Since early last fall, I noted increasing affordability relative to rents. It's now cheaper to own than to rent in many OC markets and most housing markets around the country. However, rental parity is a measure of affordability comparing one method of providing housing versus another. Rental parity does not capture the bigger picture of affordability relative to incomes. As it turns out, all housing is becoming less affordable as both owners and renters alike spend more on housing as a percentage of income than they used to. This is a troubling trend. If people are putting more toward housing, then they are spending less on everything else. Perhaps landlords and bankers like this trend, but people who produce other…[READ MORE]

Where did the resale supply go? Will declining resale inventories cause prices to go up? Conventional wisdom holds that lower resale supply translates to high home prices. The months-of-supply metric developed by realtors to instill panic in potential buyers is based on this conventional wisdom. But the reason for the lower supply matters. In an appreciating market, lower supply is caused by increased demand. Supply is absorbed which forces buyers to reach higher or accept less quality for the money. That isn't what we have today. Demand is largely unchanged. Increasing demand is not absorbing the inventory, and sales volumes are still well below historic norms. The reduced supply results from an increase in approved short sales and a delay…[READ MORE]

Many people bought during the housing bubble because they wanted a home for their families. They stayed within reasonable debt-to-income guidelines and used fixed rate mortgages. Unfortunately, the prudent were small in number, and most of them have obtained loan modifications to make their super-sized debts manageable. Many other people bought during the housing bubble because they saw their house as an investment, or worse a cash cow they could milk periodically to supplement their spending. These people saw rising house prices as a way to cash in on the American dream. They believed their houses would go up in value forever and provide them with everything their hearts desired. We see this as folly now, and a few of…[READ MORE]

Below is the Update for the OC Housing Market as of December 31, 2011. It is free to download. You can also sign up to have this report emailed to you on a monthly basis. [raw_html_snippet id="newsletter"] The Real State of OC Real Estate OC Housing News monthly market report and newsletter provides a clear picture of the health of the housing market. Both buyers and sellers find the information timely and relevant to their decision to buy or sell a home. The collapse of the housing bubble clearly showed valuation matters, and real estate does not always go up. If your new to this report, I suggest you start on page 45 with the Orange County housing market general…[READ MORE]

When I was young and much more liberal than today, people told me I would become conservative when I got older. I didn't think it would happen. But when I look at how far the pendulum has swung to the bailout-and-take-care-of-me side, I wonder if we haven't lost our way. Consumers outnumber producers, and everyone wants a free ride. Enough already. The 'Take Care of Me' Society is Wrecking the USA By MAUREEN MACKEY, The Fiscal Times January 28, 2012 You’ve played by the rules. Worked hard to put yourself through school. You’ve gotten a decent job and you pay your taxes. You’re faithfully paying down your mortgage and saving money in a 401(k) – all to secure your finances…[READ MORE]

When the housing market nears the bottom, despair dominates. Prices have fallen for five straight years and hover at 10-year lows, and real estate is out of favor as an investment class. Evidence of the market's despair crops up in articles extolling the virtues of renting. Articles about renting were common from 1994 to 1996, and at the time, renting was a good idea; prices had been falling, and there was little reason to believe they would be going up soon, just like today. However, in the big picture, people who bought in 1994 to 1996 were rewarded. They suffered for the first year or two of ownership, but when prices bottomed in 1997, the contrarians who bought early found…[READ MORE]

It's no secret that I don't particularly like the practices of the NAr. They consistently embarrass themselves and their members by putting out false and misleading data and press releases. Credibility comes from telling the truth, even when that truth may be unpopular or contrary to one's own interests. The NAr has consistently lacked credibility as they have proven unwilling to say anything negative about the prospects for real estate despite a massive decline in sales volumes and resale prices. They consistently told buyers to purchase homes as sound investments when prices were inflated and falling. From 2007 through 2011, prices were too high in most markets to warrant purchasing for cashflow investment purposes, and with falling prices, there was…[READ MORE]

Last fall the major banks all increased their foreclosure activities. Some banks may feel they are strong enough to take the necessary write downs, and B of A appears to be desperate for cash. Perhaps in anticipation of the Robo-signer settlement deal or perhaps out of a desire to clear out the shadow inventory, for whatever the reason, lenders are increasing foreclosure rates everywhere. Foreclosures on the Rise Again Published: Thursday, 16 Feb 2012 | 12:04 AM ET By: Diana Olick CNBC Real Estate Reporter After a year-long reprieve from rising foreclosures, the numbers are going up again. One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a…[READ MORE]

Loan owners with big incomes believed house prices were going up forever. They bought houses they could barely afford because they believed the additional cost of ownership over renting would provide them with a return on their investment. Buying a house was part utility through providing shelter and part investment through capturing rapid appreciation. Of course, the actions of buyers willingly overpaying for houses drove prices higher in a self-fulfilling prophesy. Like all Ponzi schemes, it went on until the supply of greater fools was exhausted and lenders stopped enabling the insanity. Now that high-end loan owners are accepting the fact that their brilliant investment was folly, many of them are choosing to dump their investments. When the investment no…[READ MORE]

Anyone who has read my writing before knows I don't think principal forgiveness is a good idea. I believe principal forgiveness is the worst policy option because foreclosure Is a superior form of principal reduction. I don't think I am being cynical when I say that the Obama administration is pushing principal forgiveness in an attempt to buy votes. Any economic benefit the policy may have is outweighed by the moral hazard it creates and the unfairness of the distribution of benefits. The most irresponsible borrowers obtain the greatest benefit from this policy. By rewarding them and buying their votes, we are letting the Ponzis take over. If we let the Ponzis run our political system, we will all be…[READ MORE]