Loans, Rates And Values “A Bad Cocktail” In California
The Sacramento Bee reports from California. “A North Carolina-based lending policy group contends that 21 percent of so-called ’subprime’ loans taken out in 2006 by Sacramento-area borrowers are likely to end in foreclosure and aggravate an already flat housing market. 2005 brought 26,800 subprime home loans to the region, according to San Francisco-based Community Reinvestment Coalition.”
“The California Association of Mortgage Brokers quickly rebutted the center’s contentions that such loans are a primary cause of foreclosures and that brokers aren’t accountable for loans they sell. ‘If a loan goes potentially upside down, we potentially have to buy it back,’ said Michael Faust, CAMB’s chairman of government affairs.”
“Faust also said subprime borrowers can get into financial trouble for all manner of reasons beyond their mortgages. ‘Life happens. People get divorces. People lose their jobs. People go out and get credit cards and run up debt,’ he said.”
“A fall in California housing prices has also aggravated such loans. ‘If the loans are less than a year to 18 months old, there’s limited equity for them to refinance,’ said Pam Canada, executive director of Sacramento-based Neighborworks Homeownership Center. ‘That’s what they’ve always done to prevent foreclosure.’”
The Union Tribune. “About one in five subprime mortgages made in the past two years is likely to go into foreclosure, with San Diego among the regions expected to be hard hit.”
“The report projected that 21.4 percent of subprime loans issued in San Diego County in 2006 will end in foreclosure. That would be a 567 percent jump from a projected foreclosure rate of 3.2 percent on subprime loans issued in the area from 1998 to 2001.”
“Only Orange County and Santa Barbara are expected to see a bigger increase.”
“Much of the greatest exposure to foreclosure risk was found to be in California and Nevada. Of the 10 cities deemed most at risk, only two were outside the two states. Merced led the list with a projected rate of 25 percent, followed by Bakersfield at 24.2 percent.”
“With a rate of 21.4 percent, San Diego placed 21st among the cities surveyed. Places with rates expected to be greater included; Riverside/San Bernardino, 22.6 percent; and Los Angeles/Long Beach, 22 percent.”
“John Karevoll, a real estate market analyst for DataQuick, said he had not studied the report, but that its projection for the San Diego area ‘doesn’t sound too far out.’”
“He said the report’s findings ‘may not be as dramatic as it looks,’ and instead might illustrate a market that is normalizing after an unprecedented run-up in prices, during which foreclosures were abnormally low due to continuing equity gains by home owners.”
“Ed Smith Jr., a Mission Valley mortgage broker and director of the California Association of Mortgage Brokers, said subprime loans are not necessarily a bad product. ‘They have put more people into homes who wouldn’t qualify for traditional products,’ he said.”
“Smith said that for subprime borrowers, the goal should be to transition into more conventional lending products. ‘Many have not planned ahead,’ he said. ‘Now their (home) values are plateauing and interest rates are rising a bit. That’s a bad cocktail.’”
The Santa Cruz Sentinel. “Fixed-rate mortgages will make a comeback in 2007, according to the California Association of Mortgage Brokers. Peter Ogilvie, vice president of First Residential Mortgage Corp. in Santa Cruz, said the statewide trends reflect what is happening in the local real estate market. For example, he expects prices to drop slightly.”
“Kevin Mee of First Horizon Home Loans in Capitola predicts an attitude change on the part of buyers. ‘I personally believe that more people will begin to shy away from the Option ARMs adjustable rate mortgages with the outrageously low start rates of 1 percent to 2 percent, and become more realistic,’ he said. ‘In other words, buy what they can afford today and tomorrow, and not what they can just afford today with some type of pie-in-the-sky loan.’”
The Contra Costa Times. “It was bound to happen. The job market for home building in the East Bay has begun to stumble, halting a strong run. The pace of employment expansion in the housing sector is a fraction of what it was earlier this year.”
“Only last spring, residential construction was booming in the East Bay. Jobs in home construction were being added at a 10 percent annual rate in April and May. But by October, jobs were being added at a 3.5 percent annual rate.”
The Press Enterprise. “As general manager of Silvercrest Western Homes Corp. in Corona, Al Whitehouse this year saw orders plunge for his factory-built homes, mirroring the retrenchment of more conventional on-site home builders.”
“Drawing on 36 years experience in what is a very cyclical business, Whitehouse slashed production staff.”
“Q: How did you adjust your factory staffing? A: We had 410 production workers in May or June of this year and now we have 290. One of the toughest things I have to do is lay off that kind of talent, but we have to be realistic relative to our level of production. We can’t be overstaffed. Otherwise we end up being unprofitable.”
The Contra Costa piece sees a seamless transition:
‘As home-building fades, industries such as highway, street and bridge construction; heavy and civil engineering; and specialty trades have stepped into the spotlight, according to an analysis of state labor data. ‘We will see a major boom in commercial, heavy industrial, public works and schools construction,’ said Greg Feere, chief executive officer of the Contra Costa County Building and Construction Trades Council.’
Kind of like the corporate spending that is predicted to stave off every recession.
The Orange County Register:
‘The growth in housing in South Orange County is outpacing the growth of new jobs – which means more residents need to commute to work in other areas, which puts pressure on both I-5 and local streets,’ Michael Litschi, OCTA spokesman, said.’
‘The Center for Responsible Lending, says , ‘We project that one out of five (19 percent) subprime mortgages originated during the last two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the ‘Oil Patch’ disaster of the 1980s.’
Well, the five bonds voted for by huge margins in the recent California election will fund massive “public works” projects like new roads, etc., so the prediction in the Contra Cost Times may not be too far off. Of course, there will be billions of dollars of debt to pay at some point, but who’s counting?
Re: highway projects,
I was thinking the same thing, but when you realize how far out these construction projects will be, housing will already be toast. Plus, the good paying jobs in highway construction do require skills that I would doubt many of the recently added “hammer swingers” have. When Granite Construction gets 10 new projects in CA, they’ll just work harder-longer hours, rather than train carpenters.
Karl Rove’s brother is one of the top dudes at Granite, serves them right.
http://www.newsreview.com/reno/Content?oid=oid%3A36513
on Rove’s bro and Granite
Rove’s bro had big differences with his brother over the Vietnam war. I wonder if they see eye-to-eye today?
Yeah, these projects are somewhere down the road, and won’t happen in time to save housing.
Another interesting point on these bond measures/public works: there may not be enough bonding capacity to actually do all of the work.
