Monday, January 26, 2015

AREAA US Economic Update by Wells Fargo Sr Economist Eugenio J Alaman, PhD (1/22/15)

Eugenio J Aleman, PhD, Wells Fargo Securities, Director, Sr Economist
January 22, 2015
Torninos Banquet Hall, Fresno, CA

Topic: US Economic Update for 2015

We are on a road to recovery at this time, normal expenditures have been growing in years and comparatively there is an argument also showing we are not spending as much.

Spending is primarily going up due to government spending in Defense.  The deficit is at its worst in years.  Everyone wants to spend and no one wants to pay their bills.
  • Going back in history, there is only one time in the political history we've paid our debts… Clinton era.

Economy grew 5% in GDP last year, strongest since 2006.  We are at a pace of growth that will start to make a difference.  With the recovery starting Oct 2010, 2014 was the strongest job growth year since 1999.
  • It can also be said we’ve had the longest consecutive expansion in job history…

Labor market growing exponentially, federal government jobs are the only slow growth jobs at this time.

Private sector growing evenly and exponentially…  there seems to still be concerns about no jobs and more people on welfare who have no jobs and have no money or food.
  • 87% of all government employees are state and federal job employees.
  • Local and state governments are raising taxes not the federal government.

Unemployment rates down to 5 to 6% , except that this is for full employment, which is why the Fed reserve is considering at some point in time soon, to raise the federal tax wages and employment taxes.

Labor force rates going down and was an unexpected ratio not considered.  Baby boomers are getting out of the labor force 10,000/day at this time.  Also a lot of people are going back to college,  they cannot get a job and having to relearn new trades.

Baby boomers retiring, people going back to college, people tired of looking for a job and that’s why our unemployment rate is going up, not due to lack of jobs.  People are dropping out of the labor force at a fast pace.  It takes 33 weeks to regain a new job.  The worst last time in the 80’s was 22 weeks… and this has surpassed.
  • Unemployment insurance is for 26 weeks  and average payout $12,000 per year.

Serious issues are the long term unemployed, looking to replace the job they had.  A lot of people are still unable to get a job that was equal to what they were doing prior.  A lot of technological issues are causing people to leave the marketplace.  Part time jobs have replaced the full time jobs and have not replaced the opportunities that existed prior.

Unemployment doesn't account for part time employees.  (Still no signs for wage inflation due to the high unemployment pool.)  When labor pool goes down, wage inflation will go up.  Expectation for feds to increase interest rates in June… REALLY expects possibly end of year.
  • Gas prices not affecting airline flight prices!

Federal reserve balance sheet is the most critical concern in moving forward.  If there is a scare and inflation starts to go up, how will they get rid of the money quickly?

Home prices are slowing down, 5% growth year over year.. the biggest issue is where is lending is going.  Lending needs to grow about 10% per year and its way lower than need be.  Mfg and service sectors are expanding quickly at this time. 

2nd concern inflation

3rd concern is lending, credit card lending is happening for most of the country… student loans are happening and kids are going back to school with a new car.  Growth in student loans is growing.

Why consumers cannot get credit when a time when it is critical….  When we are at an all-time debt to income ratio… confidence is still very low compared to other recoveries in the economy… we are using savings again to consume rather than having higher incomes.

  • Higher incomes will have to come back to help the economy recover
  • Interest rates are still going down…we need to see a signal of higher interest rates which means things are getting better, if we continue to stay low, our confidence will be lost.
  • How do we show people things are improving… when all other things are showing stress…
  • US Economy will grow 3%, no expectation for a recession, growth expected.

California economy has slowed down in the last several months, still growing slowly. 
Housing permits are slowing down considerably , Home sales for sfr, improved considerably


People are not coming into Fresno quickly enough to support a growth change enough to attract employment, tourism, etc.
  • Construction  strong while all other areas weak in growth.
  • Unemployment 11%, Present income weak compared to 80s and 90s
  • Home prices still going up which is completely different than the rest of the state and us… different from MSA
  • Permits and MFSH not growing, if home prices are growing, people are coming into the area

People are not spending money…. And they are not buying things because they have to save money for Obama care.  One argument as to why people are not buying goods and services.

The part time and full time jobs could be the competing component…  a lot of people can work part time and get Obama care… 58 yrs old +  if you are not eligible for SSI, and can retire in mass and hold a part time job, keep their coverage before they go fully into retirement.

Best new segment of home buyers is Millennials… what do you think?
  • Underemployment and student loans, as a consequence will not allow them to buy
  • Some millennials want to leave home and buy a home and get married while others want freedom and no commitment to a home.
  • 100 to 200k MBA students, no return on the money, Bachelors degree is a good return.

