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Author Archive: Irvine Renter

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]

The populist revolt brewing is stronger than most realize, and Donald Trump taps into this populist anger better than any other candidate. With Donald Trumps wins in the Super Tuesday primaries, it's looking increasingly like he will be the Republican nominee in 2016. Today I repost the material from December 29, 2015. Though this was only two months ago, the difference in the political mood and understanding is dramatically different today. When I wrote this post, nobody gave Donald Trump a chance. Right now, many Republicans have resigned themselves to a Trump nomination and his crushing defeat in November. They too will be surprised as over the next few months as it becomes apparent that he can really win. That's…[READ MORE]

All delinquent borrowers living in properties worth less than the outstanding balance of the loan will be offered a loan modification in lieu of a foreclosure because the banks can't absorb the losses. Prior to the housing bust, lenders always foreclosed on delinquent borrowers — always. They had no incentive to kick the can with a loan modification because they could reclaim their capital and loan it to a borrower who would pay the full rate. Lenders only kicked the can when house prices fell and they could not recover the full amount through a foreclosure. Can-kicking is a policy of necessity. If lenders had foreclosed on all the delinquent mortgage squatters and liquidated the inventory, house prices would have…[READ MORE]

For the missing MLS inventory to return to the market, borrowers need debt forgiveness, and house prices need to move even higher. The financial media inundates us with stories about the "problem" of low MLS inventory that supposedly holds back first-time homebuyers, who are buying in near record low numbers. Whether or not this is a real problem or a fiction of the financial media depends on your point of view. Bankers don't consider low MLS inventory a problem; after all, bankers engineered the MLS shortage in order to drive up house prices to restore collateral value to the bad loans they made during the housing bubble. Homeowners are happy to go along for the ride. Neither bankers nor homeowners…[READ MORE]

The US housing market starts 2016 with a strong economy, low unemployment, improving wage growth, and very low mortgage rates: A recipe for strong sales and price increases. The US Housing market is poised for a strong start in 2016. The underlying economy was strong enough for the federal reserve to start raising interest rates in December. Unemployment is low and wage growth is picking up, so more qualified borrowers are likely to become buyers in the days ahead. Further, with mortgage interest rates trending down toward record lows, the demand for housing as expressed in dollars borrowers can put toward a purchase is near record highs. The conditions as described above will likely lead to robust sales and strong…[READ MORE]

Today's homeowners are paying down mortgage faster than ever before as rapid loan amortization builds wealth across America. Which is better for accumulating equity, lower prices or lower interest rates? Both lower the monthly cost of ownership and result in more disposable income. Obviously, the banks prefer higher prices to recoup their capital from their bad bubble-era loans, so they are offering 4% interest rates to prevent prices from going any lower. I think most buyers would prefer lower prices, but since the banks make the rules which determine market prices, low interest rates and high prices are what we get. From a homebuyers perspective low rates or low prices depends on how they acquire the property. All-cash buyers would…[READ MORE]

Some foreclosure and eviction cases can be heartbreaking. However, we live by rule of law in this country, and unless we want to start giving away real estate to those with the saddest story, these evictions must take place. Property evictions cause severe emotional pain for the dispossessed. People develop strong emotional attachments to the place they call home, and losing that attachment suddenly is so painful that many well-meaning people believe evictions should be banned. People who support prohibiting evictions do not understand that evictions are essential to the operation of our housing system. Eviction is both a threat and a consequence. People are only evicted from their homes if they fail to make the required payments. Renters are…[READ MORE]

Paying off debt early is a far superior long-term financial plan than continually adding to mortgage debt to support an extravagant lifestyle. Most people believe they achieve the American Dream when they buy a house, but most often they only buy 3.5% to 20% of a house, not the whole thing. Although it feels like it's their house, it's not. If they quit paying the mortgage, the bank can take it from them, as millions found out during the housing bust. Real home ownership is only achieved when the debt is retired, and the shortest route to success is to pay off a mortgage early. Pay off mortgage debt early? Am I crazy? Why would anyone do that in an…[READ MORE]


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In Memoriam: Tony Bliss 1966-2012