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Author Archive: Irvine Renter

he fear of homelessness is the essential motivation to get people to work to produce goods and services in our society. Modern American culture can trace its roots on the North American continent to pioneering English settlers. Life on the frontier is harsh, and each family unit is self-reliant. In a frontier society, if people didn’t work, and if they didn’t produce their own food and shelter, then they died. Fear of death from starvation or exposure was very real, and anyone who wasn’t motivated to produce something of value to themselves or others faced the near certainty of painful death. In a frontier society, there are no bailouts. We have made much progress over the last four centuries, and…[READ MORE]

Paying too much for a house can leave the family with too little disposable income to satisfy other desires or meet important family obligations. Housing is often touted as an investment you can live in. The dual purpose nature provides twice the utility, so people feel comfortable paying twice the price. Buying a home is always an emotional decision. When people fall in love with a property, if either spouse bothers do perform a financial analysis, it's generally biased toward the answer they want to hear. Rather than an objective look at the costs and benefits, the analysis becomes a flimsy justification for an emotional decision already made. Sometimes, that leads to costly mistakes. Live & Learn: Buying a home…[READ MORE]

Lenders must deny mortgages to good borrowers to prevent too many deadbeats from getting mortgages and destabilizing the housing market. Environment is stronger than will power. -- Paramahansa Yogananda When you were in high school, did your parents ever caution you about the company you keep? The people you share common interests with can be either a positive or a negative influence on your decision making. They can lead to to success, or they can lead you astray. When lenders want to evaluate a potential borrower, they don’t interview friends, but they do examine the financial characteristics of a borrower’s life, and they make determinations based on the historical behavior of others with the same characteristics. That’s the whole point…[READ MORE]

Housing bubble 2.0 is built on stable, fixed-rate mortgages applied to verified wages rather than unstable affordability products applied to borrower lies. The Great Housing Bubble of the 00s was inflated by mortgage affordability products such as option ARMs that allowed borrowers to obtain mortgages more than double the size they could afford using a 30-year conventionally-amortizing mortgage. These toxic mortgage products proved unstable, evidenced by millions of defaults. Lenders followed their standard loss mitigation procedures and foreclosed on delinquent borrowers and resold the resulting real estate owned (REO). Since there were so many of these properties, the MLS supply swelled, and lenders liquidated their inventory at fire-sale prices. House prices were crushed. In 2012 banks went “all in” betting…[READ MORE]

The FHA traded in a viable long-term income stream for some short-term refinance revenue creating potential for future shortfalls to the fund. Supporters of HUD Secretary Julián Castro, a potential VP running mate, gloated over the recent news that the FHA insurance fund swelled to reach it's 2% capital reserve mandate. But the celebration is premature. The FHA insurance fund is not as strong as politicians want to spin it. The FHA became the replacement for subprime lending during the housing bust. It insured millions of loans as prices crashed, and many of those borrowers defaulted and many more are still underwater. With many delinquent loans and collateral values below loan balances, the FHA stands to lose billions. The FHA…[READ MORE]

The conditions that caused house prices to crash far below fundamental values will likely never happen again. During the 00s house prices rose far above any justifiable fundamental value juiced by affordability products. When these products proved unstable, millions of delinquencies and foreclosures followed, and house prices crashed far below fundamental values. In 2012 a house price rally reflated the old bubble back to a new and higher equilibrium price based on record low mortgage rates and stable loan products. In order to gain control of the distressed inventory on the MLS, lenders instituted new loss mitigation programs of aggressive loan modification, also known as kicking the can. If implemented in the future (assuming another unlikely mortgage disaster), must-sell inventory…[READ MORE]

At the height of the housing bubble hundreds of bloggers wrote about the real estate market, but over time, the genre has almost completely disappeared. The 00s were the golden age of real estate blogging. Many people from all walks of life realized house prices were a real estate bubble, and legions of citizen journalists said so. Housing blogs proliferated, but rather than experiencing an over-saturation, the phenomenon fed on it's own energy. It was a special time. Unfortunately, all good things must end, and even the most interesting and exciting times fade from the headlines; life goes on. After the Gold Rush Posted November 6, 2015 by Joshua M Brown ... I wanted to touch on the state of…[READ MORE]

Rising interest rates would put money into the hands of savers, particularly seniors, who will spend it on goods and services and stimulate economic growth. Last week I wrote about interest rates. In the post Will Janet Yellen capitulate to greedy bankers and raise interest rates?, I lampooned a poorly reasoned heap of manure published by a Chase Bank lackey. The central thesis of the study was that rising interest rates could stimulate the economy. Last Friday I met with a close friend who is a professional asset manager with 30+ years experience closely watching the economy and financial markets. I greatly value his opinion and the talks we have. He thought my post was too dismissive of the idea,…[READ MORE]

Historically, properties in this market sell at a 9.5% discount. Today's discount is 13.7%. This market is 4.1% undervalued. Median home price is $509,200 with a rental parity value of $593,600. This market's discount is $84,400. Monthly payment affordability has been improving over the last 1 month(s). Momentum suggests unchanging affordability. Resale prices on a $/SF basis declined from $403/SF to $402/SF. Resale prices have been falling for 1 month(s). Over the last 12 months, resale prices rose 3.8% indicating a longer term upward price trend. Median rental rates increased $7 last month from $2,615 to $2,622. The current capitalization rate (rent/price) is 4.9%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

Previous loan modifications and old HELOCs face reseting to higher rates and recasting to full amortization likely leading to further loan modification. Lenders don’t want to modify loans. They would far rather have the borrower pay in accordance with the promissory note they both signed when the loan was originated. Ordinarily, if a borrower is unable or unwilling to pay in accordance with the original terms, the lender would simply foreclose, get their loan money back, and loan that money to someone who will pay in accordance with the promissory note. Unfortunately, with so many borrowers underwater, lenders can’t foreclose and get their money back, so instead they modify loans to buy time until the resale value is higher than…[READ MORE]

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