New article in Wall street journal, millennials don’t want to engage, they don’t want to get married, they don’t want to buy a home and when one day they want one… it may be a tent!

The American Dream has been delayed but is still intact?  We are still the richest country in the world and we own more than most other people in other countries.  We have better benefits than other countries.  We must improve high school, elementary school and education base for the young, there is no sense.

On average we have a recession every five years… and we've been in a recession since 2007… for next 3 years we see no prediction of recession.... and eventually it's bound to come.

Thursday, January 8, 2015

The Millennia for College - how will affect the real estate market over time?

Reimagine College

Sometimes things change dramatically and quite quickly in our daily world. When was the last time you used a travel agent to book a flight? Have you ever told your kids about the days, not so long ago, before cell phones? Or about life before texting? Remember when you bought everything from actual stores, rather than so much from Amazon?


These and other parts of our daily lives have been changed forever by the process of “disruptive innovation” – a technology driven process of innovation that upends an industry’s business model and transforms the way it provides goods or services. The disrupters typically lurk at the edge of the market for a while, steadily improving their product, and then, quite suddenly, “invade” the industry.
In 2015 we are likely to see such a full-blown invasion and transformation of higher education. This will have profound and beneficial consequences for the education and finances of millions of young Americans and their parents.
Pressure for change and the signs of radical reorganization of college and universities have been gathering in recent years, with such things as the growth of online course, MOOCs(Massive Open Online Courses) and upstart colleges offering low-cost degrees. The higher-education establishment has ignored or tried to dismiss the warning signs – just as travel agents and the old phone companies did.
But 2015 could open the floodgates. If you have a child in middle or high school, here are four things you can expect to see when you are planning for their college in the next few years:
  • Tuition will begin to fall sharply. Thanks to innovative use of online courses, some high-quality upstart institutions, like Southern New Hampshire University’s College for America, are now offering a full bachelor’s degree at as low as $10,000 (for the full degree, not yearly tuition). Meanwhile the renowned Georgia Tech, in combination with MOOC pioneer Udacity, offers a complete master’s degree for $7,000. Expect more such ventures in 2015 and growing pressure on state and private colleges to cut costs to try to compete.

  • Quality information will get much better and become customized. Sifting through glossy brochures with pictures of smiling students is a poor way of determining value for money for such a large purchase as a degree. US News & World Report helped by ranking colleges according to its system of quality measures. Last week the Obama Administration released a draft document on a federal rating system. But supposedly objective rankings are easy to fault – after all, students want to go to college for a variety of reasons, so “quality” can be hard to agree on. The good news is that there is a growing range of scorecards that aim to reflect the different goals of applicants. Some, such as the Kiplinger and Forbes rankings, focus more on such things as comparing expected salaries with the cost of tuition. Others, such as the “What Will They Learn” guide, ranks colleges on the basis of seven subjects considered the basis of a rounded, liberal arts education. Expect a growing range of such scorecards in the future, allowing students and parents to make more informed choices in the changing college world.

  • MOOCs will become more sophisticated and pervasive. The early MOOCs could attract tens of thousands of students, but completion rates were low and there was no usable, transferable credit for the course. That’s been changing. Newer iterations are making big refinements in the original online MOOC model. Designers are experimenting with peer-grading, crowd-sourcing comments and other creative techniques for professors to give provide feedback to students. Some MOOCs are arranging proctored exams in multiple locations, and others are taking steps to develop course credits for a fraction of the cost of regular college. Others still, like edX, are developing relationships with prestigious universities like Harvard and MIT. While these top tier institutions hope to maintain their tuition levels while adding these online services, the evidence from other industries is that it won’t be long before they will have to cut tuition to compete with the new kids on the block.

  • The traditional four-year college will give way to other business models. The innovation taking place in higher education is changing fundamentally the way students can obtain skills and the pace at which they can acquire a degree or its equivalent. This will ultimately transform college for many students, with fewer and fewer students packing their bags and heading off for four years at the same bricks-and-mortar institution. To save money in both tuition and housing costs, many students already attend a community college before spending the last two years at a “four-year” institution. With the rise of fully credentialed and less expensive online course, even more students will take fewer courses and spend less time at a traditional college. Expect more examples of such blended education, including more partnerships between employers and colleges to provide degrees that are customized to the workplace. College for America is an example of this development, as the Starbucks-Arizona State University partnership. Within a few years, also expect many colleges to become more like general contractors for a college education. They will put together a combination of online courses, courses at other institutions, semesters abroad, externships at leading companies, with perhaps only a year or so at the college itself – and all at a much lower price tag than today.
With rising tuition and student indebtedness now exceeding total credit card debt, contemplating the cost of sending a child to college is stressful. But there are good reasons to believe this holiday season that the cost and nature of college as we currently know it is about to change.

