Party — Boston
Well you know I dont get off on workin day after day
I wanna have some fun while Im here
I play the game when its goin my way
And theres nothin like a party when its kickin into gear
As some of you may have noticed, we are planning another IHB party on January 7, from 6:30 – 10:00 at JT Schmids at the District. Everyone had a great time at the last gathering in November, and we hope to make these gatherings a regular occurrence. I will have books available if anyone is interested.
Baby, its a party as long as youre there
Its a party, party, party!
The IHB has grown into a large community and a successful website. It happened by accident rather than by design. Zovall wanted a successful website. I just wanted to write. Neither of us had a grand vision for creating a website visited by over 3000 people a day (well, perhaps Zovall did…) It is funny how things kind of “just happen.” The Irvine Housing Blog has a page rank of between 4 and 6 (the rankings are somewhat volatile), and an Alexa rating of around 50,000 (this puts us in the top 50,000 viewed websites on the internet).
I did not have a full appreciation of what we accomplished until I started to market the book. I have been exploring all the methods of internet promotion people use to peddle their products and promote themselves. Just getting a hundred people a day to visit a website is a difficult task, and some people (including myself) resort to paying for the traffic.
One of the more interesting methods of generating publicity I came across is article marketing. I did not realize there was this whole world of consultants and guru wannabes writing little articles being posted all over the web. One of the most popular of these sites is EzineArticles.com. It is one of the top 250 websites according to Alexa. It is full of articles written by people trying to direct traffic back to their websites. It is fascinating to explore just to see who these people are and what they are trying to accomplish.
Anyway, I got into the act myself. Since I already had 90,000 words put together for a book, and two years worth of blog posts to draw from, it was relatively easy to chunk almost 200 short articles to publish on these article websites. I hope tp accomplish two things: 1. Drive traffic to the Great Housing Bubble book sales site without paying for it, and find new readers for the IHB. If this marketing campaign is successful, we may see some new faces in the comments. I suspect many of these people will be real estate trolls. Most of the real estate articles on these article marketing websites are realtors trying to generate internet business. Needless to say, my point of view on the real estate market will stand in contrast to most of the articles these directories have posted. It will be interesting to see if any of these people follow the trail of breadcrumbs back to the IHB.
Below the fold is a list of all the little articles I wrote to distribute on these sites. These will go out to the rest of the article marketing websites over the next 6 months. I have them scheduled to go out one per day until they are all distributed.
{book}
Does anyone have any real estate news they would like to share?
- In Financial Markets, the Herd is usually Wrong
Financial
markets are fickle monsters. Whichever way the herd moves the market
will go the other direction. During the Great Housing Bubble rally,
prices were pushed up the herd mentality. As prices r… - The Participation of Women in the Housing Bubble
One
of the unique characteristics of the Great Housing Bubble was the large
increase in market participation among women, sometimes single women
and sometimes as married women buying property on their… - Subprime Will Return, Alt-A is Dead
Like
a Phoenix rising from the ashes, Subprime lending will make a comeback.
Lenders focus on the three Cs: Creditworthiness, Capacity, and
Collateral. Creditworthiness is measured by one’s FICO score… - The High-End Suburbs Will Also Crash
The
course of a financial market, particularly the real estate market, is a
long and winding road full of twists and turns and unexpected outcomes.
It was certainly foreseeable that banks and builders… - The Loan Program for the Next Housing Bubble
Lending
during the Great Housing Bubble was too messy. There were too many loan
programs. Since real estate always goes up, and since people want
immediate access to this appreciation to spend it like… - Can You Still Make Money Flipping Houses?
Speculation
is a battle. The forces of greed and fear drive the financial markets,
and the speculator attempts to profit from these moves. Speculation is
not investment, although most do not understan… - Why Did We Have All Those Bailouts?
It
all starts in the housing market. Realtors peddle fantasies of
unlimited wealth that leads to people wanting to overpay for houses.
The desire for real estate at any cost provides an opportunity fo… - Housing Desire is Not Housing Demand
The
last line of defense for the housing bulls is the fallacy of pent-up
demand. Belief in this fallacy relies on people’s inability to
distinguish between desire and demand. Most people want a house…. - Why Were People Buying Houses While Prices Were Dropping?
There
is a great deal of price volatility in California. There are
significant periods of time where house prices will appreciate faster
than incomes increase. This is purely the result of irrational … - Does Home Appreciation Make It Easier to Move Up?
The
conventional wisdom in California real estate is that you buy a home,
and when it appreciates, you sell it and move up to a better home.
