Archive for April, 2015

realtors accept reality that boomerang buyers will not return in large numbers. Economic predictions follow a repeating pattern. At first economists pander to everyone's optimism bias and proffer predictions based on recent trends and dominated by wishful thinking. Later, when reality of data forces them to abandon their fantasies, economists downwardly revise their predictions, sometimes over and over again. Finally, once they've lowered their projections enough, the data finally matches their lowered expectations, and they claim prescience for their brilliant insights. When the boomerang buyer meme first appeared, projections of "experts" (usually local real estate agents or mortgage brokers) confirmed that 80% or more of former owners would buy again. "It's more than incremental business, that's for sure," adds Dan…[READ MORE]

Too--big-to-fail banks should be bashed continually until the weight of political discontent forces their breakup. The bailouts of the too-big-too-fail banks irritated me (and many others). I would have far preferred to see the architects of the financial catastrophe of 2008 lose their jobs, their wealth, their social status, and be demonized for their atrocious behavior. Instead, we bailed them out, allowed them to keep their ill-gotten gains, and put them back in charge of our financial system. It wasn’t right. “Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits…[READ MORE]

Monetary policy implemented by central banks around the world creates the conditions where investors inflate asset bubbles by chasing yield. We hold these truths to be self-evident Those are the first words of the US Constitution. Along with equality and inalienable rights, we could add another self-evident truth: the federal reserve causes asset bubbles. Can We Blame the Fed for Asset Bubbles? Apr 14, 2015 4:18 PM EDT, By Megan McArdle On Monday, my Bloomberg View colleague Mark Gilbert explored a fretful question: Are we in the midst of yet another asset bubble? Stanley Druckenmiller, who helped George Soros “break the Bank of England” in 1992, thinks we are. In a speech earlier this year, he said he's got the…[READ MORE]

If a home seller asks a price buyers are unwilling or unable to pay, is the house really for sale? One of my goals for the writing and analysis on this site is to provide readers a vision of the future of the housing market. Where are prices going? What will happen with sales? How do the variables affecting housing cause changes in prices or sales? I do this because I believe people should have accurate information to make sound decisions on what will likely be the largest single purchase of their lives, buying a home. Most of what I write is opposed to the feel-good, Pollyanna nonsense served up by the financial media, a biased group beholden to realtors…[READ MORE]

I invite you to an event Shevy Akason and I are hosting at 6:30 on Thursday, May 7, at JT Schmids at the District. We provide free appetizers and drinks for your entertainment. Shevy and I would like to meet with you. If you arrive early, we guarantee you one-on-one time to discuss the housing market or anything you want. We will be there before 6:00, and we will stay until closing. Starting at 6:30, I will make a brief presentation on the local housing market. Shevy will follow with stories about his recent client work and what he sees happening in the OC market. We've also invited a local lender and a trust attorney to discuss current loan qualification…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 25.1%. This market is 6.5% undervalued. Median home price is $292,300 with a rental parity value of $386,200. This market's discount is $93,900. Monthly payment affordability has been improving over the last 12 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $164/SF to $166/SF. Resale prices have been rising for 1 month(s). Over the last 12 months, resale prices rose 4.7% indicating a longer term upward price trend. Median rental rates increased $0 last month from $1,691 to $1,691. The current capitalization rate (rent/price) is 5.6%. Rents have been rising for 10 month(s). Price momentum signals rising rents over the next three…[READ MORE]

The OC Housing News analyses every for sale property on the MLS for its potential as a cashflow investment based on advanced hedge fund algorithms. Between late 2010 and early 2012, I purchased 53 homes in Las Vegas -- sight unseen. I used a service that provided pictures of the properties, but since these were all auctions, sometimes the inside views were not available, so I had no idea what I would find if I won at auction. Does that sound scary or crazy? It was a manageable risk. Usually, whenever I bid on a property where I couldn't see the inside, I simply bid less to give myself an allowance in case I had to replace everything, and sometimes…[READ MORE]

Reverse mortgages sacrifice a financial future and result in many potentially negative outcomes. I’m not a big fan of debt, in case you didn’t notice. I don’t like consumer debt, and I really don’t like reverse mortgages. I wrote that Home ownership with no mortgage is the best retirement plan. It stands to reason that I view taking on mortgage debt in retirement as the worst retirement plan, yet many people turn to reverse mortgages as the primary financial planning tool for their golden years. Reverse mortgages sound like a good deal: The lender gives free money, and the borrower doesn’t have to sell their house. It shouldn't be surprising the loan is popular, particularly among spenders and Ponzis. Unfortunately,…[READ MORE]

Would you allow the federal reserve to ban currency so banks could charge you to store your savings? Money is both a medium of exchange and a store of wealth. Money represents the stored value of labor not immediately converted to consumption. Historically, people used scarce items like gold that were durable, difficult to replicate, easy to store, and easy to transport both to acquire goods and services and as a store of wealth when no goods and services were required. Gold served as money for millennia, mostly because nobody figured out how to transmute other elements into gold. However, once rulers started coining gold, they began to substitute other metals, shave the coins, and reduce the size of the…[READ MORE]

Lending industry and realtor lobbyists argue lending standards are too tight and should be loosened up. They are wrong on both counts. Real estate industry lobbyists appeal to lawmakers for policies the real estate industry believes will promote more transactions at higher prices. Most often this myopic lobbying causes unintended long-term detrimental impacts on the housing market. In 2004 every realtor wish was granted: lending standards were loosened to the point of complete abandonment, and restrictions on the amount prospective buyers could borrow were also removed through teaser rates, liar loans, and negative amortization. In the short term, realtors reaped the benefits as transaction volumes escalated even as prices rose higher and higher. Rather than being the culmination of all…[READ MORE]