Wednesday, December 31, 2014

Months Supply of Inventory for Fresno & Clovis Home Listings Down (Nov. 2014)

The months supply of inventory for Fresno and Clovis home listings decreased 19% from November 2013 to November 2014. 

Months Supply of Inventory is an estimation of the amount of time it will take for the listings currently for sale to be under contract. 

If you have any questions on this information or want specific information on the Fresno/Clovis Real Estate housing market, please contact Greg Maroot of Maroot Properties Inc. at 559-994-0254.

Maroot Properties herein deemed this information is reliable but not guaranteed; representations are approximate, individual verification recommended. 

Friday, November 28, 2014

Months Supply of Inventory for Fresno & Clovis Home Listings at a 12 Month Low (Oct. 2014)

The months supply of inventory for Fresno and Clovis home listings decreased 25% from October 2013 to October 2014. 

Months Supply of Inventory is an estimation of the amount of time it will take for the listings currently for sale to be under contract. 

If you have any questions on this information or want specific information on the Fresno/Clovis Real Estate housing market, please contact Greg Maroot of Maroot Properties Inc. at 559-994-0254.

Maroot Properties herein deemed this information is reliable but not guaranteed; representations are approximate, individual verification recommended. 

Friday, November 21, 2014

Employment Opportunity

Nonprofit Real Estate Consultant – San Joaquin Valley
November 2014

Position Summary:
NCCLF works with governmental and nonprofit organizations to assist with planning the real estate needs of their programs. In the San Joaquin Valley, focal areas for our work include community facilities, affordable housing, and mixeduse developments for organizations that serve low income communities.

The SJV Nonprofit Real Estate Consultant will identify public sector entities and nonprofit organizations that serve low income communities and will work them to plan their projects, evaluate sites, negotiate leases and purchase agreements, create development and operating budgets, and identify sources of financing. S/He will work with the Business Development Loan Officer on organizing the Community Facilities Challenge. This position is based in our Fresno office.

For more information please copy and paste the following link:
G:\COURSES AND BLOGS\New Microsoft Word Document.mht

Thursday, November 20, 2014

Las Vegas Suburb Launches Foreclosure Registry

Las Vegas Suburb Launches Foreclosure Registry

Las Vegas Suburb Launches Foreclosure Registry

Foreclosure registry Henderson NevadaCity officials in the Las Vegas suburb of Henderson, Nevada, have announced the launch of a foreclosure registry in order to help monitor the number of abandoned residential properties in the area from falling into disrepair or becoming blighted.
The goal of the registry is to urge the owners of homes that have either been abandoned or are at risk of being abandoned due to foreclosure to perform maintenance and upkeep on them so that the homes do not fall victim to blight, squatters, or vandals.
The registry launched on Monday, November 3, and can be found at Owners are required to register their property (single-family, townhouses, condos, and multi-family buildings with four units or less) on the site if there is a currently unresolved default notice or foreclosure filing on the property with Clark County. The fee to register is $200 for new registrations and $50 for any updates with new information. If the property remains distressed, owners must renew their registration annually for $200. Penalties for failure to comply may include fines of up to $150 per day or a possible criminal misdemeanor conviction.
Prior to the launch of the registry, Henderson city officials had to rely on complaints of nearby residents in order to discover abandoned, blighted homes. The registry came about as a result of the city passing Ordinance No. 3121, also known as the Abandoned Residential Real Property Registry Ordinance, in February 2014. The purpose of the ordinance is to "reduce and prevent neighborhood blight, to mitigate conditions that threaten the health, safety, and welfare of the public, and to promote neighborhood stability," according to the web site.
Henderson, Nevada's second largest city with a population of about 270,000 (according to U.S. Census data), has been hit hard by foreclosures in recent years. Nevada in particular was one of the hardest hit states during the financial collapse of 2008.
While the Las Vegas area in general has seen a significant decline in the number of foreclosures for the last few months, RealtyTrac reported that one in every 768 residential housing units in Henderson was in some state of the foreclosure process in September 2014, still way ahead of the national rate of one in every 1,232 for the month. Henderson's foreclosure rate was close to the reported rate for the state of Nevada, which was one in 797 – fifth highest in the U.S. RealtyTrac reported that the Las Vegas metro area had1,694 "zombie foreclosures" in the third quarter, the eighth highest total in the U.S. According to RealtyTtrac, 33 percent of foreclosures in the Las Vegas metro area were zombie foreclosures, which are properties that have been abandoned the foreclosure process is not complete. City officials estimate that about 5,000 residential properties in Henderson are in some state of foreclosure.


