Speculators “Got Caught” In California
The Santa Cruz Sentinel reports from California. “There’s been a notable jump in the number of home foreclosures in the county. ‘I have clients who are on the road to foreclosure, and nothing’s going to stop that train,’ said Pamela Simmons, a Soquel attorney with a specialty in mortgage lending law who works statewide. She estimated that 20 to 30 of her 150 clients in mortgage trouble are from Santa Cruz County.”
“Foreclosure sales in 2007 have more than tripled from the same period a year ago, from 11 to 41. Compare that to the number of single-family homes sold last year, an average of 159 per month. The Santa Cruz Record, a legal publication that tracks foreclosures, has expanded to 20 pages, mostly due to foreclosure-related activity.”
“Investors who planned to sell homes got caught as the housing market cooled and they couldn’t find buyers. Home prices are so high, last year’s median was $744,000, that it’s near impossible to rent a house at a price that will cover the mortgage and the property taxes. A three-bedroom, two-bath home might fetch $2,000 a month in rent, not enough for a mortgage payment that tops $4,000.”
“Buyers eager to become homeowners opted for new types of mortgages that put them at risk, such as mortgages offered with initially low rates that increased after a certain period of time. Buyers who focused on the monthly payment without devising a plan to pay higher rates are now in trouble.”
“Simmons gave an example of a farmworker making $15,000 a year who had a loan requiring payments of $60,000 a year.”
“Ronnie Trubek, an agent with 28 years in the business, said she has seen ’short sales,’ where a lender takes less than what is owed to close an escrow.”
“Simmons, who specializes in mortgage lending law, recommends people who are behind on their payments consider whether to quit fighting. ‘I’ve had to have that talk with a lot of clients,’ she said, noting that some feel better once they let their house go.’”
“For those who can’t afford payments, it’s not possible to keep the home, she said. A new loan won’t improve the situation, and the borrower will simply end up paying more fees.”
“Trubek recommends consulting a tax professional because losing a property through foreclosure is ‘a taxable event.”
From USA Today. “Here’s an alarming fact about Sacramento’s housing market: About one of every five existing homes on the market is a ’short sale.’ That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors.”
“That, in turn, puts pressure on the remaining 80% of sellers, who have equity in their homes, to cut prices. ‘Sellers are having to give concessions and cut prices,’ Saizan says. ‘It’s all about making the house show the best it can and aggressive pricing.’”
The Contra Costa Times. “Homeowners should know that although debt can be forgiven, it’s never forgotten. When a short sale, deed-in-lieu agreement or foreclosure occurs and a residential lender loses money on a loan, the lender will most likely file the loss with the IRS, and the former homeowner may end up owing thousands of dollars in taxable income.”
“‘That’s probably where we see kind of the biggest surprise on the part of our clients,’ said Jackie Pearlman, senior tax research coordinator for H&R Block. ‘Not only are they not aware it existed but are very surprised to understand that it’s income. The concept is really alien to many people.’”
“‘We all know intuitively that if you borrow money you don’t have the income,’ said Bill Purdy, a Soquel-based attorney in Santa Cruz County who represents clients with home lending problems and foreclosures. ‘If you don’t have to pay it back, it can become income.’”
“But if the lender takes a loss selling a property, let’s say $100,000, the company will file with the IRS, and the client will receive a 1099-C for the amount.”
“Purdy said many people try to ignore the problem. ‘The problem is that people do nothing,’ he said. ‘They freeze like deer in headlights.’”
“But none of this matters to the IRS, which knows only that a 1099-C was distributed as taxable income. ‘They will assume it’s taxable until informed otherwise,’ he said. ‘And you don’t want to wait for that notice in the mail.’”
“Adarsh Sangani, director of residential lending for Fremont Bank, said his bank doesn’t issue many 1099-Cs to its customers. ‘Only if a customer doesn’t respond to collection calls, a letter and a collection agency,’ he said.”
