‘A Bit Of Payback Time’ In California
The Orange County Register has this update from California. “A proposal to build a 573-unit development overlooking the freeway has been withdrawn because of rising construction costs and pressure from the city, the developer said. Shea Homes had proposed four buildings, including a 24-story residential tower, for an 8-acre lot overlooking the Santa Ana Freeway on Fourth Street.”
“But Shea withdrew its project because of rising construction costs, said Brian Riggs, Shea’s urban community development manager. Riggs also said Shea was under pressure to build higher than the company had wanted.”
From the Southland realtors. “A total of 919 single-family homes changed owners during June, down 25.9 percent from a the total of 1,240 reported in June 2005. Similarly, condominium sales fell 30.1 percent to 316 transactions compared to the 452 sales reported 12 months earlier.”
“What’s happening is a bit of payback time, said Jim Link, the Association’s executive vice president. For the past four years sellers controlled sales and dictated terms, often forcing buyers to decide on the spot. At long last, buyers again have some options. Most sellers, if they heed wise counsel from a Realtor, have already adjusted their list price to the new market conditions.”
“Inventory has grown from virtually zero listings of last year, the number of homes listed for sale bolsters the notion that the market has hit a point of balance between buyers and sellers. The inventory of active listings increased to 6,376 during June. That was up 161.8 percent from year ago levels.”
The Union Tribune. “A class-action lawsuit filed this week claims that nearly 400 buyers of converted condos at a huge La Jolla Village complex were defrauded by the developer, which advertised the units as larger than they actually are. Attorneys representing home buyers at the widely advertised Villa Vicenza development are seeking refunds for the owners.”
“Potential losses to buyers of the one-and two-bedroom condos range from $18,000 to roughly $92,000, estimates Patrick Catalano, one of two lawyers representing the homeowners. ‘People who bought were looking to sell these in a couple years with appreciation, and now they have to represent to buyers a lower square footage, and they’ll get a loss in appreciation for their units,’ Catalano said.”
“Sales at Villa Vicenza, which was built as a rental complex in 1987 before being converted to condos a year ago, are winding down. A second phase of 267 units is remaining as a rental complex for the immediate future, although plans could change, said officials.”
“Brian Duchman, a regional manager for Crescent Heights, said late yesterday that square footage of units, in general, can vary widely, depending on how the measurements are made. That doesn’t mollify Angeli Parane, who said she’s worried she’ll lose money on the one-bedroom condo she purchased in September.”
“She paid $343,000 for the fourth-floor, upgraded condo, which she is now renting out. ‘I’m trying to make this an investment, and now when I sell it later, I’ll have to sell it at a lower price,’ said Parane. ‘I feel like I’m being defrauded.’”
Here is another take on the lawsuit, also sent in by a reader:
‘These units were leased for 10 years before they were sold and when they were leased the developer was paying taxes on the lower square footage,” said attorney Patrick Catalano. Condo owners are now demanding that they be repaid for the value of the extra advertised space, which is estimated at $18,000 in the smallest units.’
The Associated Press:
‘Mortgage defaults in California rose more than 67 percent during the second quarter, compared with the same period last year, the result of slowing annual home price gains. Lenders sent default notices to 20,752 California homeowners between April and June, a 67.2 percent hike from 12,408 in the same period last year and a 10.5 percent increase from the first three months of this year, La Jolla-based DataQuick said.’
‘Twenty-three counties posted an increase of more than 50 percent in the number of notices during the quarter, with Riverside, Sacramento, Placer, Stanislaus and Sutter seeing their share of notices more than double.’
Check out these numbers from the OC
http://www.ocregister.com/ocregister/homepage/abox/article_1231279php
I guess the link isn’t working……..I’ll paste a piece of the article. You’ll get the rest
O.C. mortgage defaults spike 83.6% for 2nd quarter
Statewide rates also jump but remain historically low.
By MATHEW PADILLA
The Orange County Register
The number of Orange County homeowners who missed mortgage payments spiked in the second quarter, a report released today shows.
Banks sent delinquent borrowers 1,280 notices of default in the quarter, an increase of 83.6 percent from a year ago, according to DataQuick Information Systems. Lenders typically send such notices, which are the first step to foreclosure, after borrowers skip three or more payments.