Brian Honea
Brian Honea's writing and editing career spans 12 years across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, is scheduled to be published by the TCU Press in Fall 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
Posted by Christine Cerda, Cerdafied Solutions, Inc

Consumer Confidence Growing, But Attitudes Toward Housing Remain Mixed

Consumer Confidence Growing, But Attitudes Toward Housing Remain Mixed

Consumer Confidence Growing, But Attitudes Toward Housing Remain Mixed

Fannie Mae National Housing SurveyDespite growing economic confidence, Americans' housing sentiment remained mixed in October, according to survey findings from Fannie Mae.
Forty percent of American consumers polled in Fannie Mae's latest National Housing Survey said they believe the economy is on the right track at the moment, flat from September's survey but up 13 percentage points over the past year. Meanwhile, the share of Americans who said the economy is on the wrong track slipped to 53 percent from 54 percent last month.
Looking at their own finances, a quarter of respondents said their household income is significantly higher than it was last year, while a rising share said their expenses are significantly lower. Predicting the next year, 45 percent expect their financial situation to improve, up from 41 percent in September.
Housing attitudes were decidedly more mixed. According to Fannie Mae, Americans surveyed last month expect home prices to rise 2.8 percent over the next year, reflecting a bounce after price expectations stagnated throughout the summer.
The share of those anticipating price gains slipped a percentage point to 44 percent. At the same time, the share expecting prices to drop in the next 12 months also fell, declining to 7 percent from 9 percent as recently as August.
Respondents were a little less hopeful on the finance side. Forty-eight percent of those surveyed expect mortgage rates to rise in the coming year—a given, now that the Federal Reserve has turned its attention to bringing interest rates up. With home sales already lagging despite historically low mortgage rates, any shock to home affordability could weigh activity down further.
Meanwhile, half of consumers remain pessimistic about their odds of getting a mortgage as banks show reluctance to opening up the credit box.
All things considered, the share of Americans who say now is a good time to purchase a home fell, dropping to 65 percent. On the other hand, the share of consumers saying now is a good time to sell picked up, hitting a survey high of 44 percent.
Doug Duncan, SVP and chief economist at Fannie Mae, took the latter statistic as a hopeful sign for housing.
"The narrowing gap between home buying and home selling sentiment may foreshadow increased housing inventory levels and a better balance of housing supply and demand," Duncan said. "These results may help drive a healthier housing market in 2015."


Tory Barringer
Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

Posted by Christine Cerda, Cerdafied Solutions, Inc

Monday, November 17, 2014

‘Student Society of Real Estate’ monthly meeting

When: Wednesday, November 19, 2014
Time: 5:00PM – 5:45PM
Where: PB 023 Conference Room (Peters Business Building)
Who: All students who are interested in Real Estate, Construction Management, Finance, Entrepreneurial and other related industries
Topics:  Guest speaker, Christine Cerda will share her extensive experience in maximizing social media tools for real estate professionals, updates on recent and upcoming events.
Come join us and enjoy refreshments and good fellowship!

Look forward to seeing you this Wednesday,

Diane Ray
President, Student Society of Real Estate

Wednesday, November 12, 2014

Report: Non-Mortgage Debt Dragging Homeownership Even With Lower Down Payment

Report: Non-Mortgage Debt Dragging Homeownership Even With Lower Down Payment

Report: Non-Mortgage Debt Dragging Homeownership Even With Lower Down Payment

Non-Mortgage Debt Home Ownership

While lowering the down payment on a mortgage may clear one major hurdle to homeownership, a report released by RealtyTrac Tuesday revealed that a monthly mortgage payment is affordable to those with additional non-mortgage debt in less than half of the counties in the U.S.

In an analysis of housing affordability in 512 U.S. counties with a combined population of 235 million, RealtyTrac discovered that lowering the down payment for a conventional mortgage loan from 20 percent to 3 percent, as has been discussed recently by Federal Housing Finance Agency Director Mel Watt, would still not translate to housing affordability for a majority of those with non-mortgage debt such as student loans or a car payment.

"While lower down payments may help pave a quicker path to homeownership for some prospective homebuyers, a bigger obstacle to homeownership is the additional non-mortgage debt many borrowers bring to the table," said Daren Blomquist, VP at RealtyTrac. "For borrowers without additional debt, monthly house payments are affordable in more than 90 percent of U.S. housing markets — whether they make a 20 percent or 3 percent down payment. But for borrowers with the additional debt burden of student loans and car payments, monthly house payments are affordable in less than half of U.S. housing markets with a 3 percent down payment."

