Archive for January, 2015

Mortgage insurers have the right to collect from former homeowner on losses the mortgage insurer incurred in a foreclosure. Whenever a purchase or refinance transaction amount exceeds 80% of the value of a property, the lender will force the borrower to purchase private mortgage insurance -- not for the borrower's benefit, but for the banks benefit. It's widely known that lenders can go after former homeowners for losses incurred in a foreclosure, but what's less widely known is that mortgage insurers can do the same thing. Many former homeowners are finding out the hard way. Homeowners billed for houses lost in foreclosure By Jenifer McKim and Jess Aloe New England Center for Investigative Reporting, January 18, 2015 When Guillermo Galindo…[READ MORE]

The OC housing market faces a potential price decline caused by of rising mortgage rates and an influx of must-sell inventory from Chinese buyers. The deflating housing bubble trapped millions of borrowers underwater with mortgages they couldn't afford. The federal reserve helped lenders and borrowers by lowering borrowing costs from 6.5% to 3.5%; the policy benefited everyone by making the absurd prices of the housing bubble relatively affordable. The powers-that-be hoped stable borrowers with real jobs and incomes would buy out the hopelessly overextended hapless fools who bought during the frenzy of the housing bubble ten years ago. This policy largely succeeded, and with exception of a few markets, mortgage interest rate stimulus reflated the old housing bubble with more…[READ MORE]

2015 will finally be the year the economy recovers to near full strength. The only weak point will the ongoing slow growth in housing. I recently made a series of bold California housing market predictions for 2015. I don't believe housing will do poorly this year despite high prices because I believe the economy is improving, which will put more people back to work, cause wages to rise, and ultimately help home sales, assuming rising interest rates don't spoil the party. The only reason I am not more bullish on housing is the inevitable impact rising mortgage rates will have on sales. The federal reserve will likely begin raising short-term interest rates this year, which will likely cause mortgage rates…[READ MORE]

Historically, properties in this market sell at a 9.5% discount. Today's discount is 14.1%. This market is 4.6% undervalued. Median home price is $471,800 with a rental parity value of $556,000. This market's discount is $84,200. Monthly payment affordability has been improving over the last 8 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $388/SF to $388/SF. Resale prices have been rising for 10 month(s). Over the last 12 months, resale prices rose 8.4% indicating a longer term upward price trend. Median rental rates declined $0 last month from $2,475 to $2,474. The current capitalization rate (rent/price) is 5.0%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Excessive debt created during the housing bubble is preserved on banker's and homeowner's balance sheets providing a deflationary overhang to the US economy. The US economy is generally very resilient. There are always bearish prognosticators concocting doomsday scenarios that never come to pass. Most of the time, these people are ignored as tin-hat wearing crackpots, but occasionally a real economic crisis hits that makes these people look prescient. When I was first trying to understand the housing bubble, I used to frequent the housing bubble blogs back in 2005 and 2006. When the bears on those blogs argued the case for a near depression for the US economy, I told them I thought they were too bearish: housing would crater,…[READ MORE]

As foreign investors need cash to solve domestic problems, they often dump real estate investments in prime US housing markets. Most people in California assume buyers from mainland China will provide an endless source of demand for high-end Coastal California real estate. Everyone knows China's real estate bubble is bursting, but most assume the contagion will be "contained" in China and won't spill over to the US. I think the faithful are wrong; when the Chinese real estate bubble bursts, Chinese owners will sell California real estate to solve their financial problems at home. When wealthy oligarchs and the nearly-wealthy who support them in exchange for government largess find themselves faced with tough times, rather than exporting their wealth to…[READ MORE]

Lenders avoid foreclosure to avoid recognizing losses on their bad loans. The new super priority liens threaten lender's ability to kick the can. Super Liens are liens that have priority over all other liens in the property record, and they can't be subordinated. Courts historically shun super liens because they have potential to disrupt real estate lending because lenders want assurance they're in first-lien position, meaning they are first in line to collect at foreclosure. When lenders know they must deal with super liens, such as property taxes, the often require impounds to ensure the payment subject to lien action is paid. In most states, property taxes and construction liens are the only two liens allowed by law to survive…[READ MORE]

Subsidies for affordable housing elevates many low wage earners into home ownership at the detriment of someone who makes more money. People who support affordable housing subsidies are well meaning: they want more people to have opportunity to become homeowners. However, by subsidizing affordable housing, they don't increase home ownership opportunities, they merely displace one group of potential owners in favor of another. The buyer on the bubble When I was younger, I used to watch the time trials at the Indianapolis 500. The drama of these time trials revolves around the driver in the 33rd spot in the field: the driver on the bubble. As each driver tries to earn a spot in the field, the driver on the…[READ MORE]

The 15-year amortizing mortgage holds the promise of increased equity and sustainable ownership for low-income borrowers, assuming they can finance enough to buy a house. Many in the lending industry think their work is like science that continually advances: It's not. It is far more akin to assembly line work where the same widgets are pumped out year after year. Generally, when lenders start to innovate, trouble is brewing because most innovations in lending either cause major losses at banks, or in their worst forms these innovations destabilize our financial system. The last significant advancement in lending was the widespread use of 30-year amortizing loans that came into favor after World War II. Prior to that time, home loans were…[READ MORE]

$3,000 minimum investment, $150,000 maximum investment, 25% anticipated cash returns, three to five year holding period, potential risk of 100% loss. Back before the housing market bottomed, I convinced a number of investors to put up about $2.5 million to buy distressed properties in Las Vegas. Since then many investors asked me about other investment opportunities, but until now I found nothing I thought was compelling, special, or unique. About a month ago I became aware of an unusual business opportunity in an emerging industry (you probably haven't heard of this before). My interest grew into serious research and the creation of the business investment opportunity I share with you today. Given my experience in real estate and on this…[READ MORE]

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