Statewide defaults jumped at the fastest pace since DataQuick began tracking them in 1992. The total of 20,752 notices was up 67.2 percent from a year ago but is still low by historical standards.
I guess the OC is NOT DIFFERENT!!!!
Those numbers are for notices. That doesn’t mean anything. I know a lady who purposely won’t pay her house note for 3 months to take trips and such. Strange yes but she does it at least twice a year. When they start reporting the number of houses going back to the bank each month then it will be worth reporting. Notices mean nothing people can still refinance and sell. What I want to see is how many are hitting the bank rolls every month. Those are the important figures. When you start seeing banks taking back that amount of inventory per month then thats news. Not the notices
Note to self.
Notices mean nothing.
Thanks for the input mrincstream.
P.S. Note to self - Bad news means nothing to a PERMA BULL!
MrI-
Let me know when you finally capitulate. You and va_investor seem to be only the bulls left. Also, what city are you in?
So you’re saying nearly double the people not making their house payments this year over last is nothing. I’m going to have to beg to differ with you on this one, my friend. The first part of your argument doesn’t make any sense because it requires you to think tht nearly double the people this year decided to not make their house payments so they could take a trip. Secondly, I think “notices” are a big deal becasue they’re the precursor of what will come. I don’t wait for the rain to fall on my head…..I look for the dark clouds to start looming on the horizon, and plan accordingly.
Several years ago, as I was diligently making double and triple mortgage payments in an effort to pay off the house, I received a default notice! And a knock at the door! Guy said he was sent by the bank on reconnaissance to check if the house had been abandoned. WTF?
I got on the phone ASAP and asked what was going on. Turned out the idiots at Boatmen’s Mortgage changed the mailing address from that on the pymt coupons they sent me and never told me. I said, “so what happened to all my big checks???” Oh, they must be held up at another office. WTF? I was livid, but it all got cleared up.
I was probably part of such notice stats, believe it or not. Idiots.
“I was probably part of such notice stats, believe it or not. Idiots.”
Sooooo, you’re saying that lenders screwing up mailing addresses nearly doubled over last year? What’s going on here? Is it that hard to believe that the problem here is not people taking trips or lost mail, but a whole load of FB’s with their pants down around their ankles awaiting the proverbial “pounding”!
How often do you reconcile your checking account?
Sooooo, you’re saying that lenders screwing up mailing addresses nearly doubled over last year?
No, I didn’t say that at all. I was just conveying something that happened to me in the past regarding notices, not countering anyone’s point. Chill, my friend.
Sooooo, you’re saying that lenders screwing up mailing addresses nearly doubled over last year?
No. I’m not saying that at all. Just conveying something that happened to me in the past regarding notices, not countering anyone’s point. Chill, my friend.
Mrincomestream…
“Notices mean nothing people can still refinance and sell.”
LOL…notices mean an awful lot to anyone trying to refinance her. Does your brain-dead neighbor not realize that late payments affect her credit rating?
Gravity “On”…
You are kidding, correct? Have you ever heard of balancing your checkbook? For our own amusement, please tell us how many mortgage checks you sent in, uncashed, before the bank came knocking on your door? Or did you just think that they decided to GIVE you the house after a while?
The stupidity of some of the posters on here today is overwhelming.
No, that’s not what I’m saying. What I’m saying is that let’s at least get back to historical averages before we start cheering those numbers. If you look at the actual notices which I have access to you’ll notice that most of the stuff going back is stuff that even at the highest peak of the market should not have sold for anything close to that. Example of one that I recently looked at was a ghetto shack deep in South Central Los Angeles that sold for 600k late last year, at the top top of the market it might have sold for 500K. That was obvious fraud. From the sampling I looked at that is mostly what is coming back right now. The time to get excited about those numbers are when you look at those sheets and see properties from 3 or 4 years ago that are at least 50 to 75k under water. My point is that the vast majority of the stuff you see notices on will be saved from going back to the bank. Especially with things like 125% mortages floating around. California is not even close at this time of foreclosures affecting the market and further pulling down prices. That’s at least a year away. In my mind it’s not even worth mentioning. It’s fools gold at this point. Sort of like the statement it’s a buyers market, yea right.