About Author: Brian Honea

Brian Honea
Brian Honea's writing and editing career spans 12 years across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, is scheduled to be published by the TCU Press in Fall 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland

RealtyTrac found that it would take an average of less than two years to save up for a 3 percent down payment on a mortgage loan compared to 12 and a half years to save up for a 20 percent down payment at an annual savings rate of 5.6 percent (as reported by the St. Louis Federal Reserve).

However, once the down payment hurdle is cleared, making the monthly mortgage payment becomes a problem for those with additional debt. RealtyTrac's report found that for those without additional debt, the monthly mortgage payment was still affordable in 92 percent of county housing markets even with just a 3 percent down payment. But for those with an average monthly car payment and an average monthly student loan payment, RealtyTrac found that the monthly mortgage payment was affordable in only 48 percent of county housing markets when a 3 percent down payment was made.

The percentage of borrowers in county housing markets who can afford the monthly mortgage payment jumps from 48 percent to 78 percent for those with an average car payment and an average student loan payment when they make a 20 percent down payment, according to RealtyTrac. For those without additional debt who make a 20 percent down payment, housing was affordable in 96 percent of county housing markets.

The average car payment was $471 as of Q4 2013, according to Experian Automotive, and the average student loan payment was $321 for 2012 college graduates with an average student loan debt of $29,400, according to Project on Student Loan Debt.

The RealtyTrac report found that according to Down Payment Resource, there are more than 2,300 down payment and closing cost assistance programs available nationwide and that 60 to 80 percent of homes in most areas would qualify for assistance from one of these programs. Also, the report found the average amount of assistance from these programs was $19,720, and could be as high as $50,000 to $100,000 in some high cost areas.

"The narrative is that it's too hard to get a loan today and when first-time buyers believe that, they won't even begin their search. That hurts the overall housing market," Rob Chrane of Down Payment Resource said. "Consumers for the most part have no idea that these programs exist, so they don’t think to ask for them. Whatever your situation is, whatever you have for a down payment, you could be in a much better situation if you find out you are eligible for one of these programs."

Saturday, November 8, 2014


Marcus & Millichap Real Estate Investment Services is looking for a motivated candidate to assist a senior broker with all aspects of the brokerage business. This is a rare opportunity to join an award winning senior retail broker with inventory in place and learn from one of the best in the business.

Marcus & Millichap Real Estate Investment Services is the nation's largest commercial real estate investment brokerage specializing in transaction services. 

  • Complete more transactions than our nearest two competitors combined.
  • In 2012 the firm completed 6,149 transactions valued in excess of $22B. 
  • Represent owners in the sale and purchase of apartment buildings, retail centers, office and industrial buildings, hotels and motels, assisted-living facilities, mobile home parks and self-storage facilities from $1M- $50M in value.

For complete details and instructions to apply please copy and paste the following link:

The Better Block Demonstration Project

For more information please click here.


Friday, November 7, 2014

7 Steps to help you Prepare to Buy a Home (Bloomberg View)

US government agencies are pushing to ease the requirement for a high cash deposit on a home. This is because people can’t save the big lump sums required to help them get a foot on the property ladder. There is a similar situation in South Africa and elsewhere, like the UK. It’s easier to obtain a home loan if you have a high cash deposit, but how do you build a large savings pot when there’s so much else you need to pay for? In this piece, writer Megan McArdle sets out when you should consider buying – and when you should walk away. She likes the idea of high deposits. I’m not convinced. I think more people should be given a chance to own their own homes by allowing them to take up mortgages without putting down a massive deposit. – JC

By Megan McArdle
Oct. 23 (Bloomberg View) — America needs more low-down-payment loans.

That seems to be the opinion of our government, anyway. The government agencies that drive most of the housing market are pushing for lower down-payment standards on mortgages, easing the 20 percent requirement that has become standard for much of the market.

The Center for American Progress approves: “We shouldn’t obsess about down payments,” said Julia Gordon, director of housing policy. “Research confirms that low-down-payment loans to lower-wealthborrowers perform very well if the mortgages are well-underwritten, safe and sustainable.”

This depends, of course, on what you think “perform very well” means. A low-down-payment loan made to someone with a good credit rating and a low debt-to-income ratio will perform better than a low-down-payment loan made to someone with terrible credit and a lot of debt. But it has a higher default risk than a mortgage made to a similar borrower with an adequate down payment, because when you start out with little equity, you’re apt to find yourself in foreclosure if you get into financial trouble.

I’m with Arnold Kling on this:

There is simply no way to make low down payment lending stable in any environment any than in a rising house price environment. [The Center of American Progress's] study says it covers the last decade. If you made a low down payment loan in 2001, there was enough of a price increase after that you’re probably fine. But it only works in that environment and it creates this cycle of a boom as house prices are rising, and then once they stop rising everybody crashes. You get this epidemic of foreclosures. It destabilizes the entire market.

