ANAHEIM

Future investor sales will limit appreciation

 ANAHEIM, NEWS
May 222013
 
Future investor sales will limit appreciation

In a normal and healthy real estate market, sales are dominated by owner occupants. These owners accumulate equity through paying down a mortgage and price appreciation, and they execute move-up trades seven to ten years after they buy their starter homes. Unfortunately, that isn’t the market we have today. For the last several years owner occupant sales have been stuck in a holding pattern at 1990s levels. Orange County home resale volume very weak by historic norms, and the only increase in sales volumes over the last couple of years has come entirely from investors. Unlike owner occupants, investors don’t [Read More...]

Did stopping HELOC abuse kill the economy?

 ANAHEIM, NEWS
Apr 222013
 
Did stopping HELOC abuse kill the economy?

Economists are busy studying the “wealth effect” to determine how important it is to the country’s economic health. Unfortunately, they don’t really understand the mechanics behind what they are studying. The basic assumption economists make is the people spend more of their liquid savings when assets they own increase in value. This basic assumption is flawed. In my opinion, The “wealth effect” is the most dangerous euphemism in economics. What happens in the real world is not an increase in spending of savings, but an increase in Ponzi borrowing based on inflated asset values. It’s the behavior that lead so [Read More...]

Great monthly payment affordability is driving sales

 ANAHEIM, NEWS
Apr 172013
 
Great monthly payment affordability is driving sales

Is buying based on a low monthly payment a good idea? In the past with toxic financing products fouling the market, many buyers used affordability products to borrow much more than they could reasonably afford. Those are the same people who are currently underwater clinging to their loan modifications hoping that prices rise so they can sell before their payments go back up. In general, buying based solely on monthly payment is a path to destruction. However, in today’s housing market, the monthly payment affordability is based on stable 30-year fixed-rate mortgages. Those loans won’t blow up in the future [Read More...]

Mortgage lending standards continue to tighten

 ANAHEIM, NEWS
Feb 212013
 
Mortgage lending standards continue to tighten

Realtors, builders, mortgage brokers, basically anyone with a financial interest in a real estate transaction is complaining that lending standards are too tight. From the beginning of these complaints four years ago, it’s all been complete bullshit. Lending standards were completely abandoned during the housing bubble as all the parties allowed greed to overcome their better judgement. Any return to sane standards was going to require tightening — a lot of it. The market first reacted to a huge wave of defaults by tightening standards suddenly and violently in a massive credit crunch in August of 2007. This effectively dried [Read More...]

Lenders will target near-equity squatters for future foreclosures

 ANAHEIM, NEWS
Jan 242013
 
Lenders will target near-equity squatters for future foreclosures

Banks are letting delinquent borrowers squat rather than foreclosing on them and booting them out. At first, it was a self-preservation measure by the banks taken out of desperation when the first wave of foreclosures caused prices to crash. However, now the banks are content to allow squatting, even for years, because squatters do not become MLS supply weighing down prices. The houses occupied by squatters are effectively removed from the market creating an artificial shortage. The lack of MLS homes for sale and high affordability is causing prices to rise, and as prices go up, banks have collateral backing [Read More...]

California records its one millionth foreclosure

 ANAHEIM, NEWS
Jan 172013
 
California records its one millionth foreclosure

Everyone active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks go “all in” betting on success of loan modifications to resolve their prior bad loans. In the interim, delinquent mortgage squatters are enjoying their free ride. It’s unlikely that conditions will change in 2013. Foreclosures are likely to be fewer in number, not because the banks lack delinquent borrowers, but with the disincentives to foreclose and the new constraints from the Homeowners Bill of Rights, lenders will opt to permit squatting and allow [Read More...]

Banks go “all in” betting on success of loan modifications

 ANAHEIM, NEWS
Dec 192012
 
Banks go "all in" betting on success of loan modifications

Lenders in California are placing their faith in the success of loan modifications. Of course, to them success can mean something different than what it means to a loanowner. Success to a lender can be defined as obtaining a few more payments prior to a short sale or foreclosure. With prices rising, lenders benefit two ways from loan modifications. First, they get cashflow from non-performing loans. They know this is likely temporary as about 50% of loan modifications fail each year, but some cashflow is better than none. Plus, since prices are rising, when they do finally approve a short [Read More...]

Transit district stuck with house after former GM strategically defaults

 ANAHEIM, NEWS
Dec 062012
 
Transit district stuck with house after former GM strategically defaults

Bad financial management decisions at California public agencies is nothing new. Orange County declared bankruptcy in the 1990s due to gross financial mismanagement, and the California state budget continues to be a mess. Sweetheart deals for public officials is nothing new here either. Public employees in the City of Bell paid themselves salaries approaching a million dollars a year, and California public worker’s unions negotiate compensation packages far in excess of the value they provide. With the culture of corruption rampant in California, it isn’t surprising that minor agencies are also doling out the largess. AC Transit stuck with ex-manager’s [Read More...]