There is some truth to this idea, but not in the way most p… - Moral Hazard and Housing Bailouts
All
bailout measures have embedded within them serious issues of moral
hazard. Both lenders and borrowers were extremely foolish during the
real estate bubble. To bail them out at the expense of the w… - Getting Out of a Real Estate Transaction
Changing
your mind on a stock purchase is relatively easy. Stocks are very
liquid, and transaction costs are very low. However, changing your mind
about a real estate transaction is not so easy. Real … - Market Solutions for Preventing the Next Housing Bubble
There
is one potential market-based solution that would require no government
regulation or intervention that would prevent future bubbles from being
created with borrowed capital: change the method o… - What Did Not Cause the Housing Bubble?
To
fully understand what caused the housing bubble, one needs to examine
some of the purported causes that are not valid because these often
lead to incorrect policy initiatives. Bad policy initiative… - Do We Really Need to Maximize Home Ownership Rates?
There
needs to be an open discussion of the goal of maximizing home
ownership. Owning a home has become synonymous with the American Dream.
Every Presidential administration has had the expansion of h… - Personal Problems Resulting From the Great Housing Bubble
The
economic problems caused by asset price bubbles often lead to personal
problems in the wake of the deflating bubble. Statistics about
unemployment, foreclosure and bankruptcy are impersonal. The e… - Take Advantage of a Buyer’s Market
When
the market turned up in the late 1990s the market shifted. During the
last decline, the buyers had an advantage. During the bubble the
advantage went to the sellers. The seller’s market went on f… - What Happens in a Foreclosure?
Foreclosure
is the forced sale of a property owned by the borrower in order to
satisfy the debt(s) secured by the property. Foreclosure laws are
complex, and they vary from state to state. There are n… - Lingering Problems from the Deflation of the Housing Bubble
As
with any illness, the recovery is often plagued by symptoms of the
disease and unwanted side effects. The recovery from the Great Housing
Bubble will be no exception. The main problems will be expe… - How Does a Decrease in Home Ownership Rates Impact Residential Real Estate Markets?
There
is a strong correspondence to the growth of the subprime lending
industry and an increase in home ownership rates. This is a direct
result of lending money to those borrowers previously excluded… - Only a Fool Believes Real Estate Prices Always Go Up
In
2007 and 2008, house prices declined nationally for the first time
since the Great Depression. From 2002 to 2006, there was a massive
Ponzi Scheme of ever-increasing debt that fueled the Great Hous… - Factors that Influence the Price Declines in Residential Real Estate Markets
There
are a number of factors that will influence the timing and the depth of
the price decline. There are a number of psychological factors and
technical factors in play…. - Housing Market Speculation Was a Disaster
Many
people decided to speculate in residential real estate markets during
the Great Housing Bubble. Most were amateurs that had no idea what they
were buying or why prices were increasing. The only t… - Emergency Economic Stabilization Act of 2008 Did Not Work
In
early October 2008, the Congress passed and the President signed the
Emergency Economic Stabilization Act of 2008. The purpose of the bill
was “to restore liquidity and stability to the U.S. financ… - Housing and Economic Recovery Act of 2008 Did Not Work
In
late July 2008, Congress passed and the President signed the Housing
and Economic Recovery Act of 2008 that included the following
provisions: Federal Housing Finance Regulatory Reform Act of 2008,… - Hope Now? The Big Lies of the Housing Bubble
The
first of the numerous bailout programs was “Hope Now” introduced in
October of 2007. As the name suggests, Hope Now was sold to the general
public as a reason for them to hang on and continue maki… - Conspicuous Consumption – It’s a California Thing
So
what happens when you give poor people money? They spend it. The
stories of people who won the lottery and managed to spend themselves
into bankruptcy a few years later are classic examples of the … - The Despair Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
From a perspective of market psychology, it is difficult t… - The Capitulation Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
The transition from the fear stage to the capitulation sta… - The Fear Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
The most important change in the market in the fear stage … - The Denial Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
When the limit of affordability is reached and the pool of… - The Greed Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
In the greed stage of a financial bubble, the bullish sent… - The Enthusiasm Stage in a Financial Bubble
There
are many identifiable stages in a financial mania. These include:
enthusiasm, greed, delusion, denial, fear, capitulation, and despair.
At the beginning of the enthusiasm stage of a financial bu… - Precipitating Factors in Financial Bubbles
There
is often a precipitating factor causing the initial price rally that
pushes prices above their supported fundamental values. A bubble rally
is usually kicked off by some exogenous event, but it … - Behavioral Finance Theory
Behavioral
Finance abandoned the quest of the efficient markets theory to find a
rational, mathematical model to explain fluctuations in asset prices.
Instead, behavioral finance looked to psychology … - Efficient Markets Theory
The
efficient markets theory is the idea that speculative asset prices
always incorporate the best information about fundamental values and
that prices change only because new information enters the m… - Housing Bubble Deflation – The Stages of Grief
Markets
are the collective actions of individuals, and the psychology of the
markets can be broken down to the psychology of the individual
participants who make it up. When price levels in a financia… - Floplords – Flippers Turned Landlords
When
house prices stopped their dizzying ascent in the Great Housing Bubble,
many speculators found themselves with large monthly debt service costs
and no income to offset expenses. Many chose to qui… - How Does Leverage and Debt Impact Returns on Residential Real Estate?