“Sangani said homeowners defaulting on mortgages aren’t an issue for the bank. ‘The majority of our loans are done with 20 percent down,’ he said. ‘We’re an A-paper lender. … If we were subprime lenders, there would probably be more.’”
“Here’s an alarming fact about Sacramento’s housing market: About one of every five existing homes on the market is a ’short sale.’”
And yet people in Sacramento think they can rent out their flip for an amount equal to their mortgage for a few years and get out clean. There are many ways to chase the market down out here.
I know a few investors with up to 5 houses bought with no money down in Sac. These are new homes with the plan to sell at a profit in a few years. This is a common story up and down the Central Valley. This is why the market will get hit hard in some new subdivisions.
But weren’t people like Robert Allen pushing “no money down” as the smart way to invest in real estate?
I guess it wasn’t so smart after all.
It was very smart. In 2001.
Only if you sold by 2005.
Everyone pushed investing in real estate as the smart way to invest in real estate.
Everyday there’s more stories of everyone with the same plan. Buy a 1 to 10 houses; wait 2 years; sell houses.
This might have worked when 1 in 10 people did it. When 5 or 6 in 10 are doing it you get the current stream of news of people getting hammered.
No money down is the smart way for the flippers. They have everything to gain and can only lose their credit rating for a few years.
1099 - oops.
It seemed liked just a very few months ago the talking heads were saying Ca. was immune ,and pointed to the low foreclosure rate. Seems that “it’s different here” is not a sure bet now….
It was very smart. When you go bust, you don’t lose anything but reputation (read: credit rating). Someone else loses real money.
Exactly. It’s kind of like opening up a line of credit at a casino, with no money in the bank. Nothing like gambling “on the house”.
Bad credit translates into higher insurance premiums, rip-off credit card rates, problems with rentals and employment, problems opening bank accounts, etc. They will be paying more for things and missing opportunities for up to 10 years.
At least two problems with the “free gambling” theory.
1. These flippers don’t want to gamble, they want easy money. If they thought there was a chance that they would lose money, they would kept the money in CDs. Greed overcame fear of loss.
By speculating this way (without thinking) you sew the seeds of your own demise. Because everyone can do the same thing as you, prices rise. As prices rise more people are attracted/scared and jump into the market…..
I don’t need to describe the rest, everyone here knows the song by heart.
“At least two problems with the “free gambling” theory.
1. These flippers don’t want to gamble, they want easy money. If they thought there was a chance that they would lose money, they would kept the money in CDs. Greed overcame fear of loss.”
Uh, I think you missed the point. We’re talking about zero down purchases. Since when can you invest $0 into a CD, and get a return for that matter?
100% financing might be a good idea in this market if you’re the type that doesn’t use credit or loans much otherwise.
A friend of mine fits that category. She may have overpaid for her condo, but if the crap were to hit the fan, she would have very little skin in the game, and a lowered credit rating wouldn’t harm her much apart from applying to some rentals.
Given that a LOT of people will probably be foreclosed upon in the coming years, I wouldn’t be surprised if there were actions taken or legislation introduced to remove mortgages from basic credit ratings.
After all, the US economy is presently fueled by annual domestic consumption. That is, the Wal Marts and Circuit Cities of the world need Joe Six Pack to continually buy products now that he cannot afford with present savings.
I believe ultimately that the banks and major MBS investors (foreign and hedge funds) are going to suffer the most in the coming sh!t storm.
Remember to spread your demand deposits over many banks, with each account under the FDIC maximum.
The reporting of foreclosures is pretty inconsistent. Some banks put it on the record when they refer a case to an attorney to review, whether or not they proceeded to foreclose on the house. Unfortunately, the federal statutes makes it nearly impossible to get a creditor to change information that is not completely erroneous.
I don’t know how in the world they expect to get enough rent to cover the mortgage.They must on drugs to think that.With prices near 400-500k in most cases for something decent how do the numbers add up? I am very familiar withthe sacramento market and it is way out of whack.Elk grove, natomas, roseville and rocklin seem to be the hot spots for flippers.I would not touch anyting there until it is 200-300k for something nice.
