School ratings reflect where concerned parents move with their children, not the quality of education a school provides. Parents want to provide their children with every advantage in life. Those students with the best education generally enjoy higher wages and greater life achievement than students from school districts with low achievement scores. Parents react to inequities of our education system by shunning poor performing districts in favor of higher rated ones. Thus real estate values are higher close to better schools. Many parents shopping for a house obsess over the school ratings. They aren't chasing the ratings because of abstract correlations to a better life. Parents seek out these schools because they believe the quality of education is higher and…[READ MORE]

More housing supply will reduce the competition among workers for available properties. More housing supply is certain to bring down housing costs in the long-term. California Governor Jerry Brown recently proposed to reduce the regulatory burden on real estate developers to facilitate construction of more new homes to increase supply and make housing more affordable. A bevy of special interests line up against the proposal, and most homeowners in California would prefer to maintain the status quo because a shortage of housing benefits them personally. Most of the arguments put forth against providing new supply lack merit, and the alternative is to do nothing and watch as house prices climb beyond the reach of all but a select few citizens.…[READ MORE]

The housing market can’t absorb a sudden or large increase in mortgage rates without major declines in sales and perhaps even decreases in prices. Congress passed the Dodd-Frank financial reform in response to the housing bubble and bust. These new Dodd-Frank mortgage regulations will prevent future housing bubbles by effectively banning destabilizing loan products with interest-only and negative amortization features. Banning these loans was important because those loan programs enabled buyers to greatly inflate house prices from stable levels set by wages and mortgage rates. In a stable housing market, the equilibrium price is the highest price consumers can finance, so under pressure to complete more deals, lenders seek ways to increase the size of the loans lenders provide borrowers.…[READ MORE]

2015 was touted as the year of the boomerang buyer. Lenders and realtors prepared, and the financial media wrote the invitations, but the boomerang buyers failed to arrive. Many people criticize the financial media for running negative stories that "talk down the market," but realistically, the financial media doesn't have the power to move markets, and when they report an uncomfortable truth without the sugary spin, some people complain. When it comes to financial news, people only want to read good news, news that reinforces their belief in the correctness of their investments and reaffirms their faith in lifelong financial prosperity. Thus we have an entire branch of media that only presents good news. Any news that isn't positive must be…[READ MORE]

Many people sell when prices rise high enough for them to retire, move up, or extinguish their debts. Many people imagine the property ladder as a progression from a condo near work, to a house in the suburbs, to a mansion by the beach. Many people buy entry-level housing, and when prices rise high enough for them to pocket a 20% down for a larger property, they participate in the move-up market. If their income grew while they lived in their entry-level home, the step up can be quite luxurious. If their income didn’t go up much, they are probably better off refinancing into a lower-cost mortgage and staying where they are. The housing bubble severely disrupted the housing market.…[READ MORE]

Historically, properties in this market sell at a 18.5% discount. Today's discount is 28.5%. This market is 9.9% undervalued. Median home price is $321,500 with a rental parity value of $451,100. This market's discount is $129,600. Monthly payment affordability has been improving over the last 5 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $181/SF to $181/SF. Resale prices have been rising for 8 month(s). Over the last 12 months, resale prices rose 6.3% indicating a longer term upward price trend. Median rental rates increased $24 last month from $1,903 to $1,928. The current capitalization rate (rent/price) is 5.8%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three…[READ MORE]

I was going to write a real estate post to get back into the swing of things, but I decided instead to write about my vacation experience. It was more inspiring for me. I hope you enjoy it. My grandfather just celebrated his 99th birthday. Based on what I observed, he seems like he still has many more to come. He has clear memories of his life, he recognizes people and interacts, he still has tremendous hand strength, and he comments on how you just have to "keep going." At 99 I don't know how many more years he has left, so I try to go back and see him at least once a year. My wife and son are…[READ MORE]

Whether or not "responsible" homeowners lost their homes depends on how you define "responsible." A common theme in the financial media is that people lost their homes during the housing bust due to unemployment, probably because it's easier than acknowledging the bad loans and borrower profligacy. During the Great Recession (2008-2009), American businesses terminated more jobs than they created -- by a wide margin. More than 7 million people lost their jobs during a two-year stretch. I recently noted that US lenders completed 6,324,545 foreclosures over the last ten years. Does that mean the foreclosures were caused by the unemployment? To some degree, this is certainly the case. I bought a foreclosure from an unemployed construction worker in Las Vegas.…[READ MORE]

A house is worth no more than a buyer is willing to pay and no less than a seller is will to accept. Motivation of the Other Party Professional poker players spend hours studying people’s reactions to try to elucidate the cards their opponents are holding. In poker if players can determine what their opponents believe about the strength of their hands, they gain a significant advantage over the other players. If you know the motivations of the other party in a negotiation, you can respond by concealing your own motivation in hopes that the other party will either raise or lower their pricing to come to you. This is not deceitful; it is sound negotiating practice. The risk of…[READ MORE]

How much is a property worth? Is it whatever two parties agree to? Is value established by recent nearby comparable sales? Negotiating the sale of residential real estate is no more difficult that negotiating for any other product of service that doesn't have a fixed price; however, due to the colossal cost of houses, the process is more important financially than negotiating for other big-ticket items like automobiles. A mistake made while buying or selling a house could cost as much as a new car; sometimes such mistakes could pay for many cars. Skilled negotiators can obtain favorable pricing and terms without the assistance of a broker, but the novice who is inexperienced at this process often will not. Novice…[READ MORE]

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