As
a speculative investment, residential real estate has the potential to
make or lose vast sums of money due to the impact of financial leverage
(debt). Houses are typically leveraged at 80% of their… - Housing Bubble Market Psychology
Financial
markets are driven by fear and greed: two basic human emotions.
Rationality and careful analysis are not responsible for, or predictive
of, current or future price levels in markets exhibiti… - When Will Housing Prices Stop Falling?
House
prices became very elevated relative to fundamentals of income and
rent. Since these fundamentals underpin the housing market, prices will
continue to fall until they come into alignment with hi… - One Hundred Percent Financing Ruined the Housing Market
Once
100% financing became widely available, it was enthusiastically
embraced by all parties: the lenders suddenly had a huge source of new
customers to generate high fees, the realtors and builders n… - Adjustable-Rate Mortgage Resets Deflated the Housing Bubble
The
loan reset issue is not confined to those who bought late in the bubble
rally of the Great Housing Bubble. Many borrowers are homeowners who
refinanced to take advantage of more favorable loan ter… - Subprime Foreclosures Burst the Housing Bubble
The
first sign of trouble for the housing market was the implosion of
subprime in early 2007. Subprime borrowers stopped paying back the
loans they were given due to loan resets and payment recasts. T… - The Credit Crunch Deflated the Housing Bubble
Loan
standards vary over time as the credit cycle loosens and tightens. Many
borrowers in the bubble rally were qualified with low credit scores,
very high combined-loan-to-values, high debt-to-income… - Reactions to the Housing Bubble Burst
When
a bubble in a financial market pops, it does not explode in spectacular
fashion like a soap bubble; it is more comparable to a breached levee
which releases water slowly at first. Once the financ… - The Affordability Limit in Residential Real Estate Markets
Affordability
is the ultimate limit of any asset bubble. If prices are so high that
no buyer can afford them, there are no transactions and thereby no
market. The fear of many buyers in a financial ma… - The Supply Curve in Residential Real Estate Bubbles
The
supply curve is the opposite of the demand curve: sellers will make
very few units available at low prices, and sellers will make a great
many available at higher prices. Wherever these two curves… - Affordability Measures in Residential Real Estate Markets
Affordability
is a measure of people’s ability to raise money to obtain real estate.
It is often represented as an index that compares the cost to finance a
median house price to the percentage of the… - The Guide to Pick-a-Pay Option ARM Loans
The
Option ARM is one of the most complicated loan programs ever developed.
It was heralded as an innovation because it allowed people greater
control over their monthly payments, and it provided grea… - Four Lies Believed During the Housing Bubble
There
are a number of fallacies about residential real estate that either
affirm the belief in perpetually rising prices or minimize the fears of
a price decline. These fallacies generally revolve aro… - Eighteen Common Lies Realtors Tell
Realtors
are agents of sellers, and it is not uncommon for them to exaggerate
the income and appreciation potential of a given property to help sell
it. It is a realtor’s job to obtain the highest pos… - Debt-To-Income Ratios and Residential Real Estate
The
cumulative impact of the decisions of buyers is represented in the
debt-to-income ratios, how much each household pays to borrow versus
how much they make. Comparing the trends in debt-to-income r… - Price-To-Rent Ratios as a Measure of Residential Real Estate Value
Price-to-rent
ratios represent the cost of a dwelling unit relative to the cost of a
comparable dwelling unit. This ratio is also subject to the same
variability exhibited by the price-to-income ratio… - Price-To-Income Ratios as a Measure of Residential Real Estate Value
Price-to-income
ratios represent the amount borrowed relative to the incomes of the
borrower. There are many variables that impact house prices, and some
of the variability in prices over time can be … - Price Measurements of Residential Real Estate Markets
There
is no perfect measure for any broad financial market activity, and real
estate markets are one of the most difficult to measure accurately.
There are a number of methods for measuring prices and… - Housing Bubble – How to Identify One
Prices
went up a large amount during the Great Housing Bubble, but what makes
this price increase a bubble? To answer this question it is necessary
to accurately measure price levels and review histor… - The Great Housing Bubble – Who is Responsible?
