Author Archive: Irvine Renter

The new and improved USA Housing News reports launches soon! Now with complete national coverage!

The housing market reports are back! It's a long story, but the bottom line is that I now have control over my housing market reports again. I am working on a website to sell subscriptions to these reports as the USA Housing News. I will talk more about this as I get closer to launch. I found a new data source the allows me to provide national coverage. In fact, I now cover all 50 states, 443 metros, 1045 counties, 9,525 cities, 5,619 neighborhoods, and 11,325 zip codes. That's a lot of data. I can create custom reports with varying degrees of detail with up to 52 distinct areas in each report. For example, the Orange County report contains the county, 37 cities, and 14 neighborhoods. When I[READ MORE]

Americans borrow more money for consumption rather than the acquisition of assets.

Not all debt is created equal. I borrowed large sums to buy cashflow properties in Las Vegas, debt backed by a cashflow-producing asset. The income stream repays the debt with interest, and if for some reason I am unwilling to pay back the loan, the lender can auction the property and either receive their money back or obtain cashflow equal to or greater than the payment on the debt. That is asset-backed debt. Lenders provide asset-backed debt for the purchase of property, plant, and equipment. When lenders evaluate these loans, they consider the useful life, the recovery and resale value, and the cashflow the asset may generate (if any). Asset-backed lenders assume the debtor’s word means nothing and any recovery of capital will come solely from the collateral pledged to cover the loan.[READ MORE]

As house prices rise and more homeowners possess equity again, some are withdrawing this money at low rates and spending it, stimulating the economy.

hungry-homeownersDuring the housing mania, people bought homes because house prices rose rapidly, and lenders gave equity to homeowners at 100%+ of the value set by recent comps. Under such circumstances, houses were very desirable, and unlimited access to home equity fueled the housing mania and funded millions of personal Ponzi schemes. Homeowners like mortgage equity withdrawal because it provides them instant access to the free money bestowed upon them by the magic appreciation fairy. Even better, they didn't have to sell the golden goose: they got to keep their home and wait for it to grant them even more free money. It was like owning a personal printing press. Homeowners gladly suspended their disbelief[READ MORE]

A cap on loans and increased builder costs forces builders to increase density to meet the burgeoning demand of Millennial buyers.

Millennials find very little available for sale on the MLS in their price range because the previous generation, Generation X, is still trapped in their starter homes, lacking the equity to make a move-up trade. Nearly 6 million people remain trapped in their entry-level homes they purchased a decade ago. Perhaps they enjoy their gilded cage, but since they may not leave without severe financial consequences, their homes resemble a debtor’s prison. People also remain in their homes longer because even with the newfound equity from reflating the old housing bubble, without increases in pay, they face limitations on borrowing enough to complete a move up. While their house increased in value, the move-up house they desire also increased in[READ MORE]

California's wall is a barrier of high home prices caused by a lack of supply created by nimby resistance in areas dominated by California Progressives.

President Donald Trump's policies, like Donald Trump himself, enjoys very little support among California voters. When Trump campaigned in California during the primaries, it caused riots. During the general election, Trump lost California by nearly 4 million votes. California Progressives resist and detest everything Donald Trump proposes and stands for, particularly his immigration policies, which include proposals to deport undocumented workers illegal immigrants and build a wall to keep out future undocumented workers illegal immigrants. Surprisingly, California Progressives and Donald Trump both embrace exclusionary policies that prevent people from taking up residence in California. Whereas Trump's policies are openly hostile to immigrants, particularly illegals, Trump's proposal to build a[READ MORE]

Since the mid 1990s, mortgage interest rates and home sales moved in opposite directions. Dodd-Frank made this inverse correlation even stronger.

Back in February of 2013 when mortgage rates were near record lows, I wrote that future housing markets would be very interest-rate sensitive, despite assurances to the contrary from most macroeconomists. Last year I noted that fewer home sales or lower prices was sure to follow higher mortgage interest rates. Generally, volume precedes price, and as one would expect, the recent spike in mortgage rates is already hurting sales. The prevailing economic view is that the housing market would respond positively regardless of what happens with mortgage rates because house prices in the past have correlated poorly with mortgage rates. For example, during the 1970s, interest rates rose significantly, which should have caused house prices to drop, but[READ MORE]

My first post I am IrvineRenter (Inventory Cholesterol) debuted ten years ago on February 27, 2007.

Over the last 10 years, I posted every weekday without fail. It's been a source of joy and discipline that's shaped my life, my career, and my character. During my ten-year run, I observed many trends come and go, and I learned a great deal about the art of blogging. Today, I want to share some of these observations with you.

Blogging needs a purpose

I started writing ten years ago because I wanted to save people from financial ruin. I firmly believed housing was a financial bubble, and I was right. I didn't do it for money or fame as I wrote completely anonymously and without any compensation. I blogged purely because believed it was the right thing to do. When I published The Great Housing[READ MORE]

Inventories of below-median homes are well below historic norms due to the large numbers of underwater borrowers, leaving first-time homebuyers frustrated.

Back in late 2012, I predicted that Below-median home inventories may not recover for years, which it has. My reasoning was simple. For home inventories to recover, sellers must come back to the market. Since so many homeowners are underwater or lack the equity for a move up, particularly at lower price points, very few organic sales occur on below-median properties. Since lender can-kicking kept the foreclosures off the market, what was once a source of supply actually became a restriction of supply. Given these circumstances, it will be several years before inventories of below-median properties recover and provide opportunities for owner-occupants to enter the market.

Here's the inventory crisis smothering Millennial homebuying

3 factors blocking homeownership
[The three mentioned are not important, and[READ MORE]

Housing fundamentals are strong, but if they get too strong, rising mortgage rates will spoil the fun.

Signs of a strong economy are all around us. U.S. retail sales rise, and inflation posts largest gain in four years. Unemployment is near historic lows, and Trump plans to dump fuel on the fire with a massive infrastructure spending program. The US Housing market is poised for a strong start in 2017. The underlying economy was strong enough for the federal reserve to raise interest rates again in December. Unemployment is low and wage growth is picking up, so more qualified borrowers are likely to become buyers in the days ahead. Further, with mortgage interest rates still very low by historic standards, the demand for housing as expressed in dollars borrowers can put toward a purchase is near record highs. The conditions as described[READ MORE]

Loan modifications always had high failure rates, but modifications since 2014 fared worse than bubble-era loan mods.

Every attempted loan modification delays a foreclosure, keeps an overextended borrower in a state of debt servitude, artificially props up home prices, and keeps much-needed supply off the market. Perhaps it wouldn't be so bad if the attempts to modify loans succeeded at high rates, but the truth is that they don't. Nearly 75% of loans modified fail within two years. The public good served by these loan modifications is not readily apparent. At first, the banks did this just to survive the downturn. Then it became a political necessity as millions of people lost their homes. Now, it only serves the sense of entitlement of overextended borrowers to get a break on their loans so they can spend money on other things. It's time to rethink[READ MORE]

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