“Would-Be Sellers Have Lost The Stars In Their Eyes”
The Orange County Register reports from California. “Jeff Lazerson, president of Mortgage Graderin Laguna Niguel, said weakness in the housing market and lending industry will force lenders to cut rates by summer. ‘Realtors are starving right now,’ Lazerson said. ‘There is not a lot of demand to borrow money here or anywhere in the country.’”
“The median price of a resale detached home in Orange County slipped in December to $692,980, said the California Association of Realtors. That’s down $6,220 from November and down $9,310, or 1.3 percent, from a year ago. Leslie Appleton-Young, chief economist with the association, described the county’s home prices as more flat than falling.”
“‘There’s not a fire sale going on, but the market has definitely slowed,’ she said. In December, there was 9.4 months’ worth of inventory on the market, according to the association.”
The Daily Bulletin. “Home sales were off nearly 41 percent in the Riverside/San Bernardino area in December 2006, a sign that a mixed price picture may be about to turn down.”
“‘Nobody really knows for sure what will happen in the housing market,’ regional economist John Husing said. ‘But my guess is that by the end of this year, we will see a price decline locally of about 5 percent. There is just too much inventory on the market,’ Husing said. ‘Whether it’s overbuilding or homes in foreclosure, I think we’ll be waiting all year to see supply get down to a reasonable level.’”
“Husing said a lot of would-be sellers have lost the stars in their eyes. ‘I’ve got three different friends who have pulled their homes off the market,’ he said. ‘They got used to hearing what their home was worth and if they couldn’t sell it for that, they didn’t want to sell.’”
“‘I think the only people selling right now are people who either have to move or who have financial problems from some of these crazy mortgages,’ he said.”
The Ventura County Star. “The frenzy phase when homes were swooped off the market in a few days has passed, but that might be a good thing for buyers. Sellers are becoming more realistic and lowering their prices after about a year of flattening in the market.”
“‘Trees don’t grow to the sky; they have to stop sometimes,’ Realtor Associate Janet Scarborough said. Motivated sellers often lower their asking price in order to sell. But some refuse, expecting prices to shoot back up in March, when the market tends to start to pick up. Don’t count on it, Scarborough said.”
“She initially listed her ocean-view Ventura home at $995,000, but since has dropped it $36,000.”
“Mortgage defaults in Ventura County soared 204.2 percent on an annual basis in the fourth quarter of 2006, shooting past a historical average to the highest level in eight years.”
“‘It may be simply that lenders are sending out notices with a lot more zeal because of the weak real estate climate,’ said Mark Schniepp, who tracks real estate through the California Economic Forecast Project in Goleta. ‘It’s slightly surprising they ran up this fast,’ he said, but added that ‘we don’t see intended problems.’”
The Press Democrat. “American Home Shield is moving almost half of the jobs at its 200-employee Santa Rosa call center to other states, saying it is too expensive to operate a telemarketing facility in Sonoma County. The home warranty company, a major employer in Sonoma County for two decades, said Thursday it will move all 90 telephone sales jobs in Santa Rosa to call centers in states with cheaper business costs.”
“Home sellers and real estate agents often purchase service contracts as a sales incentive for buyers. ‘It was a very challenging year in real estate,’ spokeswoman Susanna Weston said.”
“‘It’s largely a reflection of real estate. They boomed during the boom. And now that home sales are down, it ripples throughout the economy,’ said Ben Stone, executive director of the Sonoma County Economic Development Board. ‘Obviously it’s a setback.’”
“The job losses are another blow to the region’s economy. Sonoma County has been losing jobs monthly since the middle of last year and the housing slump has contributed to the weakening.”
The Record.net. “Mortgage default notices in San Joaquin County soared to a record high in the last three months of 2006, as statewide filings hit the highest level in eight years, a real estate information service reported.”
“Lenders notified 1,293 county homeowners they were in default in the fourth quarter, nearly three times the 464 filings seen in the same period of 2005, DataQuick said.”
“That was the largest number of default filings for San Joaquin County since DataQuick began tracking the data in 1992, said company analyst Andrew LePage. The slump in the housing market and downturn in home prices is the real culprit, LePage said.”
“‘There are always homeowners in financial distress … even in a good economy, even in a good housing market,’ he said. ‘Now it manifests in default and, in some cases, actually in foreclosure, because without appreciation more of these people can’t bail themselves out.’”
“Aggressive financing schemes may also be at fault, said Art Godi, principal of Art Godi Realtors in Stockton and former president of the National Association of Realtors. ‘We said at the time that some of those wild loans were going to come back and haunt somebody,’ Godi said.”
“Coldwell Banker Grupe is handling increasing numbers of so-called short-sales, where homes are sold for less than the outstanding balance on the mortgage, said Jerry Abbott, president and co-owner of the Stockton brokerage.”
“He warned, however, the short-sale transaction may carry a hidden cost. ‘The government comes in after the sale and says, ‘Well, the bank forgave you $40,000, but you’re going to have to pay income taxes on that,’ he said. ‘There’s nothing like kicking somebody when they’re down.’”
From Scripps News. “The number of California homeowners who fell behind on mortgage payments more than doubled during the last three months of 2006. ‘In some places, the builders got a little bit ahead of themselves and the speculators got a little bit ahead of themselves and now they’re feeling the foreclosure pain,’ said Scott Anderson, senior economist for Wells Fargo.”
“California is experiencing a rise in defaults because so many people took out adjustable-rate mortgages, economists say. About 28 percent of loans in California are adjustable, more than in any other state, according to First American LoanPerformance. ‘California has been tremendously dependent on adjustable-rate mortgage products,’ said Anderson.”
“‘For a long period of time, California had some of best credit quality in the country,’ said Anderson of Wells Fargo. ‘We’re now starting to see some of that unwind.’”
http://www.fresnohomes.net/Nav.aspx/Page=http://fresnomls.rapmls.com%2fscripts%2fmgrqispi.dll%3fAPPNAME%3dFresno%26PRGNAME%3dMLSLogin%26ARGUMENT%3djs2GXuV582i1SEcgmY0Zbw%253D%253D
Talk about delusional. I saw this one on the MLS today. A condo for $283,900 that is better than original because “has just been rebuilt after fire.” PRICELESS! This idiot bought this condo (before it burned), for $257,100 in February of last year. In 1998, the same place sold for $105,000 (which was overpriced even back then!)