I see rent “asking prices” all over the board. A 2500 sqft house in a new development will be listed as $1300 to $2100 a month. Guess which ones are languishing on the market.
The best part is when these homes are listed as section 8 ok. Don’t they know that once a house going Sec 8, they are damn near locked in for life in Ca? ouch
I think the problem is that these “investors” can only see out about 30 days (i.e. until the next mortgage payment is due). If a HUD Section 8 creates higher occupancy, so be it.
I think the problem is that these “investors” can only see out about 30 days (i.e. until the next mortgage payment is due). If a HUD Section 8 creates higher occupancy, so be it.
Better yet, take a look at most Section 8’s after 2-3 years of being a rental…
Yet another reason not to rent in a flipper neighborhood - you might end up surrounded by Section 8 detritus!
Someone posted an anecdotal story about a couple who bought a Sacramento area house at auction the other day with the intent to rent it out, which they’d be doing at a sizeable monthly loss. There are STILL fools who are willing to do this!!
If someone offered to sell you a nerf turkey knife for $3M with no money down and you knew it would be worth $5 in a year you would probably buy the nerf knife.
Errrm… meant $5Million not $5
And that’s the problem….How do you know what it’s going to be worth? You don’t. You take your brokers word, your neighbor’s or co-workers word, or trust your gut. If you did your homework you would not have bought in the last 2 years. Period.
I Hear a Large Lady singing in the background…..It’s faint but getting louder everyday…..
I bet at 20% short sales, Sacramento is already worse than the SoCal bust in percentage terms.
That is a shocking amount of short sales, almost unbelievable.I imagine all these short sales are going to do wonders for the comps.The other day I was looking at countrywides REO list and it showed a bunch of homes in sacramento.I took down a few addresses and then went to the MLS and searched for them.Sure enough they all popped up listed under different realtors.Most of them said bank owned in the description.I’m afraid the banks are going to take a lot of losses in sacramento for sure.
Just wait untill April 15th 2008. 2007 1099-C’s for everyone.
April 15th 2007 we will start to hear the wining about AMT when a lot of people find out they can’t deduct their property tax bills.
I’m still waiting to hear about the IRS auditing people for deducting all of their HELOC interest. My understanding is that it’s only tax deductible if it was spent on improvements to the house; not for taking that trip to Italy or buying a Hummer or paying off credit cards. Can any accountants confirm this?
My understanding is that interest on the first $100k ONLY of a HELOC is deductable. I am not aware of any restrictions on how it is spent.
“1099Cs for everyone”
Wow….hadn’t thought of that. That 1099C could bump your income so high that the AMT would kick in. Possible?
Boy, that would suck……
I agree. You could deduct interest on home equity line upto $100K even though a loan is for reasons other than to buy, build, or substantially improve your home. There is no restriction on what you use home equity line for.
One thing IRS could nail you is when you refinance. You can only deduct interest on new debt up to the amount of the balance of the old mortgage principal just before the refinancing. The interest on additional debt is non-deductable. However, if one does not have any home equity line at the time of refinance, they could deduct interest on additional $100K.
That’s what makes this current cycle so disturbing. In the past I assume most foreclosures weren’t necessarily underwater, as much as they were simply people who couldn’t afford the payments.
On the other hand, in past cycles, there were more down payments. In that case, the lender might not be harmed but the borrower would lose some money.
In this cycle, it looks like everyone’s a loser. Except of course…..renters!
In the past I assume most foreclosures weren’t necessarily underwater, as much as they were simply people who couldn’t afford the payments.
Have to disagree. If an owner has equity, and any brains at all, he can see that he can walk away with more cash, and keep his credit rating, by selling rather than letting the lender foreclose.
Foreclosures are very low during times of rising prices for just this reason.
