Archive for November, 2015

If Millennials were really coming back to the real estate market, first-time homebuyer percentages would not be near three-decade lows and falling. Have you noticed that many financial media reporters write stories about what their sponsors want to be true without any facts in support? I understand the urge for self preservation, and even the desire to tell people what they want to hear, but it doesn't improve the credibility of the financial media when reporters fabricate stories about trends and developments that don't in fact exist. MOPE (Management of Perspective Economics) is the false belief that economists and the media can stimulate economic growth and activity by convincing the public the economy is vibrant when it’s really not. This…[READ MORE]

Successful real estate investing involves analyzing cashflow and obtaining a return on investment independent of resale value. Imagine you lived in a place where real estate was the only viable market where you could invest money. Further imagine that properties in this real estate market that had no expenses and no income. If this were your world, how would you go about selecting which property to invest in? In such a market, you only make money if someone is willing to pay you more in the future than you paid today. Since the investment offers no other metric for returns, speculation on future values is all you have to work with. What criterion would you use to select your properties?…[READ MORE]

Lowering FHA insurance fees increased sales volumes and prices at the low end. Prices went up faster than incomes, so houses are less affordable. Further, Last September I noted that High loan costs cause FHA originations to plunge; in fact, FHA financing is so expensive, it’s like taking out a 12.4% second mortgage! Something had to be done if the housing market were to sustain current pricing or build any momentum for the future. Last November I reported that first-time homebuyer participation rates hit a three-decade low, a major problem for the long-term health of the housing market. I later predicted this would pressure would mount to lower FHA insurance fees to revive home sales. About a month later President Obama…[READ MORE]

Housing will be the front lines in the battle over interest-rate policy during the next decade because higher rates will disproportionately impact housing. The federal reserve signaled their intention to raise rates beginning in 2013. The infamous "taper tantrum" of May 2013, when mortgage rates rose from 3.5% to 4.5% in about 6 weeks, was a direct result of Ben Bernanke's announcement that zero percent interest rates wouldn't last forever. We are now reaching the end of 2015, and to the surprise of most economists (but not readers here) it appears unlikely interest rates will rise this year; however, at some point interest rates will rise. The only questions are when, and by how much. One school of thought is…[READ MORE]

As rising prices restore collateral backing to bad bubble-era loans, lenders ramp up foreclosure proceedings to get their money back. Starting in early 2009, lenders placed their faith in the success of loan modifications. Lenders define success differently than underwater homeowners (loanowners): Success to a lender means obtaining a few more payments prior to a short sale or foreclosure, whereas success to a loanowner means maintaining ownership permanently. Loan modifications were granted ostensibly to "keep people in their homes," but this was disingenuous spin. It isn’t their home, and it never was. The people obtaining loan modifications borrowed a huge amount of money, often with nothing down, to get their name on title and occupy real estate. Underwater loan owners…[READ MORE]

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