Archive for February, 2016

The US housing market starts 2016 with a strong economy, low unemployment, improving wage growth, and very low mortgage rates: A recipe for strong sales and price increases. The US Housing market is poised for a strong start in 2016. The underlying economy was strong enough for the federal reserve to start raising interest rates in December. Unemployment is low and wage growth is picking up, so more qualified borrowers are likely to become buyers in the days ahead. Further, with mortgage interest rates trending down toward record lows, the demand for housing as expressed in dollars borrowers can put toward a purchase is near record highs. The conditions as described above will likely lead to robust sales and strong…[READ MORE]

IRVINE, Calif., February 1, 2016 – OC Housing News San Bernardino County Housing Market Report: February 2016 Historically, properties in this market sell at a 25.7% discount. Today's discount is 31.4%. This market is 5.7% undervalued. Median home price is $279,600 with a rental parity value of $407,600. This market's discount is $128,000. Monthly payment affordability has been worsening over the last 2 month(s). Momentum suggests worsening affordability. Resale prices on a $/SF basis declined from $184/SF to $184/SF. Resale prices have been falling for 3 month(s). Over the last 12 months, resale prices rose 7.2% indicating a longer term upward price trend. Median rental rates declined $9 last month from $1,812 to $1,803. The current capitalization rate (rent/price) is…[READ MORE]

Today's homeowners are paying down mortgage faster than ever before as rapid loan amortization builds wealth across America. Which is better for accumulating equity, lower prices or lower interest rates? Both lower the monthly cost of ownership and result in more disposable income. Obviously, the banks prefer higher prices to recoup their capital from their bad bubble-era loans, so they are offering 4% interest rates to prevent prices from going any lower. I think most buyers would prefer lower prices, but since the banks make the rules which determine market prices, low interest rates and high prices are what we get. From a homebuyers perspective low rates or low prices depends on how they acquire the property. All-cash buyers would…[READ MORE]

Some foreclosure and eviction cases can be heartbreaking. However, we live by rule of law in this country, and unless we want to start giving away real estate to those with the saddest story, these evictions must take place. Property evictions cause severe emotional pain for the dispossessed. People develop strong emotional attachments to the place they call home, and losing that attachment suddenly is so painful that many well-meaning people believe evictions should be banned. People who support prohibiting evictions do not understand that evictions are essential to the operation of our housing system. Eviction is both a threat and a consequence. People are only evicted from their homes if they fail to make the required payments. Renters are…[READ MORE]

Paying off debt early is a far superior long-term financial plan than continually adding to mortgage debt to support an extravagant lifestyle. Most people believe they achieve the American Dream when they buy a house, but most often they only buy 3.5% to 20% of a house, not the whole thing. Although it feels like it's their house, it's not. If they quit paying the mortgage, the bank can take it from them, as millions found out during the housing bust. Real home ownership is only achieved when the debt is retired, and the shortest route to success is to pay off a mortgage early. Pay off mortgage debt early? Am I crazy? Why would anyone do that in an…[READ MORE]

Land installment contracts provide a viable path to homeownership, but they are fraught with abuse. In yesterday's post, Three calculations every real estate investor must know, I discussed my personal criteria for buying rental investment properties. Everyone who actively invests has their own criteria, but nearly everyone has some criteria they use to filter out properties with problems they don't want to deal with. Have you ever wondered what happens to those properties that fail to meet anyone's criteria? What is the fate of those properties that are so far gone that it doesn't pay to renovate them and bring them up to a salable standard? Many might think these homes are demolished, and in places like Detroit, this does…[READ MORE]

The three main measures of financial performance for rental real estate are capitalization rate, cash-on-cash return, and internal rate of return. When people buy a personal residence, they often solace themselves that the high prices is warranted because the property is a "good investment". Novices generally assume that anything they sell for more than they paid is a good investment without any understanding of what a good investment really is. It’s not enough to merely make a profit, the amount of profit relative to the amount of money spent matters. If someone brags that they made $100,000 on a resale home investment, it's much more impressive if their initial investment was $100,000 than it is if they invested $1,000,000. It's…[READ MORE]

IRVINE, Calif., February 2, 2016 – OC Housing News Riverside County Housing Market Report: February 2016 Historically, properties in this market sell at a 18.5% discount. Today's discount is 23.5%. This market is 5.0% undervalued. Median home price is $305,500 with a rental parity value of $403,100. This market's discount is $97,600. Monthly payment affordability has been worsening over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis increased from $174/SF to $175/SF. Resale prices have been rising for 3 month(s). Over the last 12 months, resale prices rose 5.9% indicating a longer term upward price trend. Median rental rates declined $2 last month from $1,785 to $1,783. The current capitalization rate (rent/price) is 5.6%.…[READ MORE]

Analysts working for homebuilders see a flat market with weak sales as the likely future for OC Homebuilders. At first low MLS inventory was a boon to homebuilders, but housing market manipulations give homebuilders false signals, so Orange County homebuilders oversupplied the market, and as it turned out, reflating the housing bubble hurts homebuilders, rather than helps them. It wasn’t until early 2013 that homebuilding bounced off its five-year long malaise at 60-year lows. Homebuilding is still 40% below the average of the last 60 years, and with high prices and weak job growth, some are wondering when the industry will ever recover. Homebuilder's demand comes from financially stable households with sufficient savings, good credit, and a desire to own…[READ MORE]

Most borrowers don't realize the hidden benefits of using FHA financing they can use to game the system to their advantage. Most first-time homebuyers use FHA financing because they lack better alternatives. FHA insured loans carry weak qualification standards (they accept FICO scores down to 580), they don't limit debt-to-income ratios, and they only require the borrower to put 3.5% down. Most would-be homeowners know the FHA loans are easy to qualify for and require little savings, so the primary reasons for using FHA loans are not a secret. These loans also carry significant costs and fees that make them less attractive to buyers with sufficient resources to put 20% down; however, there are five secret reasons everyone should consider…[READ MORE]

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In Memoriam: Tony Bliss 1966-2012
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