What the hell is “we don’t see intended problems” mean anyway?
Looks like the info on this one has been taken down.
California downturn will take 1-2 years for any meaning drop in prices. It takes long for sellers to give in, if at all.
Honestly, I really don’t think it’s the sellers, but the fact that people are still buying at ridiculous prices. Sales may be slow, but in my ‘hood (90048) a duplex (2x 3/3) just sold for 1.6 million (listed at 1.8, which was a fantasy). Less than list? Sure… but 1.6 million for an “income” property?!!?! WTF?! Another (nice SFR) place just closed as well. Listed almost a year ago at 1.7 mil. Reduced to 1.6. Relisted at 1.5. Sold for 1.45. Again, less than list but??? Oh, the realtor sent a mass mail postcard to the whole area trumpeting the SFR sale. On the card was the original 1.7 mil asking price. Jerks. This ain’t over ’till buyers and or lenders wake up. I’m gonna weigh about 400 LBS from all the popcorn I’m gonna need!
These suckers who bought in will feel the pain a 1-2 yrs from now. I’m on record, you can bookmark this page!
that is what I have been saying - even in the valley. people are still buying - so what if it is asking or a little less - it is not a lot less (which it should be)……they are STILL BUYING!
They are buying, but probably at January 2005 prices. If it took five years to get this crazy, it should take at almost as long to get back to “real”.
As of right now, those of us who have been waiting for the fall are much more screwed than someone who bought in 2005. Someone like that might be down 5%, maybe, but we’ve been sitting here b!tching and moaning while watching prices appreciate 100% and have nothing to show for it. That’s as of right now, of course.
posted ” As of right now, those of us who have been waiting for the fall are much more screwed than someone who bought in 2005.”
Not so… not so…. just wait, this moment will be but the flash of an eyelash! It like the acme safe falling on the poor thing chasing the roadrunner…. for a split second they meet.
You must understand in a down cycle in RE time grinds so slowly ever so fine ever so long…. on and on it will go. The Manic side is 5-6 years the down to flat side is 10-12 years.
Don’t jump too soon, time is on the buyers side.
We’ve waited this long, it wouldn’t make sense to jump in at this time…
LA Investorgirl –
I’m not waiting for a fall. I’m waiting to be ale to afford a home in the neighborhood I want at a price I can afford (w/o using exotic or toxic loans).
I am expecting a fall. But that’s different from waiting for one.
I am also expecting an economy that will perform badly in mid to late 2007 - 2008. That will be the catalyst that eliminates any possibility of a soft or even medium landing.
Agreed. I work in the beach area and values are very strong. BUT, move inland about 3 - 4 miles and the strain begins. The further east that you go the browner the toast starts to get. Once you have gone about 20 miles from the coast the total “Disconnect / Delusion” is intoxicating. When you hit areas like Corona and areas to the east the toast starts to get black on the edges.
Respectfully, you have no idea what youa re talking about. The only difference between overpriced POS by the beach and overpriced POS away from the beach, is that the bank may be able to sell the beach stuff instead of having RTC do it.
In every other downturn, beach property has suffered as well. Go back and see the stats.
Further, the SouthBay area is not prime r.e., it is secondary to Palisades, R.H., etc. And all of these areas are secondary to OC beaches, which are generally more Caucasian and are buffered from the “undesirables” by some major freeways and highly staffed police depts, which the beach areas of L.A, are not, other than Malibu.
“Further, the SouthBay area is not prime r.e., it is secondary to Palisades, R.H., etc. And all of these areas are secondary to OC beaches, which are generally more Caucasian and are buffered from the “undesirables” by some major freeways and highly staffed police depts, which the beach areas of L.A, are not, other than Malibu.”
The longest relatively accessible stretch of good decent ’sandy’ beaches is the OC stretch from Sunset beach all way to newport beach, with the stretch thru Huntington state Beach being one of the best relatively accessible public beaches in the Greater LA/OC metro region. Pristine and uncrowded it is not, especially in peak summer season, but at least you can get to it far easier than the South Bay/Venice/Santa Monica beaches, which suffer from lack of parking,inaccessibility, questionable sanitation due to power plants, ballonia creek runroff,ect. Venice has had gang riffraff problems, and Sanat Monica, though it does have a well kept beach frontage, except near the pier area, is all but inaccessible to all but the locals. The cops do keep HB under control, due to past problems with rowdy rioting drunk teens. Actually Manhatten Beach does have a very efficient though small PD. IMHO all the south bay communities way overrated, both the beachs and the rediculously overpriced 3-story stacked condo-like SHF’s on 2000 sq ft lots with almost no lot lines. Manhatten Beach is a very small cramped community of compacted living units squeezed on teeny-weenie lots, at least the homes built on the 45 % slope facing the ocean. The driveways/garages often accessible only off narrow sharply angled alleyways. Yet these are the properties supposedly worth 1-1.5 million. And just a few miles north is the LA dept of water and power scattergood generating plant, as well as the hyperion waste treatment plant. Ditto for hermosa beach. Waaaay overrated and overpriced. Torrance has a 1 mile beach frontage which is crap. Venice beach is close to some notorious hood areas( home to the Venice Shoreline Crips). Sanat Monica Beachs get assorted bums and riffraff as well. The entire LA beach frontage is pure crap, and their overpriced beachhomes will see falling prices just like the rest of LA.
you’re right - RPV can’t hold Westminter’s jock.
Westminster is not a beach area, nor is it Caucasian, so henceforth it would not have met the criteria I was speaking about. learn to read chili.
I think the original poster is saying that the beach areas are strong NOW…he doesn’t appear to be making any declaration about future values.
Last RE market peaked in 1990 and the downturn afterward took 6 years to bottom. The mania this time is much worse, you can go imagine!
And it took another 5 years to return to 1990 prices, 11 years total for 0% increase in price.
In 1990, the homes in my neighborhood (Castro Valley) peaked in 1989, and hit bottom in about 1992. then sat for 5 years. But by 2001 (11 years later) they were roughly 40% higher than 1990.
No not true. I bought my place in 1991 and sold in 1998 and pocketed, are you ready? $1500.00
WooHoo!
I bought my place in 1990 with $40K down. Sold in 1996 and walked away from closing with a check for $1,200.
