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Author Archive: Irvine Renter

I was fortunate enough to watch this film at 10:30 AM opening day. I thoroughly enjoyed this movie, and I will likely watch it two or three more times during the holidays. First, be careful you don’t read too much about this film because someone will probably spoil it for you. There are definitely some things you would rather be ignorant to before watching the film to get the full emotional effect. Second, if you are already a Star Wars fan, you will certainly love this movie. Every Star Wars fan should go see it. Third, the new villain is the best character in the movie. He was perfectly cast, and the backstory is compelling. He is the most complex…[READ MORE]

The federal reserve finally raised the federal funds rate 1/4 point on Wednesday, December 16, 2015. However, their oft-forgotten policy of buying mortgage-backed securities is actually far more meaningful to mortgage rates. The monthly housing market reports I publish each month became bullish in late 2011 due to the relative undervaluation of properties at the time. I was still cautious due to weak demand, excessive shadow inventory, the uncertainty of the duration of the interest rate stimulus, and an overall skepticism of the lending cartel’s ability to manage their liquidations. In 2012, the lending cartel managed to completely shut off the flow of foreclosures on the market, and with ever-declining interest rates, a small uptick in demand coupled with a…[READ MORE]

We need strong regulations in mortgage lending to prevent a repeat of the housing bubble and subsequent crash.   The financial elite in the United States hate the Consumer Financial Protection Bureau (CFPB) because the CFPB stands in opposition to those who want to rape and pillage the American people. After the financial elites destroyed the economy and nearly brought down our entire financial system with reckless risk taking and foolish lending, legislators were forced to act for the greater good. Generally, I do not like government paternalism. When Ronald Reagan came to power and began our 25 year experiment with government deregulation, I thought it was a good idea. I am repelled when I see paternalistic politicians who believed…[READ MORE]

If mortgage rates remain low, home sales will strengthen and house prices will keep going up. There is much angst among potential homebuyers about rapidly rising prices and the potential for another housing bubble. The cheerleaders in the mainstream media are keen to squelch these concerns, and they argue that affordability is so good that rising rates won’t have much impact. This is where parsing the various markets is important. The pundits that claim we are in no danger of inflating a new housing bubble are right — in the weakest markets. Interest rates could double, and prices would still be relatively affordable in Las Vegas. That market is so undervalued that an uptick in mortgage rates won’t stop the…[READ MORE]

House prices and sales in 2016 depend almost entirely on what happens with mortgage interest rates "Those who have knowledge, don't predict. Those who predict, don't have knowledge." Lao Tzu Each year I like to make a real market forecast. I try to examine current conditions, consider how these conditions change, and form an opinion of how these conditions effect housing. It's the opposite of the trend extrapolation nonsense passed off as forecasting by most housing market analysts. I try to focus on areas where my forecast falls outside the consensus view. Regurgitating consensus cud doesn't make the analysts bolus any more palatable. The consensus opinion this year, like every year, is for sales and home prices to rise 3%…[READ MORE]

Homebuilders believe the feel-good nonsense printed in trade journals and industry media outlets and often rely on this information to make bad decisions. “Freedom is the right to tell people what they do not want to hear.” George Orwell As someone who worked in the homebuilding industry for over 20 years, I often drank housing kool-aid with my co-workers. Although I remained grounded enough to see the obvious housing bubble of the 00s, many of my co-workers refused to acknowledge it, sometimes with heated arguments. The homebuilding industry, like many others, has it’s own trade journals and industry news aggregators that keep people informed on happenings that impact the everyone who makes a living from home construction. But rather than…[READ MORE]

Historically, properties in this market sell at a 0.6% premium. Today's discount is 4.1%. This market is 4.8% undervalued. Median home price is $595,200 with a rental parity value of $614,400. This market's discount is $19,200. Monthly payment affordability has been improving over the last 2 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $391/SF to $392/SF. Resale prices have been rising for 10 month(s). Over the last 12 months, resale prices rose 4.6% indicating a longer term upward price trend. Median rental rates declined $10 last month from $2,757 to $2,747. The current capitalization rate (rent/price) is 4.4%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Higher mortgage rates compensate investors for greater risks, leading to looser lending standards. For the last several years, the refrain from housing insiders has been that credit standards are too tight and should be loosened. Real estate industry lobbyists appeal to lawmakers for policies the real estate industry believes will promote more transactions at higher prices. Most often this myopic lobbying causes unintended long-term detrimental impacts on the housing market. In 2004 every realtor wish was granted: lending standards were loosened to the point of complete abandonment, and restrictions on the amount prospective buyers could borrow were also removed through teaser rates, liar loans, and negative amortization. In the short term, realtors reaped the benefits as transaction volumes escalated even…[READ MORE]

The cost of owning and the cost of renting in OC housing market is balanced. Unfortunately, neither one is affordable based on local incomes. I once wrote that Rental parity establishes the value of residential real estate, but others use different metrics to measure value and affordability. If the metric is price-to-income, today’s prices look inflated; if the metric is payment-to-income, today’s prices look undervalued. So which metric is correct? In my opinion, they both are. Over the short term, it’s impossible to ignore the payment-to-income ratio because it will establish the market equilibrium at any point in time; however, over the long term, it’s hard to ignore price-to-income because interest rates will revert to the mean, so the long-term…[READ MORE]

Rising interest rates will cause the US dollar to appreciate in value, making US real estate too expensive for foreign investors. When interest rates go up, the American consumer will find housing less affordable, and as a result, home sales volume will sputter, and lower home prices may follow. How will rising interest rates impact the Chinese real estate investor? Home sales to Chinese investors began slowing down early this year because the rise in the dollar relative to the Yuan made houses about 10% more expensive. Those that purchased before the dollar rose in value obtained a windfall, but the increased prices made US real estate less attractive to future buyers. If the federal reserve raises interest rates in…[READ MORE]




In Memoriam: Tony Bliss 1966-2012