Bernanke pledges to do what he can to reflate the housing bubble

 ANAHEIM, NEWS
Nov 192012
 
Bernanke pledges to do what he can to reflate the housing bubble

The monthly housing market reports I publish each month became bullish late last year due to the relative undervaluation of properties at the time. I was still cautious due to weak demand, excessive shadow inventory, the uncertainty of the duration of the interest rate stimulus, and an overall skepticism of the lending cartel’s ability to manage their liquidations. In 2012, the lending cartel managed to completely shut off the flow of foreclosures on the market, and with ever-declining interest rates, a small uptick in demand coupled with a dramatic reduction in supply caused the housing market to bottom. Even with [Read More...]

Government and lender solutions focus on loan modifications and short sales

 ANAHEIM, NEWS
Nov 132012
 
Government and lender solutions focus on loan modifications and short sales

Based on their recent behavior, it’s safe to conclude the government and the banking cartel believe they can resolve all their ills through loan modifications and short sales. Despite a huge shadow inventory of delinquent loans, lenders have slowed their foreclosure processing, and they show no signs of picking up the pace despite the recent increase in delinquencies likely caused by people opting for a free ride. I believe lenders will ultimately be forced to push out committed squatters in a foreclosure, but I also believe that lenders will also try and fail at every other alternative first. The push [Read More...]

Ravings of an entitled whiner struggling to keep a house she can’t afford

 ANAHEIM, NEWS
Oct 292012
 
Ravings of an entitled whiner struggling to keep a house she can't afford

The housing bust is littered with sob stories about people losing their family homes. As I noted Responsible Homeowners are NOT Losing Their Homes. To see the truth in this statement, one needs to have a clear definition of “responsible homeowner.” A “responsible homeowner” is a buyer who, if they utilized financing, did not stray from the conservative parameters set forth by lenders (prior to the bubble) and financial planners. This includes using a maximum 28% debt-to-income ratio on the mortgage, at least a 20% downpayment and fixed-rate conventionally amortizing financing. Few who fit this definition are going to lose their [Read More...]

Despite record low mortgage rates, home sales volumes are weakening

 ANAHEIM, NEWS
Oct 042012
 
Despite record low mortgage rates, home sales volumes are weakening

The spring rally is over. Every year prices and sales volumes increase from January through August, then they decline for the remainder of the year generally hitting bottom on the last business day in December. The pattern repeats every year, and it’s not new or surprising. realtors generally take advantage of this phenomenon to call the bottom every year and to stoke fears of being priced out to generate more spring and summer sales. By fall, many buyers stop looking, particularly those with families who don’t want to disrupt their children by moving during the school year. Over the last [Read More...]

Fed buys more mortgages to keep interest rates low

 ANAHEIM
Sep 142012
 
Fed buys more mortgages to keep interest rates low

Forecasting interest rates is very difficult. I haven’t had much success at it. The first challenge is to figure out what the market would do if left to its own devices. With the plethora of variables in play, that’s no easy task. Further complicating the problem is the federal reserve which will often intervene to make interest rates do the exact opposite of what a natural market would do. It’s very difficult to figure out when the federal reserve will move in and mess everything up. For example, when the housing bubble burst, a free-market would have taken mortgage interest [Read More...]

Future house prices, “It’s up to the banks, stupid.”

 ANAHEIM, NEWS
Aug 162012
 
Future house prices, "It's up to the banks, stupid."

Economists and housing market observers pour over sales numbers each month to divine the direction of future house prices. Everyone has their pet theories on whether house prices have bottomed or if there is more pain ahead. Many rely on these numbers as gospel forgetting that these numbers are generated by the actions of people responding to the conditions around them. Change the conditions, and the numbers can change quickly. CA – Foreclosure Outcomes For example, in February of 2012, lenders across the Southwest abruptly stopped processing their backlog of foreclosures, not because they exhausted the supply of delinquencies but [Read More...]

Does increasing payment affordability make houses a bargain?

 ANAHEIM, NEWS
Jul 272012
 
Does increasing payment affordability make houses a bargain?

When I checked bankrate.com yesterday, the rate on a 30-year mortgage was 3.55%. That is the lowest reading I have ever seen, and we should be seeing news reports about new record low mortgage interest rates. These new low rates are making my reports on affordability show housing is a screaming buy in many cities even here in Orange County. However, super low interest rates have a problem. What happens when interest rates go up? Will rising interest rates cause house prices to crash? I don’t think interest rates will rise fast enough to cause house prices to crash again. [Read More...]

Low, stable house prices key to consistent economic growth

 ANAHEIM, NEWS
Jun 062012
 
Low, stable house prices key to consistent economic growth

Low house prices are good for the economy because low house prices make for low loan balances and less debt-service. When borrowers have excessive home debt, the excess comes directly out of disposable income. Since consumer spending is such an important component of the economy, the excess interest payments are a direct financial drain. As long as the debt on real estate is excessive and capital is tied up in non-performing assets, the economy will suffer. It’s really that simple. The solution is equally simple: foreclose on delinquent borrowers, wipe out the debt, and extract the remaining capital value. With [Read More...]

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