Crispy-
Los Angeles
You are kidding, correct? Have you ever heard of balancing your checkbook?
My banks keep the balance and cut the checks. Normally, everything goes smoothly. No need for name calling amongst readers. The derogatory term I used was directed at the mortgage company for doing an address switch then holding checks and not informing the customer before adverse action. Sheesh.
JJinla-
She’s fully aware and doesn’t care has been doing it for the last 10 years or so at least.
Mrincomestream–
My concern is that when lending standards and appraisal practices go back to long term averages (required down payments, not 125% mortgages, NOT sifting through comps for the right ones, etc.). All the people that could have refinanced using last year’s loan terms and aggressive appraisals will not come close to refinancing, and actual defaults will spike.
Today, we are just seeing the first part of the tital wave of ARMs adjusting. Those that are truly in trouble will effect lending standards, which make make it harder on the next wave, which will make banks more nervous, which will make it harder still. It’s a wicked cycle.
With a couple of Trillion in ARMs set to adjust in 2007 and 2008, most on this board are expecting a significant shake-up over the next 24 months. Yes, it hasn’t happened yet, but in the same way there were signs that the housing run was completely unsustainable, there are signs that this easy lending is unsustainable . . . it’s just a matter of time.
“it’s just a matter of time”
I don’t disagree. All I’m saying is that those numbers are nothing to get excited about. It’s the same type of rah rah that lead to the bubble and it makes people make stupid decisions. Like jumping in before it’s truly a buyers market or thinking an R.E.O. is a good deal at this stage of the game. California is not close to being a rational market yet. Again it’s at least a year away.
mrincomestream is a bear and he has alot of inside info.cut the man slack what he says is true.
“California is not close to being a rational market yet. Again it’s at least a year away.”
I see we are on the same page here.
“California is not close to being a rational market yet. Again it’s at least a year away.”
I see we are on the same page here.
I hate to “burst your bubble”, but I would think that it’s at least 3 years to a rational market. Check back in 2010 and we’ll talk.
Holy god, 67 percent increase YOY, and the resets haven’t really even begun.
California consumer spending is going to absolutely disappear. I can’t imagine the massive hit the global economy is going to take when the flow of Chinese manufacturing into the Port of Los Angeles and Long Beach slows to a trickle.
The Tsunami is still 500 miles from shore and thousands have already been hurt by it. Wait until it reaches land in 6-12 months!
To use Warren Buffett’s analogy, not only are some people swimming naked, some don’t have their swimsuits on very tight. The sudden pullback as the tide goes out is ripping them off. We’ve yet to see the naked people, and the tsunami is still hundreds of miles out.
Just keep in the back of your mind that your government will do whatever is necessary to make sure that those who made really dumb decisions will not get hurt too badly if the macroeconomic consequences of allowing them to learn from their mistakes would prove too severe…
stucco-i’m not sure if the gov’t has any get out of jail free cards left up their sleeves.
there’s a loooooong list of front and middle burner items already competing for taxpayer dollars. or to quote the great spokesman clark griswold, “his heart is bigger than his brain”
I don’t think so either. I think FB’s will be last in a long line of those looking for taxpayer handouts.
Sure, the government did a really good job getting the victims out of New Orleans after hurricane katrina hit! Ha Ha. The government loves you!
And how about the fabulous job of being prompt in picking up the Americans standing on the docs in the Mid-East, screaming “Get us the hell out of here!”
it’s not as bad as you think. with 67% increase, it is not even 5 percent of the economic activity in california. even if you eliminate 5% of the state’s economy overnight, you will just push the state into about 2 to 3 percent recession. typical on a bad year.
“Mortgage defaults in California rose more than 67 percent during the second quarter, compared with the same period last year, the result of slowing annual home price gains. Lenders sent default notices to 20,752 California homeowners between April and June…”
I wonder if the tipping point was the property tax bill due in April and, to a lesser extent, the Federal Income tax AMT reduction of the housing deduction that tipped the scale for these people.