What yogurt said. There are two things going on here: equity and cashflow. If you have ~6% equity or greater, you can almost always sell. And selling is almost always better than foreclosure. As Tanta has pointed out over at Calculated Risk, when the bank servicing your loan forecloses, they will try to pad the costs of selling as much as possible. The other question is cashflow: can you make the mortgage payments? Even if you’re upside down, so long as you keep making payments, you can stay in the house. THIS is why in previous downturns home prices have been “sticky downwards.” Only people who have to sell, either because they’re moving or they can’t make the payments sell at a loss. Typically you don’t have a large percentage of borrowers who can’t keep up payment without job losses, either plant closure or recession or what have you.
Normally, a borrower has to strike out on both equity and cashflow for there to be a foreclosure. The problem is that with the explosion of various negative ammortization, teaser rate, stupid loan products out there since 2003, many borrowers start out not able to realisticly make mortgage payments over the life of the loan. With these timebomb loans, the borrowers start out with 1 out of 2 strikes against them, and any insufficiency in equity will almost invariably lead to foreclosure or short sale.
The Contra Costa Times. “Homeowners should know that although debt can be forgiven, it’s never forgotten. When a short sale, deed-in-lieu agreement or foreclosure occurs and a residential lender loses money on a loan, the lender will most likely file the loss with the IRS, and the former homeowner may end up owing thousands of dollars in taxable income.”
it seems that a foreclosure is a gift that keeps on giving.
i am not so concerned about the taxes due from these 1099C considering that there is an irs program which deals with tax forgiveness. a lot of these *destitute* flippers/former-homeowners should be able to get a partial relief.
With an offer and compromise you can pay 10 cents on the dollar. That’s a heck of a lot of forgiveness IMHO.
An IRS program that grants Tax Forgiveness?? What? Federal Tax debts cling to people after virtually every other debt has been forgiven.
The IRS is renowned for NEVER forgiving taxes.
Can you provide some details of this program because I’ve never heard of such a thing. If you are unconcerned about taxes due on 1099C income you might want to be sure you have a rational basis for your lack of concern.
IRS debt even stays with you after bankruptcy.
I thought that taxpayers do not have to pay taxes on forgiveness of debt income if they were insolvent at the time of the forgiveness (but limited to the amount of their insolvency - e.g., if they had $200K of debt forgiveness and were insolvent by $80K, then they would only pay taxes on the remaining $120K). I’m not an accountant, but I think that’s the way it works.
Negotiating on delinquent federal taxes happens everyday. They look at your ability to repay. There are lawfirms that advertise daily on afternoon television that specialize in reducing what you owe the IRS.
Even the IRS knows you can’t get blood out of a turnip.
The Offer & Compromise program erases your debt.You must submit along with the O & C request a check for at least 10% of your debt . Also a letter explaining why you should be forgiven must accompany. Many 12 step programs help with this in the “ammends” step. Dears Sirs I was drunk and out of my mind…now I’m in recovery and haven’t had a drink for X years…..
I know a man that only had to pay 5k on 50k debt.
Honest truth. I was there.
I know very personally a person that lost a very long and expensive fight with cancer. A few years before she died she became too sick to work. No work = no insurance = medicare, right? Except that her brothers (incidentally, they were all real estate investors) got together and said that there is no way the government is going to foot the bill when they have the money to pay for treatment.
Once she died, the IRS wanted to tax the estate. Her daughter had zero money and was going to be forced to sell the house. Her brothers took all the receipts to the IRS and said “we saved the government 10 times the amount of money you want to collect, the IRS shouldn’t collect on the estate.” The IRS took a look and immediately said “thank you, you owe nothing.”
The IRS knows that they have so much power that they can crush anyone at any time. They don’t use it and aren’t mean to people unless you’re asking for it.
I don’t see them forgiving the debts of millions of investors though. Maybe the poor people that truly got screwed by someone, but the greedy bastards aren’t going to get any breaks.
