Archive for June, 2015

Historically, properties in this market sell at a 0.6% premium. Today's discount is 5.5%. This market is 6.2% undervalued. Median home price is $564,400 with a rental parity value of $593,400. This market's discount is $29,000. Monthly payment affordability has been worsening over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis declined from $377/SF to $377/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 3.5% indicating a longer term upward price trend. Median rental rates increased $22 last month from $2,599 to $2,621. The current capitalization rate (rent/price) is 4.5%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

BofA analyst projects falling house prices due to rising mortgage rates. House prices rose rapidly from early 2012 through mid 2013, and although the rate of increase has slowed, prices are still rising rapidly by historic standards. But does that mean prices will keep rising rapidly forever? Most investors assume prices will continue to rise rapidly. It's the same phenomenon that caused people to buy at the peak of the housing bubble or a the peak of the first bear rally in 2010, a phenomenon known as recency bias: People project short-term price movements to infinity. The tax credit stimulus of 2009-2010 made house prices rise quickly, which in turn prompted many potential buyers to accelerate their plans to purchase…[READ MORE]

Do the reported delinquency rates understate the magnitude of the problems faced by the major banks? The news on delinquencies over the last several years encouraged those who want to believe the mortgage mess is past. Most reports over the last several years show a declining mortgage delinquency rate, and despite the levels of delinquency and foreclosure being highly elevated from historic norms, most comfort themselves with hopes that a disastrous situation steadily improves. The common narrative in the mainstream media is that an improving economy put hard-working Americans back to work, and in the spirit of bootstrapping redemption, these hard-working Americans caught up with their missed mortgage payments and cured their bad loans. Unfortunately, that isn't how it happened.…[READ MORE]

Money spent on a down payment could have been invested in other assets that earn a return. When people buy a family home, they invest in real estate. And since it's assumed the highly-leveraged asset will appreciate in value at double-digit rates for eternity, and since the bulk of the capital gains are untaxed, nobody considers any alternative to investing down payment money other than to obtain the largest, most-desirable house in the nicest neighborhood they can find. If it weren't for the housing bust, everyone would still be thinking this way -- and despite the bust, some still do! Any family that's saved money for a down payment on a house needs to consider what alternatives they could have…[READ MORE]

The home mortgage interest deduction is an expensive subsidy that doesn't warrant its cost. If you listen to the people who benefit most from government housing subsidies, there is never a good time to reduce or eliminate a source of government largess. If you’ve been reading this blog for very long, you have a finely tuned bullshit detector. Whenever you read the shrill cries of realtors, homebuilders, and high wage earning loanowners lamenting the dire consequences of reducing or eliminating the home mortgage interest deduction, your bullshit detector should tell you to discount whatever they say as the self-serving nonsense it is. The fact that the home mortgage interest deduction is in danger is scaring the bullcrap out of the…[READ MORE]

Real estate ownership has implications for both income taxes during the ownership period and capital gains on the sale. Some people buy houses because they are "tired of paying so much in taxes." Homeownership provides the taxpayer the ability to write off the cost of interest on a home mortgage, and they can deduct property taxes as well. Unfortunately, while these tax deductions may lower the bill to Uncle Sam, they come with a cost, and often in Coastal California, the cost outweighs the benefit. Many people end up paying more in interest than they save in taxes. So while it may relieve a high wage earner to avoid paying Uncle Sam, giving far more money to a banker makes…[READ MORE]

In Memoriam: Tony Bliss 1966-2012