A more exacting way of predicting whether late notices from banks on mortgage payments mean anything is to somehow track how many of those late notices stream into foreclosures. Is there such a statistic?
“At long last, buyers again have some options.”
Like the option to rent until prices return to sane, affordable levels?
D.R. Horton has ads on the radio in Sacramento saying it is a buyers market and D.R. Horton can get you into a house. They are really starting to spin the buyers market bullshxx. Buyers market to them means we can’t sell these cracker boxes as fast as we make them so we will try reverse psychology. Sad part I am sure it works. Just like “Suzanne researched this.” Freakin Bastards.
Hey, we need buyers to drive the prices down. These idiots are taking one for the team, so to speak, by buying up the “reduced” inventory and providing comps that give evidence for a declining market. The problem in our area is that no one knows how bad it really is because the drastically reduced properties just aren’t selling. Once we can get a few GF’s to suck ‘em up, we’re officially down another 10%.
I think differently on this point. I feel all potentials buyers, unless they are absolutely in need, should just HOLD! for as long as possible. Much better results if you are a bear. Bring them to their knees by shutting down the dollars spigot.
Wishful thinking, I know, but IMO more quickly effective.
Sounds like the market is about to collaspe in Reno. Is migrating Calif. money down to a trickle? The prices in Reno got too high even for Californians.
Cali money is indeed scarce these days. Even the old standby retirees are standing off on the sidelines.
Thanks for the update. From the viewpoint of a person in North Calif., it seemed the prices got too high to make the move to Reno a good value proposition.
reno sucks enuf said
I couldn’t believe my ears when I heard an ad run on WMAL here in D.C. It was for lake-front lots on Lake Anna (~1 hour south of D.C. with no traffic). The man was exclaiming “lots are only 200K this year, and last year they were 400K !! (It’s a great time to buy!)”
As I was watching the world news on one of the networks, a real estate commercial came on after the segment. I am not sure if I can mention the company so I’ll leave that out but this is what the commercial said:
“Now (company name) has more houses to choose from than ever before.” Well, at least they’re looking at their situation on the bright side. Yes, reverse psychology.
“‘People who bought were looking to sell these in a couple years with appreciation, and now they have to represent to buyers a lower square footage, and they’ll get a loss in appreciation for their units,’ Catalano said.”
I guess we can conclude the price per square foot was even less affordable than it appeared when these dolts purchased these money-losing investments…
And once again the inaccuracy of the median rears it’s ugly head.
Pay too much for too little on the way up, masking the rise.
Pay much less for a lot more on the way down, masking the drop.
Econometricians refer to this kind of problem as “selectivity bias” in the data — the unobserved attributes of the home (e.g., freshness of paint, use of automobiles as sales incentives, deferred maintenance, etc.) affect the relationship between sale price and recorded characteristics (square footage, nos of bedrooms and bathrooms, etc) differently in a rising market than in a falling one. Basically, the residual (effect of these unobserved characteristics) is relatively more negative in a rising market and relatively more positive in a falling one, as sellers feel they need to offer more attractive nonpecuniary enticements where buyers are scarce, which they don’t need to bother with when there are ten potential offers on each home. When there are many homes for each buyer, the one the buyer chooses will tend to have a relatively large collective value of these nonpecuniary attributes, and the fixer-uppers will sit unsold until their prices are reduced to reflect the cost of repairing defects.
You heteroscedastic SAS head!
I am glad to see we have some data thinkers on board!
Here we go! Let the blame game and lawsuits begin. These morons wouldn’t have made a profit even if it turned out these turds were larger than originally stated. Their argument will be a loser by the time any of this junk gets to a trier of fact.
These units really are turds….they were nasty when they were rental units, now they are just painted turds with some nice granite. I laughed when I saw them being converted!
I was laughing too. They were really bad as rentals. The units are tiny compartments with very thin walls and awkward floor plans. A high percentage of investors and flippers bought in. The developers are hurting so badly that they have dropped prices and are offering no closing costs now. Not too long ago they were offering a $5K move in. A serious shoebox with some cheap redecoration. They aren’t even redecorating anymore. You have to request it at an additional cost.
