Contact Shevy Akason at (949) 769-1599

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Author Archive: Irvine Renter

Retiring baby boomers helped lower the labor participation rate, and with fewer workers, housing demand is far less than it should be. During the housing bubble, many astute observers of the market outlined the various reasons housing was going to crash: mortgage resets, delinquencies and foreclosures, and an economic contraction caused by the collapse of mortgage equity withdrawal spending. While these obvious problems came to the forefront, a less obvious housing headwind went unnoticed, and now this headwind holds the market down: retiring baby boomers. Ordinarily when someone retires, a new worker is hired to take their place. Similar to a move up market, a retiring senior often vacates a high-level position in an organization, and hiring a replacement causes…[READ MORE]

Every asset is salable at a price. Adjusting to a market without government guarantees has a cost, but 30-year mortgages would still exist. Most people recognize the GSEs should be eliminated because their implied government backing is now explicit. These entities are not private entities, although many private investors would like them to be so they could profit off the government guarantee. Whenever people start discussing how to reform or terminate the GSEs, invariably someone will try to scare everyone by claiming US housing finance will cease to function, the housing market will crash, or some other nonsensical doomsday scenario will come to pass. I suspect the current round of fear mongering over GSE reform comes from GSE investors who…[READ MORE]

NAr revises previously reported data by 25% to 30% but claims their analysis based on faulty data was still good. They have no shame. I write a monthly housing market report each month, so I understand the need to provide timely and accurate data and reporting. It's a big task, and it requires attention to detail, but beyond that, reporting data accurately requires the desire to do so, something the NAr completely lacks. The National Association of realtors is dedicated to advancing the interests of listing agents who dominate the organization. Their primary focus is to generate real estate sales and commissions that provide income for its members. realtors don't care if the data their organization publishes is accurate; their…[READ MORE]

Progressives like Keynesian monetary policy and inflation in general because it's a stealth tax on the rich, Conservatives oppose it for the same reason. An acquaintance of mine challenged me to read Paul Krugman's blog for a few weeks; in exchange he would read Ayn Rand's Atlas Shrugged. As I like exposing myself to other points of view, I started reading Krugman's work. As an objective reader searching for good data and analysis, I appreciate Paul Krugman's wonkish posts, but his over-the-top partisanship, juvenile name-calling, and extreme arrogance make his writings a turn off to anyone who's not a partisan Democrat. I find myself selectively skimming past the partisan bullshit searching for kernels of truth. There’s Something About Money (Implicitly…[READ MORE]

Borrowers can save money in the short term with ARMs, but these loans carry significant risks, particularly when mortgage rates begin to rise again. If someone buys in a cashflow property with an 8% yield, it's an investment with a fairly predictable return. The soundness of the investment springs from it's boring predictability, not from the more exciting caprice of resale price or speculation. Cashflow investments are wise, whereas speculative investments are lucky. During the housing bubble, many people made a great deal of money because they had the good fortune to buy right before a financial mania took hold. Most participants thought they were savvy investors, but in reality, they were just lucky: they bought the right asset at…[READ MORE]

High foreclosure rates are caused by many factors, but by far the largest is a high loan-to-value ratio because it limits the borrowers options in default. Defaults are loan disease. There are many causes of the disease, from unemployment to loss of market value, but there is only one symptom that lenders care about — defaults. Patients in good health cure from disease more often than those in poor health. Borrowers with equity cure at better rates than those who are underwater or facing a rental savings enticement, and many who see better futures in different circumstances will walk away from the debts and succumb to the loan disease. In borrower's terms, the cure for loan disease is delinquency; unfortunately,…[READ MORE]

The FHA is lobbying the Justice Department on behalf of lenders who want to make bad loans with impunity. At the most basic level, lenders, realtors, and borrowers inflated a housing bubble because they got everything they asked for. From 2004 to 2006, there were no barriers whatsoever to complete real estate transactions as inventory was abundant, prices were financeable, and buyers were motivated. It was the best of all possible real estate markets. Right now everyone who wants to see more transactions at higher prices is complaining about stringent lending standards. In their minds if qualifications were looser, more people would qualify for home loans, and they would make more money. They would be quite content to enjoy the…[READ MORE]

As houses get more expensive, marginal buyers are priced out, and without toxic mortgage products to help, a depleted buyer pool causes low sales volumes. To make people feel good for the holidays and to fill the void in real estate news from November to February, reporters entreat us to optimistic news stories and wild projections of how great the coming year will be for home sales and prices. Each year the usual suspects predict rising sales and prices, even if the optimism is completely unwarranted by market conditions. In October 2014 I asked Will the CAr 2015 housing market sales forecast be way off? After completely missing sales forecasts for 2013 and 2014 the California Association of realtors actually…[READ MORE]

Money can flow out of a high-end real estate market for many reasons, most of which relate to government policy rather than natural market forces. Local residents who don't own real estate do not benefit from an influx of foreign investment because that investment drives up house prices and forces local residents to pay more. As a result, grass-roots political opposition grows to oppose foreigners buying local real estate -- wherever that locality may be. If legislators want to see less foreign investment in single-family residential real estate, they can tax it. Taxing a commodity or a behavior makes it more expensive, which thereby lowers demand, and if legislators selectively tax non-residents, the policy lowers the prices for local owner-occupants…[READ MORE]

A dramatic and unexpected decline in new home sales is either the sign of a market top or an opportunity to get a great deal this spring. Has the OC Housing market peaked for this cycle? Is the current slowdown the sign of a major change in the market, or is it merely a lull that represents a buying opportunity? There are good arguments for either case. The economy is improving, and although the new jobs aren't necessarily supportive of housing, increased economic activity generally supports house prices and sales. Further, mortgage interest rates are near record lows, so houses are more affordable on a monthly payment basis today than they were in mid 2013 when mortgage rates hit 4.5%.…[READ MORE]

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