly inflating another painful housing bubble. The rules as drafted should achieve the desired effect. The housing bubble inflated because lenders underwrote huge loans to borrowers who didn't have the capacity to repay unless the value of the underlying collateral kept rising to bail them out. It became a massive Ponzi scheme that imploded and wiped out the housing market, the economy, and nearly our entire financial system. Regulators were wise enough to understand that much, and they were brave enough to pass the Dodd-Frank law to attempt to rein in the worst offenses. Part of the implementation of Dodd-Frank is the…[READ MORE]

Have you seen the advertisement for the 2014 Fiat all electric car?  Talk about a cutie.  It's the same bright orange as the hybrid "Cutie" tangerine.  In fact, I think they should rename it, "Bambola"; Italian for Cutie.  Check it out:     I have daughters, three, two of whom are of driving age, so I think about things like cuteness when shopping for a car for them to drive.  And we already own one Fiat, which my middle uses to drive to and from school and to the mall and to friends houses.  The oldest does not need personal transportation right now because she is in London in 'gradual school'.  We thought after graduating for UCLA she was ready to…[READ MORE]

And Sunday, and Tuesday.  I didn't feel well Monday afternoon, so my wife did not give me the 'not judging you, but really am, look' when she is wondering why I am watching TV and not doing one of the millions of things that need doing by a homeowner who thinks he can do everything himself.  I did not repipe the house myself, only because I knew that I would need to have the water turned off longer than my family could bear, so I hired a plumber for that little job.  We had our second slab leak in the two years we have owned our happy home, which was a foreclosure wreck with graffiti on the walls, algae in…[READ MORE]