Author Archive: Irvine Renter

If you were selecting a real estate agent to represent you, would the agent's style matter more than their competence? A very high percentage of people who use a real estate agent to buy or sell a home use the first agent they contact and don't shop around. This fact is largely what keeps bad agents in business. Due to the way most people select agents, being found is more important than being good; style is more important than substance. A new firm in New York fully embraces the current system. Fashion Realty, Inc. Launches a Real Estate Brokerage Firm in NYC With "Style" A newly-launched real estate brokerage firm in New York City takes a new and unique approach…[READ MORE]

When lenders deny short sales, it removes MLS inventory from the market and contributes to low sales volumes and inflated house prices. I've mentioned many times that the housing market bottomed in early 2012 because lenders changed their policies toward delinquency and foreclosure, not because fundamentals of the housing market improved. Rather than foreclosing on delinquent borrowers, lenders began offering generous loan modification terms to cure the delinquency -- at least in the short term -- thus can-kicking became official bank policy. Another policy lenders implemented had less fanfare but was equally as important as loan modification in drying up the MLS inventory: lenders stopped approving short sales. When a seller can't obtain enough money to repay the loan at…[READ MORE]

Data shows very few recent mortgage originations were from borrowers with a previous foreclosure. Over the last several years, the financial media periodically runs stories about the return of boomerang buyers, those who lost their homes in foreclosure but bought again. From the beginning I flatly stated this group would not participate in the housing recovery, and they would not be a significant source of demand. In the most complete study conducted on the behavior of boomerang buyers, the authors concluded that "Only about 10% of borrowers with a prior serious delinquency regain access to the mortgage market within 10 years of their default." So why did so many analysts think it would be different after the housing bust? Most…[READ MORE]

Lenders are willing to provide HELOC money requiring no payments until the time of sale if the borrower splits the remaining equity. Are there any circumstances under which homebuyers would be willing to share in the upside of home price appreciation? I wrote about the concept of equity share as an option for housing bears. In that program, an investor puts up half the down payment in exchange for half the net profit at sale. Anyone who believes house prices will not rise would strongly consider such a deal because someone else ties up their money in the property rather than the buyer. Of course, then the property is burdened by a third-party equity claim, which most people don't find…[READ MORE]

Most markets trade at or below rental parity, and those with a long-term ownership horizon obtain significant benefit to owning. Renting versus owning is both an intellectual decision and an emotional one. The intellectual decision is first and foremost a financial analysis of the comparative cost of renting versus owning. The basis of this analysis is a price point called rental parity. Rental Parity is the price where rent is equal to the monthly cost of ownership. When rent and the cost of ownership are imbalanced, it often signals individual properties or entire markets are overvalued or undervalued. I expanded on the rental parity concept to create detailed housing market reports, and develop the analysis of each for-sale property on…[READ MORE]

North Tustin with its large, opulent homes consumes more water per capita than any other community in Southern California. Water Board Report: Small OC Town Using More Water Per Day Than Beverly Hills April 8, 2015 10:29 PM COWAN HEIGHTS ( — As the state, ever drought-weary, continues to crack down on water-abusing communities, a neighborhood in Orange County has been exposed as having used more water per person and per home than any other community in either Los Angeles or Orange counties. The neighborhood of Cowan Heights sits north of Tustin, and numbers analyzed from the state water board say the community there is using up double the amount of water Beverly Hills is currently using. The report suggests…[READ MORE]

High house prices are demanded by foolish Ponzis, enjoyed by real homeowners, and favored by politicians pandering to both groups. Why are high house prices the keep rising considered a universal good? Does everyone benefit if house prices are high and keep moving higher? The assumption is that ever-rising house prices are good, and that a decline in house prices is bad. Ordinarily we cheer when the price of an essential product goes down, and complain when it goes up. Recently gasoline fell from $4 per gallon down to $3 per gallon, then it rebounded back up to $4 per gallon quickly. I felt good about the drop from $4 to $3, but when price went back up, I was…[READ MORE]

Rather than being priced out forever, the real risk in today's housing market is getting priced in for a very long time. Since lenders learned to can-kick their way out of any bout of irresponsible lending, they created a new phenomenon in modern real estate: priced-in forever. In a bygone era prior to the housing bubble, it was nearly impossible to be priced-in to your home for very long. Adequate down payment requirements coupled with stable and steadily rising prices made it unlikely a homeowner would ever be unable to sell and pay off the mortgage. If a borrower became financially distressed and started missing mortgage payments, either they would sell voluntarily, or the lender would foreclose to force a…[READ MORE]

Buyers can't be priced out forever, but many potential buyers can be priced out for long periods of time. Buy Now or Be Priced Out Forever! Does everyone remember that refrain from realtors during the housing bubble? It's not as effective of a sales tactic as it used to be, but some agents still use it. When prices rise faster than their wages, people can obtain less real estate with their income, so there is a natural tendency for people to react with urgency because they don't want to be forced to accept lower quality accommodations later on. When people react to the fear of being priced out, they often act irrationally and buy whatever is available, and in their…[READ MORE]

High degree of market overvaluation suggests for the foreseeable future house prices will appreciate far less than the average of the last 40 years. My favorite measure of value for individual properties and the entire market is the ratio of rent to home ownership cost. I prefer this method because it incorporates the effect of mortgage rates and more closely emulates the conditions people face when they decide whether to rent or own. Another method economists examine is the ratio of price to rent. It's a blunt instrument because it doesn't capture the impact of mortgage rates, but demonstrates the imbalances and distortions caused by record-low mortgage rates. Home shoppers today are right to be concerned about another housing bubble.…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012