Guys — thanks for your willingness to report cautionary tales about the perils of buying near the top (2005 will look much like 1990 through the lense of history, I suspect). I have tried to explain to some very smart people that buying at the top is a drain on one’s HH net worth, and they don’t all get it…
Depends. WHat do you call meaningful? If the foreclosures keep up and lending continues to tighten we might see 15-20% by the end of this year.
My call ayear ago was down 10% in 06 and down 15% to 20% in 07.It looks like i was pretty close.I believe ben did a piece on that a year or so ago,maybe he can go back and post the bloggers predictions.In his spare time of course i know this blog keeps him pretty busy.
The REO’s will push the prices down. This will happen when the banks get too many and have to lower the price to sell. But you right, waiting for individuals to lower prices will take longer.
yeah sure buddy i am seeing alot of dropping prices right now here in Lost Angeles.
“my guess is that by the end of this year, we will see a price decline locally of about 5 percent.”
San Berdo and Gutterside? Man is on crack. They will be down more than that by years end.
San ber-doo-doo and rottenside are in some deep **it.
Took a drive thru Temecula valley along the 15 between corona and temecula and they just built like crap out there. And still building like crap. From sea to shining sea a vast wave of stuccos, particularly from lake elsinore south to temecula. I counted about 30 billboards along that stretch touting lennar, kb,centex homes, and realtor company billboards. This is the only industry out in this part of the IE, just build and keep building more and more tracts and homes. BTW, the lack of rain this season has turned the TEmecula valley into a scortched toasted yellowish-brown moonscape. AS they say, the IE is toast!
Peter,
Was on that same stretch last week…
Especially liked the self congratulatory real estate co. billboards with the 4 mugshots of realtors~
You must have a much better understanding of stock markets than housing markets. Because it takes no collective action of “home sellers” to lead a market down. The mass of fools can keep their homes priced at levels where they will never sell forever, but a few REO sales whose results somehow escape into public view will reset the comps well below the average wishing price and bring the whole neighborhood’s valuations along to the basement.
‘Realtors are starving right now’
And in Nature as well as Real estate the weak must die off so the herd may survive in a smaller form.
The bright side for these starving realtors is when they get their jobs at the local buger joint,they can take home the left overs at the end of their shift. Problem solved!
hey, i used to take home kentucky fried chickens leftovers when i was working in high school. that was gummy. but wouldn’t touch that stuff now with a ten-foot pole. even if it’s given now, i just throw that artery clogging food in the trash. guess, i am getting real old.
I spent 15 years in the burger business and why would I want to hire someone who talks a lot, doesn’t do a damn thing, and whines all day long.
At least the prospective employer isn’t married to one of those Realtwhores. Imagine having to go home to that. There is a real estate office in my building and they are some of the rudest people in the building.
Monica Lewenski too. She finished a major in economics. What a coincidence. Maybe there is an opening at the US treasury for a job with Paulson ? She is very liquidity driven as an economist.
But Hillary Clinton already has a job
“I spent 15 years in the burger business and why would I want to hire someone who talks a lot, doesn’t do a damn thing, and whines all day long.”
Cause she’s hot, tarty, and loves to party?
” spent 15 years in the burger business and why would I want to hire someone who talks a lot, doesn’t do a damn thing, and whines all day long.”
I spend a good portion of my working life in the Fast food field, much of it in management/supervision. In my view, an ex-realtor would not be a suitable hire. Being in the fast food business, even as an MIT(manager in training), requires lots of hard work, wilingness to get your hands dirty, putting in long hrs, working odd hrs, late night closing shifts, willingness to do manual labor at the lower level MIT positions,ect. I doubt that most Realtors are willing to put their nose to the grindstone and perform menial labor duties required of most MIT candidates. I am sure that they can be ok in such restaurant positions as greeters, Cashiers,waiters/waitresses in fancy establishments, or other positions which do not require them to perform manual labor.
I think that most former realtors will end up as salesman of one sort or another, either in retail or in auto sales.
But the vultures will be eating well soon.
And the bottomfeeding fish will be getting fat.
not THAT soon…buyers now will still take a bath
“Jeff Lazerson, president of Mortgage Graderin Laguna Niguel, said weakness in the housing market and lending industry will force lenders to cut rates by summer. ‘Realtors are starving right now,’ Lazerson said.”
Does this delusional idiot actually think the Fed gives a crap about starving realtors? I can just hear Ben Bernanke now: “Although the dollar is suffering, and there seems to be continued inflationary pressures, recent reports indicate that realtors and loan agents are currently starving.Therefore, a decision has been made toward easing interest rates”. This guy is a classic!
haha
No! This guy’s delusion is even worse than you think. He’s not referring to the Fed lowering rates. He’s referring to the lenders lowering their rates. But lenders don’t set rates; the buyers of the mortgage backed securities do! The lenders lend at the rate that they can sell their mortgages.
It’s amazing that this guy, a president of a mortgage lender, doesn’t even know how mortgage rates are set. Just amazing.
I had a broker friend tell me same thing 4 months ago…. (hmmmmm, hasn’t happened yet). Me….I just stare the million mile stare.
What about a rate cut to save millions of starving borrowers?
posted ” What about a rate cut to save millions of starving borrowers? ”
It has never happned before. Get real nobody cares. I did no listen to the “State of the Union” address but heard it said not one word on New Orleans….They are still screwed there.
First aid kit….1 357 Mag…. 1 Mossberg 12 gauge Shotgun…. 1 30. 06 Rifle…. Water, Food etc.
I actually think the next rate move will be up…
Shake up the other currency players a little..
‘Nobody really knows for sure what will happen in the housing market,’ regional economist John Husing said.
Except when prices were going up. What a difference a year makes.
IIRC, just about 3 months ago Husing was saying that the IE’s RE prices would not drop because the IE’s job base was very diversified and growing. Now he doesn’t know what will happen? Come on, John, you can say it - prices are going to fall. You know they are, so just come out and say it.
Sounds like Florida about 6 months ago.
Agreed, and we can see where Florida has gone in the last 6 months. Coming soon to us in Cali.
Word from the street:
Spoke to a Loan/Mortgage guy at the gym last night. He said it is a bunch of bull about tighter standards. He said they are still doing no doc, stated incomes etc. He said what he reads (tighter standards) and what his company is doing are two different worlds.