Is there a good public-policy reason to encourage people to make a heavily leveraged bet on continued upward movement in home prices? Presumably, the argument is that many homeowners have done very well out of this over the past 50 years; rising home values sowed the seeds of many a college education and retirement fund.

But there are huge drawbacks to housing, too. Leveraged bets are great when they pay off; when they don’t, they leave you dead broke. Especially a bet on a large, illiquid asset such as a house. Put a homeowner into one of these gambles at the age of 35, send the local housing and job markets south a few years later, and the end result is a broke middle-age person with trashed credit in desperate need of a good rental unit. Which legislators should know, because we seem to have a lot of them around right now.

You also end up with a much more unstable housing market. When a huge segment of the market has negative equity or has equity too low to cover the substantial costs of a sale, then in any economic downturn, you are going to end up with a lot of foreclosures. Those foreclosures will, in turn, depress both the housing market and the broader local economy. Which again, we should all know, because we just went through this very process. So why are we so eager to return to this situation?

Because, I think, most of us still haven’t managed to shed the idea that buying a house is a good way to get some unearned bonus wealth. Too many people managed to do just that for too many years. We think of 2008 as an aberration, rather than reversion to the mean. And that’s a costly mental error.

The long, steep increase in American home prices from 1946 to 2008 was driven by a whole lot of trends that are hard to repeat: the invention of the 30-year, fixed-rate, self-amortizing mortgage, which allowed people to pay more for a house by lowering the monthly payments. The securitization revolution, which lowered mortgage risk by bundling the loans into large, diversified portfolios, thereby lowering rates. Rising inflation, which pushed up the price of houses. Falling inflation, which lowered interest rates and monthly payments still further and allowed people to pay even more for those houses. The credit-scoring revolution, which allowed banks to offer loans to more people, increasing demand for the existing housing stock. And in dense coastal areas, you also had the rise of NIMBY zoning laws, which made housing scarcer and therefore more expensive.

The problem is, these things have already happened. Most of them cannot happen again — interest rates can’t really go much lower. NIMBYism will go on, but the expectation of rising land values is already priced into the current value of the houses. If anything, it’s overpriced; I have a lot of conversations with Washingtonians who expect our housing market to follow a path like Brooklyn’s did, despite the notable absence of hyperwealthy financiers and international billionaires who want a pied-a-terre in our modest burg.

So I’m unimpressed by the argument that it’s unfair to lock financially marginal buyers out of this wondrous investment product. It’s unlikely that current homebuyers are going to experience the kind of windfall that their parents and grandparents did, if for no other reason than the fact that too many of them are still expecting that sort of windfall and factoring that expectation into what they’re paying for a house.

Which is not to say I am against buying homes. I am very much for buying a home — so much so that I went and bought one myself a few years ago. But buying a house is a good idea only if you meet the following conditions:

You can afford a sizable down payment to cushion you from the effects of local economic downturns or you have a super-stable job, such as working for the government or your father-in-law, that makes you unlikely to ever miss any payments.

You can afford the maintenance as well as the payments, insurance and property taxes.

You have good disability and/or mortgage insurance to make sure that you do not miss any payments even if you break your back and can’t do your job anymore.

You are pretty sure you do not want to leave your area or move to a larger, more expensive home anytime in the next five years.

Your payment is a reasonable percentage of your take-home pay (I shoot for under 25 percent; anything over 35 percent is far too risky).

You have a sizable emergency fund to deal with contingencies.

You can afford other forms of savings, rather than counting on your house as a piggy bank for future needs. In general, if declining home prices would send you into a hysterical panic about your financial situation, you are buying too much house.

If you do not meet these conditions, then buying a house is gambling — not just on rising home prices, but also on the continued soundness of your roof, boiler and plumbing. If you wouldn’t borrow the money to go to Vegas, then don’t borrow it for a house, either.

When legislators and activists say that we need low-down-payment loans because most people couldn’t possibly save up for a 20 percent down payment, what they’re really saying is that people can’t actually afford to buy a house. Helping them to go buy one anyway is not a great idea; it will work out well for some, to be sure, but it will have tragic consequences for others, and for the housing market as a whole if there’s another downturn. We just spent six years learning, the very hard way, that you can’t borrow yourself rich. That knowledge is too expensive to throw away so easily.

To contact the writer of this article: Megan McArdle at

Copyright 2014 Bloomberg.

