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Author Archive: Irvine Renter

The worst social problem in the most heavily Progressive-dominated political districts is a lack of housing caused by selfishness and greed, two characteristics hypocritical Progressives like to criticize Conservatives for. California has a housing problem. Anyone who lives in California copes with higher housing costs than nearly everywhere else in the United States. This problem is a boon to landowners and high wage earners, but it’s a bust for lower middle class wage earners who often put 50% of their income toward housing. Why do we have this problem? First and foremost, the problem is one of supply. California has a chronic shortage of housing. The lack of supply is the primary reason prices are so high. When supply is…[READ MORE]

When the mortgage industry innovations fail, millions of people lose their homes, and taxpayers fork over billions in bailout aid to foolish lenders and foolish borrowers. Financial innovation: Designing a loan program that borrowers won't repay but lenders and investors will fund. Most industries advance and evolve through innovations, sometimes very disruptive ones. However, some industries -- like mortgage lending -- are prized for their stability. Mortgage lending doesn't innovate, and as a society, we don't want it to because whenever mortgage lenders start innovating, trouble is brewing. Most innovations in lending either cause major losses at banks, or in their worst forms these innovations destabilize our financial system. Consider the "innovation" of the option ARM. This loan allowed people…[READ MORE]

Mortgage rates will remain low because the banks and the economy can't accommodate the loss of sales and lower house prices bound to accompany higher rates. "Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929 "We will not have any more crashes in our time." - John Maynard Keynes in 1927 When something goes on for a long time, particularly something the defies previously accepted truths, eventually people come to believe it will go on forever. Everyone thought the economic prosperity of the 1920s would go on forever. Few foresaw the stock market crash of 1929 and the Great Depression of the 1930s. Investors and economists are particularly prone…[READ MORE]

Politicians intentionally set up Fannie Mae and Freddie Mac to fail so they could reform mortgage finance without fear of voter backlash. You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before. Rahm Emanuel Everyone in Washington knows the GSEs must be eliminated because the GSEs can’t exist outside government conservatorship. The taxpayer liabilities from backing most mortgage loans are enormous, and taxpayer backing for the GSEs ensures the misallocation of credit. Ed DeMarco prepared for final shutdown of GSEs, but the final implementation was left to Mel Watt and Congress, but they failed to make any progress. Concerned citizens hoping for…[READ MORE]

Since high home prices can no longer be overcome by financial innovations in lending, state and local governments are trying their own market manipulations to sustain inflated home prices. The federal reserve’s zero interest rate policy is fraught with unintended financial consequences. The policy of inflating house prices is eagerly embraced by a federal reserve that wants to see collateral value backing restored for bad bubble-era loans. While this policy benefits bankers and existing homeowners; however, it harms everyone else. When I first started writing about real estate matters, some of the bulls accused me of talking down the market so I could profit from its demise. When I replied that I wanted prices to go down and stay down…[READ MORE]

Lobbyists for payday lenders gained the support of the Chair of the Democratic Party in their efforts to rip off the poor and keep them in debt servitude. Many lenders are contemptible scum, particularly those who make consumer loans to poor people. Payday lenders are the worst of the worst. They provide no value to the society, and they leach the financial lifeblood out of people who foolishly use their products. They are a small step above loan sharks. What's so bad about payday lenders? Don't they serve their customer's needs? Why do they exist at all? The need for payday lenders Poor people are poor because they either don't have the income to cover their basic needs, so they…[READ MORE]

Competition for limited housing stock will prompt low-income workers to allocate any pay raises to securing better housing, enriching landlords. Advocates for raising the minimum wage have lofty aspiration. Many working-class Americans barely make ends meet earning minimum wage -- and some don't make ends meet. Advocates of raising the minimum wage believe forcing employers to pay more will put more spending money in the pockets of low-wage workers and improve their quality of life. Many advocates for eliminating the minimum wage are industry shills paid to peddle lies so employers can exploit workers without paying them a livable wage. Assholes like that disgust me. However, many advocates for freezing the minimum wage or eliminating it completely also believe they…[READ MORE]

Homebuilders change their focus from move-up to entry-level buyers as sales wane in the move-up market and more Millennials buy entry-level homes. Homebulders typically provide product for all levels of the housing market. However, after the housing bust, most homebuilders completely abandoned the entry-level market, leaving this market segment vastly under served -- sort of. The main reason homebuilders quit building this product is because for many years, they couldn't sell it. The Great Recession forced many Millennials, the next generation of buyers, to live with their parents or rent an apartment because they couldn't earn enough money to pay of their sizable debts and save for a down payment. So while the need for entry-level housing was great, there…[READ MORE]

Conforming loan limits create intense buyer competition at under-limit prices and restrict home price increases need to bail out underwater borrowers. The FHA and the GSEs exist to provide subsidized mortgages to lower- and middle-income Americans. The conforming loan limit is put in place to limit the size of loans insured by the FHA and the GSEs to ensure these loans are targeted to the borrowers they're intended to subsidize. Prior to establishment of the FHA and later of the GSEs, lenders often wouldn't make home loans to lower-income Americans, or the cost of these loans was so high, lower-income borrowers couldn't afford it. The FHA and the GSEs succeeded in opening a market for these borrowers, and by bundling…[READ MORE]

We've all read stories about the challenges first-time homebuyers face in today's market. First-time homebuyer participation is hovering near 30-year lows, and showing little sign of improvement. Rather than describe the effects in another post, I thought it would be informative to share a real story from a real buyer who just completed their purchase. Enjoy. First time homebuyers are lacking in today’s housing market.  What does it take to buy a first home in coastal SoCal?  Why did a housing bear decide to purchase? Getting Ready To Buy. As a life-long renter, I shared the commonplace goal of home ownership.  There is a huge chasm between wanting and having.  Readying myself to be attractive to a lender was a…[READ MORE]




In Memoriam: Tony Bliss 1966-2012