Who
is responsible for the Great Housing Bubble? It is one thing to
identify who or what caused the bubble, but it is another to assign
responsibility and blame. Borrowers, lenders, investors, and the… - Visualizing the Real Estate Bubble
The
Great Housing Bubble can be visualized with a simple thought
experiment. Imagine a room with 100 people representing the pool of
subprime borrowers. These are new entrants to the market. They were… - The CDO Market Solution for Future Housing Bubbles
The
solution to preventing future bubbles in the residential real estate
market lies in the market for collateralized debt obligations and
conforming loans insured by the government sponsored entities… - Residential Appraisals and Collateralized Debt Obligations
There
are three methods of appraising the resale value of residential real
estate: the comparative-sales approach, the cost approach, and the
income approach. The comparative-sales approach uses recen… - Credit Rating Agencies and the Secondary Mortgage Market
Credit
rating and analysis of collateralized debt obligations and all
structured finance products are integral to the smooth function of the
secondary market for mortgage loans. A credit rating agency… - The Housing Bubble was a Credit Bubble
The
Great Housing Bubble was not really about housing; it was about credit.
Most financial bubbles are the result of an expansion of credit, and
the Great Housing Bubble was no exception. Housing just… - Why did Freddie Mac and Fannie Mae Go Under?
The
Federal Home Loan Mortgage Corporation, also known as Freddie Mac, was
created by Congress in 1970 to make possible a secondary mortgage
market to provide greater liquidity to banks and other lend… - How to Value a Vacant Home Building Lot
The
market value of an individual lot is equal to the revenue it could
generate when a residential housing unit is built on it minus the cost
of creating that revenue (construction cost, marketing, pr… - Valuation of Lots and Raw Land
The
valuation of land used for residential housing is mysterious and often
misunderstood. The valuation of lots and raw land requires a detailed
knowledge of construction and marketing costs as well a… - The Inflation Premium for Residential Real Estate
Residential
housing does have a cash-saving value, if financed with a fixed rate
mortgage. Over time, the growth in income and rents increases the cost
of housing for renters. The inflation of housing… - Negotiating Skills Make a Big Difference in Home Sale Profits
The
negotiating abilities of buyers and sellers and the overall market
environment greatly impact the profits from real estate. Sellers almost
universally believe their properties are worth more than … - The Appropriate Discount Rate for Residential Real Estate Analysis
The
investment value of a property can only be measured against other
investment opportunities available to an investor. If investors can
earn 4.5% by investing in government treasuries, they will dem… - How Much Does a House Really Cost?
When
contemplating purchasing a home, one should examine all of the costs of
ownership to budget properly for the expenses they will face. Most
people simply focus on the payment, and soon after they … - Buy a Home as a Place to Live
A
house should not be viewed as an investment. When investments go bad,
it causes financial hardship and anguish. When the bad financial
investment is a family home it ruins everything. The joyous mem… - Everyone Wants To Live Here… Not!
The
Great Housing Bubble witnessed many foolish ideas and beliefs about
real estate. Among the most foolish was the idea that prices went up
because everyone wants to live wherever they are. When rati… - Have California House Prices Always Been Crazy?
Volatility
in real estate prices is not new to California. During the 1970s, real
estate prices detached from typical valuations of three-times yearly
income seen in the rest of the country. Once resi… - Should You Worry About the Opportunity Cost of a Housing Downpayment?
The
initial equity in a home is equal to a purchaser’s downpayment. If a
buyer pays cash for a home, all equity is initial equity. There is an
opportunity cost associated with downpayment money. This … - Where Is The Epicenter Of The Housing Bubble?
The
epicenter of the Great Housing Bubble is located in Irvine, California.
One of the primary causes of the bubble was the lowering of lending
standards and the extension of credit to people who coul… - Fifteen Common Lies Realtors Tell
Realtors
are agents of sellers. It is their job to obtain the highest possible
sale price for a piece of real estate. The most common ploy realtors
use it to attempt to create a sense of urgency in a … - If You Are Underwater but Can Afford the Mortgage Payment You Should Hang On
Anyone
that can manage their payments should consider trying to hold on, even
if the house value has dropped well below their purchase price. There
are still a great many overextended homeowners and s… - The Pent-Up-Demand Meme Is Complete Nonsense
The
realtor spin about “pent up demand” is complete nonsense. There is
probably a lot of pent up desire for housing, but demand is measured in
dollars, and there is a major lack of demand with the abs… - Regulating the National Association of Realtors Would Help Prevent the Next Housing Bubble
The
sales tactics of the National Association of Realtors should be
examined and potentially come under the same restrictions as securities
brokers through the Securities and Exchange Commission. Real… - Regulating Loan Amounts Would Help Prevent the Next Housing Bubble
The
parameters of the forming limitations on the debt-to-income ratio and
combined-loan-to-value are essential to prevent bubbles in the housing
market and to prevent the banking system from becoming … - Strict Loan Documentation Standards Will Help Prevent the Next Housing Bubble
One
of the most egregious practices of the Great Housing Bubble was the
fabrication of income by borrowers that was facilitated and promoted by
originating lenders. Stated-income loan programs were wi… - Regulatory Solutions to Prevent the Next Housing Bubble
The
regulatory solution proposed herein is simple, yet far reaching. It
comes in two parts, the first is to limit the amount lenders can loan
to borrowers with a rather unique enforcement mechanism, a… - Changing Appraisal Methods would Prevent the Next Housing Bubble
Investor
confidence in the market for CDOs and all mortgages was shaken during
the decline of the Great Housing Bubble, and rightly so. Investors were
losing huge sums, and nobody clearly understood w… - Housing Bubble Economic Problems – Have We Seen the Worst?