One realtor in the San Fernando Valley (CA) is going back to acting. She said her monthly realtor nut in January was almost $2,000 for advertising, fees, expenses etc. She is worried about her burn rate of cash and lack of sales. A lot of realtors have a business burn rate that is going to eat them alive. These are the realtor that have not thrown in the towel, but will get eaten by their “business” expenses.
Loan Office Girl: Trying to sell jewelry and do loans. Not much money in loans these days. After, a few weeks on selling jewelry I think she will not find much money in that as well.
The other side: My sister works for a small CU in the Central Valley. Over dinner this week she said that the home loan collection unit is being swamped with non-payments - running to 10% of outstanding current loans. She said the LO’s are acting stunned, and she ( a real home-prices-only-go-up-type) is suddenly worried. She has no clue what the problem is - so I sent her to Ben’s site. It may just kill her, though.
I was unde the impression that CU underwriting was always much tighter. Do you think it is just the nature of the whole CV economy and RE market are was her CU a little more liberal than others?
Well when the GX recoups on RK I ofter think the WQ will FL closer to PD. But only if HF and XZ manage to HKJ on the QT.
imPLODer
Well said!
What imploder no likey my simple acronyms imploder need glossary ok imploder…
CU = Credit Union
CV = Central Valley
RE = Real Estate
No, I liked them a lot. Gave me something to write about!
Wow, Acting? Now thats a stable profession. Way to plan future coffee barrista…oh, I mean Genius and brilliant realestate agent!
Coffee barrista? Rotfl. How do you find an actor/actress in LA? Easy, call waiter/waitress.
Actually, in the west-side, it really isn’t that much of a joke!
The burn rate for realtors ™ and the non-performing loans are both going to be important in the coming months.
Its still a work in progress. I’m curious how many new companies will be added to the implode-o-meter tonight (recall, post 5pm PST on Friday the implode-o-meter has been reliably fed for weeks now).
Got popcorn?
Neil
After losing my job of 25 years 4 months ago i have now started a gardening landscape business here in Los Angeles may i can hire her to some labor.Its amazing what these hollywood types will pay for lawn service repairs around their overpriced pos.Business is growing steadily and in a few months i will have all the work i want.I will work 4 days a week with 4 weeks vacation a year.The financial freedom of selling my home 2 years ago has enabled me to semi retire and work as much as i want.I will be paying cash for a home when we hit bottom.
Nice to hear you are doing well. Working in garden design, I have often thought I could make quite a nice living down there.
Bottomfeeder,
Nice “retirement proffesion.” I wish you well both in your new business and in buying a home at a reasonable price.
Good foresight,
Got popcorn?
Neil
thanx it is working well i advertise on the internet free ads only and i get 1 call a day.i only take jobs that pay so i pick up 1 client a week.besides i need time to read bens blog and i sleep till 8.
“After losing my job of 25 years 4 months ago i have now started a gardening landscape business here in Los Angeles”
Good luck! Sounds like a good business opportunity, doing gardening, landscaping for Westside homeowners. I do some gardening, outdoor yard work as a hobby in my spare time. Rockscapes, fence posts, spring garden prep,planting stakes, ect. Good outdoor stress- relieving exercise. Once I went out to the desert area of big rock creek southeast of Palmcaster area and gathered some good-sized boulders, which normally cost $4-5 apiece at Home depot, brought them home to my house in LB, and placed them in the front yard planting well, to create a sort of rock-scape. The best natural landscapes are those i’ve seen in the hi Sierra mts above 9,000 ft, with granite outcrops interspersed with ground-hugging bonsai pines and
delicate velvet-like meadows along a flowing crystal stream.
Sales of big ticket items and luxury goods will probably not do well in the coming 5 or so years. So those salespeople are in trouble as well. But, acting, now there’s are good lifeplan. Lot’s of stability there what with the guaranteed income - it’s in the bag.
Hey guys, it really depends on what kind of “acting” job she’s going back into…might be the kind where they pay by the scene.
or by “the acts” they are willing to “perform”
Yes and no. Luxury goods companies have done well in the past despite stock market downturns or economic downturns. There are always rich people or wannabes that will put this stuff on credit. Big ticket items such as vehicles, boats, furniture, appliances have had tremendous sales growth in recent years due to use of home equity cash outs and profits from the housing boom (contractors, realtors, mortgage folk, etc.).
Depends on how you define “luxury”. The “Robb Report” & “Departures” crowd will spend like they always do; however, those catering to the faux luxury wannabe crowd will be wiped out.
As tj is alluding to, I am not referring to actual rich people, but the upper-middle working class who overspend on faux luxury goods.
posted ” worried about her burn rate of cash and lack of sales.”
That is funny. I have not heard that term “burn rate” since Barrons did a big bit about the Dot-Com biz 7-8 years ago….Humm I wonder if alot of the “new landlords” really understand the burn rate…. If they are hoping to sell high this spring or summer they will face the truth about the burn rate.
The spring/summer of 2007 will be the last stand… if and when it does fail it will be a “new paradime”
“‘For a long period of time, California had some of best credit quality in the country,’ said Anderson of Wells Fargo. ‘We’re now starting to see some of that unwind.’”
credit quality was good only because houses continually went up in price…that has nothing to do with true credit quality of the borrowers…most of these borrowers are clowns about to go tits up and i can’t fukkin wait!
“credit quality was good only because houses continually went up in price”
Spot on. Don’t the lenders get this simple point? Or is it simply a CYA concern at this stage?
Exactly. The credit quality wasn’t based on borrowers’ ability to pay, but borrowers’ cushion in equity built by appreciation. The entire convoluted Int-Only-ARM & Option-ARM invention relied on continual appreciation.
Kick that appreciation leg out from under the stool and “unwinding” will be catastrophic because it’s the single-point-of-failure for a huge proportion of outstanding loans. Add an actual price drop and there’s a nuclear chain reaction about to get unleashed…
“Kick that appreciation leg out from under the stool…”
Overbuilding of McMansions should be sufficient for that task.
Anderson of Wells Fargo ? You’re sure of that ? Maybe it’s the same guy from Arthur Anderson Consulting Group ?
