Archive for February, 2016

Reducing the number of homes for sale was the essential ingredient to bail out bankers and loanowners whose foolish behavior caused the housing bubble. From early in the housing bust, I knew that how the banking cartel disposed of their REO would determine the fate of the housing market. Since lenders modify loans, hold non-performing loans on their books, and allow delinquent borrowers to squat, they control the flow of properties through the foreclosure process. Also, they control the approval of short sales; therefore, they control the flow of properties through the short sale process. Since distressed sales of foreclosure properties and short sales flooded the market during the bust, lenders controlled the bulk of the supply on the market. At the time,…[READ MORE]

The housing bubble in San Francisco is the fourth unsustainable price rally in the last 45 years. The only question is when the correction will happen and how deep it will go. In the ashes of the first technology bubble, the term web 2.0 was coined to describe the new and improved mania gripping Silicon Valley today. Adding the term "2.0" is now synonymous with any resurgent industry in the aftermath of a near total collapse. Some would like to call the housing bubble inflating in San Francisco today housing bubble 2.0, but that wouldn't be accurate: We're on housing bubble 4.0. Housing bubbles 1.0, 2.0, and 3.0 The first housing bubble in California inflated shortly after the passage of…[READ MORE]

Investors move out of stocks and into safe investments like government-backed mortgages, lowering rates and increasing housing demand. For the last several years, the real estate market observers awaited the imminent rise in mortgage rates sure to trigger a price crash. While the spike from 3.5% to 4.5% in a six-week period in mid 2013 certainly removed the strong backwind from real estate, it didn't signal the beginning of the end. On the contrary, since then mortgage rates have pushed back down near record lows, and despite high prices, housing is very payment affordable again. Since mortgage rates are near record lows, the consensus opinion is that mortgage rates will eventually rise again. It's very unlikely that 3.5% mortgage rates…[READ MORE]

IRVINE, Calif., February 1, 2016 – OC Housing News Los Angeles County Housing Market News February 2016 Historically, properties in this market sell at a 9.5% discount. Today's discount is 14.0%. This market is 4.4% undervalued. Median home price is $507,100 with a rental parity value of $594,700. This market's discount is $87,600. Monthly payment affordability has been worsening over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis increased from $408/SF to $410/SF. Resale prices have been rising for 11 month(s). Over the last 12 months, resale prices rose 5.7% indicating a longer term upward price trend. Median rental rates declined $2 last month from $2,633 to $2,630. The current capitalization rate (rent/price) is…[READ MORE]

Do you want free money?  If you buy a home from a homebuilder without an agent, you pay full price. If you buy a home with us as your agent, you get 1.5% back. Same house, but 1.5% of the purchase price refunded back to you. It’s free money! Take it!  As a bonus, you get full agent representation. Did you know many items in a builder’s sale contract are negotiable? Do you know which options are better installed by the builder and which ones are better done by others later? In addition to helping negotiate a better price, we also prepare detailed reports showing the cost of ownership of your new home. Why put yourself at the mercy of…[READ MORE]

Though realtors and politicians like to present home ownership as an entitlement, it's really a privilege bestowed on those who can sustain it. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. US Declaration of Independence Did you notice that in the defining statement of American Entitlement, the right to own a single-family detached home was not mentioned? I remember when I learned to drive, I was told repeatedly that driving was not a right, it was a privilege, a privilege I earned by learning the rules of driving and demonstrating good judgment. Why…[READ MORE]

As the Yuan declines in value, houses become increasing expensive to Chinese Nationals, prompting further erosion of new home sales to this large buyer group. Last month I asked Will the slowdown in China hurt Irvine real estate? There is little doubt that stopping the flow of Chinese capital will impact new home sales in Irvine. Irvine homebuilders depend on Chinese buyers to purchase their overpriced houses, which becomes a problem if this flow of money dries up. Last year I documented that Chinese real estate investors are less active in Irvine. For years, Chinese could export cash by setting up dummy foreign corporations that import goods into China. The dummy corporation sends a bill to the Chinese mainland for…[READ MORE]

House prices should continue to rise in Las Vegas as cloud inventory supply restrictions and undervalued conditions persist. Back in 2010 when house prices were crashing, I advised people to buy Las Vegas real estate because I believed it was a good value. With house prices at 1995 levels, even if they fell further (which they did), it only made good deals even better. House prices rebounded strongly in early 2012 due to the manipulation of supply, but despite the strong house price rally, the market is still undervalued. One of the problems with long-term price charts is that straight-line technical analysis often understates the appropriate support or resistance levels. If the same data is plotted on a logarithmic scale,…[READ MORE]

Some normal housing demand was delayed to the recession, but no great influx of demand is likely forthcoming. Pent-up demand is the idea that many, many more people would participate in a financial market if some temporary barrier were removed, a barrier currently preventing them from participating today. Since polling data shows a very high percentage of people want to own a house but only about 60% actually do, theoretically, there is always pent-up demand waiting to be unleashed. The primary barriers preventing more people from buying homes are down payments, qualification standards, and verifiable income. All three of these barriers were eliminated during the housing bubble by 100% financing, fog-a-mirror qualification standards, and liar loans. As a result, homeownership…[READ MORE]

As house prices rise and more homeowners possess equity again, some are withdrawing this money at low rates and spending it, stimulating the economy. During the housing mania, people bought homes because house prices rose rapidly, and lenders gave equity to homeowners at 100%+ of the value set by recent comps. Under such circumstances, houses were very desirable, and it added fuel to the housing mania, and funded millions of personal Ponzi schemes. Homeowners like mortgage equity withdrawal because it provides them instant access to the free money bestowed upon them by the magic appreciation fairy. Homeowners gladly suspend their disbelieve at the too-good-to-be-true nature of free money, and if lenders willingly dole it out, homeowners eagerly accept it. Politicians…[READ MORE]

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