The
foremost problem resulting from the deflation of the Great Housing
Bubble was the imperilment of our banking and financial system. The
bailouts emanating from Congress have mostly focused on keepi… - Housing Bubble Causes – Why Did It Happen?
The
Great Housing Bubble was caused by an expansion of credit that enabled
irrational exuberance and wild speculation. The expansion of credit
came in the form of relaxed loan underwriting terms inclu… - Future Housing Bubbles – Should We Prevent Them?
The
deflation of housing bubbles is very financially and emotionally
painful, and if possible, housing bubbles should be avoided. The pain
of the deflation of a housing bubble cannot be avoided by try… - In a Buyer’s Market the First Offer is the Best Offer
The
most counter-intuitive part of buying in a buyer’s market is to make
the first offer the best offer. Ordinarily sellers, or more accurately
the seller’s realtor, try to create a sense of urgency t… - Distressed Sellers – Should They Attempt a Short Sale?
A
short sale is a property closing where the proceeds from the closing do
not satisfy the outstanding debt on the property. The lender must agree
to accept less money at the closing table for the clos… - What to Do When the Sale Price of a Home Does Not Pay Off a Mortgage
Once
a price decline gets underway many buyers who were late to the price
rally find they are in a property worth less than they paid for it. As
prices continue to fall, many find themselves “underwat… - Buying and Selling Real Estate during a Decline
Residential
real estate markets generally move very slowly and trend in a single
direction for long periods of time. Once these markets reach an
inflection point, the direction of price movement chang… - The Housing Bubble – What Buyers Need to Know
During
the decline of house prices in the deflation of the Great Housing
Bubble, price levels will fall to fundamental valuations of historic
levels of appreciation, price-to-rent ratios, and price-to… - Foreclosures and Residential Real Estate Markets
The
number of foreclosures will affect both the timing and the severity of
the deflation of the Great Housing Bubble. It is foreclosures that
drive prices lower quickly. Foreclosures control the timin… - Unemployment and Residential Real Estate Markets
Prior
to the Great Housing Bubble, house price declines had only been
associated with economic downturns and increases in unemployment. As
people lost jobs, they lost their ability to make house payme… - It Is Different This Time… Not!
Each
time the general public creates an asset bubble, they believe the rally
in prices is justifiable by fundamentals. When proven methods of
valuation demonstrate otherwise, people invent new ones wi… - Residential Real Estate Markets Crumble from the Bottom Up
The
real estate market can be visualized as a massive pyramid. There are
very few multi-million dollar properties at the top of the pyramid, and
a large number of relatively inexpensive entry-level pr… - Home Price Appreciation and Transaction Fees – Only the Realtors Get Rich
Profiting
from house price appreciation requires getting more money from the sale
of a property than was originally paid for it and not having that
profit cancelled out by moving costs, transaction fe… - Buy Now or Be Priced Out Forever… Not!
When
prices rise faster than their wages, people can obtain less real estate
with their income. The natural fear under these circumstances is to buy
whatever is available before there is nothing desir… - Flip That House… Not!
During
the Great Housing Bubble, many speculators tried to make money through
trading houses. The vast majority of these traders were not
professionals but amateurs who thought they could be professio… - They Aren’t Making Any More Land… Not!
All
market pricing is a function of supply and demand. One of the reasons
many house price bubbles get started is due to a temporary shortage of
housing units. This is a particular problem in Californ… - Inflation and Home Equity – What Is the Relationship?
House
prices historically have outpaced inflation by 0.7% nationally. In a
normal market, this is the only appreciation homeowners obtain. This
appreciation is caused by wage inflation translating int… - Lies Realtors Tell – Ten of Their Favorites
Realtors
are agents of sellers. It is their job to obtain the highest possible
sale price for a piece of real estate. By law they cannot misrepresent
any facts about the property, but when it comes t… - Renting Versus Owning Residential Real Estate
Renting
versus owning is both an intellectual, financial decision and an
emotional decision. The financial decision is first and foremost an
analysis of the comparative cost of renting versus owning. … - Housing Bubble – Why Should Anyone Care?
Why
should anyone care about financial bubbles in general and the housing
bubble in particular? The first and most obvious reason is that the
financial fallout is stressful. Many people lost a great d… - Real Estate Bubble Fallacies – Can You Identify Them?
