Archive for June, 2016

Homeowners can save the 6% commission and sell their homes on their own, but it's more difficult than most people think. realtors commissions are too high. Does the work they do really warrant 6% of the sales price? On a $1,000,000 home, which is increasingly common in Coastal California, the commission is $60,000! Many ordinary people don't make that in an whole year. It's very tempting to look for lower-cost alternatives -- or the lowest cost alternative off all: selling a house without a realtor. While this is tempting, it's not as easy as just refusing to pay real estate agents. One of the first problems would-be sellers face is valuing their home. Sellers almost universally believe their properties are…[READ MORE]

US lenders completed 6,324,545 foreclosures over the last ten years, and it should have been worse. The mortgage and foreclosure debacle of 2008 was cut short by government intervention. Is the mortgage and foreclosure crisis resolved or merely delayed? Most people believe the mortgage and foreclosure crisis of 2008 is completely resolved, a misperception fostered by a financial media eager to disseminate good news. Most people believe an improving economy created jobs for struggling borrowers, and those hard-working Americans cured their loans of past-due payments: all is well. While the image of the noble American borrower recovering from the perils of the Great Recession appeals to our sense of collective pride, reality is somewhat less noble. Most borrowers were hopelessly overextended before the…[READ MORE]

Orange County housing market report: June 2016 Historically, properties in this market sell at a 0.6% premium. Today's discount is 5.9%. This market is 6.5% undervalued. Median home price is $609,100 with a rental parity value of $648,800. This market's discount is $39,700. Monthly payment affordability has been improving over the last 4 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $399/SF to $400/SF. Resale prices have been rising for 11 month(s). Over the last 12 months, resale prices rose 5.9% indicating a longer term upward price trend. Median rental rates increased $13 last month from $2,790 to $2,803. The current capitalization rate (rent/price) is 4.4%. Rents have been rising for 12 month(s). Price momentum…[READ MORE]

Republican Jeb Hensarling, an industry shill who funds his campaigns from too-big-too-fail banks, is the Capitol Hill voice of the financial services industry in Washington. Now that the US taxpayer directly insures over 80% of the loans in the housing market, the ultimate financial coup for the too-big-too-fail banks would be a relaxation of lending standards allowing them to underwrite profitable, high-risk loans at taxpayer expense. The financial services industry spends millions lobbying Washington to remove the taxpayer protections in place that prevent unsound lending with taxpayer backing. If they were to succeed, they would inflate another massive housing bubble, profit from the origination and servicing fees, and when it implodes, they would leave taxpayers holding the bag. Through their…[READ MORE]

Many people truly don't understand by helping "struggling borrowers" was a bad idea. It was. It encourages even more risk taking. Many issues compete for our attention in the wake of the housing bust. However, the importance of these issues is not equal. Underlying most of them is the central problem of the housing bust: moral hazard. Every decision we make in life has consequences. If we save regularly and invest wisely, the consequences are wealth and peace of mind. If we spend foolishly and speculate wildly, the consequences are periods of feast and famine, delusions of grandeur, enormous entitlements, and when times are tough, unbearable stress. Positive results come from good decisions and visa versa. That’s how people distinguish…[READ MORE]

Other necessary costs of ownership consume a quarter to half the amount borrowers could potentially put toward loan payments. When lenders calculate how much they are willing to loan to any particular borrower, they measure the borrowers income from wages and other sources and calculate how much of that monthly income is available to pay the debt. One limitation on borrowing is the front-end ratio, generally 31% of verifiable gross income. Lenders assume that a borrower can afford to spend 31% of their gross income on all housing related expenses and still have enough money left over to pay all other obligations and have a life. This 31% is called PITI, or principal, interest, taxes, and insurance. The lender is primarily…[READ MORE]

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