A little background for those who may want to know about bonds on public works: Public works jobs (i.e., government construction - whether roads, schools, courthouses, or whatever) require the general contractors to post bonds (payment and performance) for the cost of the work. Each general contractor basically has a “credit line” with its surety (the company that issues the bonds), meaning that the surety will allow the general contractor to take out bonds up to (but not exceeding) the amount of the limit. These sureties have to be licensed (admitted or authorized) to do business in the state where the public work is, and the public works contracts usually require that the sureties have at least a certain minimum AM Best Rating (e.g., A-; VIII). There are only so many sureties out there with these ratings, and the sureties are limited in the amount of bonds they can issue (as they have to meet certain benchmarks for assets v. liabilities). Once a project is completed (or, often, after the expiration of the warranty period for the work), the bond is exonerated and frees up that amount of the contractor’s credit line and surety’s ability to issue additional bonds.
In California, we passed bonds for tens of BILLIONS of dollars worth of public works. The surety companies and general contractors do not have enough credit capacity to handle that much work, so it will have to be done with certain projects going first, then additional projects can start after the bonds from the first tranche are exonerated. So, the state can’t spend all of that money now, even if wanted to (and assuming the general contractors could find enough workers). Then you need to add in the fact that many general contractors have switched to Subguard from Zurich (a little too complicated to explain here in this post, which is already long), but the Public Contract Code does not allow public works jobs to be bid with Subguard (only ordinary bonds are allowed), and you have fewer contractors who can bid on the work.
Sorry for the long (probably boring) post, but this is a topic that I have some familiarity with and I thought some of you might be interested.
thanks - I did not know that they were somewhat handcuffed…
WaitingInOC -
Nothing boring about your post or the process! This just drives a stake through the heart of those who claim we’ll have an instant infusion of displaced workers into govt. construction. Based on your ‘bond education’, it looks to me like most wouldn’t even be necessary. I only had some familiarity with the process being lengthy. Thanks for that info.
Thanks for the post, it was very informative, and it’s not too long. Not any longer than reading the voters pamphlet about the bonds, anyways. I voted against most of them.
“Sorry for the long (probably boring) post, but this is a topic that I have some familiarity with and I thought some of you might be interested”
I Can see exactly now why such large projects as the garden grove freeway widening project and the riverside freeway interchange project take forever. It looks like they only do small portions at a time, using only a limited number of workers and machines. And these large public works projects only use skilled experienced contractors, unlike the housing projects which employ large numbers of immigrant laborers.
Very, very interesting post. Thanks for the info.
Someone else here works in CA Public Works.
Bid Bonds
Performance Bonds
These are two things the most FB homebuyers wish they had as their homebuilder goes belly up.
Yeah Ben….I just don’t understand the logic….Can you just borrow your way to prosperity with bonds ??? paticularly when a lot of the money is for repair and not new product ??? Where is the value added ??
“Can you just borrow your way to prosperity with bonds ???”
Of course you can! It’s a new paradigm here in the land of eternal sunshine. And please don’t forget: RE always goes up!
I voted against all of these recent bonds. I figure on living for at least another 50 years (fingers crossed!), and I just don’t understand how my generation (X) will not be negatively affected by all this debt.
As an old geezer, this is a thing that actually irks me. Just amazing how our attitude changes when we’re not the ones footing the bill.
Geezer: “Don’t touch my Prop 13”.
Geezer on election day: “Bond measure? …… yeah, that sounds good”.
I don’t really see a problem with these bonds. At least it’s building infrastructure and local jobs, as opposed to being flushed down the toilet somewhere (not mentioning any recent crusades).
Personally I voted against almost all of them. What I find disgusting is these bonds have come to replace the dreaded tax hike. We can’t raise taxes, so we raise our debt. Call me old fashioned, but in my book you either live with the tax money you get or you raise taxes. It’s called reality, and californians are not good at grasping it…
Troy, it’s money we ain’t got. The projects can only ultimately be funded by large increases in taxes, or the ole funding via defaulting on debt. Which one do you choose?
Perhaps the logic is that they will never have to pay the bonds off with “real” money but instead will float new bonds to pay off the old bonds. Raising taxes means the citizens (voters) have to pay whereas issuing bonds means a lot of foreigners (nonvoters) hold the debt.
I never ever vote for any bond, but I do own municipal bonds and invest in them. They are there, they are tax-free. I’d rather have some sucker who voted for them pay my interest than to be guilty of voting for more spending. Voting for bonds through referendums is essentially allowing common citizens (and illegals who vote) the ability to legislate, effectively turning voters into state legislatures. It’s more evident that democracy is equivalent to two wolves and a sheep voting on what’s for lunch.
The value added is in the good old american bull sh–t! It works wonders with the stupid and the foreign morons from Asia and Russia. Yeah stupid foreign morons from Eastern Europe and Asia, obsessed with the stupid hollywood american culture and all the BS culture. That’s the way you create added value. And it works just wonderfully for most of these foreign morons obsessed and hypnotised by the BS. You have great hypnotists in Hollywood and Madison Avenue. The BS in Washington is however not very good. It’s lacking a little bit of Monica stuff and down with the pants.
Bakersfield is #2 on their list and our newspaper is silent. Idiots!
“Much of the greatest exposure to foreclosure risk was found to be in California and Nevada. Of the 10 cities deemed most at risk, only two were outside the two states. Merced led the list with a projected rate of 25 percent, followed by Bakersfield at 24.2 percent.”
“Riverside/San Bernardino, 22.6 percent; and Los Angeles/Long Beach, 22 percent.”
This is shaping up pretty much like many on this blog had projected… and pretty much on sechedule. A little scary to see it in black and white in the mass media.
imploder posts “Riverside/San Bernardino, 22.6 percent; and Los Angeles/Long Beach, 22 percent.”
I have been gone awhile…. But Wow I am glad that is not Orange County because we have 15% in the bag here up, straight up! I already spent my money. Do you want to know why? Because they are not making any more land in Orange County!!!! Besides it is a new paradime…. I really don’t know what that word means but it is bucks for me!
I am lucky too bad for Riverside/San Berardino….boo ya would’t want ta’ bee ya!!!! LOL LOL too bad you loosers!
LMAO!
“Santa Ana-Anaheim-Irvine
22.8 668%”
Yea, Now that’s really “in the bag..”
implorer posts “Santa Ana-Anaheim-Irvine
22.8668%
Yea, Now that’s really “in the bag..”
ER Ah doh…. that is 22.8% up right? Please pretty please say UP????
““Riverside/San Bernardino, 22.6 percent; and Los Angeles/Long Beach, 22 percent”
Guess what folks. Hispanics have been buying homes in droves in these areas using 0 down neg am, stated, no-doc,option arms,. Look for astronomical increases in foreclosures in LA inner city crapzones real soon, like say 2007 earliest. Unless out Gov’t does something stupid like offering financial bailout assistance to low-income FB’ers.
Default means worse credit. Another domino tips over.
More than 20% of the subprime loans in foreclosure ? Has anyone seen the actual report ? Do the mean default or foreclosure ? I am assuming they probably have a higher number for defaults.
Eventually the defaults will also add to the inventory. Due to the bank trying to get the foreclosure done or the FB trying to cut and run. Either way it will balloon the inventory.
The news keep getting worse and worse. This is going to affect buyer’s psychology. And yet, everyone is waiting for the spring bounce, when prices will “again start going higher”.
I was thinking the same. Affected people reading the SacBee must be feeling scared now.
Are you kidding? I was elated reading the Sac Bee this morning… of course, I’m looking at possibly buying at the end of 2007 or early/mid 2008. Of course, by the time that we’re ready to buy, Elk Grove looks like it will be as ghetto as West Sac, so hopefully the Davis home prices fall back into the $300-350k range.
“There has never been a better time to wait to buy a home.”
Walt: what has been happening with Elk Grove these past few years that is making it ghetto? Too many marginal buyers coming in as of late? Just a few years ago that was a real white flight town for the younger generations. I can’t even imagine how bad the commutes to downtown must be by now.
A couple of factors, mostly related to growing pains associated to a booming city that’s only been incorporated for a short period of time.
First, the city government (city council and zoning commission in particular) is completely ineffective if not corrupt. Developers have erected mile after mile of identical tract homes in very close proximity with limited infrastructure.
Second, EG now runs continuously into South Sac. There used to be a mile or so of undeveloped land that served as a buffer zone of sorts. At the risk of being un-PC, the less desirable elements of South Sac (namely gangs) have now expanded their territory into EG.
Third, (related to the earlier two points) the police department is basically composed of rejects from Sacramento County Sheriff. Unlike the school district, which has long offered one of the best benefit packages in the state (disclaimer: my wife is tenured faculty member of Valley High School), the Elk Grove police department is relatively low paying for an affluent suburb (compare it to Rocklin or Davis, for example). As a result, property crime is on the rise and will probably approach the levels that you see in the Pocket quite soon (ie, nonresidents from South Sac burglarizing the wealthier homes).
Finally, the air (and probably water) quality has taken a noise-dive with all the construction. Again, 10-15 years ago EG used to enjoy some isolation from the city, but no more. Most of Elk Grove is now as densely populated as most SFH parts of Sacramento.
Davis isn’t perfect (I lived there from 2002-05, half of which as a student), but the city government (particularly zoning) can make the Third Reich look easy-going. So far, developers haven’t been able to commandeer the zoning board of Davis nearly as much as they have in Elk Grove, and the result has been sprawl that has gone unchecked. I strongly suspect that the quality of workmanship of the 2003-06 homes will prove to be inferior.
So you’re saying Third Reich like it’s a GOOD thing, right?
Walt, I’m in Davis too and have been watching it and the surrounding area. My husband and I work for UCD and have decided to move out - both renting in the short term and buying in the long term. This seems to be a trend lately both with students and with UCD employees. I have some great stories to share about landlord’s being convienced that a student will rent their 2/1 condo for $1550 per mo. this spring. They are positive they’ll get that price and are letting the properties remain vacant until they get that price and not a cent less! It would be funny if it wasn’t so damn sad.
Walt calling the Davis Planning Commision the Third Reich and it’s pretty close to the mark. He’s not kidding. What is really making Davisites nervous is that Woodland keeps creeping toward the Davis city limit on our north east side with new developments price well below Davis comps. Rental prices are decreasing here too. I just saw a 5/3 SFR for rent in the Enterprise for $1600. I haven’t seen a price like that here since 1994.
As for EG, the Bee just released two stories. One on the upswing in violent crime and now on property crime in Sac County. The thing is most residents don’t realize how bad Sac has been for property crime all along. I suppose they are about to get an education.
walt-At the risk of being un-PC, the less desirable elements of South Sac (namely gangs) have now expanded their territory into EG.
I assume you are white…white’s need to stop aplogizing for the empiracle evidence that they witness before there very eyes.
k, ready….tell me which statment as racist?
1) asians score higher at mathmatics than the rest of the population.
2)Hipanics make up a large portion of the manual labor workforce.
3) Italians are renowed for their fine, high end sports cars
4) blacks make up 90% of the NBA
5) (insert ethnic group) has a high unwed mother rate. (insert ethnic group) contributes more crime as a percentage of poplulation than any other. (insert ethnic group) uses religion to guide every move they make.
/observation is not bias. if i flip pennies and 70% of all of the pennies i flip land on heads 65% the time , i dont believe that all pennies will land on heads 65% of the time. But, i might say pennies land on heads alot.
–
EG also know for row upon row of spec houses now vacant except for the ones being used to grow pot.
“This is going to affect buyer’s psychology. And yet, everyone is waiting for the spring bounce”
And we will have a wonderful sring bounce, some day. Just not spring of 2007. We are very early in this. My guess is spring of 2013. I know, I know, but I’ve always been an optimist.
How ’bout a nice bounce in inventory….that’s the only foreseeable bounce for spring of ‘07, and oh what a bounce it’ll be.
if you nationalise the number 20% of 2003 to 2006 loans= x ?
2003 being the watermark so to speak- 2044 and on are uderwater now
2044 and on are uderwater now Already? I’m not even remotely ready to consider a housing boom that far out in the future.
“The report projected that 21.4 percent of subprime loans issued in San Diego County in 2006 will end in foreclosure….”
Hope you guys have your housing bubble rain coats handy. The stuff we’ve been talking about is hitting the fan. My guess, when you add regular foreclosures and specu_closures on top of subprimers, things are going to get pretty messy.
Yep, the slo-mo crash is playing out just as people here said it would many months ago. It’s going to be an interesting new year…
A year ago, everyone I know was criticizing me for selling and renting. My father-in-law basically told me I was making the biggest mistake of my life. My fat-cat robber baron double-breasted-suit-wearing brother-in-law kept telling me how much money he was pouring into residential real estate. The LA Times was no help either, predicting continued price increases and a healthy market. And I won’t mention the housing-heads on various housing blogs.
I’m no economist. I’m not a real estate expert. I’m just a dude who had a gut feeling that when I sold my house, I sold it for way too much money. I felt guilty when I sold my house, like I ripped the buyer off. And forget looking at new houses. I mean, I’d walk into a these $1 million hovels and just laugh out loud.
All I’m saying is that if I — with zero qualifications, zero experience — could predict this, then why the f*cking hell didn’t the media, the economists, the Fed predict this?
I have no family here, but your story is basically the same as mine. Sold in SD 6 months ago - for a bunch of money. Renting a nicer house in a nicer ‘hood at about 50% of what it would cost to buy - and am sleeping better for it. A lot of contemporaries though I was crazy - it took a while to get the wife on board too.
Crazy no more. I felt the market in SD was tanking when we sold, it just took a few months for the stats to build up steam. Going forward it’s only going to build momentum and volume.
Like a lot of people here I think things are going to get interesting by the end of 2Q ‘07 - and that 21.4 % figure only confirms this to me.
They absolutely knew they’re just trying to keep things together as long as possible. The other answer is that they’re vastly more intelligent and we’re just lucky pessimists.
Congrats!!! Be sure to update us when the in-laws finally come around and admit that you “got lucky” in selling your house when you did. (They’ll never actually go as far as admitting that you had the common sense to see what they couldn’t, of course, so you’ll just have to be satisfied with “lucking out”)
Go to zip realty and search condos in sd,alot of bank owned short sales on there.But of course they still have 200k to 280k as listed price.Name your friggin price already!
The way I see it, just play their game. The spread is really the wishing price minus what they “think” they should get.
Therefore, the offer price should be the low end minus the spread - i.e. for a spread of 200 to 280, the offer is 200 - 80 = 120.
I wonder what percentage of non-subprime loans they think will end in foreclosure?
Are all option ARMs subprime?
“Q: How did you adjust your factory staffing? A: We had 410 production workers in May or June of this year and now we have 290. One of the toughest things I have to do is lay off that kind of talent, but we have to be realistic relative to our level of production. We can’t be overstaffed. Otherwise we end up being unprofitable.”
It continues… How many people will be locked out of their jobs in the new year? What is the anticipated drop in earning due to cut overtime? For many hourly jobs, the base salary is often refered to as the “welfare check;” overtime is expected to maintain standard of living.
Does J6P have any awareness? Not yet. Soon… soon…
The Santa Cruz Sentinel. “Fixed-rate mortgages will make a comeback in 2007, according to the California Association of Mortgage Brokers. Peter Ogilvie, vice president of First Residential Mortgage Corp. in Santa Cruz, said the statewide trends reflect what is happening in the local real estate market. For example, he expects prices to drop slightly.”
Oh, I expect fixed mortgages to become a greater fraction of mortgages issued. But look at why all those option ARMs were taken… it was the only way to get into a house. For buyers to buy (with the requisite larger down payment that I believe will be required, soon), that means more than a slight drop in prices.
Neil
“Kevin Mee of First Horizon Home Loans in Capitola predicts an attitude change on the part of buyers. ‘I personally believe that more people will begin to shy away from the Option ARMs adjustable rate mortgages with the outrageously low start rates of 1 percent to 2 percent, and become more realistic,’ he said. ‘In other words, buy what they can afford today and tomorrow, and not what they can just afford today with some type of pie-in-the-sky loan.
_________________________________________________________
So don’t buy now then…
buy what they can afford today and tomorrow, and not what they can just afford today with some type of pie-in-the-sky loan.’”
Which, in a nutshell, means nobody will be buying homes. Who the hell can actually afford a home on a traditional mortgage?
The first time buyers definitely cannot. How many first timers have $ 100K to $ 150K in the bank for a down?
Once existing homebuyer’s equity disappears, they’ll be in the same boat (or worse).
Ray: assuming that the $100-150K is 20% down, that would mean you could get a trailer in Capitola. Maybe.
And when you consider the median incomes in Santa Cruz and Santa Clara Counties, that would also mean there will be ZERO buyers using traditional 30 yr loans. These mortgage guys are truly amazing. I doubt this goon was warning his I/O clients the past five years. This is just another example of a wishful thinking REIC team member. Probably hasn’t done any business since summer.
I left Santa Cruz in 1994 after my wife quit her job. We were looking at a condo in Soquel - 1500 square feet, $199K. We almost went for it. I checked recently - it’s at least doubled. So… It really COULD fall 50%, and then just get back to semi-reality. We moved, because we only had one income (mine).
It could fall more than 50% because if builders start building a lot of condos, prices can go anywhere. If they don’t build, they earn any money. It’s not like they earn money by protecting “current investment.”
MS posts ” It could fall more than 50% because if builders start building a lot of condos, prices can go anywhere.”
Eazy….
There seems to be a lot of conflation of 20% down and a “real” mortgage. I have a 30-year fixed mortgage for 90% of the value. I don’t consider this particularly risky, as my payment aside from taxes (about 25% of the total) is fixed.
ARMs (and Option ARMs) are a very different beast than a low down payment product.
Charles,
The issue with a 20% downpayment is that the lender is protected against a 20% loss (very probable in this market, and already happening in various locations). It’s why, in days long-ago, buyers with less than 20% down had to have PMI.
In other words, a 10%-down buyer is underwater when the market “dips” just 10%.
In a normal market, 10-20% drops are significant, and not very likely. However, with the appreciation rates in double-digits for the past 5+ years (like in SD), a 10-20% drop is nothing. It just brings us from “you’re hallucinating” overpriced to “way, way, way overpriced”.
Personally, I expect a minimum of 35-50% off peak prices. In the far-flung regions, that may well be a conservative estimate. And that’s **IF** there is not a severe recession/depression — in that case, things can drop through the floor, IMO.
Unless the govt decides to make the dollar worthless (still a possibility), we will see drops that will make the sheeple sick to their stomachs.
“Which, in a nutshell, means nobody will be buying homes.”
Oh people will buy again… Once the prices drop by 50%.
But I seriously doubt that sales numbers will come back to anywhere near what they were during the Mania. Cause there won’t be any incentive for “investors” to buy 3 or 10 or 20 houses.
If prices drop 50% the economy will be so wrecked that demand will be no where near where it was when those prices existed 6 years ago. I think this is why reversions to mean tend to over correct.
KirkH posts ” If prices drop 50% the economy will be so wrecked ”
You wrong and right Kirk. It will be “wrecked” for those that had owned the over priced and rotten loaned propertys. But life will be sweet for the wise buyers that come in and buy at .50 CENTS ON THE DOLLAR! Then get 30 or 25 year fixed rate loans. Just buy and stay put.
I’m not so sure. I went through this in the early to mid 90’s in Orange County, CA and I can tell you that as cheap as home prices got, loans were very tough to get, and no one had the money to buy. Thus over-correction is a likely outcome, coupled with high inflation will make this worse. (or better depending on your position in the market
Posted ” Who the hell can actually afford a home on a traditional mortgage? ”
On the median priced home in LA/Orange County about 2% of the buyers….. Oh excuse me my pants just filled up….bye!
You mean they had a choice to begin with last year and this year.
I dont think so. Without ARMs sales volumn would have dried out
years ago. Prices would have been curbed..
After all, many were told “you buying the monthly payment and not $1M home”
Lay-away mania gone total nuts….
“He said the report’s findings ‘may not be as dramatic as it looks,’ and instead might illustrate a market that is normalizing after an unprecedented run-up in prices, during which foreclosures were abnormally low due to continuing equity gains by home owners.”
The market is normalizing. Falling prices are the new black.
….might illustrate a market that is normalizing ….
or, it might illustrate the beginnings of a gruesome and protracteddfinancial slaughter coming up in the very near future….
I don’t think that we CAN get to normal without going through the finnancial slaughter of the fools on the way.
There is a first time for everything, as they say…
ambien and antidepressants are the new black…!
Are the foreclosure numbers dependent upon them hitting their “targets” of housing prices going flat? No one expects the subprime foreclosure percentages to increase if some markets drop 20% next year?
This just in… OT & sorry if already posted….
Top “How To” google search query for 2006
1. How to refinance
#2 google search should be
how to remove head from a**
oh this is going to get real good come spring
1. Place hands round ankles
2. Push hands against ankles with full might
3. Wait for “Pop” sound
4. Don’t EVER do it again. There is NOTHING GOOD UP THERE FOR YOU!
LMFAO! Had to take a look myself once. I fully agree with your findings.
“The report projected that 21.4 percent of subprime loans issued in San Diego County in 2006 will end in foreclosure. That would be a 567 percent jump from a projected foreclosure rate of 3.2 percent on subprime loans issued in the area from 1998 to 2001. Only Orange County and Santa Barbara are expected to see a bigger increase.”
I wonder if might have any implications for Gary Watts’ 2007 OC price forecast? It looks like an exponential increase in the number of foreclosures is in the bag.
I suspect some very irate borrowers will shortly be stuffing Watts into his infamous “bag” and dumping him in Newport Harbor.
Hey! I kayak in Newport Harbor and there’s already too much garbage in it.
Don’t worry… Bullsh#t that thick wont float…
These dirtbag mortgage brokers are worse than the Realtors. They are both below sidewalk hucksters and scammers.
Re: Contra piece. Aren’t there different skillset/qualifiers to work on govt Civil Engineering projects vs. nailgunning some stuccor jigsaw set to create a McBubblebox ?
Yes, the commercial projects are the last bastion of the union guys… the residential stuff was lost long ago to the illegals. It has been hard for my business to get a good electrician in - they’re buried in other commercial work. May be that commercial /industrial spending will pick up SOME of the slack this time.
That is what I was wondering as well. Generally speaking, I always thought that commercial and residential were two distinct specialties. Kind of like how GM mechanics probably can’t just jump right into a Ferrari engine. I also thought that because of the high union membership % in commercial, it is therefore more difficult for the residential guys to get in the door. I think this is just more wishful thinking, feel good talk from the puppet masters.
I noticed several years ago the distinction between commercial and residential. If you look at most if not all commercial building (at least in the mid-atlantic where I am), it is all metal studs, brick and concrete veneer, and standing-seam metal roofing. Residential is still all wood studs, vinyl siding (some brick), and 3-tab shingle roofing.
I wondered why the residential guys didn’t start building with metal studs like the commercials, and the only reasons I could come up with are 1) they don’t know how, 2) it requires a completely different set of tools, and 3) it’s just “different”. I think number 1 and 2 are the biggest factors. The residential guys would need a completely new skill set and tool inventory to switch over, and because so many of the residential guys are small independent sub contractors, they don’t.
3-tab shingles? Heck, in Texas you still see a lot of houses with wood shingles.
There are a very few private builders that have experimented with metal studs. There are benefits–namely that the tolerances are extremely tight, from a product standpoint, you end up with a well constructed house. There are different tools and the negative is that it takes a lot of expertise to build with metal studs.
The builder I was aware of was experimenting with metal so that he had flexibility depending on the cost of materials.
Where are you located? I’m a purchasing agent for a large, well-established union electrical contractor in Sacramento. If you’re in the area, I can get you in touch with our service manager if you like (although you might not, after the read the rest of my post).
Commercial/industrial/institutional is slowing WAAAY down. We just had a high school up in Lincoln canceled. There’s still work, but our estimating department has been sending out about half as many bids as we were this time last year.
In Sacramento, in most trades union contractors only have about 20% of the commercial market share (and probably something like 5% of residential). Since 1970, its lost about 10% a decade, give or take. The problem is the labor rate. At present, a journeyman of the IBEW 340 makes $35/hr plus employer contributions to the union of $12/hr plus other expenses (including taxes), and the labor rate approaches $55/hr. Rex Moore (large nonunion contractor) is in the $25-30/hr range. It’s extremely difficult for union contractors to compete.
I’m in Portland, OR. Our electrician is union also, and loaded with business at the moment. I do think things are about to slow down here, though. We lag the rest of the country by 6mo to a year.
Oregon requires certified electricians do or oversee the work. California does not. It’s much easier to enter the electrician field in California.
That’s about to change, albeit after a series of extensions. Effective January 1st, all electricians are required to have passed the state exam or be enrolled in an apprenticeship program. No exceptions. My company has to layoff about a half dozen guys in a few weeks because they couldn’t be bothered to take the test.
But it should be noted, the test is incredibly easy. Its multiple-choice, they can use their code book. Honestly, anyone with an IQ above room temperature and basic English skills could pass the exam with minimal preparation.
Pretty sad when a guy can’t study up and take a simple test which his livelyhood depends on. Your company is probably better served getting rid of those guys.
“But Ed Smith Jr., a Mission Valley mortgage broker and director of the California Association of Mortgage Brokers, said subprime loans are not necessarily a bad product.
“They have put more people into homes who wouldn’t qualify for traditional products,” he said.”"
…So, instead we “qualified” them for a good ole traditional Forclosure.
Hey sport — There’s a REASON those people wouldn’t qualify for “traditional products” (definition: a loan that the borrower has a snowball’s chance of paying back).
‘There’s a REASON those people wouldn’t qualify for “traditional products”’
Another reason: People using debt to buy stuff they can’t afford.
http://www.youtube.com/watch?v=fMudzRcPxLc
“Live with in your means and support the police” Margaret Thatcher.
One out of two ain’t bad.
‘Now their (home) values are plateauing and interest rates are rising a bit. That’s a bad cocktail.’”
Well, I guess home prices are not decreasing, but still plateauing … until that cliff just 2″ away. Somebody is still in denial.
“That’s a bad cocktail.”
Bad? How could it be? Molotov JUST made it….
a soft landing is in the bag…no cliff there!!!
The report says foreclosure within about 5 years of the beginning of the loan. If sales following a NOD are included, then the forecast rate of mortgages that don’t make it go to 25% from 20%. By my reading anyway. Also, they say that if the loan is rolled over, then foreclosure rates increase with each roll over, to about 50% foreclosure by the 4th roll over. This does not mean that a house with 4 loans, it means one loan, but rolled over, with possible cash out.
The report’s recommendations were 1. find a way to eliminate 3rd party origination as this distorts incentives towards getting any deal done, regardless of the longer term payment risk. 2. ensure mortgages are made on the basis of ability to pay all of the loan. 3. chop all Mortgage and realtors ‘nads off
okay, I’m lying on that last one, but I can hope!!
I’ve posted something about this situation before but this is an update which I heard today. My wife works with a woman who’s husband was in construction prior to the “boom”. He switched to selling sub prime mortgages and for the period of the boom (about 5 years in his case) he re-fied his $160,000 condo into a $1.5 million house. I suspect he used a crooked realtor who was working with a corrupt appraiser to simply keep upping prices, flipping, upping the price, flipping, etc. Seeing as he was writing his own mortgages it wouldn’t be too hard to run up values. The final house, as stated, was purchased for $1.2 million then put on the market (for flipping) at $1.5 million. Then the crappola hit the fan as the boom turned to bust.
This guy was buying every toy he could lay his hands on. BMW’s, R.V’s, those four wheel scooter things, etc. Life was good - but it ain’t good now. His cash flow from writing mortgages dwindled pretty quickly , then basically stopped. This month he has made nothing. Zip. Zero. Last month he wrote up one mortgage. Obviously, there is no financial cushion now that the good times have come to a screeching halt. Needless to say, the wife (they have kids) spends a lot of her time at work sobbing as she relates to my wife and her boss how the debts are piling up.
So…..how is this guy surviving? Well, he couldn’t sell the house at $1.5 million so he lowered it (in stages) to his buying price of $1.2 million. Still no bites except for one would-be buyer who turned out to be a fellow scam artist. A case of sharks feeding off each other. Obviously in trouble, he quickly rented a condo for $1,500, moved in, then rented out the house. His mortgage payments are over $5,000 a month + taxes, etc. My wife’s employer wondered how, if he wasn’t making any money, the couple were surviving. I suggested (and it seems I was right) he is surviving by NOT paying the mortgage on the house from his rental income. I suspect he’s renting the house out for about $3,000 a month. In other words a VERY negative cash flow. In California, he can get away with this for at least 5 or 6 months. If he talks fast to the bank and spins a story possibly longer. The banks sure don’t want to get stuck with the house.
Why post this? Well, it seems a lot of these realtors, mortgage people, etc, quit their jobs and jumped on the boom. The dramatic rise in the numbers of realtors these days bears that out. Prior to the boom, I suspect that a lot of them were in sales jobs. Selling cars, air conditioning, etc. Probably some are ex-telemarketers. I wondered where a lot of them went after the “Do-Not-Call” telemarketing laws were brought in and that was about the same time as the boom was gathering steam.
My point being, the real estate business and other jobs like appraisers, etc, probably have a VERY high percentage of main-chance, fast talking ex-sales people who would sell their daughters if they could make a quick buck so I am expecting to see a LOT of fraud, deception, outright embezzling cases to start to appear as this mess gathers momentum.
Maybe the next building boom will be in prisons. Then the realtors, appraisers, mortgage brokers can spend some time working out what the next con they want to get into when they get out of jail,
Needless to say, the wife (they have kids) spends a lot of her time at work sobbing as she relates to my wife and her boss how the debts are piling up.
____________________________________________________
Please take a pic, I would love to this!
And before any of doo-gooders on here slam me - Think about all the families facing foreclosure because of this guy and others just like “sales” tactics.
*and others just like him who used these sames “sales” tacticts.
no apology needed crispy maybe they can live in the rv
the stupidity of these greedy bastards who thought this gravy train would last forever
as per your advice crsipy the wife and i have stocked up on popcorn this is going to be a long one
Live in the RV? I immediately thought of the movie “Lost In America”. I think many will take this route! Soon!
http://en.wikipedia.org/wiki/Lost_in_America
Comment by solvingadream
Live in the RV? I immediately thought of the movie “Lost In America”. I think many will take this route! Soon!
It’s gonna be more like “Broke in America”
Ya, ya, ya… Still not cool. This whole thing stinks…
I know quite a few mortgage brokers who better have their ego’s in check cuz the jack they were making was unbelievable!
Yes, no need to justify yourself, C&C. I’m with Mike in that I too will not be surprised if tons of fraud comes to the surface. The other thing is that many who jumped on the boom heavily drank the Kool-Aid. I have seen lots of resale listings that say the seller is a licensed RE agent. Kind of like those Enron folks who had all their retirement funds in the company stock. The barriers to entry for RE sales and lending is so low that there are tons of true dimwhits practicing. I feel sorry for the guy’s wife and kids. They should pack up and leave his greedy a$$.
I agree too. As soon as they started no-money-down, no-doc loans they might as well have hung up a sign saying “Bring Your Fraud Here”
Why wasn’t she talking sense into him? Time to sell the toys, I guess.
Too bad he didnt buy 10 houses. Then he could collect rent on them all and stiff bank on 10 mortgages. That would be some $$$$$ and he would end up with same result =bad credit.
It doesn’t work that way, but I’m sure that these people wish that it did work that way. LMAO.
In truth, taking the rent money and not paying the mortgage would probably considered fraudulent conveyance. The money belongs to the lender. When they go BK, any good attorney (for the lender) is going to ream those people a new one. Because is BK any contracts or purchases of disposable income type products can be rescinded/cancelled/voided by the court and then you have to give the money back (or sell what you bought) to your creditors. This is similar to someone charging up a credit card for say $100,000 then filing Bk and saying they dont have any assets or nay way of paying the money back. This is a no-no.
And once they start garnishing the wife’s checks, things will get ugly real quick, i.e. divorce, finger-pointing, probably some jail time since he wont be able to afford a good attorney by then.
Sorry for the grammatical/spelling errors. Where did I get my learnin from?
I suspect however that once the magnitude of the FB is brought to the attention of the new administration, the current BK laws will be rewritten again. These things swing back and forth all the time. Bush got the BK laws to change for the benefit of his cronies in the financial sector. The new Democrat president as well as the Congress (coming in at the crest of the credit burst) will be hearing clamourings from the FB to loosen the BK laws. Just my conjecture but I think the Dems want to solidify their powers for the next couple of decades by locking in the FBs’ votes.
Mike
I told you that we would all end up paying for this - even if we are not the FBs…
You said it, MBA…
“I think the Dems want to solidify their powers …”
for them to risk their gain in power for this *law-breaking* and despised minority, is not very likely.
Why do you think these people are in the minorites of the whole populace? If what everyone who predict 25~80% nominal drop in prices come true, then don’t you think the whole economy just went into the crapper? Sure you have your house paid off or a fixed mortgage, but if you’re not making any money from the dearth of available jobs, you just became an FB also. Unless you have load of cash, I wouldn’t put the bailing out of the American Idiots by the Dems. Good way to do a feel good…show we care. That was how the Republicans won most of the southern states. Came in after the Civil War and been entrenched ever since.
Mike
Most of the South was Democrat after the Civil War and stayed that way until recently.
Like Casey? He must be taking the day off today.
Hey guys, been a lurker here for a long time, love this blog. Whenever I read a housing story, I come here to see the ‘real’ spin.
Doesn’t all this prove that there never was a “housing” bubble but it was all a “credit” bubble or “easy money” bubble or whatever? The house was the product but the credit was the vehicle that got us here.
I’m not sure if you can distinguish the two. Ridiculously easy credit was what enabled the house bubble; housing is the asset class that attracted the money from the easy credit (as most were spooked from stocks, since that bubble already burst). So, it’s fair distinguish between what caused the bubble (credit) and what asset was a bubble (housing); but I don’t think you can say that there wasn’t a housing bubble.
BTW, I love the Shortbus Driver name.
watch out, cos the last trick for these guys is the straw buyer, and if they get you SS number and or id, it could be you!
um, no, you need a willing participant to perpetuate that scheme. mortgage loan closings require you sign in front of a notary with proper id.
“Ed Smith Jr., a Mission Valley mortgage broker and director of the California Association of Mortgage Brokers, said subprime loans are not necessarily a bad product. ‘They have put more people into homes who wouldn’t qualify for traditional products,’ he said.”
The pilots union president said: untrained pilots (subprime loans) are not necessarily a bad product. ‘They have put more untrained people into cockpits who wouldn’t qualify for traditional pilot seats,’ he said.”
The report said that 21% or so will foreclose. It also said that, if sales made at least one month after a NOD was issued, then the rate will go to 25%. The recommendations were 1. End the separation between origination and risk or at least find a way to make the originators carry default risk 2. only judge mortgages on ability to pay all of the loan and 3. chop all mortgage bkers and realtors ‘nads off
last one is implied, of course
For OC, the CRL report predicts 22.8% of the recent subprime loans will end in foreclosure. Considering that OC appears to have a lot of subprime FBs, that looks like a whole lot of inventory that will be hitting the market. This is one of the few differences from the last bust, as back then most people had traditional 30-year fixed rate mortgages and were able to avoid foreclosure. This time, many more will see foreclosure because of the toxic loans. I am hoping that the flood of foreclosures will help to speed up the crash versus the 5 or so years it took to bottom out last time in OC.
Oh but you left out the most intriguing part about the OC. Where has the majority of the new high paying jobs in the OC come from?? Can you say REIC? Also, where in SoCal is there a high concentration of Subprime Lenders??? Can you say OC?
Oh it’s going to be so very ugly in the OC in 07 and 08…I can’t wait.
A few months ago we sublet office space from a sub-prime lender in Orange County CA who was downsizing operations. The OC is just loaded with these sub-prime guys. And then there’s home builders, and then the title companies, … You get the idea.
Someone estimated that the Irvine Company (the largest renter of office space in the area) leased 40% of there office space to these real-estate related companies, though they claim it’s only 25%, but even so, it’s a disaster waiting to happen.
Waiting in OC ….These sub-prime loan foreclosures will speed up the crash .I think housing demand was 30 to 50% more than it would of been had it not been for the sub-prime loans along with speculation .
Isn’t it interesting how in many towns the demand went down 30 to 60% so quickly . I think it’s going to be a faster than normal correction this time because of the faulty lending .
1 in 5 loans will go into foreclosure ,which is a extremely high number ,but I think the % will even go higher than that with these loans . I call them “walk away ” loans .
Agree with WAAAAY over 20% of sub-primes going into foreclosure (barring any “intervention”).
I’m already seeing mid-2004 homes going into foreclosure, and the bank is trying to sell them for late 2003/early 2004 prices with very little luck.
In 2001, prices were already too high for “normal” people to buy “normal” houses on a “normal” income. IMHO we’ll see 1997/1998 prices by 2009/2010, but that may be wishful thinking (the speed, not the amount of the decline).
This is very interesting. It indicates a faster correction is likely, rather than a slow drawn out depression, which is probably a good thing.
I would think that the risk that subprime loans will end up in foreclosure is far greater than 21.5% in bubble markets like San Diego. Stated another way, @80%, or 4 in 5 of all sub-prime loans will NOT end up in foreclosure? NFW.
I would reverse the numbers. I suspect that 80% of these loans WILL end up in foreclosure or some form of short sale.
There is NFW that 80% the $400,000 SFH’s in Compton and ghettos like it will avoid foreclosure. Ditto for many McMansion communities. In the middle class neighborhoods, many subprime borrowers are just one lost job or illness away from foreclosure.
Maybe 8 in 10 of the early 20-somethings who were suckered into buying $400,000 1BR condos will faithfully pay their mortgages for the next 15 years until they can sell and break even, but I doubt it.
21.5% isn’t even close.
i see a booming business in “credit repair” in the near future
I’d be more worried about the implications for the crime rate.
A higher crime rate is yet another factor which will drive prices lower, and lower prices will drive the crime rate higher in turn. Endogeneity really bites on the downside of a mania.
ding ding ding! You get today’s prize for SAT words!!!
“Endogeneity ” You know, like the way David Bowie used to look. It was said that he liked to bite on the downside as well.
Endogeneity………….
Damn………..another one that’s not in my Funk n Wagnall
JP posts ” I’d be more worried about the implications for the crime rate.”
The crime has already taken place. In the concerned post we can safely say it will be the crime rate will be up 22% or more next year.
Of course it will be the bum, that steals a candybar from 7-11 that will go to jail.
“Maybe 8 in 10 of the early 20-somethings who were suckered into buying $400,000 1BR condos will faithfully pay their mortgages for the next 15 years until they can sell…”
You know they won’t be able to do that even in the best of economic circumstances. Life changes (marriage/divorce, kids, job move) will force their hands at least once in that time frame if not more. That’s assuming that they keep their jobs too.
“I would think that the risk that subprime loans will end up in foreclosure is far greater than 21.5% in bubble markets like San Diego. Stated another way, @80%, or 4 in 5 of all sub-prime loans will NOT end up in foreclosure? NFW.”
The estimated percentage that will end up in foreclosure is obviously dependent on a hidden assumption about future price dynamics. But I doubt that whoever came up with the price change assumption considered the fact that rising foreclosures could lead to further price reductions which could lead to still more foreclosures which could lead to still further price drops… the reversal of unaffordable prices leading to increased use of liar/suicide loans leading to still more unaffordable prices we saw on the bubble runup. Because that would not be much of a soft landing, would it?
“Because that would not be much of a soft landing, would it? ”
No, it wouldn’t. That’s exactly why the so called experts have to lie about it so much.
just seeing if I can post
Reversion to the mean is the law that will dictate the prices. 21% isn’t even close to where this may be going.
And I agree, the crime will be huge. SoCal will be a much more dangerous place in the near future.
21.5% isn’t even close.
Damn straight.
Joe posts “21.5% isn’t even close.”
Joe I think you are correct. More like twice that easy. Not to rub it in but I would say “21.5% is in the BAG” ….LOL Hardy Har Har
You got it, Joe!
I live in California but think I would like to move somewhere where the homes are more affordable. Why is Indianapolis so affordable. I have never been there.
snow=affordable. not counting ski resorts.
or cities like Boston, NYC, etxc…
Indy is a nice, clean town. It’s just not on anybody’s dream location list. You had better like small city life with a fairly long drive through absolutely flat cornfields to the next population center of ANY size. There is practically unlimited buildable land also, so no BS about land running out. Hence, reasonable prices.
CNN Money just did a “best and worst” cities for a variety of traits (do they do this every week or what?). Median salary in Indy is relatively high for the cost of living which placed it the highest for affordability. Conversely, for LA…
“In Los Angeles, the median home price is more than four times what it is in Indianapolis, yet the household income is nearly $9,000 lower.”
Heh.
posted ” Why is Indianapolis so affordable.”
Because they still make land out there.
Hey, we may run out of land in some places, but we will never run out of shitty KB homes on miniscule lots…
One of my oldest friends moved to Indy a couple of years ago. She was surprised by how much she liked the place. It’s not for me, but it does seem to have its attractions.
Come join us in Columbus, Ohio. 5 of the 10 houses on my block owned by former West Coast folks (4 CA, 1 Seattle). University town + state capital + affordable. Similar to Indy in some ways. Wow, I sound like the chamber of commerce.
I grew up and lived in CMH until 3.5 years ago when we moved out to SD (husband’s job). I miss CMH. 10 years ago I wouldn’t have said that, but now it’s a nice city with plenty to do–strong arts community, etc.
Sure, the weather is (mostly) nicer out here, but the trade-offs aren’t worth the price.
My co-workers and his brother purchased at the peak in 1989 a condo in Capitola Village. The condo value-prices declined by 40% and he as well underwater for 10 years. Their only grace was they spread the pain to both families.
Nice place Capitola, but not much for local economy to support high prices.
Some of my family has had homes in the Village since WW 2, and everything you state is true, Louie. Basically Capitola is only busy during the summer months. IOW, crappy economy, and one that does not even come close to justifying the housing costs. But we can say that about many cities now!
But everyone wants to live/have sex/retire/die on the beach!
Well the sex part has always been good…
So how did this whole thing start????
Wasn’t it some ass going on and on about “the ounership society”
I thought he was talking about people ouning houses, not banks ouning people.
Sad observation: there are still some GFs out there coming on board…..a local Starbuck’s manager with kids and stay home wife just bought a condo for $400k in my area (eastbay,CA)
He was telling me the advantages of using a teaser rate till your income goes up and you can afford the”regular rate”.
How sad…a nice guy sucked in to a nightmare.
Doug-home …I’m sure that your example was one of the ways agents sold the loan .Since the teaser rate doesn’t last very long ,this guy would have to get a raise really fast to afford the increases . People bought this “don’t get priced out forver ” BS ,and were willing to go on these loans with the idea that they would get a better loan down the road .Poor sap , the mortgage scum most likely put a pre-pay penalty on the loan also so it would cost them if they wanted to sell or make a change .
I can’t stress enough that the only way you can get a person to go on a bad loan is if that person looks at that loan as just a temporary measure ,but borrowers got trapped instead .
Capitola makes a decent bedroom community for going “over the hill” to jobs in the S.V. I lived in Live Oak 2000-2003 and it wasn’t that bad. . . 40 minutes each way.
No, you have to drive the hill to San Jose. Once folks discovered that RE costs were the same in Santa Cruz as they were, say, in Tracy or Stockton, the prices went way up. A couple of drought years made the Hwy. 17 commute manageable.
No way in the world are there enough jobs in and around Santa Cruz County to support the housing prices. Frankly, I’d live in San Jose, and drive to the beach when I wanted, for all the time I’d get to spend there. Figure 1 hr. commute in the AM, 2 hrs in the PM - and that’s IF it’s not raining (because someone WILL crash and back up traffic). Beentheredonethat
The Impact of Foreclosures on Crime
http://tinyurl.com/yb46rj
God bless America!
It only takes a few foreclosures to change the comps after the bank dumps the 500k, empty, roach infested, overgrown-weed house for 300k.
Sheesh, glad I sold out of San Diego in 2004. At the time, I asked my realtor what most of her clients were putting down. She said 5-10% down and ARM loans.
Funny, everyone I knew that bought in 2004 (smug lot they were too) used 80-10-10’s to buy in San Diego. I remember one of them saying “mark my words, in 5 years, you will not be able to buy in San Diego for under a million dollars”. I would guess he is upside down by about $100K right about now, and not nearly as confident, although I have not seen him in a year.
by Sacramento-area borrowers are likely to end in foreclosure and aggravate an already flat housing market
Sacramento is already down 20%, and they’re calling it “flat”?
You know what they say,
“EASY COMETH EASY TAKETH AWAY!”
Wahahahaha.
We humans have a strange sense of unreality and denial. It doesn’t matter how high real estate goes, there’s always a legion of bulls standing there going “it’s only going higher”. If every man, woman, child, and cockroach takes out 3 teaser-rate subprime liar loans and buys homes spec from the builders, people are always going to fill the headlines with “buy now before you are priced out (of you eighth home)” and “they ain’t making any more land” and “real estate never goes down”.
It’s like “F=ma”, “you can’t push a rope”, and “a bubble mania always self-reinforces until its back is broken by reality.”
Seriously, it sounds ridiculous now, almost like a sitcom, but the old “Dow 36,000″ idea was being pounded hard by many equities people at one time. It sounds so hard to believe now, that it feels like they must have been joking. They weren’t joking, they were serious! After the first 1,000 loss on the Dow and 1,000 on the Daq, still people are pounding the TV stations and airwaves with “It’s time to buy!” or “Pick up stock on the dip” or “Back the truck up, beep beep beep beep, and load up on this puppy the Daq is coming Baaaack!”
It just never ends. But it’s not all bad. It’s part of capitalism’s way of taking the wealth of the masses and giving it to the few (at least in a probabilistic sense, of taking from the dumber and giving to the smarter).
“The report projected that 21.4 percent of subprime loans issued in San Diego County in 2006 will end in foreclosure. That would be a 567 percent jump from a projected foreclosure rate of 3.2 percent on subprime loans issued in the area from 1998 to 2001.”
‘
BURN BABY, BURN.
All the dominos are lining up for a big fall in 2008 in San Diego.