There is no perfect measure for any broad financial market activity. Markets for stocks, bonds and other securities are the most widely reported and measured financial markets. It is relatively easy to measure activity in these markets because all sales are recorded at a few central exchanges and the “products” are uniform (one share of stock is equal to another). In contrast, real estate markets are much more difficult to evaluate. Real estate transactions are recorded into the public record in thousands of locations across the country. Keeping an organized database of these records is such a daunting task that the title insurance industry has taken this responsibility as part of its business model, and many people are devoted to the arduous task of obtaining and organizing these records on a daily basis. Real estate does not have the uniformity of stocks or other financial[READ MORE]
Archive for December, 2015
Psychological Stages of a BubbleOnce a bubble starts to form, it will go through several identifiable stages: enthusiasm, greed, denial, fear, capitulation, and despair. Each of these stages is characterized by different speculator emotional states and different resulting behaviors. There are outside forces that also act on the market in predictable ways in each one of these stages. Most often, these outside factors serve to reinforce the market’s herd behavior and exacerbate changes in price.
Precipitating FactorThere 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 may occur simply because prices have been rising and investors take notice, or it can be merely the result of a[READ MORE]
The populist revolt brewing is stronger than most realize, and Donald Trump taps into this populist anger better than any other candidate.
This isn't a political blog, and I don't want it to become one. That being said, after watching The Big Short yesterday, I had an epiphany: Donald Trump is going to be the next President of the United States. What about The Big Short made me realize that? To answer that we need to look back at the history of populist candidates and at the widespread Wall Street fraud that spawned the housing bubble and the financial collapse of 2008 that resulted in the Great Recession -- something The Big Short does exceedingly well.
Populism in the late 19th CenturyLike the early twenty-first century, the late nineteenth century was a period of extreme disparity between the wealthy ruling elites and the common man. The[READ MORE]
When the FHA cut their insurance fees in half in early 2015, using FHA loans to obtain the benefits of loan assumption became a better option.
This post contains specific advice that in the future will either help you sell your house faster and easier or for more money. Utilize fixed-rate assumable financing: Government entities like FHA, VA, GNMA or some other official government program (not Freddie or Fannie) provide assumable, fixed-rate loans desired by your future buyer.
Maximize your down payment (within reason)I am not advocating FHA loans because they allow you to put down as little as 3.5%. I believe you should minimize your time to payoff by optimizing (generally enlarging) your down payment and utilizing accelerated amortization. Nor am I advocating emptying savings accounts and failing to keep liquid reserves or other investments. The middle road I advocate leads to financial freedom, whereas the road of maximum debt leads to deflation through individual[READ MORE]
Historically, properties in this market sell at a 25.7% discount. Today's discount is 33.0%. This market is 7.3% undervalued. Median home price is $280,000 with a rental parity value of $412,000. This market's discount is $132,000. Monthly payment affordability has been improving over the last 2 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $184/SF to $184/SF. Resale prices have been rising for 9 month(s). Over the last 12 months, resale prices rose 6.8% indicating a longer term upward price trend. Median rental rates declined $14 last month from $1,856 to $1,842. The current capitalization rate (rent/price) is 6.3%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three months. Market rating = 8 [gview file="http://ochousingnews.g.corvida.com/images/documents/ochn_san_bernardino_housing_market_report_2015-12.pdf" height="800px" width="600px" save="1"][READ MORE]
Historically, properties in this market sell at a 18.5% discount. Today's discount is 23.9%. This market is 5.4% undervalued. Median home price is $305,000 with a rental parity value of $398,300. This market's discount is $93,300. Monthly payment affordability has been improving over the last 2 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis declined from $172/SF to $172/SF. Resale prices have been falling for 2 month(s). Over the last 12 months, resale prices rose 4.6% indicating a longer term upward price trend. Median rental rates declined $4 last month from $1,785 to $1,781. The current capitalization rate (rent/price) is 5.6%. Rents have been rising for 12 month(s). Price momentum signals rising rents over the next three months. Market rating = 8 [gview file="http://ochousingnews.g.corvida.com/images/documents/ochn_riverside_housing_market_report_2015-12.pdf" height="800px" width="600px" save="1"][READ MORE]
Why Trustee Sales?Most buy at Trustee Sales to make or save money. When compared to resale properties, Trustee Sales are generally discounted between 10% and 20% and sometimes the discounts are even greater. The first post in this series featured a property being flipped for a 25% gain, a significant profit for taking risks and trapping cash for a few months. However, flipping for profit is not the only reason to consider this market. My disdain for flippers is apparent, but my ire is not spread evenly. Flippers who buy at auction provide necessary liquidity in a market isolated from lender financing, and flippers who renovate properties (even with pergraniteel) add tangible value; however, the flippers who annoy me are the ones who trade stucco boxes without making improvements or adding value as they merely drive up prices for families. The problem is[READ MORE]
Judicial or Non-Judicial ForeclosureForeclosure proceedings in most states are either Judicial or Non-Judicial at lender’s discretion. Unlike mortgages, Trust Deeds give the lender the Power of Sale at public auction if the borrower fails to repay the debt. With a Trust Deed, a lender can exercise this right without a court order using the faster and less-expensive non-judicial foreclosure. The lender may sue the borrower for repayment of property debt in a judicial foreclosure and obtain a Deficiency Judgment which they can record as a blanket lien against all borrower property in a given jurisdiction. Lenders often will pursue judicial foreclosure and Delinquency Judgment if the amount is large and the borrower has other liquid assets the lender can take or illiquid assets the lender can encumber (look out Coastal California). Lenders greatly weaken —[READ MORE]
The next three days get a little wonkish. Prepare for a primer on foreclosures.
Ownership is primal. The first two words children learn in any language are “no” and “mine.” People have an deep intuition of what is theirs and what is not. Emotionally, It’s Mine defines ownership; in the real world, it is not so black and white. When people own real estate, what they really “own” is a bundle of property rights. What rights are the bundle, and how are these rights held? Today, I want to take a step back and review real estate law and outline property rights and vesting title. As I recently took the excellent Broker’s review course from Real Estate Trainers, much of the legalese comes from their study manual.
Who or what is an Owner?The[READ MORE]
Many people truly don't understand by helping "struggling borrowers" was a bad idea. It was. It encourages even more risk taking.
Many issues compete for our attention in the wake of the housing bust. However, the importance of these issues is not equal. Underlying most of them is the central problem of the housing bust: moral hazard. Every decision we make in life has consequences. If we save regularly and invest wisely, the consequences are wealth and peace of mind. If we spend foolishly and speculate wildly, the consequences are periods of feast and famine, delusions of grandeur, enormous entitlements, and when times are tough, unbearable stress. Positive results come from good decisions and visa versa. That’s how people distinguish wise from unwise and learn to make decisions to achieve positive and desirable ends. When people do not endure the negative[READ MORE]