Thursday, November 6, 2014

FORCE Market Briefing Oct 2014

Your Friday, Oct 24, 2014 FORCE Market Briefing
View this email in your browser

Nothing but the Facts:

Distressed Sales Accounted for Just 11 Percent of Total Home Sales in August 2014

  • Distressed sales (REO and short sales) accounted for 11.2 percent of total home sales in August 2014, the lowest share since December 2007 and a strong improvement from the same time a year ago when this category made up 15 percent of total sales.
  • The ongoing shift away from REO sales is a driver of improving home prices, as REOs typically sell at a larger discount than do short sales. There will always be some amount of distress in the housing market, so one would never expect a 0-percent distressed sales share, and by comparison, the pre-crisis share of distressed sales was traditionally about 2 percent.
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Existing home sales for September surge to fastest pace of 2014

  • Existing home sales jumped 2.4 percent last month to an annualized pace of 5.17 million, according to a report released Tuesday by the National Association of Realtors (NAR). That was better than the 5.1 million pace analysts had been expecting, and a significant improvement from the 5.05 million pace in August. September marked the fastest annualized pace for existing home sales this year, according to the report.
  • “Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” NAR chief economist Lawrence Yun said in the release. “Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter.”
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Talk of the Nation:

Castro Outlines HUD’s ‘Blueprint for Access’

  • After nearly three months without a failure, another FDIC-insured institution went down last week. The Office of the Commissioner of Financial Regulation in Maryland shut down NBRS Financial, based in Rising Sun, appointing FDIC as receiver, according to dual releases from both agencies.
  • Chartered as a national bank in 1880, NBRS converted to a Maryland charter in 2002. Following the financial crisis of last decade, the bank took years of losses from non-performing assets and was never able to find enough capital to return to sound condition, said Acting Commissioner Gordon Cooley of the state's financial regulation office.
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Foreclosure Dispute Pits Mortgage Lenders vs. Investors

  • Mortgage lenders and housing investors are squaring off in Nevada over a court decision that has allowed thousands of foreclosed homes to be sold for pennies on the dollar, in a case that could have big implications on an already-tight home-loan market across the country.
  • Like lenders, homeowners associations can foreclose on homes to recoup delinquent payments, an option that many have taken after waiting years for lenders themselves to foreclose, a scenario that has left homes without dues-paying owners and some HOAs strapped for cash. Nevada and about 20 other states have laws that allow HOA liens to get priority over first mortgages.
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Key Demographics:

REO Sales Account for More Than Half of All-Cash Transactions

  • Overall, all-cash home sales slipped yet again in July, falling to their lowest share in nearly six years, according to CoreLogic. Home sales transacted entirely in cash accounted for 32.9 percent of total home sales in July, down from 35.9 percent year-over-year. It was the lowest cash sales share since August 2008, according to CoreLogic.
  • "A trend to watch is the cash share of re-sales, which has fallen almost 15 percentage points from its peak cash share of 47.1 percent in February 2011," said Molly Boesel, senior economist at CoreLogic. "This category will determine the direction of cash sales going forward, since re-sales make up the largest share at 81 percent of all sales."
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Buying a Home 38% Cheaper than Renting

  • According to Trulia, when the purchase includes 20 percent down and a fixed 30-year mortgage, buying is 38 percent cheaper than renting. This is true in general across the United States and is true in all of the 100 largest metros except Honolulu.
  • A fixed 15-year mortgage with 20 percent down is even more affordable—43 percent, according to Trulia's calculations. All-cash purchases are 36 percent cheaper than renting. Deals featuring 10 percent down and including private mortgage insurance are 35 percent cheaper; and buying a property with a Federal Housing Administration (FHA) loan at 3.5 percent down is 25 percent cheaper. (These numbers are all national averages, all assume a 25 percent tax bracket, and all assume the homeowner stays put for at least seven years.)
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HUD orders Rhode Island Housing to repay $1.1 million in grants to Safe Haven homeless facility

  • The regional office of the federal Department of Housing and Urban Development came down hard on Rhode Island Housing Tuesday and ordered that the agency pay back more than $1.1 million for failing to provide financial controls at Safe Haven, a homeless facility in Pawtucket that shut down this summer.
  • HUD decided to seek the reimbursement of $1,157,573 after Rhode Island Housing “was unable to provide HUD with documentation and assurances that it had established such fiscal control and accounting procedures as may be necessary to assure the proper disbursal of, and accounting for grant funds …” wrote Robert D. Shumeyko, HUD’s regional director.
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2014 New York State Housing Market Sales Strong Through Three Quarters