I also know of another investor with 5 houses. He tried to unload last year, but still stuck with all 5 houses. Another one I heard of is a RE agent, with 28 houses. Good luck Sacramento.
28 houses? Might as well just flee the country…
28 houses? These people are EVIL, total parasites on the system.
I found a bunch of rental homes (Craigs List) that all had the same LA phone number. Turned out the guy lives in LA, is from the mideast (Mohammed…) and owns about 15 rentals here in the area (mostly eastside..Kirkland/Bellevue/Redmond). These @#$$% infestors are a big reason supply dried up and prices went thru the roof. No mercy for these clowns…
Unfortunately, a lot of those middle easterners can afford to hold those properties indefinitely. They’ve got more than enough cash. They’re just stupid with it.
That may be true, but this guy literally begged my wife and I to rent one of his houses in Kirkland. He chased us for a week.
But our rules are:
1) never rent from someone who is not “local”
2) don’t rent a house which is not in good shape
3) don’t rent from a flipper if other options exist
His place violated all 3 rules….
Do you know what kind of car “Mohammed” drives? If it’s a BMW, then chances are he’s not swimming in cash and can’t afford to sit on all his houses indefinitely.
Islam forbids paying interest and requires living a non-flashy, modest life. If you lived like that, you’d probably be swimming in cash and would have no problem buying houses without using a mortgage. And you too could wait out the bust.
But if the guy is driving around in a BMW or a Lexus, chances are he’s not a strict muslim (if a muslim at all) and is mortgaged to the hilt and about to lose it all. Given that he begged you for a week, I’m guessing he’s not your normal, respectable muslim.
There are about 350 units in downtown San Diego listed as resales that are under $1million in asking price. Of those 350, approximatley 20 are listed as eaither ‘Bank Owned’ or ‘Short Sale.’ I believe that about 5.7% of the total for downtown.
If this is the case….. why the hell are prices not coming down faster! Have you seen the prices in FOLSOM!!! To top it off… you should have seen the people out looking this past weekend at all the open houses….. I am feeling VERY angry…. I am so tired of renting & waiting….. I have talked to some friends still in the business and they say things have been picking up. It sure looks like it when you see people streaming into open houses like ants!
OKAY RANT OVER!
High end/choice homes are still selling up here. A lot of CA equity locusts moved here last year and have been biding their time and are now making their moves. I know 3 mortgage brokers and they say the market is still moving because of CA buyers who were lucky enough to get out “at the top” in CA. God I’ll be glad when the supply of CA equity locusts and CA infestors dries up. They are a HUGE problem up here.
Amen.
Depending on what they’re buying, though, given the lag in the NW, they may be buying at the top as well.
Well put Seattlemoose,
I share your sentiments. The Rogue Valley, Oregon, is still getting munched by the locusts. And the effect is particularly pronounced here in Ashland (and Jacksonville). You can imagine the locust effect in towns of 20,000 people or less.
Fester,
I’ve been traveling down there (Grants Pass, Medford, Ashland) for work for about 9 years now. Wow, what a change.
What’s the median price for an Ashland home these days?
Adarsh Sangani, director of residential lending for Fremont Bank, said his bank doesn’t issue many 1099-Cs to its customers. ‘Only if a customer doesn’t respond to collection calls, a letter and a collection agency,’ he said.”
Isnt that illegal not to file???? Isnt he required to file the 1099-C? Boy I wish my employer didnt file a W-2 for me because they didnt feel like it!!
Hey Paladin, you feel like notifying the IRS about Fremont not issuing 1099-C’s? Looks like you have proof.
I believe there is an option with debt forgiveness. If the bank wishes to write off the loss then it must file the form. I can’t imagine many cases where they wouldn’t want to write off the loss. One case might be if the loss is smaller than the sum of the costs associated with filing the forms / legal fees for following up.
I believe they have to issue a 1099 C once they decide it is not collectable and write off the loan balance.