There
are a number of fallacies about residential real estate that either
affirm the belief in perpetually rising prices or minimize the fears of
a price decline. These fallacies generally revolve aro… - Subprime Containment Theory Was a Lie
Conventional
wisdom (or market spin) was that the risk of default from subprime
would not spill over into Alt-A and Prime loans. This argument was made
because these two categories have historically h… - Home Equity – What is It?
Many
people who purchase real estate have no idea what equity is, what
creates it, what destroys it, and what to do with it. People who
purchase real estate use the phrase “building equity” to describ… - Unaffordable House Prices, Will It Last Forever?
During
the Great Housing Bubble, prices detached from their fundamental
valuations and became very inflated. This price inflation created a
situation where affordability dropped to record low levels i… - Interest Rate Resets on an Adjustable Rate Mortgages Are a Problem
Many
people took out adjustable rate mortgages during the Great Housing
Bubble. After 25 years of steadily declining interest rates, people
forgot about, or never knew about the risk of rising interes… - Real Estate Investment versus Real Estate Speculation – What is the Difference?
Owner-occupied
residential real estate is viewed by many people as a good investment.
Realtors often use this idea as part of their sales pitch. This view is
fallacious and it is one of the beliefs re… - Low Mortgage Interest Rates, It Is a Bad Time to Buy A House
The
fluctuation in mortgage interest rates has implications for when it the
best time to buy and the best time to refinance a home mortgage. It is
a popular misconception that low interest rates make … - Real Estate Only Goes Up… Not!
The
mantra of the National Association of Realtors is “real estate only
goes up.” This economic fallacy fosters the belief in future price
increases and the limited risk of buying real estate. In 200… - Higher Interest Rates and Residential Real Estate Markets – What Would Happen?
A
key factor impacting the fundamental value of housing and thereby the
bottom is interest rates. Higher interest rates would devastate
residential real estate markets. When interest rates go up, the … - Debt-to-Income Ratios Impact on Residential Real Estate Markets
The
debt-to-income ratio is a measure of how far buyers are “stretching” to
buy real estate. Buyers have historically committed larger sums to
purchase real estate when prices are rising in order to c… - Hyperinflation and the Housing Market
The
Federal Reserve under Ben Bernanke began aggressively lowering interest
rates at the end of 2007 in response to the severe economic downturn
caused by the collapse of house prices and the related … - Housing Market Bottom – Price-to-Income Ratio Estimates
One
method used to evaluation residential real estate prices is the
price-to-income ratio. Since people borrow the vast majority of the
funds necessary to purchase residential real estate, and this bo… - Housing Market Bottom – Price-to-Rent Ratio Estimates
Comparative
rent is the primary method of evaluating the fundamental value of any
property. The price-to-rent ratio links the cost of ownership with the
cost of rental. This link is direct because pos… - Housing Market Bottom – Price Action Estimates
Most
market participants focus on price action. The price-to-price feedback
mechanism largely responsible for bubble market behavior gathers its
strength from an awareness of market pricing, and the w… - House Prices Fall – How Low Will They Go?
Despite
the difficulty in market forecasting, many who have examined the
residential real estate market point to continued declines through 2009
and beyond. The most likely scenario has resale residen… - Future House Prices are Dependent upon Future Loan Terms
Every
homebuyer operating in the deflation of the Great Housing Bubble needs
to consider what loan terms will be available in the future. At some
point, most buyers become sellers. The future buyer wi… - Housing Bubbles as Cultural Pathology
What
is a Cultural Pathology? There are certain beliefs if widely held and
acted upon by a group of people leads inevitably to collective
suffering and personal destruction. The housing bubble was a f… - Housing Bailouts are False Hopes
One
of the more interesting phenomena observed during the bubble was the
perpetuation of denial with rumors of homeowner bailouts. The bailout
rumors were false hopes provided by the government to all… - Fundamental House Value, What Are Houses Really Worth?
The
fundamental value of all housing prices is equivalent rents. Rents
define the fundamental value of real estate because rental is a direct
proxy for ownership; both rental and ownership provide for… - Flip That House – Houses Were Traded Like Commodities
Commodities
are items of value and uniform quality produced in large quantities and
sold in an open market. Although every residential real estate property
is unique, these properties became uniformly… - Fundamental House Value, What Are Houses Really Worth?
The
fundamental value of all housing prices is equivalent rents. Rents
define the fundamental value of real estate because rental is a direct
proxy for ownership; both rental and ownership provide for…
Hey IR, I live in Rhode Island but frequent your blog regularly because what is going on your coast is relevant to what is happening over here. I have directed many people to your site and will continue to do so as I believe it is one the few sources of knowledge and truth regarding the housing bubble, not to mention the shock and awe value I get out of some of the reads. Perhaps a future evolution of your product could include regional property analysis to broaden the appeal of the website?