From their website-
AVAILABLE UPON REQUEST:
Interior Highlights:
Stainless steel appliances
Granite countertops
Marble vanities
Maple cabinetry
Private patios or balconies with extra storage
Washer and dryer in each residence
Spacious walk-in closets*
Cozy wood-burning fireplaces*
Mirrored wardrobe doors*
Designer carpet
These guys deserve what they have coming.
Will we soon see the day when sellers brag about “over 500 sq. ft. in granite countertops, 500sq. ft. in marble flooring, and 250 sq. ft. ‘face’ of stainless steel appliances?” Or “hardwood (faced) cabinets?”
How so? If they bought using a developer’s agent, it would seem their claims hold some water.
“I’m trying to make this an investment, and now when I sell it later, I’ll have to sell it at a lower price,’ said Parane. ‘I feel like I’m being defrauded.”
Oh hunny bunny, you’re gonna have to sell it at a lower price in a few years no matter what! Better get used to that idea.
IMO, these folks just want out. It will be curious to see if the TV channels version pans out.
Of course they do! They see the writing on the wall. And if they don’t get out this way, the next attempt will be construction defect litigation, then predatory lending litigation and if none of those work, I suppose there’s always the old stick your head in the oven gambit.
Time to declare BK!
Bring it on.
I feel like she deserves it.
Of course you can feel anything you want. The facts should be used to bring court cases, not feelings. She may have, in fact, been defrauded. On the other hand her future losses could make that fraud look minor in comparison, especially as they make a very public mess over the fact that the condos are overpriced. This is possibly a case where the win could spawn even greater losses.
I think the buyers are pissed that the units didn’t go up in price like they expected . Also I think the buyer/owners are angry that part of the project, (267 units ),are still remaining as rental units when they thought the whole project was going to be sold .
Exactly… would we have an issue here if there was still 20% appreciation.
I think they should sell those last 267 units for a lot less than they paid. Problem solved right?
A couple of observations:
Is it possible to pay $343K for 643 square feet and NOT get ripped off? (methinks no).
Are you telling me this woman paid that kind of money for something and didn’t bother to take a measuring tape to it before she closed escrow?
Sheesh…
I felt defrauded when someone bought a house 2 years ago for 350k and then tried to sell it for $1.8 million. WTF is up with that?
Defrauded? That is sillyness.
Nobody held a gun to her head and made her buy the home….ot did they?
Hmmm… having to sell your 1Bdm condo at a lower price than one’s own greed-inflated fantasy suggests it’s “worth” = fraud. I’m no lawyer, but the legal foundation for this very serious allegation looks a bit shaky.
If the company misstated the size of the units (especially when they may have been accurately represented while they were being rented) is prima facie (on it’s face) fraud. There may be some mitigating factors (refurbishment, elimination of interior walls, etc) that boosted the number, but I don’t think it’s simply sour grapes.
The more telling line from the article was that the lawsuit clouds title. This is going to be more damaging than an straight cash outlay they might have to come up with to disgruntled tenants. Until this is resolved, prices will continue to drop even more sharply than the surrounding buildings.
Nobody tell my wife that misstating the size of a unit constitutes fraud. I could be in some serious trouble here.
LOL! I’m surprised someone hasn’t picked up on that yet.
Speaking of being defrauded, here’s a good one-
http://www.stltoday.com/stltoday/news/stories.nsf/stlouiscitycounty/story/593F5C32867FD9BB862571BE001804CB?OpenDocument
Based on the 18k figure ,given a 600 a sq foot cost, it sounds like the builder was off by 30 to 60 feet .Not off by a whole lot but if I was the builder I would pay and get it over with . I wonder if the builder had a disclaimer allowing himself to be off by a small percentage .
I’m sure he did. I’d be surprised if he didn’t have a “deemed to be accurate but not guarenteed” statement on every piece of literature that had his name on it. Like Ben said above these people see the writing on the wall and just want out because they have now realized they have stepped on themselves and it’ll be 10+ years before they see anything close to a profit.
“they have now realized they have stepped on themselves”
Too polite. I would say they have now realized they have shat upon themselves…
can’t wait for the TEXAS housing boom!
