Author Archive: Irvine Renter

Banks reject most loan modifications because they really don't want to modify loans, and in many cases, the applicant doesn't deserve a break. If they had it to do over again, lenders wouldn't have made so many loans to weak borrowers during the housing bubble. Underwriting standards were nearly non-existent late in the bubble, and delinquency rates ran so high that lenders needed to reevaluate these borrowers after the loan was already made. The problem with underwriting after the fact becomes apparent when lenders reject three quarters of the reviewed loans. At the peak of the housing bubble, about three quarters of marginal loans to spotty borrowers probably shouldn't have been funded at all. The real reason for loan modifications…[READ MORE]

People should fear the consequences of being trapped underwater with an expensive mortgage on a cheap house. During the housing bubble, nobody feared debt. When people believe real estate prices can only go up, then they see no risk in buying because they believe they can sell the property for enough to pay the debt. This peace of mind is rational as long as everyone disbelieves the reality that house prices can go down. The housing bust ended the delusional complacency regarding mortgage debt. Millions of people discovered very painfully that house prices can go down, and they can end up owing more than they could possible repay absent recovery in house prices. With this pleasant delusion shattered, what emerges…[READ MORE]

Those who are no longer underwater but lack the equity for a move-up could sell if they wanted, but they are not listing their homes. For many loanowners, the last eight years in borrower purgatory felt more like borrower hell. They’ve been trapped beneath their debts, and any remedies for their situation would carry negative consequences of their own. Many people opted to strategically default, and I openly encouraged this action for years because it immediately relieved the emotional distress and put people on a path toward building a new future. However, those that did strategically default had to pay a price of a lowered credit score and lingering debt collection issues. Many others borrowers opted to sell short, but…[READ MORE]

Rent-to-own offers the opportunity for homeownership to those with low savings and bad credit, but the path is costly and many don't make it. Typical rent-to-own deals are a renter's path to poverty. For instance, renting furniture often requires the renter to pay many times the actual value of the item, and the only reason anyone enters into these agreements is because they have no savings and no better alternative, when in fact it's better to contact a Chinese furniture factory bases and buy furniture from them. This kind of imbalance in the relationship between renter and landlord is ripe for abuse (or profit). The lure of a rent-to-own deal is the ability to enjoy the house while saving money to…[READ MORE]

Government subsidy programs promote dependency, and they are expensive, but they provide a service needed by millions of people to alleviate poverty. In a frontier society, there are no bailouts. 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. We are no longer a frontier society in America, but our collective past still influences our attitudes and politics today. We have made much progress over…[READ MORE]

Properties in distressed communities surrounded by strong demand for real estate often provide opportunities for investors betting on an economic recovery. Distressed property investing is both a science and an art. Finding a distressed property market is not difficult, and anyone who understands business math enough to compute a rate of return can measure which markets are a good deal in today’s dollars -- the science. The art of distressed property investing is recognizing which of these markets the conditions are temporary and in which markets the distress is a long-term problem. I am bullish on Las Vegas because I believed the local economy would recover there because the distress was temporary. When looking in to investing there are many…[READ MORE]

Condo prices remain low until better alternatives are removed from the market and people are forced to compete for lower quality digs. Condo prices are notoriously volatile, far more volatile than house prices. But why is that? Is it because nobody wants to live in a condo? There's something special about a detached house on a clearly defined lot that a person can point to and say, "that's mine." But why should that matter to the volatility of condo prices? When you look at the cities where prices are most volatile, and when you look at the type of housing that's most volatile, one common element stands out: the less desirable a housing alternative is, the more volatile its price,…[READ MORE]

REO-to-rental companies enabled many foreclosed former owners to remain in their homes with lower monthly payments, a genuinely positive outcome. When I went out to Las Vegas to buy houses, the banks were feverishly foreclosing and selling properties for whatever they could get. The discounts from peak values approached 80% on some properties, and every house in town was cashflow positive. This was not a good time and place to be a homeowner, but it was a fantastic time to be an investor. When REO-to-rental companies hit the scene, they were vilified by the political left despite the good they were doing for individual families. Since these families were having their names removed from the title, and most of them…[READ MORE]

Peace-of-mind in retirement is attainable, affordable, and priceless. Stable income streams do more for us emotionally than does a large but shrinking pile of money. We are all born needing a lifetime of cashflow to meet our needs and wants. Except those lucky few born to parents who provide a lifetime of income, everyone else takes a job, and spends the majority of adult life working to pay the man. At some point each worker looks at when they will get Social Security and how much it provides. The timing and amount of Social Security is critical to retirement decision making as it's the last remaining source of stable cashflow for many retirees when they reach retirement age, for this…[READ MORE]

Restoring peak housing prices required record low mortgage rates during a period of weak growth and a falling home ownership rate. It's time to celebrate! National home prices reached the peak of 2006. Surviving homedebtors are regaining equity, surviving lenders have collateral backing behind the bad debt they've preserved for the last decade, and new homeowners are stretched to the max to repay the bad debts of previous generations, albeit at lower rates. Since the housing market peaked in 2006, the powers-that-be resisted the price decline with a variety of government relief programs, and most importantly, record low mortgage rates. The recession caused by the 2006-2009 housing market crash left many people unemployed and underemployed, removing their demand from the…[READ MORE]

Monthly Housing Report

In Memoriam: Tony Bliss 1966-2012