Keep up the good work.
Happy Holidays!
Your website provides content-rule #1.
Advice for renters if landlord faces foreclosure
“This is becoming an all too familiar scenario for thousands of renters nationwide who have become the unintended victims of foreclosures. Banks are booting good tenants onto the streets with little to no notice after seizing a property from a delinquent owner, ignoring tenant leases.
In the most troubling cases, some families are forced into shelters for temporary housing because they have little savings to cover moving costs, first month’s rent and a security deposit at another apartment.
Fannie Mae this month pledged to change that with its new renter policy starting in January. The plan will allow renters living in foreclosed properties to sign new leases with Fannie while the property is up for sale, or give the tenants money to relocate. Fannie has yet to establish the length of the leases, and the amount of move-out assistance will vary by state and property.”
Article from the LA Times today…
Home prices expected to fall further in 2009
Growing unemployment, more declines in consumer spending and a particularly long and deep recession are expected to depress demand, economists say, with falling rents adding to the downward spiral.
Peter Y. Hong
December 27, 2008
Real estate experts who were troubled by a 10% drop in median home prices near the end of last year from the previous year probably were stunned by the 35% drop in values since then.
But that may be overshadowed by what they now worry lies ahead.
Growing unemployment, more declines in consumer spending and a particularly long and deep recession are expected to batter home prices even further next year, they said.
“As unemployment keeps rising, demand for housing softens. It will probably get worse before it gets better,” said Delores A. Conway, director of USC’s Casden Real Estate Economics Forecast.
And the ripple effect is pushing rents down, which in turn could put greater pressure on home prices and exacerbate the downward spiral.
Overbuilding in some areas and hard economic times have driven apartment vacancies up, and that is causing rents to stagnate or fall, Conway said.
In downtown Los Angeles, for instance, apartment rents were about the same in the third quarter this year as they were in the same period a year ago, halting the rise in rents in previous years, Conway said. In Hollywood, apartment rents fell 2% in the third quarter compared with a year ago, she said.
Data on single-family home rentals are less complete, but real estate agents in areas with numerous foreclosures say rents for houses are falling as the supply of vacant houses for rent exceeds demand.
Those falling rents could offset any boost to home sales from currently low interest rates and prices, economists said. For those able to qualify for mortgages and willing to buy a home, terms have become quite favorable.
At the end of November, Southern California’s median home sales price had fallen to $285,000, from $435,000 in November 2007. If median prices were to continue falling at that pace, they would be below $200,000 a year from now.
But even bearish forecasters don’t expect so severe a decline. More likely, prices in Southern California will settle in late 2009 at a level roughly 55% below their peak, said Christopher Thornberg, a Los Angeles economist.
That would amount to a price near $230,000, a level at which home prices would be roughly in line with incomes by historical norms.
The rapid drop in home prices this year has helped to bring previously inflated prices closer to normal levels. About 20% of Los Angeles-area residents could afford to buy a median-priced home at the end of September, according to a National Assn. of Home Builders index. A year before, only 2% could make such a purchase, based on area income levels.
The typical monthly payment for such a home in November would be just over $1,300, according to the real estate information service MDA DataQuick. That’s down from $2,049 a year earlier. Adjusted for inflation, the $1,300 monthly payment would be 37% below the typical payment in 1989, the peak of the previous real estate cycle, DataQuick reported.
Increased government intervention also may help to shore up home prices in 2009. One of the more aggressive measures would be a proposal to allow bankruptcy judges to order lenders to reduce principal and payments on troubled mortgages.
Supporters, including former U.S. Treasury Secretary Lawrence H. Summers, now a top economic advisor to President-elect Barack Obama, say such an expansion of bankruptcy powers would be a powerful tool to slow the flood of foreclosures.
UCLA economist Edward E. Leamer said further government action to stop foreclosures was essential for putting the brakes on falling home values.
“When you’re sick you need medicine for the disease, not the symptoms,” he said.
In housing, the disease is the deterioration of neighborhoods and home values as houses are foreclosed, abandoned and sold at greatly reduced prices, said Leamer, director of the UCLA Anderson Forecast.
He proposes creating a government agency to manage foreclosed or distressed houses as rentals for several years to keep the homes occupied until they recover some of their lost value.
“We need to eliminate vacancies and bring about their orderly sale,” rather than allow lenders to get rid of empty houses at fire-sale prices.
“The rapid drop in home prices this year has helped to bring previously inflated prices closer to normal levels. About 20% of Los Angeles-area residents could afford to buy a median-priced home at the end of September, according to a National Assn. of Home Builders index. A year before, only 2% could make such a purchase, based on area income levels.”
Yes, we definitely have to help keep prices unaffordable. No way we should let affordability get up to levels in the high 40s like it was through much of the 1990s.