‘There’s not a fire sale going on, but the market has definitely slowed’
‘It may be simply that lenders are sending out notices with a lot more zeal because of the weak real estate climate’
‘It’s slightly surprising they ran up this fast,’ he said, but added that ‘we don’t see intended problems.
‘We’re now starting to see some of that unwind.’
If I could find some way to harness the energy from the spin of this perpetual idiocy machine, I’d be rich. I’m just glad I’m not the one holding onto the hot potato.
And for anyone with a contrary opinion, I have only this to say: come back to me when the median house price is equal to three times the median income.
‘It may be simply that lenders are sending out notices with a lot more zeal because of the weak real estate climate’
This is the best one and a new one on me. Good jobs await these folks in Washington!
Yes, I can imagine the lenders as they zealously lick stamps before pounding them onto the NOD envelopes that will later be angrily shoved into a mailbox.
With the lender’s cooperation, the remainder of the loan is forgiven. That loss, however, is often less than the cost of going through a foreclosure process.
“It’s something the banks do to assist the borrowers, when the circumstances are right,” Abbott said.
He warned, however, the short-sale transaction may carry a hidden cost.
“The government comes in after the sale and says, ‘Well, the bank forgave you $40,000, but you’re going to have to pay income taxes on that,’” he said.
“There’s nothing like kicking somebody when they’re down.”
All the more reason to let the home go onto the auction block from a buyers perspective.
“Jeff Lazerson, president of Mortgage Graderin Laguna Niguel, said weakness in the housing market and lending industry will force lenders to cut rates by summer.”
Does this nitwit realize lenders don’t control interest rate ?
For president of a mortgage company, he sure has a bass-ackwards view of his industry’s food chain.
He must mean their in-house processing fees. But these are small potatoes next to PITI. Maroon.
ya he’s a Macaroon too…
That is exactly what I thought. Lenders didnt cut rates back in the 80s and 90s when weakness occurred then. Oh, I forgot, it is different this time. Fricking idiot.
Hey, Neil…pass the popcorn.
According to the brokers outpost blog Fremont savings raised their subprime rate .25% this week.Also they are really getting stricter on qualifying.too many bad loans are coming back to these lenders and they have to make it up somehow.The big credit squeeze is well under way.
the pig is just going into the boa constrictor. Will take a LONG time before it becomes a pile of poop….
This visual brings forth a question….
I wonder if snakes fart?
Rotfl.
BubbleButt, you are so right. Rates are going to go up due to reduced competition and a return of the risk premium.
He’re the bucket.
Got popcorn?
Neil
Whoops, replied to this above.
Got popcorn?
Neil
Well, there you go. Problem solved. Darn, all that popcorn is going to go to waste! Geez
had I seen your post I would have added my comments under yours. Yep, this dude is one nifty character.
- Wasn’t Riverside and Sin Bernadino the “Center of the Universe” several months ago?
and it will be the center of foreclosure except this time it will be the “epic” center.
posted ” Wasn’t Riverside and Sin Bernadino the “Center of the Universe” several months ago? ”
It will be center mass for money-nutron bomb….takes out all of the people and leaves the buildings standing.
“Center of the Universe”
I quote from The Who’s “Tommy”:
“You know where to put the cork…”
A bit away from CA, but I was talking to a friend whos wife is a realtor in the WV Panhandle (far suburb of Washington DC). He said that she is having to screen potential client to be sure that the house is worth more than they owe, otherwise she would just be wasting her time.
“The median price of a resale detached home in Orange County slipped in December to $692,980, said the California Association of Realtors. That’s down $6,220 from November and down $9,310, or 1.3 percent, from a year ago. Leslie Appleton-Young, chief economist with the association, described the county’s home prices as more flat than falling.”
For the record, is this the first officially-documeted YOY decline in OC prices? And what is Gary Watts saying to spin this situation?
I don’t give a dime to what these guys said. They have their agendas and are all guilty of pumping up the RE bubble this big and now try to perpetuate it. Too bad the law of gravity has kicked in. I just feel sorry for those credulous homeowners that have bought in their story and now are financially ruined. These are irresponsible bottom-feeder bastards
For those who haven’t read about Mr. Watts…..here ya go:
http://www.ocregister.com/ocregister/money/housing/article_727675.php
Thanks for the history lesson…
“Home prices, Watts says, will rise 15 percent to 18 percent in 2006. Interest rates will stay flat, but even if they rise, they won’t hurt real estate appreciation.”
wow, prove positive that even a broken clock can be right twice a day.
What morons!! “He’s never been wrong,” said Cate Florey, an agent with RE/MAX Metro in Anaheim, who hands Watts’ reports out to clients.
“I would put a lot of weight in what he has to say,” added Sharon Boyd, owner of Rosegate Realty in Orange. “He looks at so many things, and he takes other economic factors into account, not just real estate.”
“He looks at so many things, and he takes other economic factors into account ….”
…. (she continues) “I mean he’s incredible! He even knows how, …how to do percentages!!!! Uh Huh, he does too…! With a CALCULATOR and everything!!!!!! I am NOT making this up! Honest!…… He’s a GEEENNUISSS”
“‘For a long period of time, California had some of best credit quality in the country,’ said Anderson of Wells Fargo. ‘We’re now starting to see some of that unwind.’”
What planet is this guy from?
Might need to take another look at Wells Fargo’s 10Q after a statement like that. Sheesh.
Huh? That is a complete crock of sh!t….
Planet ENRON.
This is interesting. I have the entire article if anyone wants to read it.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=786427
Very interesting. Acting non-rationally in borrowing is rational, if the borrower simply doesn’t care about the outcome. Or maybe has no historic (learned) reason to fear it. Smells like a massive butt-whippin’ is due.
Oh, and attach the whole article, if you would be so kind. A great find. Thank you.
Downloadable from the link above. (Several mirrors are listed I believe.)
How does the cash back mortgage fraud phenomenon fit? Doesn’t that show a certain ingenuity (ifcriminal) on the part of consumer borrowers, taking advantage of the lenders’ loose standards?
From the burgeoning subprime crisis, doesn’t it appear that many lenders are not profiting at all, that in fact just the opposite is the case?
If I got it right, a central purpose of the BK law changes were to increase rationality - create more severe consequences for stupid moves, like excess debt levels. Cash-backs for fraud purposes are fraud pure and simple - very rational acts as long as you have no real fear of the endgame. In a way, these people are simply paying the bankers game: increasing profit margins in a world where risk is forgotten. That interest rates increase, decrease or cease to exist matters little if you head for the beach in Mexico with your margin.