BubbleButt,
That’s not how I read it. He says they’re an A-paper lender, require 20% down on loans, and don’t have much problem with foreclosures (yet). They don’t write many 1099-C’s because they don’t have to. They get their money. Note that he said they only write the 1099-C if they can’t get the money back through a collection agency. If they do end up writing off the loan, you can bet they file the 1099-C.
These corporations are smart enough to start a little subsidiary company and put all the subprime mess there. I don’t know if this is the same Fremont, but if it is, this guy just doesn’t work for the subprime unit.
Ric:
Thats what I thought, but just the way this guy stated it did not make any business sense to me.
Thanks.
If the bank books a deficiency as a loss, the loss offsets income the bank would have otherwise had to pay income tax on. That’s the only reason the bank will fill a 1099-C. It’s not to spite the defaulting borrower — it’s to make sure the bank gets credit for its losses. The bank’s loss is the borrower’s gain, so the borrower gets taxed. If the bank is willing to forego the tax deduction for the loss, the IRS doesn’t care; it just collects its tax from the bank, rather than the borrower. But as a practical matter, since banks aren’t in the business of charity, you can bet they’ll book the loss and send the 1099-C every time they face a deficiency.
““Simmons gave an example of a farmworker making $15,000 a year who had a loan requiring payments of $60,000 a year.”
Hey, thats how we do it in California. Its called ‘Meximath’.
Or ‘Meximeth”. Whatever.
Remember, In this game he has nothing to lose.
Forget about house prices 10X income. We now have house payments at 4X income. The new math, it is isn’t your Father’s finance math anymore.
It’s the new meth we are talking about…
It’s called ‘Meximath’.
Is that like Spanglish?
Yes, Phillygal. It’s Spanglish. A widely spoken language places like Arizona and California.
Fun factoid: If you try to use the grammatically correct Spanish you learned in school, a lot of Spanglish speakers won’t understand what you’re saying. It’s even more fun to use the Castillian Spanish that’s spoken in Spain. That REALLY gets the blank looks.
Yup, I read an article saying that in a couple centuries Spanglish will be a language in its own right. I guess we just have to wait. In the meantime, it’s awful.
Aren’t you a native of Argentina, cassiopeia? As a speaker of proper Spanish, are you able to understand Spanglish?
Thanks.
I do understand most, but it just sounds very strange, with words that don’t make any sense until you think of them in English and then try to pronunce them in Spanish. It’s odd, but interesting. It’s like being there when a new language was born.
Egad, Argentina. That place where I have to order a
“cono de banisha” at McDonalds. Eshos no hablan Casteshano. Don’t get me wrong, I love Argentina. Guess my ear is more famishar with Spanglish.
is this the same as george bush’s “fuzzy math”? if it is, it would be a “catastrophic success” for the educational system in california.
Meximath…. the fees and commissions were great with Meximath. It was a cash cow and moo, moo all the way to someone’s pockets. Guess who?
Think of the size of the loan this guy got for it to add up to $60K! And on a $15k salary. I wonder how CAR has this figured into their forecast?
This stuff is getting more screwy every day. Now a guy’s got PAYMENTS at 4x INCOME?! That loan officer should go to jail, period. Pass the popcorn.
Haha, his interest won’t even be tax-deductible because he doesn’t earn enough income to actually owe any tax!
Aw, Ben, you know it’s all super good for CAR!
There’s not a devastating percentage that they CAN’T put a spin on. All the stuff coming out of NAR is simply souped-up semantics.
I am sure the poor sod who’s SSN he used will be in for a shock when the IRS comes to garnish his wages .
Another damn good reason to pull your credit report at least once a year. I used to think I was paranoid for checking mine twice per year, but I’d rather be paranoid than have my credit destroyed by identity theft.
Credit monitoring through Costco is cheap. Get mine checked 12 times a year.
I actually had a beneficiary designation form with SS #’s returned from USPS opened. That put the fear of ID theft into me.
