Archive for 2014

House prices will rise from a combination of market manipulations and slow, natural healing; however, conditions are so poor, the market can only get better. It's always darkest before the dawn -- or at least that's what they say -- but it's also rather dim just before pitch black. Do you prefer to see the glass half-empty or half-full? Builder magazine recently opined, "Tired of the negative media barrage on housing's Spring Selling Season? Calculated Risk's Bill McBride cuts through the noise and focuses on the housing benchmarks that show where the recovery really stands." In other words, if you want to read someone saying what you want to hear, check out his post. Bill's views have been decidedly "half-full"…[READ MORE]

Median prices and cost of ownership is stagnant, but the cost per-square-foot is rising. Buyers get less for their money as they substitute down in quality. The most commonly reported measure of house prices is the median. Despite it's flaws, it does provide a good indication of how much people are spending on housing at a given time in a specific geography; however, it has one particular weakness of importance in today's market: the median resale price doesn't indicate how much value buyers obtain for their money. (See: Median as market price measurement) In today's market, the median is flat, but prices on individual homes are going up. To correct the problem of value obtained in the median resale price,…[READ MORE]

 From 2003 to 2006, American lenders and borrowers inflated a massive housing bubble. From 2007 to 2012, this bubble has deflated, and the market bottomed in spring of 2012. Since the launch of the new website, traffic has increased about 60%. Many of the new visitors are looking for real estate, but many more have begun reading the blog. I assume readers have a working knowledge of what happened during the housing bubble, but since most of what happened was 7 to 12 years ago, it's worth taking a look back to see how we got where we are today and educate the new readers who just discovered the blog. A Brief History of the Housing Bubble The conditions preceding…[READ MORE]

Sellers are not listing and selling their homes because the debt on their property creates incentives for them to stay where they are. Mark Twain coined the term "gilded age" in response to a superficially prosperous era that covered over many deep structural problems in society. The US housing market enjoys its gilded age as the only housing recovery with record low sales, record low purchase originations, and record low home ownership rates. Since the housing bust began, banks controlled the inventory of homes on the MLS. At first, they flooded the MLS with subprime foreclosures, but with mark-to-fantasy accounting, they were able to slow their foreclosure rates and store delinquent borrowers in shadow inventory. Since early 2009, the number…[READ MORE]

 Can we design a building that makes life easier for people with autism? A place where autistic children can learn more easily and develop with less stress? I found this article about designing for autism interesting. Autistic children and adults both love water, so anything that incorporates water features into the design will make them very happy. Designing Buildings for Children With Autism Sarah Goodyear Apr 28, 2014 Progressive Architects, Cairo Can we design a building that makes life easier for people with autism? A place where autistic children can learn more easily and develop with less stress? According to architect Magda Mostafa, the answer is yes. And creating these kinds of places, she says, can reveal important lessons about…[READ MORE]

Most homeowners regret their purchase because they were pushed by agents to buy more home than they could afford without enough research. Buyer's remorse is common, but it's more common in real estate transactions than in other kinds of purchases largely because the agent's people rely on don't represent them very well. Homeowners often realize later they bought the wrong house in the wrong neighborhood because they didn't do the proper research, and their agent pushed them into a quick sale in order to generate a commission with minimal work. One of the main purposes of my writing and the tools on this site is to eliminate buyer's remorse. I believe that if buyers are given accurate data they will…[READ MORE]

The so-called housing recovery milestones include 6-year sales lows, 19-year purchase application lows, and 19-year home ownership rate lows. Recovery? Doesn't the word recovery imply improvement? When people recover from illness, their health improves; shouldn't a housing recovery show improvement in multiple areas, not just price? So far, price is the only indicator of improvement, assuming high prices are better than affordable prices, of course. What does it mean to be bullish on housing? I believe the lender manipulations are going to succeed, and house prices will likely continue to trend higher on very low volume by historic standards. Since I believe prices will continue to move higher, am I bullish? I also believe house sales volumes will remain well…[READ MORE]

A housing recovery generally exhibits higher prices and higher sales volumes; however, after the 2012-2013 rally ended, home sales declined precipitously. Shouldn't home sales strengthen? Wouldn't a housing recovery based on strong fundamentals of job and income growth cause both prices and sales volumes to rise? Well, it isn't happening. Why is that? Most economists and housing pundits succumb to their optimism bias and predicted rising home sales in 2014: Trulia: 2013 was the year of the investor, but 2014 will be the year of the repeat home buyer. Investors buy less as prices rise: higher prices mean that the return on investment falls, and there’s less room for future price appreciation. Who will fill the gap? Not first-time buyers:…[READ MORE]

Lenders lower standards to qualify more borrowers and increase business, a precursor to another bubble, but only if risk is again mispriced. The recipe for a housing bubble takes many ingredients, and loose lending standards are one of them; however, it requires a gross mispricing of risk and enormous capital flows into unstable loans before prices get pushed up into bubble territory. Let's assume for a moment all qualification standards were eliminated and anyone who wanted to borrow money could get a loan, similar to what happened in 2004 through 2006. Would this cause a housing bubble? In my opinion, it would not. It would inflate prices, and it would cause a great deal of downward substitution of quality to…[READ MORE]

Rather than react with excitement and increased urgency, potential homebuyers fear rapidly rising home prices signal a new housing bubble. Does it? California endured three large housing bubbles since the early 1970s. Each one was kicked off by a huge house price rally, inflating prices well beyond any reasonable fundamental measure. From early 2012 to mid 2013, the house price rally was just as steep as previous price surges, but not as long in duration. Cautious home shoppers fear this latest rally may signal yet another housing bubble, but rather than purchase for fear of being priced out forever, buyers wait or decide to safely rent instead. I consider this cautious behavior a great sign for housing. In the past,…[READ MORE]

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