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Federal reserve policy of zero percent interest rates inflates asset values and diverts money from savers to bankers. When the federal reserve buyers Treasury notes or mortgage-backed securities, it merely prints money. Unlike ordinary banks or citizens, the federal reserve doesn't need money in its accounts in order to buy things. The federal reserve doesn't usually print a great deal of money; it usually tries to print enough to match the increase in value of goods and services in the economy. The first policy response of the federal reserve in a downturn is to lower interest rates... [Read More]
Voters warm to the idea of reforming Proposition 13, but large financial interests would vigorously oppose any attempts to curtail their subsidy. Property taxes have long been a source of local government tax revenues because real property cannot be moved out of a government’s jurisdiction, and values can be estimated by an appraisal, so it's a convenient item to tax. In most states, local governments add up the cost of running the government and divide by the total property value in the jurisdiction to establish a millage tax rate. California is forced to do things differently by... [Read More]
Bankers around the globe learned from the US how to reflate house price bubbles by removing distressed inventory and lobbying for government subsidies. Bankers in the US discovered the formula for reflating housing bubbles: remove distressed inventory from the market through loan modification, denying short sales, and permitting long-term delinquent mortgage squatting, then lobby the government for a variety of housing subsidies and stimulants to stoke demand. This two-prong approach reduces supply and increases demand forcing house prices to go up; in fact, the more severe the housing... [Read More]
Rising rents make owning an attractive alternative despite the high home prices, so rising rents will likely push more people to buy rather than rent. After the big rally in home prices and the sudden increase in interest rates, houses feel expensive. In many areas, prices have reflated back to the peak of the housing bubble, and affordability has plummeted, prompting many to become bearish on housing. Despite these signs, my monthly reports still show the market as fairly valued, and when I look at individual properties, I see most are still selling for prices near rental parity, even... [Read More]
How can you not adore something so cute? How could anybody tarnish the reputation of a loyal, cuddly, lover like a Pit Bull? Maybe because they are vicious animals that have killed people? Personally, I don't like Pit Bulls. And I do not have a clue as to why it is legal to own one. I can guess as to why some people may want one, but too bad. I am a staunch defender of liberty and our Constitution, especially the bit about gun ownership, but I don't think anyone should be allowed to own a Pit Bull, Presa, Rottweiler, Cane Corso, etc., unless they live far from most people,... [Read More]
Despite the happy-talk from realtors, the housing recovery flounders on low volume, sustained only by low inventory. Most housing analysts expected sales to increase in 2014. They believed an increase in sales and an increase in price would represent “escape velocity,” a virtuous circle where rising prices increases demand and causes more sales and rising prices; in the past, this would have worked because lenders would extend toxic financing terms to new buyers to keep the party going, but the new mortgage regulations changed how real estate markets work. With those products now... [Read More]
California’s Homeowner Bill of Rights compels banks to foreclose through courts and take more time to complete. The housing bubble and bust exposed many flaws in our property finance system. The Dodd-Frank reform corrected many of these problems, and I believe the new mortgage regulations will prevent future housing bubbles. It's rare, but occasionally legislators and regulators get it right. The California Homeowner Bill of Rights was not one of those occasions. The California Homeowner Bill of Rights supposedly corrects flaws in the foreclosure processing system exposed by the... [Read More]
Decimated during housing bust, first-time homebuyers and first move-up buyers struggle to buy homes, breaking the chain of move-ups. Houses are expensive. Most renters who would like to buy a home lack the down payment necessary, and many are early in their careers when their income is lower. As a result, first-time homebuyers are forced to buy the lowest cost properties available for sale in the housing market, and they must use the highest cost financing options due to their low down payment. Assuming they sustain ownership, assuming they have an amortizing mortgage, and assuming... [Read More]
Weak job growth creates persistent unemployment and slows wage growth, which delays a durable housing recovery based on fundamentals. For the housing market to really improve, the fundamentals underpinning the market must improve because manipulating inventory and interest rates can only carry the market so far. The recent house price rally had little or no fundamental support; even housing bulls acknowledge that fact. Although housing bulls like to ignore or downplay the record lows in purchase mortgage originations, this is a sign of just how weak the housing market fundamentals... [Read More]
Attracting private equity to housing finance without GSE loan guarantees will raise lending costs and lower loan balances, hindering bubble reflation. Since many borrowers at the margins borrow the maximum allowed based on their income, any increase in borrowing costs decreases their borrowing power, lowers their bids for houses, and ultimately hinders efforts to fully reflate the housing bubble. For lenders and underwater loan owners who want prices as high as possible, higher borrowing costs imposed on new borrowers is a bad thing. Unfortunately, it's impossible to reform Freddie Mac... [Read More]
I spend nearly every Sunday morning at Disneyland with my son James. It's the best time of my week, something I always look forward to. I've been a season passholder as Disneyland for several years. My son and I go nearly every Sunday morning, arriving just as the rope drops on Main Street in the happiest place on earth. We have our routine; we go to Space Mountain, Star Tours, Astro Blasters, then make our way over to Indiana Jones, Big Thunder Mountain Railroad, Splash Mountain, and Pirates of the Caribbean. If you arrive just as the park opens, there are no lines, so it's easy to... [Read More]
San Diego woman who didn't get her dream home made fake sex ads for new owner's wife telling johns to "force their way in and take me while I say no." Warning! This post has sexual language. If this is potentially offensive, read no further. We've all wanted something badly and didn't get it. Most of us get over it and move on, but some people can't accept being thwarted in their desires and launch into irrational and truly outrageous behavior. A woman in San Diego missed getting what she considered the house of her dreams, a common disappointment. Most people have the wisdom to... [Read More]