Archive for June, 2016

Riverside County housing market report: June 2016 Historically, properties in this market sell at a 18.5% discount. Today's discount is 27.8%. This market is 9.2% undervalued. Median home price is $316,500 with a rental parity value of $442,300. This market's discount is $125,800. Monthly payment affordability has been improving over the last 4 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $179/SF to $181/SF. Resale prices have been rising for 7 month(s). Over the last 12 months, resale prices rose 6.7% indicating a longer term upward price trend. Median rental rates increased $24 last month from $1,886 to $1,911. The current capitalization rate (rent/price) is 5.8%. Rents have been rising for 12 month(s). Price momentum…[READ MORE]

When asset values rise and stay up, that's considered prosperity. When asset values rise and then fall, that's considered a bubble. What will happen with housing tomorrow? Nobody wants to overpay for a house. From 2006 to 2011, anyone who bought a house anywhere in the United States paid more than they would have if they had waited until March of 2012. Of course, it isn't practical to time the bottom tick of any financial market, so prudent buyers with an understanding of value, look at key benchmarks to determine when prices are too high or too low. The benchmark I favor is rental parity. Rental parity represents a crossover point where renting and owning have an equal monthly cost.…[READ MORE]

Previous loan modifications and old HELOCs face resetting to higher rates and recasting to full amortization likely leading to further loan modification. In the heat of financial distress during the depths of the recession, many people asked their banks for unilateral loan term modifications in favor of the borrower. Ordinarily, banks would never consider such a request, but since so many borrowers were distressed, and since foreclosure would result in a loss of original capital, many lenders offered these distressed borrowers deals to keep them paying. Borrowers thought they were getting a deal. Many enjoyed reduced payments, and since fees, charges, fines, and other garbage was clandestinely added to the loan balance, borrowers only saw the benefit and ignored the…[READ MORE]

Ireland chose to preserve the unsustainable mortgage debt from their housing bubble a decade ago. As a result, nearly half the adult population of Ireland are lifelong debt slaves. When the service on existing debt exceeds the borrower's capacity to make payments, the borrower is insolvent. The limit of insolvency is also known as the Ponzi limit because once this threshold is crossed, the only way borrowers pay their debts is through additional infusions of borrowed money. Every dollar loaned to a borrower beyond the threshold of solvency, beyond the Ponzi limit, is a dollar lost by the lender -- unless lenders find "innovative solutions" to preserve the debt for another day, which is what Irish lenders accomplished when they…[READ MORE]

New supply in Irvine blunts rent increases while the rest of Orange County experiences rapid rent growth. It's no secret that we lack sufficient housing to meet demand in Orange County. The lack of supply causes people to put ever-larger percentages of their income toward housing, bidding up rent. At the low end of the housing ladder, it forces families to double and triple up in poor quality housing. Many people leave the area for lack of housing. While there are signs that politicians may finally move to do something about the problem (See: Governor Brown’s housing affordability proposal could actually succeed), any real relief will be years and years away. In the meantime, rents keep going up faster than…[READ MORE]

Lenders are supposed to be the adults in lending transactions. They have superior knowledge and experience, and it's their money at risk; therefore, they should bear more responsibility when things go wrong. People of good conscious must apportion blame for the housing bubble appropriately to craft public policy to prevent a recurrence or provide financial relief. As with any public policy issue, activists on both sides polarized the issue based on their world view. Activists on the Left portray the evil banks as taking advantage of hapless borrowers thus entitling these borrowers mortgage relief or absolution for strategic default. Self-serving borrowers side with the political left because they want free money in the form of debt relief. Activists on the…[READ MORE]

Los Angeles County Housing Market Report: June 2016 Historically, properties in this market sell at a 9.5% discount. Today's discount is 15.5%. This market is 5.9% undervalued. Median home price is $527,900 with a rental parity value of $621,600. This market's discount is $93,700. Monthly payment affordability has been improving over the last 4 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $418/SF to $421/SF. Resale prices have been rising for 11 month(s). Over the last 12 months, resale prices rose 7.6% indicating a longer term upward price trend. Median rental rates increased $19 last month from $2,666 to $2,686. The current capitalization rate (rent/price) is 4.9%. Rents have been rising for 12 month(s). Price…[READ MORE]

realtors are supposed to be experts and marketing. Sellers pay them 6% of the value of their homes for this expertise -- or lack thereof. Although many realtors are upstanding business people with strong ethics and empathy for their clients, many others are not. Collectively, the association that represents realtors is a dysfunctional, highly-manipulative group. Since I began writing about real estate matters nearly 10 years ago, I refused to capitalize the letter "r" in realtor. Such capitalization would be a sign of respect I don't believe the association warrants. In short, I think realtor associations suck. The association in Orange County sued me once, so perhaps that biases my judgement. (See: OC realtors seek to silence free speech by…[READ MORE]

Full-service brokerage may be the worst way to sell real estate, except for all the others. The Internet obliterated travel agents. It was easy to ordinary people to disintermediate travel agents, and as it turned out, obtaining advice on travel from someone who's been there isn't very valuable. So do real estate agents continue to thrive? What value do they provide beyond the functions people can perform on the Internet? Some people — many people — can benefit from having an agent as a leader and guide them to a closing. Yesterday, we explored the for-sale-by-owner option and today we are going to look at utilizing a full-commission broker. The pros of using a full-service brokerage Once an owner has…[READ MORE]

Cash listing services provide sellers the ability to lower their commission costs while still obtaining MLS exposure, but sellers must still do most of the work. Sellers who eschew real estate agents must overcome a lack of exposure. Putting a sign in the front yard is generally not sufficient exposure to ensure a seller obtained the highest and best offer for their property. Many will post on Craigslist or other classified ad services, but many buyers don't look there, so these methods often come up short. In order to obtain the best exposure for any potential sale, the owner must show the property where buyers actually look: that means listing on the MLS. Cash Listing Services I still consider Cash…[READ MORE]

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