Archive for January, 2016

Since affordable housing is opposed to the interest of existing homeowners, policies which would truly improve affordability are shunned in favor of ineffective alternatives. Most people in California suffer from higher housing costs than the rest of the US, putting major pressure on middle-class wage earners who often put 50% of their income toward housing. Why do we have this problem? First and foremost, the problem is one of supply. California has a chronic shortage of housing, and the lack of supply is the primary reason prices are so high. When supply is limited, people substitute downward in quality just to obtain any housing at all. It’s why an income in Southern California that barely affords a condo would buy…[READ MORE]

Many wealthy and powerful people make Coastal California their home because of the weather, and they build companies and stimulate the economy. The local climate in Coastal California contributes to real estate value, but not because everyone wants to live here. By far the largest reason Coastal California house prices are so high is because there are many high-paying jobs and many wealthy businesspeople who operate businesses here. The climate is arguably as good in Tijuana, but Tijuana is not known for high real estate values. The most expensive real estate in the US is at the Hamptons in New York, but the climate there isn’t very good at all. Perhaps it can be argued that successful business owners who…[READ MORE]

The OC Housing News published its monthly housing market report, covering resale home prices and rental rates across Southern California. IRVINE, Calif., January 2, 2016 – OC Housing News San Bernardino County Housing Market Report: January 2016 Historically, properties in this market sell at a 25.7% discount. Today's discount is 32.2%. This market is 6.6% undervalued. Median home price is $280,200 with a rental parity value of $406,600. This market's discount is $126,400. Monthly payment affordability has been worsening over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis increased from $184/SF to $184/SF. Resale prices have been rising for 1 month(s). Over the last 12 months, resale prices rose 7.0% indicating a longer term…[READ MORE]

By forcing owners of shell corporations to reveal their identities, US officials will slow the flow of illicit money into high-end real estate. People who make money outside the legal financial system have a problem. If they want to put their money back into legal circulation without exposing their nefarious activities, they need to "launder" the money through some kind of financial transaction, and ideally they want to hold the asset secretly so the authorities can't find it if they get caught. Owning real estate through a shell corporation is a favored activity of money launderers. Since most agree that cracking down on drug cartels, organized crime, and other illegal activities is a good thing, preventing drug kingpins from anonymously…[READ MORE]

Good climate, good services, and a chronic shortage of housing combine to create an intractable problem with homelessness in California. What is the minimum level of housing quality people are entitled to? If you pose that question to Coastal California residents, many will cite their needs for a large single-family detached house with granite counter tops -- and they believe they are entitled to it. For me, I'm just thankful I am not homeless. If I were facing homelessness, I wouldn't want to freeze, and I wouldn't want to starve, so I would seek out a location with good climate and ample social services. The want for a good climate rules out the Northern US, the rain and humidity rules…[READ MORE]

The federal reserve raised the federal funds rate, but that doesn't mean mortgage interest rates must rise. The future of housing in inexorably tied to the course of mortgage interest rates. If mortgage rates remain below 4.25%, both house prices and sales volumes will be higher in 2016 than 2015. An improving economy, strong job growth and rising wages are a recipe for a healthy housing market. Unless rising rates spoils the party, 2016 will be a good year. Does that mean there's no reason to worry? Hardly. The federal reserve is raising interest rates, and although this doesn't necessitate higher mortgage rates, it certainly encourages them. Higher mortgage rates will harm sales, and if rates rise high enough to…[READ MORE]

In a recent speech, Bernie Sanders unapologetically bashed the too-big-too-fail banks. He's a rare breed: an honest politician. I recently wrote that Donald Trump will be the next President of the United States due to his populist appeal. However, for people like me who really want to see the too-big-to-fail banks crushed to rubble, Bernie Sanders is a more appealing alternative to Donald Trump. When Donald Trump blusters, everyone knows it's just red meat supplied to augment the bread and circuses campaign to win the Republican nomination. Nobody really knows what Donald Trump believes or what he would do if elected President. On the other hand, Bernie Sanders means what he says, and he says he wants to break up…[READ MORE]

A rising US dollar makes Irvine homes much more expensive for Chinese buyers, and capital controls makes it much more difficult to move money out of China for those inclined to do so. Chinese investors buy a significant number of homes in Irvine. Anecdotally, 80% of sales in some new home communities are sold to Chinese Nationals. In fact, Irvine homebuilders depend on Chinese buyers to purchase their overpriced houses, which becomes a problem if this flow of money dries up. Both homebuilders and real estate agents delude themselves with notions about the desirability of Coastal California to convince themselves the influx of Chinese money is based on sustainable fundamental factors. In reality, this is hot money escaping an unstable…[READ MORE]

The OC Housing News published its monthly housing market report, covering resale home prices and rental rates across Southern California. IRVINE, Calif., January 2, 2016 – OC Housing News Los Angeles County Housing Market News January 2016 Historically, properties in this market sell at a 9.5% discount. Today's discount is 14.2%. This market is 4.7% undervalued. Median home price is $507,300 with a rental parity value of $589,300. This market's discount is $82,000. Monthly payment affordability has been improving over the last 3 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $407/SF to $409/SF. Resale prices have been rising for 10 month(s). Over the last 12 months, resale prices rose 5.4% indicating a longer term…[READ MORE]

Millennials are not climbing on the property ladder, upsetting everyone who depends on real estate transactions to make a living. A common refrain among housing industry advocates is that Millennials are simply ignorant to the benefits of home ownership, and if they could only be "educated" properly, they would shun renting in favor of owner-occupied housing. Apparently, Millennials are ignorant to both the benefits of home ownership and the lending options available to them. This is nonsense and wishful thinking. To the chagrin of housing industry advocates, Millennials are well aware of the perils of home ownership, and the education propaganda spouted by the housing industry falls on deaf ears. Millennials learned from the housing bust -- they learned house…[READ MORE]

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