When you have easy money its just human nature that the people will go for it . That is why the lenders have to screen for the amount borrowers can really afford .
During this recent housing boom of the last 5 years you saw borrowers willing to go on loan payments that exceeded their monthly income just to have the opportunity to gamble on appreciation or not get priced out of the market . Fear and greed are apparently emotions that are more powerful than the rational mind ,especially when the sheep are witnessing all the other sheep going for it . You actually had many normal people willing to commit fraud rather than be priced out forever or lose out on the appreciation .
What I don’t like about the marketing ploys of this housing boom is that they played on these most base emotions of greed and fear ,” Buy now or be priced out forever”,”You can’t afford not to buy with housing going up 20% a year ” .”We are running out of land “, “Your wasting your money on rent”, ‘ Real Estate always go up , get in now “,
“You can always refinance later ,after you make alot of money ,” etc etc.
There was no check and balance system to keep the hype from getting out of hand and the sub-prime lenders made it possibe for the people to just…… gamble .
This isn’t the first time in history that the lenders allowed margin buying that turned into a mania ,turned into a bust . …..Think 1929 .
Well, this is definitely a classic bubble, and a big’un, no doubt about it.
The point of the article , though, at least based on the final paragraph of the abstract, is that consumers would not change their borrowing habits despite the more stringent laws, and that this would inevitably lead to higher profits for creditors. Given that conclusion, it is interesting that so many creditors seem to be experiencing pain as we the bubble burst/deflation begins to unwind.
It would be intriguing to ascertain the nature of the underperforming loans that seem to be causing so much duress for lenders (via the buyback mechanism.) How many debtors have simply … disappeared?
Would it be fraud if a person used that ‘cash back’ to renovate another ‘flip’ and stimulate the housing renovation program market. By the way…I have yet to see a flipper on one of the tv shows who doesn’t say at the end of the program “Sure, I’ll filp again”.
Yes it would be fraud to use any cash back for any reason ,even if it was to pay for your mothers eye surgery .
Wizard –
What if the cash was attached to the structure of the house? (Just kidding — not sure how that would work…)
GS : Do you mean a lender approved cash back to repair something to bring the house to appraisal value ? That might be approved by the lender if the repair was actually done or the cash was held in escrow into proof of repair was submitted .
The more I think about it the more I think the lenders might of thought they could make risky loans because of the new BK laws . Maybe the lenders figured they had recourse this time ( which they actually do ). But heck , you can’t get blood out of a rock from a FB . Still no reason to make dumb loans .
Housing Wizard no blood to be had, yes, but perhaps the loan officers felt that bankruptcy bill gave them a “fig leaf”? Since it wasn’t their money and all.
Go read the paper. It says almost the exact opposite to what you wrote.
It’s basic thrust is this:
1) people are not completely rational when it comes to analyzing costs and benefits.
2) lenders have computer models and data that can avoid most opportunists and sell to the honest, but irrational, people.
3) borrowers behave irrationally when deciding to default. Rationally, they should default sooner, but they don’t.
So, it looks like better models led to the lenders pushing for tougher bankruptcy laws, then lending to the naive class of people at high interest rates while avoiding the ‘not caring about the outcome’ people.
Wow. That is fascinating. I’m tempted to toss my engineering degrees and programming skills and start studying for a third career as a sheeple herder. (I’m not being sarcastic either.)
Two pages in and I’m experiencing deja vu and looking for my copy of Isaac Asimov’s Foundation Trilogy.
It is awe inspiring what the lenders have accomplished with consumer credit in just my lifetime with the confluence of laws, information explosion and money. I can’t imagine that this didn’t mostly just coalesce via serendipity either, at least in the early stages. Imagine what they will be able to “accomplish” when they can go beyond empirical models and can actually steer the ship consciously.
Only problem may be that the same flawed human “heuristic” shortcuts that tempt their targets also affects their own human steering ability, hence the subprime blowup… ?
If you are serious about becoming a “sheeple herder”, you don’t have to toss your programming skills. They will be in demand at the companies that develop these “shearing tools”, including at least one in North Texas.
Foundation trilogy (ended up as a 5 book series though, but the 5th book isn’t good) is the best scifi series ever.
I agree. Sometimes, I also want to give into my baser emotions and simply herd the sheep.
So many sheep. So stupid. So easy.
Someone else wrote above that it’s sickening what happened. Prey on other’s fears (we’re running out of land and if you don’t do this you’ll be priced out forever) and profit handsomely. I totally agree.
“weakness in the housing market and lending industry will force lenders to cut rates by summer.”
Huh ? Exactly the opposite is going to happen ! As house prices drop forclosures are going to rise and lenders will start requiring MORE downpayment and MORE interest margin. Not only that, but the MBS buyers are going to become smart to the situation, sooner or later.
And the lenders don’t really care if the RE brokers are starving. That isn’t their problem.
Of course. I actually chuckled when I read that quote. What total nonsense.
I thought that was an odd statement as well.
what wishful thinking…. more than housing goes into that calc.
Yea, I could work on something funny to say, but……
If I was in front of this guy I would have said
“what the fu@k are you talking about?”
Tony Crescenzi Blog
Subprime Indices Stumbling
By Tony Crescenzi
RealMoney.com Contributor
1/26/2007 3:11 PM EST
URL: http://www.thestreet.com/p/rmoney/tcrescenziblog/10335214.html
Indices on subprime lending are falling sharply again, which some fear might spill into other segments of the financial markets. The declines are also seen by many as a sign of possible strain in the overall economy.
A key gauge of the subprime market is the ABX index, which has several variations that reflect the different levels of credit quality for mortgage and home-equity loans. The indices were launched a year ago by CDS IndexCo and are administered by Markit Group.
The subprime ABX indices represent a basket of credit default swaps on subprime mortgage and home-equity loans. Credit default swaps act as insurance against defaults, with protection sellers obligated to repay protection buyers for any losses that they might incur as a result of a default.
When the ABX indices fall, it indicates that default rates are either rising or are expected to rise. Over the past week, some of the more widely followed ABX gauges have weakened sharply. The question is whether the declines relate more to an increase in risk-aversion owing to the rise in interest rates and, most recently, to the decline in stock prices, or to fundamental factors in the economy whose impact on markets could deepen over time.