My new year’s resolution was to freeze my credit inquiries. For $10, you just write a letter to the 3 agencies and tell them “freeze my credit” State of California website has addresses and form letters.
There’s also a website where you can opt out of prescreened credit solicitations. It’s been over 2 months, but I don’t see the mailbox volume going down. They say it takes up to six months…
In Sacramento, your mailbox has to either be one of those locked ones put in the new developments or you need the slot to be in your door or exterior wall. Anything else will be broken into. People surf the mail here for ID info all the time. This happens a lot in the good of downtown, midtown, and the “Parks”.
I lost a paycheck once to someone cashing it at a “check cashing” house. The feds went after her. While you may own the house and the mailbox, the feds own the space inside the mailbox. That’s why stealing mail is a federal offence.
It just absolutely blows my mind. I’m guessing at my salary, I can start buying the good stuff in Santa Barbara.
Of course you can. The brokers have adopted a standard of “We can put you in any house you want, period.”
Where I work,I found out two years ago that two custodians whose combined income was $50,000/year were approved for $650,000 to purchase a house in Watsonville which is just south of Santa Cruz. I don’t know how much of a down payment was made, but I can only guess that it was a purchase for the entire family. My wife and I make a very nice combined income and I was flabbergasted when I heard of this deal. That was the “light bulb” moment for me about the housing bubble.
And yes Santa Cruz sucks, but pretty much just the city. The hippies and trustifarians have been displaced by the gutterpunks, professional homeless people, and violent transients over the last 10 years. A cop was just attacked by a transient just last week. If you do come to Santa Cruz and want to come downtown, just stay North of Cathcart street on Pacific.
BTW, according to zillow the townhouse I live in has gone up in price from $225,000 to $735,000 in just 6 short years. No bubble here!
Santa Cruz is ok, but too liberal for its own good. They really need to clean that place up….voters there are so stupid.
If I were mayor, first thing I would do is order the police to beat every single homeless person and gutterpunk they see into a pulp….then ask them never to return.
Now that’s an agenda!
> If I were mayor, first thing I would do is order the police to beat every single homeless person and gutterpunk they see into a pulp
Thank God, you’re not the mayor. Homeless people are more than a roadblock on the way towards gentrification.
“Homeless people are more than a roadblock on the way towards gentrification.”
So true! Take for instance the bum, errr I mean “homeless guy”, on the subway this morning. The only roadblock he put down was the big lumpy roadblock in his pants. The smell was amazingly awful. You know it’s bad when you get in the subway at rush hour and the car is empty. There are reasons not to jump into a car when you are rushing. Patience is a virtue.
I won’t refer to all “homeless” as trash if you don’t refer to them all as saints.
How about you buy them a one-way bus ticket to Skid Row in LA?
Maybe they became homeless because of flippers, greedy Realtors, and NOD fraudsters.
I bet, that same 225K TH was selling for under 180K in 1998-99.
Yes Santa Cruz is really wacky. Doesnt make sense in long term.
If homes appreciate at rate of inflation as histically its been documentated, then this home should be around $300K.
Im about 25 miles due east of you and know Santa Cruz well.
Doesnt make sense! There is not much of an economy during fall-winter season. Everyone goes to sleep until summer.
I lived in Live Oak 2000-2003, and drove through the city today (down 1 from SF, back over 17 to home). I was looking at listings in 2001-2002 timeframe, nice condos were 250-350 on the Capitola side of the city. Now, they’re twice that, but not moving. Check ror.com for awesome stats on the area.
nice but too short… check out zillow historical prices per zip.
too bad many sites only show last 5 years when they should look at more history 10-15 years. SCC got wacky real early due to stock options of 2000. Now days stock options due to back lash will be extinct.
Hey how is the situation near the boardwalk. When I left in 2001 they were building upsale condos next to the crack houses. I am so glad to be out of there.
Meximath, Meximeth,…Methmouth?
Fremont is an A-paper lender.
LOLROFLMAO.
