Harvard: Lax Underwriting Standards Did Not Inflate The Housing Bubble

A recent Harvard study concluded, "the boom and bust in housing over the last decade was not primarily caused by low interest rates, reduced downpayment requirements, or laxer underwriting standards"

I cringe with embarrassment for them.... 

Irvine Home Address ... 20 VILLAGER Irvine, CA 92602
Resale Home Price ...... $950,000

Flipping Trustee Sale Houses on Speculation

At times like these when the opportunities to flip properties at trustee sale are available, it is a great way to make superior returns with limited risk. Today we will take a careful look at how it is accomplished. 

Irvine Home Address ... 2 Elderglen 60, Irvine, CA 92604
T-sale Home Price ...... $387,294

Ghost Estates: Twenty Percent of Ireland’s Houses Are Vacant

America inflated a massive housing bubble, but the Irish managed to build so many excess houses that they could house every Irish citizen and still have many left over.  

Irvine Home Address ... 26 LEWIS Irvine, CA 92620
Resale Home Price ...... $620,000

Nine Years to Clear the Inventory from The Great Housing Bubble

The mess from the Great Housing Bubble, millions of foreclosures, will take nine years to sell at its current rate. 

Irvine Home Address ... 57 NIGHT BLOOM Irvine, CA 92602
Resale Home Price ...... $629,000

Future House Prices - Part 1

Future House Prices

For all our wisdom and collective experience, none of us knows what the markets will do next. Like an ocean current or a raging river, a financial market charts its own course. It is fickle and feckless and flows without regard to our hopes and dreams. The ebbs and flows of financial markets are meaningful to us, but in reality they are just movements in price; nothing more. Price rallies make homeowners blissful and renters bitter, while price declines make homeowners gloomy and renters gleeful. These feelings and emotions are independent of movements in price. The market just moves, that is all it does. It is benign, yet dangerous; it is indifferent, yet demonstrative; the market is a paradox which we must simply accept.

During the rally of the Great Housing Bubble, buyers did not concern themselves with the day they were going to become sellers. Why would they? There was an endless demand for properties, and buyers were paying whatever was asked. If they wanted a price above current market values to pay off a loan, all they had to do was wait. Once the bubble burst and home prices started to decline, the conditions people were accustomed to during the rally dramatically changed. Anyone considering buying a home in the aftermath of a crash should think about the buyer who is going to buy their home from them at some point in the future, and more specifically, what debt-to-income ratio and loan terms this future buyer will utilize. This is important, because the amount of money this take-out buyer will pay for the home is completely dependent upon these variables. At most, a house is only worth what a buyer can pay for it. In a declining market with few qualified buyers, many of those qualified buyers will only make offers if the deal is exceptional or simply wait for further price declines.

In a market environment where prices are detached from fundamental valuations, bubble buyers face a daunting challenge just to break even on their purchase when the time comes to sell it. A future buyer must have favorable borrowing terms allowing for a high degree of leverage or they may not be able to borrow the prodigious sums borrowers during the bubble rally were able to obtain. If a future buyer is not able to borrow as much with their income as bubble buyers, then wages must increase over time to permit future borrowers to borrow the same sum and allow a bubble buyer to avoid a loss. Unfortunately, it will take many years for wages to catch up to bubble prices. Even when this occurs, and a seller can recover their purchase price, inflation will have diminished the value of those dollars. If the prices are adjusted for inflation, many bubble buyers will never see an inflation adjusted breakeven price.

IHB News 5-1-2010

I enjoy looking at Shady Canyon properties on the weekend. They are very beautiful homes. It's even more entertaining when you see a $650,000 loss.... 

Irvine Home Address ... 59 GRANDVIEW Irvine, CA 92603
Resale Home Price ...... $2,999,000

Strategic Default Is Merely Collecting On Home Price Protection Insurance Sold By Lenders

There are many ways to view strategic default. Borrowers use mortgages like option contracts giving them a "put" from a lender. It can also be viewed as an insurance contract against downside price movements. Borrowers are merely collecting on their insurance policy. 

Irvine Home Address ... 26 MIRADOR #59 Irvine, CA 92612
Resale Home Price ...... $750,000