One widely watched gauge of the subprime market is the ABX-HE BBB 07-01 index. The index is said to have fallen 5 points over the past week (most ABX subprime indices are priced somewhere around 90-100 points).
For now, with the subprime market representing only about 6% of the mortgage market, home sales stabilizing and the U.S. banking system in extremely strong shape, the declines in the ABX indices do not seem indicative of systemic issues that will have material effects on the financial markets.
Nevertheless, there is the potential for the problems to escalate if the housing market fails to rid itself of burdensome inventories. The recent rise in mortgage interest rates is a threat on this front. If home prices fall, subprime borrowers are apt to liquidate their homes (if they are so strained to do so) at cut-low prices, spurring further weakness in prices.
Given this risk, it will therefore be very important to track housing activity in the spring when home sales tend to peak on a not-seasonally-adjusted basis. The spring represents to best chance for the industry to rid itself of excess inventory.
Hmmmm. If we knew the identities of the insurers of the lower quality MBS bonds, we would certainly have a tempting short candidate.
Who’s holding the MBS insurance bag?
“Who’s holding the MBS insurance bag?”
Guesses:
1) FNM
2) FRE
3) You
Is FRE or FNM in the credit default swap business? I wonder about the exposure of the big financial houses, such as Goldman Sachs.
Best guess: AIG.
“there is the potential for the problems to escalate if the housing market fails to rid itself of burdensome inventories”
Hmmm, too bad that inventories in certain California areas seem to be going up again…too bad indeed.
Q: Why would CA be ground ZERO for the housing bust, you ask?
A (one of many):
“About 28 percent of loans in California are adjustable, more than in any other state, according to First American LoanPerformance”
Is it safe to assume that all 28% of those loans are no money down or 103% loans as well? If so, ground zero will not be habitable for many years for none but the cockroaches, aka. bitter renters.
Hail to the mighty cockroach, king of all species!
Suttmeier
Interpreting Real Estate
1/26/2007 11:42 AM EST
It appears that the consensus is that the existing home sales release on Thursday showed stability in the housing market, and with inflation still above the Fed’s comfort zone that a rate cut was off the table.
In my judgment the real estate and housing markets are far from leveling off. The homebuilders are camouflaging sales data. Current new homes are built on land that may have been purchased before the bubble, perhaps in 2002 to 2004. They are walking away from options to purchase land at current prices. Even with the glut of unsold new homes, there are many unfinished homes that have been funded that need to be competed and sold on the cheaper land.
The regional banks are still loaning new funds disbursements to complete the pipeline of projects already partially funded through those ballooning residential construction and development loans. Some banks are even funding new projects even though their risk ratio versus working capital is above the regulators risk guidelines. Banks are starting to push some of these loans, those non-current, into a category called, “Other Real Estate Owned”. I will be watching this statistic as the current year over year growth rate for this balance sheet item was 34.5% at the end of Q3 2006.
Existing home sales is probably one of the most bogus and inaccurate data series in existence. If an owner cannot sell a property it comes off the market. Some industry experts tell me that statistics from some regions of the country can be off by as much as 50% do to local issues of the National Association of Realtors. Some say that 50% of existing homes for sale are vacant - Flippers who have walked away for example.
Then there’s the statistic I mentioned earlier in the month that nationwide foreclosures filings rose 42% in 2006 from 2005 climbing to 1.261 million filings, or a rate of one for every 92 households, up from one for every 131 households. Are these 1.261 million homes in the backlog figure?
In my opinion, real estate and housing is the Achilles heel of the US economy and it shows in the deteriorating fundamentals of the homebuilders, and the stress among regional and community banks.
Bond yields are rising as another asset bubble begins to pop ending the Bond Conundrum.
Position: none
There is just too much inventory on the market,’ Husing said. ‘Whether it’s overbuilding or homes in foreclosure, I think we’ll be waiting all year to see supply get down to a reasonable level.’”
You’ll be waiting longer than that before you get to that “reasonable level”. There is a HUGE run-up of inventory…everywhere.
BayQT~
Yes. And, most of the “Spring Bounce” believers haven’t even put their properties on the market yet. This is just the beginning.
I can’t wait to see what happens to inventories the week after the Super Bowl.
the Screaming Spring hasn’t even started yet. the kick-off is going out of bounds and the buyer will have the ball on the 40 yard line.
*motions first down*
“‘It may be simply that lenders are sending out notices with a lot more zeal because of the weak real estate climate,’ said Mark Schniepp, who tracks real estate through the California Economic Forecast Project in Goleta.
Whoa dude, you could be onto something here. Lets all think out loud, “borrowers are having a harder time paying at the same time any equity which lenders may have recourse to is shrinking, hmmmmmm. File this under “Blinded by Common Sense”
BUT WAIT THERE’S MORE. ‘It’s slightly surprising they ran up this fast,’ he said, but added that ‘we don’t see intended problems.’……..intended problems…..something’s wrong, my brain has seized up and I can’t understand what this man is saying.
‘Trees don’t grow to the sky; they have to stop sometimes,’ Realtor Associate Janet Scarborough said…what did she say last year? oh yeah, she said ” real estate only goes up”.
The tide has turned and now the Real Whores will be begging their sellers to lower their prices.
SKB
“Leslie Appleton-Young, chief economist with the association, described the county’s home prices as more flat than falling.”
Well, some builders seems to have a better grasp on reality than Leslie does.
There’s a development in the south end of San Juan Capistrano that’s been in the works for the past few years (www.pacificasanjuan.com). One of the builders, John Laing, has finally put up their models for their “Belle Cliff” neighborhood. The beginning of the first phase is just 9 homes. The website originally advertised the homes as being priced “from the mid $1 millions”. Now that they’re finally coming up for sale, they’re starting in the $900’s (not that that’s cheap). There’s no sign of activity from any other builder as of yet. There are supposed to be over 400 homes in the development when it’s complete.
I love their “Neighborhood Opening” ! People apparently gathered to view the field where houses would someday be built !
http://www.pacificasanjuan.com/07_0109_opening.pdf
Apparently the land has been graded since October. Houses are supposed to be done in late spring. That would be April, right ? So those houses are now framed and insulated, ready for drywall ?
http://www.pacificasanjuan.com/06_1029_levelingoff.pdf
They started working on the Belle Cliff models last summer. If “Blue Harbor” models are going to be in by April, they’re going to have to work pretty fast.
