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Author Archive: Irvine Renter

With the elimination of toxic mortgage products, high prices cause demand to falter, as it should; it also signals new mortgage regulations work as planned. Everyone wants to buy a home and see it go up in value. Most people assume the greater the increase the better because they don't want to believe there is a natural limit to home price appreciation determined by income growth. During boom times, people blithely assume the magic appreciation fairy doles out free money with no end in sight; however, that free money was created by the last buyer in the neighborhood establishing a new comparable sales value for everyone. Everyone cheers the new comparable sale while the last borrowers who set that value…[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]

The housing market under performed by nearly every measure from economists expectations in 2014 for a variety of reasons. The housing market rebounded strongly in 2012 from a six-year decline, and in early 2013, the market sustained the momentum it gained in 2012. Economists succumb to their optimism bias and failed to correctly forecast the interaction of negative circumstances that caused sales volumes to decline significantly in 2014. Most economists were predicting an increase in sales volumes and price as the market supposedly achieved "escape velocity" in 2012 and 2013. It hasn't worked out that way. Today's post examines the top 10 reasons the housing market underperformed in 2014. Notably absent from this list is the favorite laughable excuse of…[READ MORE]

Affordable housing programs are intended to provide good homes to low wage earners; instead, they provide government handouts to developers. Russ Wetherill, May 31, 2014 If there’s one thing I can’t stand… [full-disclosure: there’s actually a lot of things I tolerate, but don’t really like very much, like stop lights – what are those good for? Sure they prevent accidents, and save lives, but I probably waste an hour a week just sitting there fish-eyeing the people in the next car for signs of instability.] … but one thing that irks me more than most is phony compassion for the poor. The poor aren’t particularly wealthy, and thus generally not a very good source of revenue. In an ordinary universe,…[READ MORE]

The US foreclosure crisis contributed to the nation's jump in suicides, independent of other economic factors associated with the Great Recession. People form attachments to many things, and these attachments are the source of most suffering. I recently lost a $300 laser distance finder I use to play golf; I was so upset that I couldn't concentrate on my game for a few holes, but I got over it and accepted my loss. I was attached to that item, and losing it caused me to suffer. We've all experienced the grief of losing something we value, but the suffering caused by these attachments can sometimes be extreme. Ownership is a primal form of attachment, and becoming attached to your shelter…[READ MORE]

The housing recovery benefits the top 1% who have the cash and the credit to complete the sale. The other 99% continue to struggle. The rich get richer, or so they say. It's the rich who have the cash for a down payment and the good credit to qualify for a mortgage, so the one segment of the housing market seeing the most activity is the top 1%. For everyone else, the housing recovery is something they only read about in the financial media, but it doesn't really impact them. With the current political and financial regime in place, the 1% benefit the most. Federal reserve policy provides cheap debt to inflate asset values, and since the 1% owns most…[READ MORE]

Large real estate investors in California reject higher prices and stagnant rents and dramatically slow their purchases over the last 18 months. Sales are slow across the country, but particularly in California, because prices are too high. When prices were low enough that investors could obtain a sufficient yield, they bought them; in fact, they bought a great many of them, so many that they absorbed all the available inventory and drove prices up to the point that they no longer make sense on a cashflow basis. The theory was the owner-occupants would step up, pay higher prices, and sustain the market momentum. It hasn't worked out that way. In the past, whenever affordability became a problem, lenders would come…[READ MORE]

Negative equity is making ordinary homeowners into speculators in the options market, each betting on the continued reflation of the old housing bubble. An option contract provides the contract holder the option to force the contract writer to either buy or sell a particular asset at a given price. A typical option contract has an expiration date, and if the contract holder does not exercise their contract rights by a given date, they lose their contractual right to do so. An option giving the holder the right to buy is a “call” option, and the option giving the holder the right to sell is a “put” option. The writer of an options contract is typically paid a fee or a…[READ MORE]

Weak housing numbers will not cause the federal reserve to change its policies because aggregate debt is rising and mortgage rates are still low. In the minds of some people, unlimited support of inflated house prices is an absolute, not to be questioned or wavered from. If house prices are weak, stimulus is required. If sales are weak, stimulus is required. Since we no longer have a free market in anything, every gyration in house prices or demand is greeted with more calls for stimulus; however, this time, I believe the calls will fall on deaf ears. The federal reserve is not going to employ lower interest rates or unconventional stimulus measures to prop up flagging demand, despite pleas from…[READ MORE]

Homeless people settle in areas not favored by local communities; some municipalities forcibly remove the homeless leaving them no place to go. 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,…[READ MORE]


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In Memoriam: Tony Bliss 1966-2012