Archive for April, 2014

California’s Homeowner Bill of Rights compels banks to foreclose through courts and take more time to complete. The housing bubble and bust exposed many flaws in our property finance system. The Dodd-Frank reform corrected many of these problems, and I believe the new mortgage regulations will prevent future housing bubbles. It's rare, but occasionally legislators and regulators get it right. The California Homeowner Bill of Rights was not one of those occasions. The California Homeowner Bill of Rights supposedly corrects flaws in the foreclosure processing system exposed by the millions of California borrowers who quit paying their mortgages. Apparently, adhering to the terms of the promissory note and mortgage agreement, as has been customary for hundreds of years, somehow violated…[READ MORE]

Decimated during housing bust, first-time homebuyers and first move-up buyers struggle to buy homes, breaking the chain of move-ups. Houses are expensive. Most renters who would like to buy a home lack the down payment necessary, and many are early in their careers when their income is lower. As a result, first-time homebuyers are forced to buy the lowest cost properties available for sale in the housing market, and they must use the highest cost financing options due to their low down payment. Assuming they sustain ownership, assuming they have an amortizing mortgage, and assuming house prices rise, after some period of waiting, the first-time homeowners could sell their starter house, usually to another first-time buyer, for enough to cover…[READ MORE]

Weak job growth creates persistent unemployment and slows wage growth, which delays a durable housing recovery based on fundamentals. For the housing market to really improve, the fundamentals underpinning the market must improve because manipulating inventory and interest rates can only carry the market so far. The recent house price rally had little or no fundamental support; even housing bulls acknowledge that fact. Although housing bulls like to ignore or downplay the record lows in purchase mortgage originations, this is a sign of just how weak the housing market fundamentals really are. What the housing market needs to get back on track is growth in jobs and incomes. People who get high paying jobs either form new households or make…[READ MORE]

Attracting private equity to housing finance without GSE loan guarantees will raise lending costs and lower loan balances, hindering bubble reflation. Since many borrowers at the margins borrow the maximum allowed based on their income, any increase in borrowing costs decreases their borrowing power, lowers their bids for houses, and ultimately hinders efforts to fully reflate the housing bubble. For lenders and underwater loan owners who want prices as high as possible, higher borrowing costs imposed on new borrowers is a bad thing. Unfortunately, it's impossible to reform Freddie Mac and Fannie Mae, the GSEs, without increasing borrowing costs. Senators recently unveiled a Fannie Freddie reform plan. Housing industry lobbyists oppose any meaningful reform; realtors, homebuilders, and lenders all want…[READ MORE]

I spend nearly every Sunday morning at Disneyland with my son James. It's the best time of my week, something I always look forward to. I've been a season passholder as Disneyland for several years. My son and I go nearly every Sunday morning, arriving just as the rope drops on Main Street in the happiest place on earth. We have our routine; we go to Space Mountain, Star Tours, Astro Blasters, then make our way over to Indiana Jones, Big Thunder Mountain Railroad, Splash Mountain, and Pirates of the Caribbean. If you arrive just as the park opens, there are no lines, so it's easy to hit all your favorites and be done by lunchtime. We put in our…[READ MORE]

San Diego woman who didn't get her dream home made fake sex ads for new owner's wife telling johns to "force their way in and take me while I say no." Warning! This post has sexual language. If this is potentially offensive, read no further. We've all wanted something badly and didn't get it. Most of us get over it and move on, but some people can't accept being thwarted in their desires and launch into irrational and truly outrageous behavior. A woman in San Diego missed getting what she considered the house of her dreams, a common disappointment. Most people have the wisdom to realize there are many dream homes, and dreams often change, so they get over their…[READ MORE]

People erroneously believe professionals who packaged toxic mortgage-backed securities knew the housing market would crash and profited from bad loans. Matthew 15:14 "Let them alone; they are blind guides of the blind. And if a blind man guides a blind man, both will fall into a pit." When the housing market collapsed under a pile of toxic mortgage paper, many ordinary people lost money on their investments, their properties declined in value, and many others lost their homes in foreclosure. With all this pain, people want someone to blame -- some nefarious person must have foreseen this disaster and made billions, right? Some did. Did the professionals who packaged toxic loans into mortgage-backed securities knowingly produce garbage merely to profit…[READ MORE]

House prices reached levels of payment affordability relative to rents last seen in the 1990s, with few sub-markets overvalued or undervalued. The last nine months were boring... thankfully. House prices stabilized after the extreme volatility of the last seven years. House prices rose rapidly from March 2012 through June of 2013, then abruptly stopped rising when mortgage interest rates went from 3.5% to 4.5%. House prices moved little since then. The financial media still touts the large year-over-year price gains, but these slowly evaporate because the spring house price rally was called off due to affordability problems. Rental parity establishes the value of residential real estate, both for entire housing markets and individual homes. For each property on the MLS,…[READ MORE]

Many websites now publish lists of convicted sex offenders, a valuable public service. How close are your children to a sex offender? Find out here. As a society, what should we do with dangerous criminals and sex offenders after they serve their sentences? We can't lock them up forever, nor is there a deserted island we can deport them to. We must try to reintegrate them back into society while making sure they don't repeat their heinous crimes, no easy task. As one might expect, nobody wants sex offenders living in their neighborhood. Most people imagine the people on these lists as merciless child predators looking for any opportunity to get at their children; some of them probably are. Perhaps…[READ MORE]

Higher interest rates reduce housing demand by causing mortgage applications to decline, reducing loan balances, harming employment, and suppressing wages. The federal reserve establishes interest rate policy, and for the last six years, the federal reserve held the benchmark federal funds rate to zero to stimulate the economy. Also during the period when interest rates were held at zero percent, the federal reserve applied stimulus through a policy known as quantitative easing, a fancy term for printing money. Quantitative easing and mortgage interest rate stimulus were designed to bail out Wall Street, not benefit Main Street. Last year the federal reserve decided to taper housing market stimulus. Eventually, they will raise the federal funds rate from zero and attempt to…[READ MORE]

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