  • Home sales throughout New York State remained at a strong level through the third quarter of 2014, even as closings fell off the 2013 pace, according to the housing market report released today by the New York State Association of REALTORS®.
  • "The third quarter is typically a busy time in our seasonal housing market and 2014 was no exception, posting the third highest closed sales total for this quarter in the past seven years," said Duncan MacKenzie, NYSAR CEO, noting that 2013 third quarter sales set the high-water mark during that time. "Home sales in the Empire State remained strong as we closed out the third quarter. New York's REALTORS® continue to project that 2014 will finish among the strongest markets in the past several years."
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Former Alabama Bank Manager Sentenced for Fraud

  • A former branch manager of an Alabama bank that received assistance through the government's Troubled Asset Relief Program (TARP) was sentenced after pleading guilty to fraud, Special Inspector General for TARP (SIGTARP) announced recently.
  • Phillip Owen, 36, of Selma, Alabama, pleaded guilty to one count of conspiracy to commit bank fraud and was sentenced to six months in federal prison, after which he must serve six months of community confinement as a special condition of five years of supervised release. Owen was ordered to pay $217,540 in restitution.
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U.S., Florida Home Prices Up In September

  • Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.4% to a seasonally adjusted annual rate of 5.17 million in September from 5.05 million in August. Sales are now at their highest pace of 2014, but still remain 1.7% below the 5.26 million-unit level from last September.
  • The percent share of first-time buyers continues to underperform historically, remaining at 29 percent for the third consecutive month. First-time buyers have represented less than 30 percent of all buyers in 17 of the past 18 months.
  • Distressed homes – foreclosures and short sales – increased slightly in September to 10% from 8% in August, but are down from 14% a year ago. Seven percent of September sales were foreclosures and 3% were short sales. Foreclosures sold for an average discount of 14% below market value in September (same as in August), while short sales were discounted 14% (10% in August).
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‘King of Foreclosures’ Arrested, Charged with Bankruptcy Fraud

  • A Wisconsin man once known as the "king of foreclosures" and his adult son (Todd Brunner, 57, Shawn, 24) were arrested at their home Monday and charged with bank fraud and bankruptcy fraud
  • The elder Brunner is accused of hiding about $7 million in assets from various lenders and creditors following a bankruptcy filing in 2011. The bankruptcy case was thrown out of court the following year when a federal judge said he believed Brunner had not disclosed all of his assets. The FBI and other agencies soon launched a two-year investigation that led to the indictment of Brunner and his son earlier this month. According to the indictment, Todd Brunner set up shell corporations in Shawn's name and transferred assets to these entities with the purpose of protecting the assets from being seized in bankruptcy. The indictment alleges that Shawn was a willing participant in a scheme to shield the assets.
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Lighthouse Title fined $200,000 for real estate violations

  • CFPB issued the consent order Sept. 30 after an investigation found Lighthouse had entered into several marketing service agreements, or MSAs, with third parties such as real estate brokers and were, under those agreements, allegedly paying fees in return for business. Lighthouse Title, among other functions, provides settlement services for federal mortgage loans in Michigan
  • Lighthouse Title President Bob Wuerfel said MSAs are common practice in the industry and Lighthouse, which had contracted with a RESPA compliance consultant in 2010, was operating within the most recent guidelines, established by the U.S. Department of Housing and Urban Development in 2010.
  • However, industry officials say there is a very thin line between illegally inducing business through agreements and paying for marketing and advertising services, which are a clear means of attracting business.
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Foreclosure Activity Way Down in New Mexico for Q3, September

  • Foreclosure activity plummeted in New Mexico both in the third quarter and in September, according toRealtyTrac's Q3 2014 Foreclosure Report recently released.
  • Overall in Q3, one in every 765 residential housing units had a foreclosure filing in New Mexico, which ranked the state 31st in the nation, according to RealtyTrac. The national average for the quarter was one foreclosure filing for every 415 housing units.
  • New Mexico totaled only 317 foreclosure filings in September, which was a decline of 33.8 percent from August and a drop of 36.4 percent from September 2013. It was the 15th lowest total of any state in the nation among states that reported data. RealtyTrac reported a total of 106,866 foreclosure filings nationwide in September and 317,171 nationwide for the third quarter.
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Houston rises to top of national real estate report

  • Houston was named the top market to watch for commercial real estate investment in 2015, according to the newest PricewaterhouseCoopers Emerging Trends in Real Estate, an annual report based on surveys and interviews with more than 1,000 real estate investors, fund managers, developers and other industry professionals.
  • Houston’s prominence in the report represents a recent rise in investor interest and activity in markets outside of the big coastal cities like New York, Los Angeles and San Francisco.
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FORCE Disclaimer: All data is public information. Any views, opinions, or investment advice presented in this email are solely those of the respective authors and do not necessarily represent those of the FORCE.
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