Ditto
I documented damn near all of Fremont’s loans for over a year. To say that they’re an A-lender is totally laughable. Nice people though.
Two different banks. There is a Fremont Bank in Santa Monica in trouble ’cause if you could fog a mirror you could get a loan. And, there is a Fremont Bank in Fremont. They were selling their paper to the Freddies. I believe their quality of borrower was a bit better than sub-prime?
The Fremont in Santa Monica is not a bank. It is Fremont Investment and Loan. They have also made a lot of condo construction loans. I can not see them surviving.
LOLROFLMAO.
Please include the F between the M & A.
‘Sellers are having to give concessions and cut prices,’ Saizan says. ‘It’s all about making the house show the best it can and aggressive pricing.’”
But wait, this doesn’t make sense when the CAR tells me that the double-digit price appreciation is a thing of the past and we can only, at best, expect single digit appreciation. How can something appreciate when seller’s have to cut pricies?
He’s only saying they have to cut their “wishing price”. When he is saying, ‘It’s all about making the house show the best it can and cutting the losses.”, now then we’ll be getting somewhere.
“Sangani said homeowners defaulting on mortgages aren’t an issue for the bank. ‘The majority of our loans are done with 20 percent down,’ he said. ‘We’re an A-paper lender. … If we were subprime lenders, there would probably be more.’”
Huh? Fremont was big into subprime. Are they claiming that the current loans are mostly 20% down? If so, that is a huge credit tightening. Something isn’t adding up here. Otherwise, why is Fremont #5 on the implode-o-meter’s list of top subprime lenders? Claiming what you do now doesn’t work when the past comes to bite.
http://ml-implode.com/
Something isn’t adding up here… what’s the true answer on Fremont?
Got popcorn?
Neil
The first loan is 80% - then they issue a second loan for 20%, but they are not counting that one.
This guy is a liar or blind!
This is Fremont Bank located in the SF Bay Area, which is a small local bank with regular banking services. I think the other one is Fremont (Fremont General?) is located in the OC, a subprime outfit.
Oh… that’s why things didn’t add up! Two different banks…
Thanks,
Neil
check out this website that lists the REO properties of various banks. http://www.biggerpockets.com/bank-reo.html
I don’t see too many properties for the Anaheim Fremont bank
just randomly going through that list for california. there is a super slowing my internet connection down list of REO’s at Countrywide. BTW I saw 1 REO under $400k condo and 1 Short Sale condo this weekend. My price range of $400k is slowly this last year looking like I can finally buy something not super duper sucky.
In the same Santa Cruz Newspaper, it says this:
http://www.santacruzsentinel.com/archive/2007/February/19/edit/stories/01edit.htm
>>But so far, we don’t see a collapse in prices coming. And without that, we also feel confident that businesses connected to real estate will continue without major problems.
>>Nationwide, and even statewide, the story might be different. But when you’re talking about the coast of California, don’t expect real estate prices to bottom out.
I posted that yesterday. IMO, they knew this article would run today and did that editorial to soften up the local RE people.
Ahh, very astute. I think you’re right.
But when you’re talking about the coast of California, don’t expect real estate prices to bottom out.
So does that mean it will keep falling?
Banks and lenders are making a huge mistake by allowing people to short sell. Now every home owner who’s in trouble will want to short sell, and the investers and stockholders of lending institutions will take it in the shorts.
Lenders need to read the riot act to borrowers: No short sells, and if we foreclose on you we will come after you for the rest of your life to pay us back the balance due on the loan.
A bank will go out of its way to repo a $10,000 car. They sure as hell are going to go after a borrower who owes $100,000 after a foreclosure sale.
Or will they?
I want the bond holders to take a bath so that the whole situation cleans itself up. It wasn’t just the homebuyers that were stupid, it was the bond buyers too ! Who the heck would give their money to poorly financed homebuyers with no risk premium !
Mark my words, there is going to be a big blow up in the banking sector before this is all done.
> