Bits Bucket And Craigslist Finds For January 22, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Hey some of these REO sales I’m noticing are quite large discounts from peak. Like I found one sold last week at 23% off the peak 2005 price!
You can see it here I posted some new ‘haircuts’ at my anecdotal bubble blog for Ventura/Los Angeles counties.
http://realestatehaircuts.blogspot.com/
Hee Hee Hee! Thousand Oaks soon to be Thousand Jokes!
Or 900 Oaks after the fire tonight.
Still going down in Ventura County (Ojai 93023):
917 Sunset Place sold 8/31/05 $662,500
1001 Sunset Place sold 11/21/06 $520,000
801 Sunset Place currently in escrow at $499,000
Same exact house in 1955 - off 24.6%
I found one yesterday….a chicago bungalow in a rougher part of the NW side sold for ~100K in 1992; sold for ~150K in 2001; the current owner HELOC’d to it $300K and now it’s on the market for $340K. I understand these aren’t the coast prices…but seriously, the current owner bought six years ago, mortgaged *all* the ‘equity’ and he’s trying to sell it for 2.5x what he bought it for.
I hope no one buys his home. He deserves to lose it in foreclosure. Sorry buddy, there no GF’s for you!!!
I doubt he really cares if he loses it in foreclosure.
He’s already got the money. He will just walk away and have a nearly $150,000 of “free money”. It’s taken me 5-1/2 years to save that much money.
I missed out on this “new paradigm’.
> He’s already got the money. He will just walk away and have a nearly $150,000 of “free money”.
If he HELOCed it, it will follow him everywhere, also to bancruptcy court. I hope he cannot discharge it there neither and will have to work for paying it back over the years.
Ojai, home to older baby boomers with no kids.
That’s not even a “price decline” it’s someone losing over $200K in about a year.
$730,000 Oct 31, 2005
$565,000 Jan 19, 2007
That’s a Bagholder Extraordinaire!
“Hey some of these REO sales I’m noticing are quite large discounts from peak. Like I found one sold last week at 23% off the peak 2005 price!”
Same in my hood (92127).
In one recently-constructed section of 4S Ranch, the 2005 price for a group of very similar models of the same vintage was $648K; a recent REO sale of same model was listed at $489K (-25% off peak), where it still sits after 19 days on the market and counting.
Crash, the house on Neon was was 100% financed on an 80/20 sub prime loan by First Franklin. I believe this lender will be going out of business soon, as I have seen many such stupid loans they made. Their loan was on a house that sold 6 months earlier (2/05) for $595,000. Making a 100% loan at $730,000 is a joke. Guess who losses? You do, if FF sold the loan to your pension fund. You do, when FF raises rates and fees to compensate for this fraudulent and BS lending.
We are starting a web site for mortgage fraud reporting. It will be up and running in a few days. We are going to report the transactions to the FBI, the rating agencies AND to the LENDERS THEMSELVES. This will prevent these loans from being sold to third parties. The lenders will have to eat their own fraud the day after the make the loan. More soon.
looking forward to it….
Paladin:
I work at a hedge fund in CT that would definitely be interested in uncovering fraud. Once your site is up I would definitely like to show it to some of my coworkers - they’re actually flying out to California this week to shake down one of the big lenders. We’re hedged naturally against defaults but fraud is another matter entirely.
You need to come to Texas too. You might find some good short sales in REITS too
Cycle Geek, nothing would make me happier than to help slap around a few sub primes. We are going to make these idiots eat their own young until they extinguish themselves. Quick, someone call the Environmental Protection Agency. We will have a listing for them shortly.
Paladin
Have Gun, Will Travel
Hey Paladin,
2437 Beech St Bakersfield CA 93301 looks funny on zillow.com
David, the deal was done for $625,000. The lender was Countrywide. It appears there was a $125,000 Down payment (20%) unless there is a silent 2nd. The deal closed in June 2006. The seller paid $335,000 in April 2002.
This does not appear to be fraud, just stupidity. What is the market value of this house?
Have you seen this site? http://www.jtscommunities.net/
Zillow has the market value at $478K. Its hard to imagine someone over paying for that house, maybe it has a gold plated koi pond.
Thank you for the info.
Melody, yes, that is the builder for the Estates at Lincoln Crossing. You will see they have a bunch of other subdivisions, which should be pretty rich mining territory for suspected mortgage fraud deals. It is so crazy in northern California now. You would not believe all the 500 SLC’s driving around these subdivisions with AZ license plates.
I will be glad to contribute to your blog with any fraud in my area of Orange County.
I’m impressed with your work, Paladin, and have thought of you when seeing certain local listings. I’ll have to help publish your website link locally.
Last night I heard my first radio spot for a new breed of ambulance chasing. It was for a legal firm specializing in defending “unsuspecting home buyers” from loosing their homes due to upwarding adjusting rates.
The premise is that people didn’t understand what they were signing. They actually use this verbage in the radio spot. This was in the Sacremento area - ground-zero for some of the worst of the housing bubble. It made me sick.
If you “loose” your home, do you gain an extra bedroom? -
“We are going to report the transactions to the FBI, the rating agencies AND to the LENDERS THEMSELVES.”
Paladin, anyone at the IRS that you can copy as well?
Thanks Paladin, will report shady stuff when I find it.
So how do you identify the 2nd lienholder - from the title company database? Which one? It would be great if there was a FAQ about ‘How To Identify Mortgage Fraud’ with online tools.
I know many MLS’ will let general public join, also title company database - is that correct? Lots of people would like access to this if only they knew where to sign up.
Crash, if you do a lot of business with a title company, you can usually get the info from a link up with them on-line, or you can call the customer service dept. I like First American Title and they have a web site. If you only have a few properties to look up, you can call customer service and ask them to get the info for you. Just remember to use them when you buy or sell property.
Thanks,
I use this site realist.com but they charge a few bucks per lookup altough when linked from mls its free.
I suppose most people will be able to use zillow/zip realty for past sales/fraud.
You have to have the connections to buy at insider prices. Two of my Colorado Denver SE Tech Center neighbors got foreclosed on their $500,000 homes and the bank turned them for under $300,000. Both were never listed by any RE agents.
That is interesting. The loan servicers are rated by Fitch, S&P and Moody’s. The large mortgage lenders consider this very important. They get downgraded if they don’t list with a 3rd party agent on the REO sale.
Just another reason not to deal with a bank, I guess, if they service their own loans.
Do you have the addresses?
Both are in Willow Creek. I wouldn’t be surprised if fraud occurs at both ends of a foreclosure.
Good work Crash L! Arleta and that entire Ne corner of SAn Fern valley(Pacoima, sun valley, San Fernando. panorama city, ect), are third=world immigrant-impacted cesspools! The rot will spread like a cancer from there and infect nearby Burbank, Granada hills, Van Nuys regions. The East/NE SFV is becoming more and more like SCentral LA. Gang crime shot up 40% in SFV.
LA is a crazy place. I remember ‘forced busing’ from the 1970’s in LA County - virtually everyone I knew moved to avoid being bussed to compton schools. That law made LA what it is today (no whites in the school district
So funny you mention that, Crash.
I was also an itended victim of LAUSD’s “integration” policy. They wanted to bus us from our happy Woodland Hills school, right around the corner, to 42nd Street School. I remember when they took us for a field trip the year before it was supposed to happen. I cried all the way back during the 1+ hour bus commute.
Needless to say, we were sent to private schools, along with ALL of our higher-scoring, English-speaking kids with college-educated parents.
What happened to test scores in LAUSD? Bussing is what happened. Ruined the SFV, too, as all the gang kids came over the hill and decided they’d like to stay there as well. Just like what happened to the Antelope Valley in the late 80s, the parents moved to a “better area” and took the blight with them in the back seats of their cars.
clarification: the Woodland Hills school was right around the corner from our house (walked there). 42nd Stree School was located in **downtown** LA, right in the middle of gangland. Very scary, dirty, ugly area with particularly tall fences around the school. Total concrete jungle and the requisite suffocating smog that enveloped LA in the 70s.
peter m posts ” Good work Crash L! Arleta and that entire Ne corner of SAn Fern valley(Pacoima, sun valley, San Fernando. panorama city, ect), are third=world immigrant-impacted cesspools!”
Peter I have lived in the Greater LA area and SFV since 1959 and you have nailed it again my friend! You are very lucid in your decriptions of the LA Area. Some might say what you just wrote was not kind….But it was stone cold fact. What you wrote is the simple truth of this part of LA today.
Keep up your good work and don’t back off the facts as you see em’.
Thank you! I sometimes make sweeping generalizations of such and such an area of LA, IE, or the OC, but i do travel a lot throughout the Southland and have observed thousands of neighborhoods all over the LA basin. The East SFV has undergone a great demographic shift over last 20+ years, and the decline of formerly tidy middle class neighborhoods throughout E SFV is easily observable. Can’t provide details for each and every area of the east SF valley, but can tell you that the LAUSD is eminent domaining hundreds of homes/properties all over city of LA and preparing to build scores of primary/secondary schools, mostly in heavily immigrant-inundated communities. They are also expanding and refurbishing existing schools. It is fascinating to watch an entire row/tract of fenced-off derelect abandoned homes being sampled for toxins by environmental contractors- some of these properties are toilet pits.
The most active areas for LAUSD-related contracting have been the East/Central SFV and Central/SCentral LA. These areas coincidentally have had the heaviest waves of immigrants.
Very interesting, crashlanders. Nice blog. Is there any place on the Internet where all the floppers are meeting to share their horror stories? I would sure like to lurk in there for a little while. I know it sounds a little mean but, hey, I promise I am not going to troll…
thanks,
Not sure about flopper sites - I think they post on Casey Serin’s fabulous blog?
The current trend in California is 70% of homes(guestimate) never ever sell due to ‘prop 13 prisoners’ won’t sell, the other same 30% of inventory get ‘churned’ every so often.
I really have seen the same house sold year after year now.(always a higher price until recently!)
The new Madison, Wisconsin Housing Bubble blog is now online.
http://madisonhousingbubble.blogspot.com/
looks great Moderator. You are bookmarked. Just shows how extended this bubble truly is.
Moderator –
Did you see this paper? You might consider running a thread on this one, as I believe it dramatically demonstrates how much worse the recent bubble was in Wisconsin compared to historic booms. In particular, the historic median home price to median income ratio in Wisconsin fluctuated on the range from 2.2-2.4 (with a mean of 2.3!). Do you have any reading on how high the ratio went over the past five years? I am guessing higher than 2.4…
The paper I refer to is the top link on this page:
http://www.wellesley.edu/Economics/case/Research1-1.html
The fact that Madison Wisconsin has its own bubble blog tells you all you need to know about how insane this market is.
There is a bubble in every state in the country. Some worse than others, but this thing is national.
a house is a house is a house is a house. it doesn’t matter where it is, you can overpay for it in Wis or Cali, it doesn’t matter.
Especially so when loose lending has made it easy to leverage a little bit of accumulated equity into an investment in some other part of the country.
the journal sentinel reports Milwaukee’s median house is $179,000
The paper also reports the city’ median income is $32,216
that’s what? Just under 6X median income.
ridiculous.
Skeleton found at Pulte development… Could this be the making of a real life Poltergeist? Link here Speaking of Poltergeist (the movie), wasn’t that linked to the real-estate market by some postmodern critics?
LMAO
Pulte-geist!!!!!! That’s rich!
They will be safe as long as they pay the cable bill and their TV screen does turn to snow and if they have a clown doll with long arms they may want to ditch it.
Was the skeleton’s owner investing in new construction? Come to think of it, that would not have been possible — he could not have qualified for a loan, as skeletons don’t breath.
My folks are still on a century farm; I know who’s buried there, but they couldn’t afford markers in those olden days.
Maybe they’ve removed the mirror fogging requirement for a mortgge.
Florida lawmakers vote to cut property taxes today. Link to USAToday article: http://tinyurl.com/2hwpem
Err….uhhh…
I think you mean Florida lawmakers vote to cut insurance today.
Ain’t no way they are givin’ back the new, inflated property tax assessments down here. No way……
“If the catastrophe fund or Citizens Property were to come up short and be unable to pay claims, it would be nearly everyone with an insurance policy who would be hit with an assessment under the proposal.”
Lower insurance premiums = higher property taxes
For some reason people don’t get the concept of “no free ride”. SOMEBODY has to pay the bill…..
You are right Les. Both issues are so intertwined I typed taxes instead of insurance.
Nevertheless, here are some valuable quotes from the article:
“In addition, [to 5 - 20 pct rate cuts] lawmakers canceled a 56% average rate increase that Citizens customers would have been hit with this year, and they rolled back a recent 21% rate hike.”
“Insurance industry officials have called many parts of Florida’s proposal ‘anticompetitive….’”
Lastly, “the industry also says the plan is a quick-fix bailout that puts more risk on the government.”
So, is this the first step in a Florida housing bubble bail-out? Also, where is the legislature going to get the money? How will the insurance industry respond? Will more people sign up to buy homes in FLorida as a result?
Yea, the tax-cut comment got me, too!
I thought that was a joke or a mistake or too good to be true.
While were talking Florida, I got a craiglist find from Tampa.
Someone is willing to barter their way out of a house. A flip i believe.
http://tampa.craigslist.org/for/266770423.html
Any thoughts on having a “Bubble Summit”? A get together of followers of the blog in a bubble city and have speakers to REALLY help people……loans, appraisals, etc…..no industry cheerleaders. Many topics come to mind.
Lot’s of potential…..what do ya say, Ben?
i think ben should furnish all of us with bumper stickers with some of our catch phrases so we can spread the word and direct people to the site. Make em simple like, “im not buying your overpriced mcmansion. Thehousingbubbleblog.com”
matter of fact ill just make my own with Ben’s permission
Are you serious? With that kind of advertisement you are a target for a bigass rock through your windshield.
Desperation makes FBs act crazy.
I agree. Better invite people who are in doubt to come to this blog to read many different views on houding and form their own opinion: “Where are house prices going? Thehousingbubbleblog.com” Even then, an ill-minded REIC employee agent might see this as invitation to damage your car.
And if they do, ill sue them for everything they own….oh wait a minute, that wont work
Dang! I just spit out my coffee! I’m reading along here, saying yep to phillygal’s post and uh huh to Peter T’s post … then I see yours and at the start my brain is off on a tagent, going yeah right if youcan cath em, then my brain catches up with my eyes and !!! You nailed it baby! LOL!
Actually Ben you should have bubble web site premiums that we can buy to help fund this site. There have been so many great one liners created here.
I’ve been getting alot of mileage out of the term “sheeple” coined by……? (Somebody help me here, pls)
“sheeple” or “sheople” has been used long before this great blog. It is used many times in politics by third party (non-Demopublicans) who refer to people that accept with little obvious thought whatever the mainstream (pick one of the two political parties or both) party spokespeople say.
“Catch a Falling Knife Now: Ask Me How - thehousingbubbleblog.com”
“Bag of money and a box of stupid.” -thehousingbubbleblog.com
“Got Popcorn?” thehousingbubbleblog.com
Raise the house or Raize the house? - thehousingbubbleblog.com
Who the hell is CaseySerin? -thehousingbubbleblog.com
Simply “Dead Cat Bounce” may be provocative. Ne?
I love some of these, but “Got Popcorn?” is my favorite so far.
Nah i say a drunken bash in Vegas when prices are off 50%,i’ll buy the first round.
Date & Time…I’m there.
Me too! Vegas condos for everyone! Buy one, get two more free! Plus you have the building to yourself! Whee!
me too!
I’ll buy the second!
As the drunk writer in Barfly says, “Drinks for all my friends…”
Home Builders Association of Metro Orlando Engages in Scare Tactics, Self Contradictions, and Lies To Sell Homes
http://tinyurl.com/2t7cka
Scare Tactics: The Home Builders Association of Metro Orlando uses scare tactics to frighten renters into buying now. In their Frequently Asked Questions (FAQ) section. They ask and answer “As a first-time buyer, should I wait until prices go lower to buy a home? No. If you continue to wait, you may never be able to afford to get into the housing market.”
Bubble Meter Blog
“If you continue to wait, you may never be able to afford to get into the housing market.”
You may never be able to afford to own a home again after getting foreclosed on the exotic loan needed to buy one now.
–
I realize that here everyone only wants to blame people associated with the Unreal Estate industry, but the same problems plague the whole economy.
The current US E-CON-omy — Of the Crooks, by the Crooks and for the Crooks!
Bankrupters of New York City and the Fraudulent Reserve had a LOT to do with the Housing Bubble. Who do you suppose is responsible for overseeing the lending? The most important factor in the Housing Bubble and associated frauds was the “reckless mortgage lending.”
It is important to look at the Big Picture and the whole picture even as we focus on one aspect of it that is presently of interest and importance.
Jas
Jas is right - everyone had to do their part to inflate a housing bubble of this magnitude. A collapse of lending standards certainly fueled this ‘boom’, every bit as much as much as RE agents and economists, corrupt appraisers, greedy speculators. Gee, I’m running out of adjectives - where’s my thesaurus?
Jane Bryant Quinn has a nice piece on msnbc today on the helpful exotic loans that did their bit.
http://www.msnbc.msn.com/id/16720755/site/newsweek/
The lenders are the main culprits in this credit/housing bubble fiasco. Without them, it wouldn’t matter what RE agents, appraisers, etc. did. The prices would have been constrained by what the average buyer could truly qualify for.
Nobody would have been able to buy a house with a [stated income, no assets, no downpayment, 1.5% teaser rate (and to actually be qualified based on the teaser rate), neg-am, 100%+ LTV (due to stated income), 550 FICO score] loan marketed to “savvy buyers”. Therefore, prices would never have gone beyond 60% of peak prices, IMHO.
And what happens when everyone who is left is priced out? Oh wait…it’s happening.
“As a first-time buyer, should I wait until prices go lower to buy a home? No. If you continue to wait, you may never be able to afford to get into the housing market.”
….so, let me get this straight. If you are a young couple that can’t afford today’s prices and have decided to work and save a few years, then they are “PRICED OUT FOREVER”.
You, young couple will NEVER be able to afford a house. Isn’t America the great land of opportunity. For some, just not you. Sorry.
The phrase “being priced out forever” is just a scare tactic meme begun by NAR, undoubtedly. Houses will be more affordable for the young people in ten years, provided they save up money in savings bonds for their purchase. But that should be in addition to contributing the maximum they can in their Roth IRAs and 401ks in equities. Every young colleague in their 20s who asks me about financial advice - I tell them to maximize their 401k investing, never take money out of it until they retire (don’t even take out a loan from it), and put it all in equities, and above all, contribute maximum to Roth IRAs. Personal Finance 101 showed you build wealth faster with equities than with real estate.
“Personal Finance 101 showed you build wealth faster with equities than with real estate.”
You can lose it faster too, as in dot-com bust of 2000.
Sure, if all you invested in was dot-coms. With a reasonably diversified portfolio (I count myself in that number) the 2000 bust was just a glitch in the long term rise.
Now if, on the other hand, you were like some of my coworkers who thought diversification meant having investments among both fiber optics AND web retailing… then you were hit hard.
And in the case of fools like Casey Serin, you can lose even more money in real estate!
Housing is (by nature of mortgages) highly leveraged, whereas straight-up buying stocks long (as most do, not txchick) won’t turn your initial investment negative on you like it did for quite a lot of real estate FB’s right now.
That “glitch” was a 40%-50% drop (or more) of the Wilshire 5000 over 3 years. That’s quite a glitch.
My preference is to never be wed to any one asset class.
That “glitch” was a 40%-50% drop (or more) of the Wilshire 5000 over 3 years. That’s quite a glitch.
True, but I guess NoVa meant that if you were diversified and you hadn’t bet your rent money, you were able to ride it. That’s what happened to us. The portfolio lost money, sure, God knows we still have a couple of shares worth exactly zero to sell off so as to offset gains, but the proportion invested in those kinds of shares was very small compared to the rest. We bet, we lost, but we still came out OK. We still had to pay taxes for our gains during 01,02,03, etc…
“True, but I guess NoVa meant that if you were diversified and you hadn’t bet your rent money, you were able to ride it.”
True, but somewhat the same can be said with housing as well (but then it’s *instead* of your rent money). Yes, I guess I could take a 40%-50% hit in my retirement savings (remember that the Wilshire 5000 is about as diversified in US stocks as you can get), but it wouldn’t be fun. Same with housing as an investment. Again, I never want to be so enamored with an asset class that I “forsake all others”.
True, but somewhat the same can be said with housing as well…
I agree. I’m sure that savvy people with enough skin in the game will ride it and come out OK as long as they are not obliged to sell. The difference in this case is the sheer number of people who have bet not only their savings, but all their future earnings for as far in the future as the eye can see. Talk about being enamored. Even Romeo wouldn’t do that for love, but oh so many FB’s did it for the promise of money. It just makes you despair of human kind.
What worked for the last 20 years may not work for the next 20. If housing crashes, I would think equities would follow.
Nope — it’s different this time.
Actually, it is more likely the same. There has been no 23 year period in which the large cap stocks ended up lower (w.r.t inflation) than at the beginning in American history. Got 23 years? And the nice thing about index funds is that you get free management by, say, Standard & Poors. They toss the worst performer out and add a good performer to the 500 index. Put $50,000 in Vanguard 500 index fund in its inception date August 1976 and you would have well over $1.5 million now (over 12% annual gain). And that’s without adding another penny to that fund. My N.W. went up $40,000 in the last 2 months and I’m on the way to millionaire status in about 2 and a half years - no real estate, ‘cept a $12,000 time share.
“…contribute maximum to Roth IRAs.”
This is going to be very important as future tax liabilities look grim given our descent into lack of personal responsibility and socialism.
Yep, I just wish that the maximum contribution wasn’t so low. But I just love looking at the earnings listed on my statement and thinking “I’ll never have to pay taxes on that money.”
“I’ll never have to pay taxes on that money.”
Apparently you haven’t heard rumblings by certain pols that it’s unfair that IRA’s are allowed to avoid taxation. In any case, IRA’s are a scheme to keep your money in the system. We’ll see how happy IRA holders are when the system implodes.
“Apparently you haven’t heard rumblings by certain pols that it’s unfair that IRA’s are allowed to avoid taxation.”
Rumble they might, but carrying out this plan would be guaranteed political hara-kiri in a nation where the household savings rate is already negative for the first time since the 1930s.
http://www.bartleby.com/65/ha/harakiri.html
i am more optimistic that the regular ira/401k will someday, soon, have the tax break akin to roth ira.
In 20 years, anyone with a well-funded IRA won’t be eligible for Social Security, or at least not the full amount. Just my opinion.
You are very likely right on that, Mark.
Regarding ROTH IRA’s my two cents worth:
First cent; I paid my dang tax on my IRA when I rolled it over into a ROTH IRA. The gobment induced me to pay the tax then with the agreement that any future tax is waived. If they tax my ROTH IRA years from now then this would break the agreement, in other words FRAUD.
(If they did tax me years later, will the gobment agree to compensate me for the opportunity cost of lost compounded investment income from this tax money I agreed to pay then? Of course not! Any way you slice it, it would be FRAUD.)
Second cent; it would be nice if they could remove the restriction of funding ROTH IRAs with only EARNED income. But if they don’t do this then nobody should feel dissapointed because reversing this restriction in later years was never part of the agreement. The most important thing is do not tax my ROTH IRA years down the road because this would be both double taxation and FRAUD!
I’m gradually converting my IRA to a Roth, and paying the taxes. It’s not alot of fun writing checks to the govt, but taxes are going to go up, and benefits like SSI and Medicare down, despite what the politicians say. Someone is going to have to pay for this debt binge debacle.
But how does converting to Roth protect you from OASDI payroll taxes (er, I mean contributions)?
One further thought: Be sure your Roth IRA is adequately protected against stealth taxes (aka inflation).
It’s fully loaded with energy, oil, commodities, etc. Not sure about paying SSI taxes on Roth or non-Roth withdrawls. Anyone know?
Did a little research. When you get a paycheck, it’s taxed first for SSI and Medicare, before deductions are made for 401K deductions or IRA deposits. Then, the income tax is figured. Basically, current earned income is subject to SSI and Medicare taxes (if you make over a certain amount, it’s not subject to any more SSI tax, on a yearly basis…)
A Roth is no different - any earned income put into a Roth has already been taxed for SSI and Medicare.
I don’t believe income from a Roth IRA (or regular IRA) has any SSI or Medicare tax liability.
A Roth IRA is truly tax free forever, if you follow the rules for withdrawals from it, and they don’t change the rules.
A friend I trust asked me last week to reconsider a Roth IRA.
I had rejected them from the beginning. Apparently, he met with a financial consultant (I had one once and fired his worthless ass after he bought us into Lucent, Xerox, and Microsoft at the top of the bubble) who informed him that the after-tax contibutions to a Roth IRA could be used as a “safety net.”
Interest, dividends, or other proceeds could not be withdrawn before a certain time, BUT all principal could be withdrawn beforehand, if needed. True? If so, it is certainly a different animal than I first thought.
As has been voiced here, I too have my suspicions about the politicians leaving Roth IRA’s untouched from future taxation.
Each year, they’re continually changing the rules for retirement accounts: some changes are for the good while others not so good. I think this gives the pols courage to really muck it up.
At least with non-Roth, deductible IRA’s you get an upfront tax deduction. It is true that you also have a heavy tax-payout when you withdraw (hopefully at a lower tax bracket). However, I’m not so sure that’s altogether a bad thing. It’s more like being in business with the Mafia, at least you get something, as long as they get their cut. That means that the feds are less likely to tamper with deductible IRAs in the distant future.
Contrarily, Roth IRA’s are pure gravy for the retiree in the distant future, with the government getting nothing. Hard to see, especially when the feds are strapped, that they will hold the line on no taxation for withdrawals. I can even see how they would pitch it. “Well, Roth-IRAs were never intended to be windfalls for rich geezers, with their million-dollar stashes to get off scott-free”.
Maybe it will all work out. But I wouldn’t stake everything on it.
“Contrarily, Roth IRA’s are pure gravy for the retiree in the distant future, with the government getting nothing. Hard to see, especially when the feds are strapped, that they will hold the line on no taxation for withdrawals. I can even see how they would pitch it. “Well, Roth-IRAs were never intended to be windfalls for rich geezers, with their million-dollar stashes to get off scott-free”.”
I know some very wealthy people who have used their Roth-IRA’s as investment vehicles and have millions of dollars in them. Let’s just say these people will spend whatever it takes to prevent the loss of their tax-free status. The government may stop the creation and use of future Roth IRA’s, but they won’t be able to do much about the party they already started.
when you withdraw “hopefully at a lower tax bracket”
This is the assumption made by those selling the benefits of traditional IRA’s. I expect the opposite will occur when congress is forced to grapple with budget, SS and Medicare deficits.
I can only play by the rules and hope for the best. Politicians can always take away the tax advantages of a Roth IRA, but this would be a pretty drastic change. They would be more likely to end the Roth IRA, but grandfather in the tax advantages of existing Roth’s.
“They would be more likely to end the Roth IRA, but grandfather in the tax advantages of existing Roth’s.”
I concur 100% with this. Why would politicians (as a group) agree to tax by rescinding promises, when there are many more politically palitable means of taxation? The political consequence of breaking the tax provisions under which Roth IRAs were popularized would be to
(1) further damage an already abysmal household savings rate;
(2) increase the eventual need for the govt to chip in welfare to cover missing baby boomer retiree savings;
(3) pre-emptively torpedo any level of faith in future Federal government intitiatives designed to increase private savings rates.
Not exactly an ideal policy proposal there…
“Why would politicians (as a group) agree to tax by rescinding promises”
See Canadian Income Trusts?
http://www.minyanville.com/articles/index.php?a=11982
to try to prevent a equity bubble ? most companies would take advantage and become a trust ,this would lower govt corporate tax revenues and they would have to raise other taxes to compensate, as the govt wouldn”t reduce spending.
Well I think that the most likely way for the government to marginalize Roth’s is to never adjust the income limits for inflation. 10-20 years from now, upper middle class workers with good incomes won’t be allowed to make Roth IRA contributions, and others will only be able to put a pittance in. So few people are saving sufficiently for their own retirement, I don’t think the all those people taking money out of their Roth’s will represent a huge pot-o-money for the Gubment to raid.
As to the earlier question on SSDI, Roths and regular IRAs are a wash. You pay SSDI before the money you put into either account, and you don’t pay SSDI on earnings when you take it out.
I know some very wealthy people who have used their Roth-IRA’s as investment vehicles and have millions of dollars in them
How does that work exactly? The Roth IRA has only been around for about ten years. My understanding is that you can’t put more than $4k per year into one, and you’re not eligible at all if your income is over $110k per year.
It seems to me that a Roth IRA is of zero use at all to “very wealthy people.” Note that the $110k/year isn’t indexed by local cost of living, so plenty of people with relatively modest incomes in places like California are also “priced out” of the Roth IRA.
I was going to do this also, but the AMT will get us. It takes the max of my and my wife’s 401K contributions to keep us off it now–I can’t bring any more income onto the balance sheet until this gets fixed. If they repeal the AMT–then I am going to start a big move.
My dad wants to buy a house now in Monterey, California. We talked about briefly about the housing bubble and he agrees that we need to sell my grandmother’s house in Hemet, California ASAP. But he doesn’t think the bubble will impact Monterey because it’s always been expensive, and he wants to take advantage of low interest rates now.
I know Monterey is a nice place, and I don’t think anyone is going to pick up dirt cheap real estate there any time soon, but as surrounding areas lose value that has to impact Monterey prices somewhat, doesn’t it?
Anyone have any advice on what I can say to him?
I was so surprised when he told me he was thinking of buying in Monterey that I could hardly talk. I’m planning on calling him up as soon as I can formulate some decent arguements with stats to back them up.
What would be the best way to find out what happened to Monterey housing prices durring the last crash?
“but as surrounding areas lose value that has to impact Monterey prices somewhat, doesn’t it?”
I live in Monterey Co. and am renting. You’ve got to be kidding! We have the lowest per capita income and highest housing costs. I rent a 1300 sq. ft. SFH for $1600/mo. and last year they were selling for $685K. Lots of homes have 2 or more families and the street looks like a WalMart parking lot. Pacific Grove is nice but even more expensive and they’ve been closing schools because single families can’t afford to live there. Another thing we have is low income households buying into your neighborhood at very, very low prices which is wonderful…..you buy for $700K and your neighbor buys in with an income under $40K. I’m sure you get the picture!
Got to thebubblebuster.com, request that analysis guy (if he hasn’t already) do his standard analysis on Monterey.
Or said another way, housing always seems expensive problem is that sometimes it really is. (hat tip to Calculated Risk)
“But he doesn’t think the bubble will impact Monterey because it’s always been expensive, and he wants to take advantage of low interest rates now.”
Monterey always has and always will be expensive relative to less desirable areas (more so now than historically, because the formerly-foul-smelling part of town where fish processors had their processing facilities, known as Cannery Row, is now a fresh-smelling tourist mecca). The question is, how expensive is it currently compared to historically in real terms– that is, in terms of the median home price to median income ratio or the home price to comparable rental price ratio. These historical yardsticks are something like extremely sturdy bungy chords — you can stretch them as far as you want and they will never break, and the farther you stretch them, the more powerfully they will eventually snap back.
But if you get a fixed rate mortgage, you don’t repay the money with inflation adjusted dollars, you pay it back with nominal dollars whose value has been eroded by inflation. Those who bought BEFORE the high inflation period of the late 70s - 80s made out very well indeed even if the inflation adjusted value of their home didn’t change much. This was brought home to me when I found out that my parent’s mortgage for a nice house in very nice neighborhood cost less than my share of the rent living in a crappy old aparement.
It depends on whether we get out of this debt-choked economy through deflation or high inflation. Currently, nominal prices are going down, it’s probably a bad time to buy. But if we have a period of wage/price spirals, securing a nominal price and lower, pre-inflation financing COULD be a good idea, even if the inflation adjusted price of the house decreases.
I can’t see how wage inflation can occur quickly enough to correct affordability levels that have reached single-digit levels in Cali, especially with so much new Asian labor coming online. So can anybody describe a realistic scenario for wages and home prices to get back to normal alignment without further substantial home price reductions. (BTW, I think we are already off the 2005 peak by 25% or so in my hood, 92127, though most seller’s wishing prices do not reflect this yet.)
Exactly…you have to have wage/income inflation to have the “get a fixed rate mortgage, you don’t repay the money with inflation adjusted dollars” thing work. Otherwise, you are doubly screwed.
But he doesn’t think the bubble will impact Monterey because it’s always been expensive
Ask him to wait it out for another six or eight months, then he will have some comps to tell him whether or not that is true.
“But he doesn’t think the bubble will impact Monterey because it’s always been expensive”
Cass, then by the same logic, the bubble won’t impact Santa Barbara:
Area, zip code, # sold, meian $, YOY change
Santa Barbara 93101 5 $783 -11.8%
Santa Barbara 93103 18 $945 -30.0%
Santa Barbara 93105 14 $1,370 10.8%
Santa Barbara 93108 18 $2,745 37.3%
Santa Barbara 93109 5 $1,150 34.1%
Santa Barbara 93110 6 $905 -30.4%
Santa Barbara 93111 5 $890 -1.1%
Even areas in The Mighty Santa Barbara are taking hits. Monterey will “be different”?
Monterey will “be different”
Oh, I don’t think so at all, but Melsky’s dad needs some hard evidence, and it will be easier to prove it in a few months.
Well isn’t it just as nice to live there if you’re renting? Until the rent/buy ratio returns to sanity, purchasing doesn’t make much sense . Now of course interest rates DO matter when making the rent/buy comparison, but current prices are all based upon anticipated future appreciation IMHO.
“But if you get a fixed rate mortgage, you don’t repay the money with inflation adjusted dollars, you pay it back with nominal dollars whose value has been eroded by inflation.”
Suppose a Prudent household making $100K/year is bidding alongside a Risklove household with the same income. The conservative household comes in with 30-year fixed and the Riskloves use 0% down I/O Option ARM financing? What can we say with no further stipulation?
1) The Riskloves can outbid the Prudents by 40%.
2) The Riskloves face a high probability of future bankruptcy, which the Prudents would not have faced.
The notion that subprime status is solely dependent on past credit history ignores the effect of changing the rules to make it easier for Riskloves to buy houses they cannot afford.
All of which is why the prudent household should wait until more subprimes implode. IMHO the best time to buy is going to be when the Riskloves can’t get a mortgage.
In his position my advice would be for him to sell your grandmother’s house AND his own house, I am assuming he has one, BEFORE he buys or even puts an offer in on a house in Monterey, also checking to see what the tax implications would be since he would be paying more taxes. That way he won’t get stuck with an extra house he doesn’t want that he can’t sell for a high enough price and it will give him time to really understand what is going on in the housing market. From what I have read there is nothing like trying to sell a home to make people see the realitiy of the market.
With this market it definately makes sense to sell before buying.
Absolutely! In particular, if you buy now then try to sell at the price you think your home is worth (after blowing lots of dough on expensive upgrades to get it ready to sell for top dollar), the trend may kill off more than the value of your upgrade expenses while you wait for a GF to step forward and take the falling knife off your hands.
An acquaintance just sold an older home in Hemet after 5 months on the market and a price reduction. I agree that selling both houses before thinking of house hunting is a much better idea, if your dad insists that he is headed to Monterey. I spent some time there this summer and I agree with salinasron’s post. I was surprised by how much I saw for sale in the surrounding area.
“we need to sell my grandmother’s house in Hemet”
Man get the sign in the ground fast..that place is going to get hit with a backdraft.
Sell before you buy…or walk on a tightrope.
Thanks. I should have mentioned that he currently lives in Monterey, has a well compensated job that he has had for many years, and currently rents.
Hopefully selling my grandmother’s house will be an eye opener, but the problem is that Monterey is “different”. He can accept that there is a housing bubble in Riverside county but not that there is one in Monterey.
Yes, no bubble up here in Monterey area. I have a friend whose friend bought here 7 yrs ago for $50K and sold in late 2005 for $550K and went to Bakersfield where she bought two condo’s and put money in the bank. Yes, no bubble here.
I was just in Hemet on Friday for a conference on economic development in the valley. I saw statistics that their median home price is $408,000 while the average household income is $45,654 and the per capita income is $17,903. This is one of the most overextended markets I have seen. You father should sell now, and get whatever he can. I foresee a 60% or greater drop in prices in this market.
I have driven thru Hemet a few times. It seems to be one gigantic colony of trailer/mobile parks owned/rented by retirees. Not at all impressed by that part of the SW riverside which includes Hemet, San Jacinto, Perris,Menifee,Romoland,Sun city, ect. That whole area is classic boom and bust:Too many new home tracts and communities have gone up or are still going up at a too rapid pace. I checked zip reality and sfh’s in hemet are listing as low as the Mid $200,000’s. THis area is basically a parched bone dry desert 8 monthes of the year, and the 74 hwy drive from 15 fwy all way to hemet is a depressing panorama of rural scarred and bulldozed terrain, with pockets of dilapilated ranches and shacks.
Look for Hemet/Perris basin to go into a RE nosedive, as the massive overbuilding of new tracts results in HB’s offering deep discounts for new homes built in the pockmarked moonscape regions of SW riverside county
Amen to that about Hemet. I grew up in Canyon Lake (between Sun City and Lake Elsinore), and Hemet = ewww. It’s hot and boring and a lot of it is run-down. If you need a lot of land for animals (many people out there have horses), it might make sense, however. But for most people, get the heck out of Dodge!
“and he wants to take advantage of low interest rates now.”
Repeat 10 times every night before going to sleep: “Buy when interest rates are high. Buy when interest rates are high. Buy…”. This should help to fight the urge to buy now.
I agree with you. It makes more sense to me to buy while interest rates and high (and prices are correspondingly low) and refinance when the rates drop. The declining rates reduces your cost of ownership and increases the value of the home.
Definitely.
Not sure why people think low rates = time to buy. When rates are low, money is cheap and easily accessible. This draws in more buyers = more competition = higher prices. Also, we’ve seen all the suicide financing out there which is a consequence of cheap money trying to find a home.
As interest rates dropped, housing prices rose to offset the rate drop (and then some). At the bubble peak, housing prices AND monthly payments were at record highs. There is NO benefit to buying with low interest rates.
As others have said, the benefit of low interest rates goes to those who bought in a high rate environment and were able to refi to a lower rate, thereby lowering their monthly payment.
No benefit to buying in a low rate/high priced market. The property taxes reflect the purchase price AND the lender won’t reduce the principal due them.
If one buys in a high rate/low price environment, there is upside potential on the house price/equity gains AND lower prop taxes AND the possibility to refi at a reduced rate sometime in the future.
“My dad wants to buy a house now in Monterey, California.”
December Dataquick/CAR Year-Over-Year median price numbers for select cities in California just came out today:
http://www.dqnews.com/ZIPCAR.shtm
Area, # sold, current median, last year median, % change
Monterey County, 230, $589,500, $606,000, -2.72%
MONTEREY, 17, $700,000, $1,109,500, -36.91%
Median YOY is inacurate for various reasons, buuuuuuuuttt…
Thank you, that is helpful into!
The wife and I took a drive to Lincoln, CA yesterday to go see Lincoln’s greatest attraction to date the fabled Lincoln Crossing “JTS Community” with empty McMansions as far as the eye can see. 90% of these things are empty and the funny thing is I saw “Owner Occupied” signs in front of some, must be to keep the lookey loos away from the few poor soul caretakers who actually live in this tract neighborhood. However, I counted three $200,000 liquidation sell spinners on my drive up to Lincoln Crossing specifically for JTS homes. Paladin should take a picture of these spinner guys, right there is proof that the appraisals for the fraud cah back deals are bogus, I mean dang you got guy with a sign saying $200,000 in discounts.
David, This weekend a friend told me they had an airplane flying around the Hwy 65 corridor! It was trailing the $200,000 Off Liquidation Sale sign. He got a picture of it!! When I get a hold of it, I will send it into Ben.
Ben, by the way, is it O.K. to send photos to you again?
Paladin
Nice.
Wow. Sounds like fraud to me.
Could the builder have artificially upped the price on the ones you are following so they could use those as comps to show future buyers what a deal they are getting @ $200K off?
90% of these things are empty and the funny thing is I saw “Owner Occupied” signs in front of some, must be to keep the lookey loos away from the few poor soul caretakers who actually live in this tract neighborhood.
A contact I have who lives in Lincoln Crossing says that most of the homes with “Owner Occupied” signs in front are in reality vacant. Truly the epitome of the new Western “ghost towns.”
There is a new Sheriff in town and his name is Paladin.
owner occupied ? is that like a security service sign
ADP ?
no maryjawanna inside
move along
Must read
http://www.investorsinsight.com/thoughts_print.aspx
All of the M&A and LBO deals could be termed CEW for Corporate Equity Withdrawal. All warning signs lead me to believe that the end is near:
http://www.bloomberg.com/apps/news?pid=20601109&sid=akRtIlTTEx2Q&refer=home
LMAO…Thanks!
How did the lending standards go from 20% down, proof of job, proof of where down payment came from, etc. to “stated income”, no money down, no verification of anything. Who and what govt entity is responsible for the lax lending standards ?
Why should the gov’t be responsible for that? I would think the lender would be. Try a little personal and corporate responsibility. It’s what made the US rich; lack of it is making the US poor. The GSEs will all go BK sooner or later.
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/21/AR2007012100675.html
speaking of GSEs, Raines is using some of his “bonus” money to fight back. what a scumbag.
The government or some other high level agency needs to be involved because financial transactions follow the lowest common denomenator. Once one bank is giving out special loans or looking the other way then other banks must follow if they want to compete. Especially in a system where debts can be traded away there is an incentive to be at least as fast and loose as might be allowed, if not a little more so. This is why at some level there needs to be external regulation, and in general government is the external solution although an NGO might play a role or handle this entirely.
Mark,
In an ideal world, everyone would be equally endowed with high intelligence, integrity, common sense, and an understanding of long-term causal relationships.
Unfortunately, that world does not exist. The economic chain is as strong as the weakest link. Without some kind of regulations, we get what we witness now…major market distortions which threaten not only the gullible fools, but the entire economies of the industrial world.
Guess you could say I prefer some govt regulations to violent market corrections, recessions and depressions…and all the social consequences that might entail. But that’s just me.
“Who and what govt entity is responsible for the lax lending standards?”
The govt has outsourced this responsibility to the invisible hand.
“invisible hand”
The “invisible hand” SHOULD be the investors (including some very large countries) that keep buying up our debt (of all shapes and sizes), with little or no risk premium.
“SHOULD be the investors… with little or no risk premium”
The risk premium is there, but it is not visible in the nominal price because it comes in the form of a Poisson process. Compare to LA and SF homeowners who pay $1m for the chance to live right along side the aimed-and-loaded gun known as the San Andreas fault.
The govt IS responsible for the lax lending standards. Last time I looked, the govt had the force to be the only printers of money and the ability to force the Central Bank on the people. Look at the irresponsibility where it starts, not in the middle.
Note which sector is the largest in Arizona’s economy:
http://www.azstarnet.com/business/165593
One out of every $3 of Arizona’s economy is real estate. I can dig up the link to the 2004 economic report if you want.
Here is a funny one.
On cable TV there is a program called California Connected. For these types of public access/pr pieces it is done fairly well.
However, they had a story on the housing bubble in Baja California. Specifically Rosarito.
What a disaster. They intereviewed a guy who paid $350K for a high-rise condo in Rosarito. He thinks it is worth $800K now.
Only one drawback was mentioned in the news piece. Raw sewage flowing down from the Colonia (slum) onto the beach. It was priceless when the bagholder was asked about raw sewage he said that yeah it smelled but that was the price of too fast development.
They interviewed a neighbor that had a SFH with their deck about 6 feet away from the hi-rise condo and essentially they will be sharing their deck with the hi-rise balcony.
OK, now I am going to editorialize. Does anyone know what Mexican Building codes are? I bet they aren’t as strict particularly for seismic risks.
Can anyone say populist uprising? Mexico has a bit of a history of them. 2 miles away from an $800K condo, hovels with no sewer.
Oh yeah and title is held in a Mexican bank trust.
They really hung their hat on poor boomers who want to retire someplace cheaper. What about healthcare?
They talked about how most Californian’s didn’t need financing since they just refinanced their home in CA.
Man the list goes on and on. I can’t wait for these stupid speculators to get their pounding and eat dog food in their twilight years.
Yeah I saw that. Raw sewage thing was sick. I mean their was crap flowing into the ocean across the beach right where this condo is. Condo towers look sort of freaky. Sort of like something you would see in a Flinstone cartoon.
Have you guys seen the IPad?
http://www.thedubailife.com/index.php/main/blog/ipad_tower_in_pictures
OMG, txchick, that is truly FREAKY.
Brown tides and La Jolla surfing vacations don’t mix.
Rosarito is a pit. Always has been a pit and always will be a pit.
There is also a potential for populist uprising in Los Angeles, where a great amount of illegals are situated. I suppose some “highly aware” cultural relativist left wing rich people think it’s a great idea to be living with the impoverished with running sewer streams. NOT! The leftist elites all send their children to private white - only schools! Amy Carter in the 1970s, for example.
you must be smoking something to assert that “leftist elites all send their children to private white - only schools”. you do not know LA that much to make such a statement.
Nice market dump. Love to see the panic when S&P 1400 breaks.
TxChick — Have you lost faith in the PPT?
You might see them about 10% lower than this. On the indices.
I guess you don’t suspect (as I do) that the new monetary policy is to inflate away any and all stock market losses, in order to make sure that brokers can honestly tell their clients “stock prices always go up”…
No. I agree with that Market Semiotics thing I put on here a few weeks ago. This is the equivalent of housing in the summer of 2004. In a few years, it will look like a big mistake.
I don’t have a strong opinion — but I do find it curious that the high-profile market indexes often seem to right themselves to the opening bell level on days (like today) when there is an early selloff.
In the big scheme of things, this will matter very little. If my hypothesis that the Greenspan put is in effect on a day-to-day basis turns out to be correct in historical retrospect, the invisible hand will eventually force stock prices to revert to historical fundamental pricing norms, the same way the invisible hand is currently helping housing prices become more affordable.
“You might see them about 10% lower than this.”
I think you might see them whenever the market drops by 100 pts. On such days, the market always levels off to a temporary low plateau, before bouncing back towards the close. I would think there would be a good arbitrage opportunity there for astute day traders.
ABN Amro mortgage bought by Citibank.
“ABN Amro mortgage bought by Citibank.”
Is this a move by Citibank to move all undesirable loans over to a subsidirary and then dump it while protecting the stock of the parent company?
There have been a lot of these transaction hitting the tape lately, some large, some small. The Wall Street guys (Morgan Stanley, Merrill Lynch, etc.) have been buying up smaller subprime lenders in order to ensure a steady stream of production to feed the securitization maw. Barclays buying Regions Financial’s EquiFirst unit on the 19th was just the latest example.
The bet seems to be that demand for mortgage bonds will remain robust, fed by dollar recycling from foreign central banks and the like. A secondary bet? That credit quality will not get much worse than it is now, so getting into subprime is worth the risk.
I don’t happen to believe either of those things. But that’s the dynamic at work in most these deals, in my opinion.
Like the guy said above, they all believe they are hedged but fraud could throw a monkey wrench into that scenario.
Hard to believe that possibility wasn’t accounted for in the models. Maybe the scale of it was underestimated.
I also suspect their models didn’t consider the possibility of greater than 20% house price declines eating into the principle of the first mortgage.
If they didn’t, considering historical price appreciation, if I were an investor in the fund, I’d want my money back. WTF are they paying 2 & 20 for ?
I agree. Given the historical rarity of price declines of greater than 20%, they probably thought it was a 3 standard deviation event and priced it accordingly. It reminds me of 1987 when several option traders whose strategy was to short deep out-of-the-money puts were obliterated by a 12 standard deviation move against them. Statistically, the hedges were probably priced appropriately, but we are in unusual times where the unprecedented may very well happen.
Just read on Minyanville that RBC Greenwich Capital, apparently a “long time proponent of high yield paper” is EXITING THE HIGH YIELD CORPORATE BOND MARKET (their caps)
…”they all believe they are hedged”
They might have some bias:
Déformation professionnelle - the tendency to look at things according to the conventions of one’s own profession, forgetting any broader point of view.
Illusion of control - the tendency for human beings to believe they can control or at least influence outcomes which they clearly cannot.
élargir de derriere - the eventual ass pounding that results from illusory control by myopic professionals.
From The San Luis Obispo Tribune:
Housing prices climb in 2006
http://tinyurl.com/yspps5
“San Luis Obispo County’s median home price set a new record in 2006 even as sales in the county hit an 11-year low.”
“The monthly median price — the statistical point where half the homes sold for more and half for less — peaked in June 2006 at $585,000.”
“However, successive monthly declines through the fall translated into a December median home price of $497,000…”
“Despite last year’s housing market downturn, many local real estate professionals are optimistic about this year’s outlook.”
““We are seeing signs of stabilization,” added Robin O’Hara, a real estate agent with Keller Williams Realty in Pismo Beach. “Sellers are more realistic and more buyers are stepping up to the plate.””
“But DataQuick’s LePage says it’s still too early to predict the how the housing market will fare in 2007.”
““We don’t think it’s likely the market will see any big shifts over the winter. This spring we’ll find out how much demand there is out there at current prices,” said LePage. “With so many unknowns out there right now– including the direction of the economy, inflation and interest rates — you might as well throw darts at a dart board when trying to predict the housing market for the next year or more.””
==================
Median going from peak of $585,000 down to the current $497,000 is a 15% decline in six months.
Note to Robin O’Hara, Pismo Realtor: What does someone buying the most expensive asset they will probably ever own have to do with “stepping up to the plate”. Is that the same as “taking one for the team”?
Yep AG, that 15% decline is the real story. They should be going around asking people what they think its like to lose nearly $100K in 6 months.
The Tribune and Sandra Duer are terrible. Our only hope is that the New Times has the nads to expose some of this.
On a side note - I was wondering if you and some of the other Central Coast contributors would be interested in starting a Central Coast blog/flippers in trouble site? Maybe something just to list overpriced POS’s and make fun of their owners?
I think it would be fun to skewer all of the smug REIC people.
I meant to link this on Saturday. Excellent read.
http://www.telegraph.co.uk/health/main.jhtml?xml=/health/2007/01/08/haffluenza08.xml
More good stuff on Affluenza on PBS and “The Affluenza Project”:
http://www.pbs.org/kcts/affluenza/
http://affluenza.com/
I saw that show years ago. It might have been right after the last recession. Timeless stuff.
I live in Garden Grove, California, a deteriorating neighborhood in North Orange County, about 10 minutes ( 4 miles for the non locals) away from Disneyland. As I was trying to enjoy the NFC Championship game, there was a knock at my door. I opened it up to find a man in a suit. My first thought was, “Oh no, Mormons” But it turned out to be much more fun than that. It was my friendly neighborhood realtor, out trying to beat the renters into submission (and a juicy commission) Our conversation went like this:
Him: Hi Ma’am. I’m Joe Realtor, I don’t know if you’ve heard but…
Orange Girl: Oh! We’re renters, Goodbye (trying to close the door)
Joe Realtor: Oh, I know Ma’am. You don’t remember me, but I remember you. Last year I came by to let you know that you could buy a house, and you told me to come back in a year, so here I am.
Orange Girl: Well, we’re still not interested in buying a house. We don’t have enough of a down payment saved for it to be affordable.
Joe Realtor: What would you say if I could get you 100% financing?
Orange Girl: We don’t feel comfortable with that. If you finance 100% of your house, and house values decrease, you have no safety net. That’s not smart.
Joe Realtor: Well, what would you say if I could get you $20,000 to $80,000 back from the purchase of your new home?
Orange Girl: Well, I would say that you just sold me a house that had just decreased in value $20,000 to $80,000.
Joe Realtor: (flustered) Ma’am. Houses do not decrease in value that much over a year!
Orange Girl: (chipper) Sure they do!
Joe Realtor; (stunned) Ma’am…Ma’am…
Orange Girl: (hearing a safety called!) Look. We don’t have enough saved. We’re fine renting. Maybe come back in a year. We’ll see how we’re doing then.
Well, too bad for him. I guess he will need to go pound the pavement a little more looking for that next sale. And I’m sorry to say, even if he comes back next year, I won’t be purchasing a home with his help. If a realtor comes to your house, give him the facts, and nothin’ but the facts about why you don’t want to buy a house. We’ll get them thinking about it, one conversation at a time…
“Well, what would you say if I could get you $20,000 to $80,000 back from the purchase of your new home?”
I’ve been seeing a lot of comments and articles saying that “cash back at closing” is actually illegal (although “everyone does it”). I’ll try to look up some citations.
Imagine what THe OC housing market would look like if everyone did things legally…not lying on stated income or stated asset loans, not giving ‘cash back at closing’, etc.
Not definitive, but here is an example:
http://tinyurl.com/2f8xz5
“Let me make this simple statement: ANY cash paid TO THE BORROWER (the person who’s credit is used for you “credit partner” folks) without having been fully disclosed on the 1003 (Uniform Residential Loan Application - URLA) is mortgage fraud and a criminal activity in all 50 states.”
“If the sales price is $200,000 but the seller rebates, kicks back, spiffs, or otherwise transfers funds FROM THE PROCEEDS OF THE LOAN to the borrower which has NOT been submitted to the lender for their consideration then a MATERIAL OMMISSION has been made. The actual LTV/CLTV has changed and the risk to the lender has increased. This is a federal crime and the FBI is looking for perpetrators.”
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It seems that there can be cash back IF it is reported to the lender, but even then there are limits:
“So what happens if you do disclose a rebate to the borrower from the proceeds of the loan? Each lender has their individual limitations for each loan program of how much can be rebated to the borrower from the proceeds of the loan. Many lenders follow stict Fannie Mae, Freddie Mac or FHA/VA guidelines. Generally up to 6% can be rebated to the borrower for closing costs on a primary mortgage or a mortgage of less than 90% CLTV. On high LTV/CLTV mortgages such as 100% non-owner occupied (investment) mortgages the limit is 3%. Rebates beyond these limits would generally precipitate a denial of the mortgage application.”
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In my opinion, lenders that allow 3% cash back on a 100% (or more) loan to value loan deserve what they get. Although, at that point, they had probably already sold the loan to investors, so in that case, the investors deserve what they get for putting such a low risk premium on this trash.
3% isnt much = 30k on a 1 million dollar house.
We are seeing 10-20% cash back deals regularly.
I had some realtors make an offer on a house I was selling that amazed me. They were buying for themselves (not to flip, really) and they wanted 3% cash back with 3% down payment on thier loan. Also add in thier commission of say 1.5% so they would get 15k for ‘thier trouble’ to buy the house at 100% financing. Cheaper than renting as far as down payments.
AND THIS IS LEGAL - the illegal cash back deals are well discussed.
“Imagine what THe OC housing market would look like if everyone did things legally…not lying on stated income or stated asset loans, not giving ‘cash back at closing’, etc.”
There would be no OC housing market. All sales activity would cease until the REO’s hit the market and started going at 40% to 50% reductions.
Actually whether your “downpayment” is sitting with the mortgage bank (paid up-front) or in equities (an 80/20 loan )makes little difference to the “safety” calculation, except with the down-payment you’re locking in your rate-of-return of that money @ your marginal mortgage rate (less the mortgage deduction tax refund thereof). HSBC is paying 5.0% now, as are many online savings banks, including t-bills.
What do you wanna bet that Orange Girl’s door-knocking realty wiz will be in Some Other Career Field by this time next year? Say, fast food order-taker?
Happy news from DQ on the Antelope Valley markets.
93552 Palmdale sales off 69% YOY. 42 sales in December is the lowest since tracking began. Currently showing 11 month inventory on MLS.
Not to be outdone, 93551 in Palmdale (more desirable zip) also showed lowest sales since this reporter began tracking and has 11.27 months of inventory on MLS.
Additionally, the spike in default notices for 93552 is nothing short of shocking and awe inspiring. October was 14, November was 46, and December was 61. The 12 month rolling average is now at 18 up from just 9.5 in August.
Burn, baby burn.
Dude, you had me running to the bathromm (that’s where my hubby reads the paper) to fish out the DQ data from yesterday’s LA Times. You were talking about Dec. 2006 vs. Dec. 2005, right? Interestingly enough, in the newspaper we got the ANNUAL sales and the 93552 zip code shows a 12.2% INCREASE in price and 726 sales for the whole year. A 69% decline in sales should be in the cover of the papers, but if you just report the annual figures you can fudge it for a little longer. Aren’t the local papers reflecting this?
Local papers are playing ostrich, I check front page daily when I check rental numbers.
‘05 vs. ‘06 Dec is correct.
The sales being posted these days are most definitely not smart money.
Looks like Pfizer is closing several plants:
http://tinyurl.com/2xhbsm
I can’t imagine this helps home sales in any of the markets - Ann Arbor, Kalamazoo, Brooklyn and Omaha.
Kristen Crabtree, Realtor, “reports” on the California Central Coast
http://tinyurl.com/22owkw
“While prices are down now, appreciation is still happening, so…it’s a good time to buy! Plus interest rates are in a downward trend, and are currently at an average of 6.4% for a 30 year fixed.
Prices and interest rates are down now, and appreciation will still happen because it’s the last affordable place to buy coastal property in California. So…it’s a great investment.
Prices have been falling over the past 9 months, although they are starting to level off a bit. It’s a great time to buy and get into a great second home or to relocate to the home of your dreams! ”
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However, on here “price trend indicator”, she has marked “falling”. Good time to buy indeed.
“it’s the last affordable place to buy coastal property in California”
Note to Kristen:
Arroyo Grande is “coastal” the same way Culver City, Inglewood, Lawndale, and Hawthorne are “coastal”…they are “next to” cities that actually touch water.
Coastal means sharks = fish, not streetgangs.
Kristen Crabtree, Realtor says: ” While prices are down now, appreciation is still happening..so, it’s a good time to buy!”
At some point, hopefully SOON, Most Americans are going to wake up out of the trance they’ve been in and see how utterly illogical these ridiculous statements are that have been coming out of the REIC.
Prices down= Appreciation Happening??!! Come on, fellow Americans! Get a brain!
DOWN 30% - Check your FDIC insurance paperwork:
http://www.marketwatch.com/tools/quotes/quotes.asp?symb=CFHI
From the Yahoo message boards:
there is an under the table relationship between the bank and the developer. Trust me on this one. I have much inside information on this. Felonies galore on both sides! Hopefully, everyone will be protected except those at fault. An exmaple shpuld be set for corporate fraud in this industry.
Tiny (77 square foot) London Apartment on Sale for $335K…
http://www.breitbart.com/news/2007/01/22/D8MQGPLG2.html
Dammit Mike, you beat me to the punch. I just saw the article this afternoon on MSNBC. That “closet” deserves an entire thread to itself!
Just had the shock of my life. Went to http://www.foreclosure.com to see how many foreclosures were in my zips compared to last year this time.
My B’ham foreclosures were 39. Not good but not even double a year ago.
Then I went to my Seattle zip. Last year this time there were about 40. Now there are 295!
I couldn’t believe it. I thought maybe they were throwing in surrounding areas. But all the streets were indeed in that neighborhood.
Went through about 150 of them. Most were tax liens. Had a feeling last Fall this would happen after the late October taxes were due. Idiots can’t budget in a few thousand for the taxes on their precious RE.
The stupidity of this whole episode is mind-numbing. I’m so glad that, through following the info. on this blog, I’ve been able to adjust to each escalation in the insanity piece by piece over the past year or so.
Can you imagine, most people are going to get hit with ALL of this info. in one fell swoop?
Another thing about all those listings on foreclosure.com: I had just checked Ziprealty on that zipcode. It showed only 45 homes on the market.
So what does that mean? In the same zip code, 45 on the MLS and 295 in various stages of foreclosure?
Pretty soon, people will be going to foreclosure .com when they want to peruse what’s “on the market” rather than the MLS. Not just because it might be cheaper but because the selection is WAY bigger.
So is foreclosure.com the new MLS?
Trickle Up Theory:
Lowly blogsters propagate memes and break credible news reports (with supporting data and analysis) that filter their way up to the MSM.
Does anyone else see the evidence?
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
It took longer for knowledge to trickle up before blogs were invented…
I had an odd experience today. One of the screws holding my sunglasses together fell out, so I stopped at one of those Sunglass Hut stores that you see at the mall. It was quiet when I walked in. There was just one woman talking with the man behind the counter. While I waited to speak with the clerk, I overheard the woman saying “Yeah, if you describe yourself as self-employed, we can REALLY work with THAT! No problems documenting your income.” Then she gave her card to the guy and left. I couldn’t help but think about all the articles and discussion I’ve read on this blog about mortgage fraud.
That is the traditional last hurrah for a bubble market.
Get the last suckers in…
Then the floor falls out.
Got popcorn?
Neil