Author Archive: Irvine Renter

Though realtors and politicians like to present home ownership as an entitlement, it's really a privilege bestowed on those who can sustain it. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. US Declaration of Independence Did you notice that in the defining statement of American Entitlement, the right to own a single-family detached home was not mentioned? I remember when I learned to drive, I was told repeatedly that driving was not a right, it was a privilege, a privilege I earned by learning the rules of driving and demonstrating good judgment. Why…[READ MORE]

As the Yuan declines in value, houses become increasing expensive to Chinese Nationals, prompting further erosion of new home sales to this large buyer group. Last month I asked Will the slowdown in China hurt Irvine real estate? There is little doubt that stopping the flow of Chinese capital will impact new home sales in Irvine. Irvine homebuilders depend on Chinese buyers to purchase their overpriced houses, which becomes a problem if this flow of money dries up. Last year I documented that Chinese real estate investors are less active in Irvine. For years, Chinese could export cash by setting up dummy foreign corporations that import goods into China. The dummy corporation sends a bill to the Chinese mainland for…[READ MORE]

House prices should continue to rise in Las Vegas as cloud inventory supply restrictions and undervalued conditions persist. Back in 2010 when house prices were crashing, I advised people to buy Las Vegas real estate because I believed it was a good value. With house prices at 1995 levels, even if they fell further (which they did), it only made good deals even better. House prices rebounded strongly in early 2012 due to the manipulation of supply, but despite the strong house price rally, the market is still undervalued. One of the problems with long-term price charts is that straight-line technical analysis often understates the appropriate support or resistance levels. If the same data is plotted on a logarithmic scale,…[READ MORE]

Some normal housing demand was delayed to the recession, but no great influx of demand is likely forthcoming. Pent-up demand is the idea that many, many more people would participate in a financial market if some temporary barrier were removed, a barrier currently preventing them from participating today. Since polling data shows a very high percentage of people want to own a house but only about 60% actually do, theoretically, there is always pent-up demand waiting to be unleashed. The primary barriers preventing more people from buying homes are down payments, qualification standards, and verifiable income. All three of these barriers were eliminated during the housing bubble by 100% financing, fog-a-mirror qualification standards, and liar loans. As a result, homeownership…[READ MORE]

As house prices rise and more homeowners possess equity again, some are withdrawing this money at low rates and spending it, stimulating the economy. During the housing mania, people bought homes because house prices rose rapidly, and lenders gave equity to homeowners at 100%+ of the value set by recent comps. Under such circumstances, houses were very desirable, and it added fuel to the housing mania, and funded millions of personal Ponzi schemes. Homeowners like mortgage equity withdrawal because it provides them instant access to the free money bestowed upon them by the magic appreciation fairy. Homeowners gladly suspend their disbelieve at the too-good-to-be-true nature of free money, and if lenders willingly dole it out, homeowners eagerly accept it. Politicians…[READ MORE]

Do you want free money?  If you buy a home from a homebuilder without an agent, you pay full price. If you buy a home with us as your agent, you get 1.5% back. Same house, but 1.5% of the purchase price refunded back to you. It’s free money! Take it!  As a bonus, you get full agent representation. Did you know many items in a builder’s sale contract are negotiable? Do you know which options are better installed by the builder and which ones are better done by others later? In addition to helping negotiate a better price, we also prepare detailed reports showing the cost of ownership of your new home. Why put yourself at the mercy of…[READ MORE]

Higher mortgage interest rates will reduce future demand. Today's homeowners will not experience the home price appreciation enjoyed by the previous generation. Many would-be homeowners rush to the market to lock in low mortgage rates out of fear of being priced out forever. They fear that if they wait, houses that are affordable today won't be affordable tomorrow. Perhaps there is some basis for this fear, but if they paused for a moment to consider the ramifications of that occurrence, they might not be in such a hurry to buy after all. If today's homebuyer were to be priced out tomorrow, they probably wouldn't be alone in that predicament. In fact, if a great many people are priced out by…[READ MORE]

Coastal community real estate is more expensive relative to rent than it's ever been. A bubble perhaps? Very expensive real estate dominates Coastal California communities. The narrow strip of land within a mile or two of the ocean is one of the most desirable climates in the world, and many people of great wealth want to live there. The wealthy have done very well over the last 30 years, and the concentration of wealth at the top is so high that the richest 1% of Americans own 42% of all the wealth in the country. As the rich get richer and as other opportunities for investment wane, many are competing for the limited number of prime beach properties, sending prices…[READ MORE]

Rising interest rates and a falling affordability ceiling will limit home price appreciation for a decade or more. There is no free lunch -- at least according to economists. However, if you work for the federal reserve, you truly believe you can have a free lunch. They lowered interest rates to reflate the old housing bubble, and they convinced people nobody has to pay for it. They created wealth out of thin air -- that and printing about four trillion dollars. Unfortunately, there is a price to be paid. It will either be paid by holders of wealth through currency debasement and inflation, or it will be paid by future homeowners through lower levels of home price appreciation. Think about…[READ MORE]

For long-term home occupancy, owning is generally more financially favorable; however, there are strong reasons not to buy and rent instead. Considering the many benefits of home ownership, why would anyone chose to rent? It’s said that the decision to own is emotional whereas the decision to rent is financial. During the housing bubble, renting was a wise financial move because it cost twice as much to own than to rent, but now that prices are much closer to rental parity, there are fewer compelling financial reasons to rent rather than own. Between 35% and 40% of Americans chose not to buy and rent their primary residence instead. The reasons vary, but they all generally relate to commitment and finance.…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012