I love their description of the lot sizes as “huge”. 7500 SF isn’t huge, especially when a lot of it is hillside. The frontage for most of the lots is very narrow - approx. 50 feet. The garages are all 2-car, except for the “tandem” design 3-car garages, which IMO are all but unusable. BTW, some of the lots have very nice views, but they’re asking a $300K - $400K premium for them.
posted ” “Leslie Appleton-Young, chief economist with the association, described the county’s home prices as more flat than falling.”
She was talking about her boobs.
Casey’s back for those of you who can’t live without your daily dose of hallucinogenic feedback.
Must of done a cash-back refi on his domain name.
Notice he has nearly 500 responses to that post. More than I have ever seen here. Proof positive that the public loves a bloody spectacle.
I think this article is the best piece of BullSh*t I have seen in months. I am reading this and laughing my ass off.
I can’t wait for all the sleazeball mortgage maggots & thieving real estate agents to go belly up. They are desperately trying to stop a moving train….. I can’t wait till they all get flattened! hehehehe!
You know recently I have fallen in love with new words… Foreclose, Bankruptcy, reduced price, repo. Words I have not heard in a while… they sound so lovely to my ears…. This summer my ears are going to be really happy!!! hahahaha
Ok, a little too happy here…just drop the blog and back away. Easy now, that’s it.
LOL ….
I realized I had to take little breaks from Ben’s blog when I saw an ad for an LA home, and screamed “that’s right, call it like it is, it’s a turkey!!” Then I realized the ad said “turn key.”
LOL!!
‘It’s slightly surprising they [defaults] ran up this fast,’ he said, but added that ‘we don’t see intended problems.’
WTF are “intended problems”? And if this guy can’t see any problems, then he has some seriously rose-colored glasses or is smoking some strong weed. NODs are up, and foreclosures are up dramatically. The foreclosures (which lag the NODs by several months) will continue to skyrocket, which will lead to more REO. The banks can only handle so much REO on their books before the regulators force them to sell, and then the banks will have to undercut prices to move the REOs, which will then be the new lower comps. This puts more FBs under water, just as more loans reset to higher rates that FBs can’t afford, which leads to more NODs. Rinse and repeat. A virtuous cycle that will lead us back to normalcy (after likely overshooting a little on the way down).
“In many parts of economics there is an assumption that a complex system of determinants will tend to lead to a state of equilibrium. When this tendency is absent terms like virtuous circle and vicious circle (or virtuous cycle and vicious cycle) to describe these unstable pattern of events are used. Both circles are complexes of events with no tendency towards equilibrium (at least in the short run). Both systems of events have feedback loops in which each iteration of the cycle reinforces the first (positive feedback). The difference between the two is that a virtuous cycle has favorable results and a vicious cycle has deleterious results. These cycles will continue in the direction of their momentum until an exogenous factor intervenes and stops the cycle”
That’s the same thing LTCM was going through. The fear was, without an external event it could plunge the entire economy into meltdown. The government stepped in.
What will happen for RE since your description is the most likely scenario?
I’ll be happy when the all the starving Realtors can hold their Roll Call in a Telephone Booth.
Hey !!! There’s NO butter on this Popcorn Ben
I will take extra butter and salt
Mmmmm… Old fashion(ish), made on the stove in a pot with 1/8″ of olive oil. It comes out light and “pre-buttered.” Then you just add salt. MMM….
Got popcorn?
Neil
Jiffy-pop, made on a campfire, so that you’d get those black “overburn” kernels at the bottom…washed down with hot coacoa, and a smores chaser.
“Husing said a lot of would-be sellers have lost the stars in their eyes. ‘I’ve got three different friends who have pulled their homes off the market,’ he said.
Some of these sellers will have black eyes soon as they get beaten down by bargain hunters. They may have to say “No mas, no mas lowball offers” to their agent.
“No mas, no mas lowball offers” To which their agent says “No mas advertisements or open houses. Your POS is overpriced!
Sellers still have stars in their eyes. Its going to take another year of this just to warm them up. But Florida, Sacramento, and San Deigo will warm them up. I expect a very slow selling season throughout 2007. The YOY numbers will be interesting.
Got popcorn?
Neil
Desperate sellers to patient buyers:
“No mas, no mas.”
http://espn.go.com/classic/s/add_leonard_sugar_ray.html
I wonder….If the baby boomers are close to retirement, they know that selling now is better than selling later (since they probably have been through market changes before). Since many probably bought before the run up, they have the control. If they put their house up for sale to move quickly, they set the new comps and sell at a lower price than FB and can get out of Dodge before the FB, even if they have to take a loss. In a nutshell, if the FB don’t move NOW with the prices and take a beating before the seasoned others come into the market (if the FB are able), they are screwed anyway. Any comments on FB and GB loosing their jobs and not getting rehired due to bad credit? Loved the fact that someone stated they had most of the applicants for a job posting were RE and none were hired. Finally some reality. Gives me some ideas for the upcoming the next MTV hit “REAL atorWORLD”
Just a note here… If factor in the number of IO or ARM mortgages was something like 40% of the California activity… whoa, Sales really fell off a cliff.
You also have to factor in a lot of people are unaware they are under water. Blissfully so… Perhaps that is why the defaults take a couple years to peak. Substantial population doesn’t even think to refinance till the reset kills them and they can not.
“You also have to factor in a lot of people are unaware they are under water.”
You are correct IMO, people can barely deal with their jobs and kids…. The sh!t ain’t real till it’s in their face, and on paper.
This thing is going to take a while to explode… the mortgage maggots are still doing wacky loans…. just today, one of the mom’s that is in my son’s playgroup was commenting on how they bought a new car…hmmm funny thing is 2 months ago she was talking about how they were in the hole, $2600 mortgage and a bunch of credit card debt….. and she was going to refinance…sooo how is it possible they have any equity in a home she bought a year & a half ago… I did the comps, her house… NO EQUITY, worth less then when she bought it!!! The mortgage maggots have now let this dumb-dumb go for another year or two before she has to file BK!
This is going to be a long, drawn out dump. This summer is just the tip of the iceberg.