Contact Shevy Akason at (949) 769-1599

Shevy (at) EveryDayLux.com

Author Archive: Irvine Renter

Very few recent mortgage originations were from borrowers with a previous foreclosure. Less than 25% ever return to homeownership. It's human nature to find hope when times are bleak. When housing crashed, bankers and underwater loanowners clung to any hope of recovery that would bail them out from their catastrophic lapses of judgement during the housing mania. People look for hope wherever they can find it, and over the last eight years, people who work in real estate, homebuilding, sales, and so on, needed hope for a better tomorrow because their current situation was consistently bad. One story of hope was the inevitable return of legions of boomerang buyers, those who lost their homes in foreclosure but bought again. Over…[READ MORE]

House prices are high in Coastal California causing sales to wane and many to question whether or not we pushed prices up too high. In previous real estate cycles, when house prices began to rise, people became excited about participating in the real estate market, and the buying activity would sometimes become frenzied. This desire for real estate was enabled by lenders providing alternative financing products, products that later proved disastrous. In this cycle both potential buyers and lenders behave differently. At this point in previous cycles, affordability products proliferated, and house prices rose rapidly. With affordability products effectively banned this cycle, the only thing pushing house prices higher is record low mortgage rates. As prices rise, the buyer pool…[READ MORE]

Despite legislators and bureaucrats best efforts, the homeownership rate continues to slide. Since the Great Depression, presidential administrations with a cooperative Congress implemented policies intended to maximize the homeownership rate. At the end of World War II, the returning servicemen armed with FHA loans bought millions of new production homes and raised the homeownership rate significantly from the bottom of the depression. Apparently, the new policies were a success. However, the early success was not matched by future increases in home ownership. Once the stimulus provided by FHA loans reached a new equilibrium, the home ownership rate stabilized at about 64% and remained there for about 40 years -- despite ongoing tinkering with financing and other policies. During the mid…[READ MORE]

The cuts to the FHA insurance premium had little impact on sales overall, but more borrowers used FHA insurance. Was the policy a success? Lowering the FHA insurance fees was the right idea at the right time. Due to the losses sustained and expected at the FHA insurance fund, the fees were raised to very high levels, making FHA the new subprime. When first-time homebuyer participation rates hit a three-decade low, I predicted that Pressure would mount to lower FHA insurance fees to revive home sales. Shortly thereafter FHA loan fees were cut in half, and I stated that Lowering FHA insurance fees will spur the housing market. Why was lowering the FHA insurance fee so important? My market studies…[READ MORE]

Since most people no longer fear being priced out, prospective home buyers see high prices as a deterrent rather than an incentive to recklessly jump into the market. Generally, when the price of any good or service goes up, buyer demand at the higher price diminishes because fewer people can afford higher prices. This isn't a particularly difficult economic concept to understand except that housing markets violated this idea repeatedly over the last 40 years. In the past, rising house prices often led to an increase in the quantity demanded, not because more people could afford it, but because buyers became more motivated in order to capture home price appreciation. When prices rise faster than their wages, people can obtain…[READ MORE]

Most feedback I receive from readers is positive, but occasionally someone with an opposing point of view has an emotional reaction and writes me to correct my many misconceptions. I recently ran the post, Responsible homeowners did not lose their homes in foreclosure. In that post I made the case that most foreclosures were caused by overborrowing rather than unemployment or other unforeseeable events. Not everyone agrees with my view of the world, and one reader in particular was incensed enough to write me about it. As with most victim rants, this one points to everyone and everything else to blame for their outcome in life. This woman blames the banks, insurance companies, even the weather for her misfortune. Nowhere…[READ MORE]

School ratings reflect where concerned parents move with their children, not the quality of education a school provides. Parents want to provide their children with every advantage in life. Those students with the best education generally enjoy higher wages and greater life achievement than students from school districts with low achievement scores. Parents react to inequities of our education system by shunning poor performing districts in favor of higher rated ones. Thus real estate values are higher close to better schools. Many parents shopping for a house obsess over the school ratings. They aren't chasing the ratings because of abstract correlations to a better life. Parents seek out these schools because they believe the quality of education is higher and…[READ MORE]

More housing supply will reduce the competition among workers for available properties. More housing supply is certain to bring down housing costs in the long-term. California Governor Jerry Brown recently proposed to reduce the regulatory burden on real estate developers to facilitate construction of more new homes to increase supply and make housing more affordable. A bevy of special interests line up against the proposal, and most homeowners in California would prefer to maintain the status quo because a shortage of housing benefits them personally. Most of the arguments put forth against providing new supply lack merit, and the alternative is to do nothing and watch as house prices climb beyond the reach of all but a select few citizens.…[READ MORE]

The housing market can’t absorb a sudden or large increase in mortgage rates without major declines in sales and perhaps even decreases in prices. Congress passed the Dodd-Frank financial reform in response to the housing bubble and bust. These new Dodd-Frank mortgage regulations will prevent future housing bubbles by effectively banning destabilizing loan products with interest-only and negative amortization features. Banning these loans was important because those loan programs enabled buyers to greatly inflate house prices from stable levels set by wages and mortgage rates. In a stable housing market, the equilibrium price is the highest price consumers can finance, so under pressure to complete more deals, lenders seek ways to increase the size of the loans lenders provide borrowers.…[READ MORE]

2015 was touted as the year of the boomerang buyer. Lenders and realtors prepared, and the financial media wrote the invitations, but the boomerang buyers failed to arrive. Many people criticize the financial media for running negative stories that "talk down the market," but realistically, the financial media doesn't have the power to move markets, and when they report an uncomfortable truth without the sugary spin, some people complain. When it comes to financial news, people only want to read good news, news that reinforces their belief in the correctness of their investments and reaffirms their faith in lifelong financial prosperity. Thus we have an entire branch of media that only presents good news. Any news that isn't positive must be…[READ MORE]

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