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Author Archive: Irvine Renter

Government subsidy programs promote dependency, and they are expensive, but they provide a service needed by millions of people to alleviate poverty. In a frontier society, there are no bailouts. 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. We are no longer a frontier society in America, but our collective past still influences our attitudes and politics today. We have made much progress over…[READ MORE]

Properties in distressed communities surrounded by strong demand for real estate often provide opportunities for investors betting on an economic recovery. Distressed property investing is both a science and an art. Finding a distressed property market is not difficult, and anyone who understands business math enough to compute a rate of return can measure which markets are a good deal in today’s dollars -- the science. The art of distressed property investing is recognizing which of these markets the conditions are temporary and in which markets the distress is a long-term problem. I am bullish on Las Vegas because I believed the local economy would recover there because the distress was temporary. There are many distressed property markets where I…[READ MORE]

Condo prices remain low until better alternatives are removed from the market and people are forced to compete for lower quality digs. Condo prices are notoriously volatile, far more volatile than house prices. But why is that? Is it because nobody wants to live in a condo? There's something special about a detached house on a clearly defined lot that a person can point to and say, "that's mine." But why should that matter to the volatility of condo prices? When you look at the cities where prices are most volatile, and when you look at the type of housing that's most volatile, one common element stands out: the less desirable a housing alternative is, the more volatile its price,…[READ MORE]

REO-to-rental companies enabled many foreclosed former owners to remain in their homes with lower monthly payments, a genuinely positive outcome. When I went out to Las Vegas to buy houses, the banks were feverishly foreclosing and selling properties for whatever they could get. The discounts from peak values approached 80% on some properties, and every house in town was cashflow positive. This was not a good time and place to be a homeowner, but it was a fantastic time to be an investor. When REO-to-rental companies hit the scene, they were vilified by the political left despite the good they were doing for individual families. Since these families were having their names removed from the title, and most of them…[READ MORE]

Peace-of-mind in retirement is attainable, affordable, and priceless. Stable income streams do more for us emotionally than does a large but shrinking pile of money. We are all born needing a lifetime of cashflow to meet our needs and wants. Except those lucky few born to parents who provide a lifetime of income, everyone else takes a job, and spends the majority of adult life working to pay the man. At some point each worker looks at when they will get Social Security and how much it provides. The timing and amount of Social Security is critical to retirement decision making as it's the last remaining source of stable cashflow for many retirees when they reach retirement age. Though many…[READ MORE]

Restoring peak housing prices required record low mortgage rates during a period of weak growth and a falling home ownership rate. It's time to celebrate! National home prices reached the peak of 2006. Surviving homedebtors are regaining equity, surviving lenders have collateral backing behind the bad debt they've preserved for the last decade, and new homeowners are stretched to the max to repay the bad debts of previous generations, albeit at lower rates. Since the housing market peaked in 2006, the powers-that-be resisted the price decline with a variety of government relief programs, and most importantly, record low mortgage rates. The recession caused by the 2006-2009 housing market crash left many people unemployed and underemployed, removing their demand from the…[READ MORE]

Dodd-Frank effectively regulates the mortgage market and greatly restricts the proliferation of unstable loan products that harm both borrowers and lenders. In the post, Dodd-Frank prevents lenders from inflating another bubble, I detailed the impact Dodd-Frank had on the housing market. Today, I want to look at the impact Dodd-Frank has on the mortgage market, the mechanism by which Dodd-Frank prevents future housing bubbles. When Congress took on the task of regulating the excesses of the mortgage industry, it ostensibly wanted to prevent a recurrence of the housing bubble. To that end, they passed the Dodd-Frank finance reform. One of the provisions of Dodd-Frank was to establish a “qualified mortgage” that establishes the parameters of what constitutes a “safe” mortgage…[READ MORE]

Paying off a promissory note early removes the mortgage encumbrance and turns a real estate borrower into a property owner. Most people realize their dreams of home ownership when they borrow hundreds of thousands of dollars to purchase a house. This is not ownership; it is debt slavery. People don’t own the property until the debts are retired, and true home ownership is the reward for those who master paying debts faster. Affordability is a measure of people’s ability to raise money to obtain real estate, a function of financing. During The Great Housing Bubble, financial innovations dramatically increased the amounts people were able to borrow; unfortunately, Affordability Products Make Prices Unaffordable. The affordability was short lived because the loan…[READ MORE]

Raising the conforming loan limit encourages affluent borrowers to buy expensive homes, the opposite of what lawmakers intended when the subsidies began. In order to spur lending to lower and middle income Americans, the GSEs and FHA provide loan guarantees to mortgage loans under the conforming limit. The money for mortgage loans is all private money, but with the government guarantee on smaller loans to less affluent Americans, the cost of these loans is lower, and lenders will underwrite more of them, which is what the policymakers intended to accomplish. During the housing bubble, the conforming limit rose as high as $417,000, but when the housing bubble burst, this limit was raised to $729,750 in markets like Coastal California that…[READ MORE]

California is not in another housing bubble yet, but prices are high relative to income thanks to low mortgage rates. Nobody wants to be a peak buyer, so fear of a housing bubble stops some people from buying homes, but are these fears well founded? Are we inflating housing bubble 2.0 (actually 4.0 in California)? Because houses seem so expensive and prices rose so rapidly, particularly in California where kool aid intoxication is a cultural addiction, many people are wondering if we are inflating another housing bubble. My answer to that question is no. We are not inflating a new housing bubble -- we are reflating the old one, but the interest rate stimulus used to reflate the bubble is…[READ MORE]




In Memoriam: Tony Bliss 1966-2012