The more certain people become that real estate prices can only rise, the most likely they are to make a foolish emotional purchase that ends in disaster. Repost from OC Housing News 2011-2016 The efficient markets theory postulates that market participants have equal access to good information and they make rational judgments based on the available data. The theory appeals to vanity because everyone likes to believe they have above average financial acumen and that they make rational decisions. Unfortunately, that isn’t the world we live in. People often fall victim to groupthink, pick and chose what data to believe and what to ignore, and seek the perceived safety of the herd when making financial decisions. The housing bubble was…[READ MORE]

Today is part 3 in the ongoing series on Ownership Cost: Ownership cost: income, payments and house prices Ownership cost: interest rates and down payment requirements Ownership cost: property taxes, insurance, Mello Roos, and HOAs Ownership cost: taxes and opportunity costs Four Major Variables that Determine Market Price Over the last two days we looked at the four main variables that determine home price: borrower income, allowable debt-to-income ratios, interest rates, and down payment requirements. Today we are looking at some of the minor cost inputs that work by influencing the major ones; property taxes and Mello Roos taxes, HOAs, and insurance. PITI lenders have an acronym called PITI, which stands for principal, interest, taxes, and insurance.To that we can…[READ MORE]

Many housing analysts suggest the lack of inventory is because potential sellers are concerned they can't find another home to buy. This is a red herring. The real reason is the lack of move-up equity. Repost from OC Housing News 2011-2016 Back in 2012, I postulated that homeowners would list their homes as soon as prices reached near-peak levels when they could get out without completing a short sale. After watching prices inflate to peak levels and the listings failed to materialize, I concluded that the lack of equity to complete a move-up is what kept supply from coming to market. Loan modifications kept homes off the market to facilitate the recovery. As these loan modifications expired, some of these…[READ MORE]

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