‘People who bought were looking to sell these in a couple years with appreciation, and now they have to represent to buyers a lower square footage, and they’ll get a loss in appreciation for their units,’ Catalano said.”
————————————————————————
I love it! The lawyers must be salivating already…..and it’s not even 2007 yet!
But Shea withdrew its project because of rising construction costs
Ah, the old phantom “rising construction costs” excuse rears its’ ugly head again.
payback time
I like the image of a fire hydrant peeing on a dog.
http://photos1.blogger.com/blogger/6511/1295/1600/0040.jpg
“Inventory has grown from virtually zero listings of last year, the number of homes listed for sale bolsters the notion that the market has hit a point of balance between buyers and sellers.
Is there a realtor out there who can explain what this means?
We need a realtor definition of “balance”.
Right. I suspect that in their grade school arithmetic, the seller/buyer unit (as long as it’s many) means balance.
Patrick Catalano can be found at
http://www.legalcat.com/
I sent him this email.
You need to look into a class action litigation against C.A.R., Gary Watts, Leslie Appleton Young and David Lereah for promoting California property never goes down in value. It does.
“Most sellers, if they heed wise counsel from a Realtor, have already adjusted their list price to the new market conditions.”
barf
C’mon! Who can can live the American Dream without their own lovely view of the 5…..
There’s only so much land within 100 yards of interstate 5! Buy now before it’s gone forever!
I rented a cheapo apartment right in the armpit of Santa Ana at the 5 & 55 freeways in 1998. (That’s how I saved up the downpayment for the house I bought in 1999.)
Man, was it a noisy, smutty, illegal immigrant dive. And I’m sure it still is…
Nah, I grew up in that ‘hood.
I am pretty sure that CalTrans emminent domained that apartment complex for the new exit off of the 5.
I have the Vicenza brochure from 2005 and it says below each floorplan:
“Actual floorplans, illustrations, square footage are aproximate and dimensions may vary.”
Also below each floor plan it says: “Approx. XXX Square Feet”
The question is, how approximate can a developer be? Off by 1-2 feet? 10-20? 25-50?
Who will start the law suit against Watts, LAY, and Li=lirah. We should proudly announce that to In the BAG
Let the lawsuits fly, and the equity fall like a rock. LOL
“67% increase”
I think that number is about to increase by an order of magnitude and it will happen much faster than even those who post here realize. I’ve been tracking the number of NODs (not foreclosures, but the first step in that process, 98% are redeemed) published by my local newspaper. Last year at this time there were 2-4 and yesterday there were 16. At this time there are still a few buyers, mostly speculator types with “I buy houses” on their license plates going after distressed properties. They will now get all 16 properties for what is now considered 15% or more below market. However, they will not be able to unload them and all of those RE seminar types will be completely flushed out of the system within the next six months. By that time however, they will have sabotaged the comps. The substantially “below market” sales they started to be able to get only in the last few months will be hitting the comps very soon. This means nothing on the retail market will appraise, sales will virtually halt for a few months and then the panic selling and chain reaction meltdown will begin. Combine this environment with rising rates, inflation, tightened lending standards, and the coming recession (rates will fall AFTER the crash), and you have the storm of the century. It’s not two years down the road but next year. That’s not to say it won’t crash for another five years beyond as well. As everyone here points out the ARM resets will destroy the market by the end of 2008, but it will be like another hurricane hitting New Orleans at that point.
Is this 4th street project the one that directly overlooks the 5 freeway, in Santa Ana? The one they have listed in the one millions to buy? Who in their right mind would pay a milion dollars to live with gang and crime riddled Santa Ana on one side, and the 5 freeway on the other? If this is that property, no wonder it’s in trouble. It should be that way.
Another example of a horrible idea born out of the bubble.
I’ve been watching the Huntington Beach, CA, listings on ZipRealty.com go from 600 or so several months ago up to a peak, last week, of about 1080. But today, it’s down to 1012.
What could explain this huge delisting? (I doubt they all sold over the weekend.) Could it be that realtors are “resetting the clock” by relisting them at lower prices?
The listing total will often tick down on the first day of a new month. More listings will have the last day of the month as their expiration date than would be expected if the dates were just random.
Ah. Thanks!