And we should never ever have homes be as affordable as in many large expanding areas elsewhere in the US. No way we should have 60-70% of families able to afford homes. That would be uncalifornian.
/snark off
Funny how this fact based analysis is in direct opposition to the statements made by Tom Iovenitti (the President of Coldwell banker in OC) in the glossy real estate magazine included in the LA Times. This guy’s weekly bullish statements are always disguised as analysis, but they seem to always ignore what the real economists are saying. Is it just me or does anyone else feel that his statements border on being criminally negligent?
I meant to include Tom Iovenitti’s quotes from this morning:
“…Orange County home prices have nearly hit their low and may be on the rise again as early as next summer” and “the window of opportunity for those who want to take advantage of an unprecedented buyer’s market may not be open for much longer.”
A little self serving?
“nearly hit their low” meaning they haven’t.
“may be one the rise” or may not.
“may not be open” or may.
I do feel the same as you. I have been collecting some of his best “articles” or puff pieces for months. I plan on making copies of them and send them to him, the DRE, CAR, a few politicians and the SEC, and then I will do a blog post about it and to highlight just how wrong he was and is.
By this coming summer, the real estate market will be just as healthy as ever! There’s always a slowdown in the winter. After all, would you want to be sued because a potential home0buyer slipped on icy steps and broke their patella, or tibula rasa, or some other limb?
It’s just a temporary slowdown.
The volume of transactions doesn’t tell you much about the price.
There is a modest seasonality of both price and volume, but the price seasonality is being overwhelmed by the overall plunge.
If anybody should be sued, it’s Irvine Renter, for being a wet blanket! A person could freeze to death, wrapped in one of those things!
Even the anti-spam word submittal brings us a harbinger of better times! Give me my harbinger with everything on it!
Does this mean you are about to buy a home?
There is no harbinger … What really urkes me is that although I sold my home 18 months ago and told my realtor (and I thought friend) about these blogs and the information available, he no longer talks to me. Also, my former neighbors, who I wish well, put me off; they seem to be very jealous. I warned them, why are they mad at me???
If you want harbinger you hafta grind up some bulls first
*Everybody likes it but nobody wants to see how it’s made*
Man, I love Boston
RIP Brad Delp
Remember this one, 22 Honey Locust?
https://www.irvinehousingblog.com/blog/comments/columbus-lost/
Yes, being only a few tens of feet away from major power lines, this baby was also built on top of dirt contaminated with very permeable tricholoroethylene.
http://en.wikipedia.org/wiki/Trichloroethylene
Yet, after several months held as REO, it was sold to some knife-catcher recently for $20k over the bank’s asking price of $880k. Maybe IPO or others could shed some light on the reasoning behind this seemingly irrational move.
http://www.redfin.com/CA/Irvine/22-Honey-Locust-92606/home/7201191
Mebbe the figured if they birth a kid with 3 arms they’ll be able to retire on his NBA earnings-
Closing prices in Irvine for December are up 1% over November and at right about the same level as September.
Maybe that Tom Lovenitti dude is correct?
Low inventory + less foreclosure activity + really low mortgage rates = flat prices
http://www.ipoplaya.com/iposhiller.pdf
Not real estate news… This weekend I’ve been slogging thru the book “the black swan” which I heard about on the forums. It’s about our inablity to account for the unpredictable.. e.g. the turkey who thinks humans are great because he is fed for 1000 days who doesn’t know what’s going to happen on day 1,001 (Thanksgiving) and how to avoid being that turkey. (Borrowed from the library of course)
The reason I’m bringing this up is that the Pakistani ambassador was on TV the other night saying that Pakistan and India will not go to war because they are both democracies and modern democracies do no fight. I’m thinking I should send him a copy. Just because something hasn’t happened before is exactly why we should be worried that it could happen.
Cheers…
Not really related to Irvine housing other than the fact that the house is in Irvine and that there are some realy messed-up people out in the world.
http://news.yahoo.com/s/ap/20081228/ap_on_re_af/the_slave_next_door
That story makes me very sad, and very angry…
I am in Guanzhou, china today….guess what, the orange county register real estate blog is blocked from view.
That’s ‘cuz they’re filtering for obscenity…
I think the sentiment is that the market will recover this year, however it’s still early days.
Sharon Hollas – Langley Real Estate
Have you considered asking for a column? Either online or in one of the papers? They are actually quite starved for content, and many of them have been laying off writers.
You could probably get a few hundred per article. Newspapers like people who aren’t fulltime employees. If you don’t need a desk, an office, a health plan, or retirement arrangements, you might get the OC Register or the LA Times to bite. If you just want to annoy the Times, then you would write for LA Weekly or the Daily News.
Real estate news to share?
Driving down Ventura Blvd in the San Fernando Valley yesterday, there were tons of for rent signs. Both retail and office space available. Several times the vacancy rate of a few months ago.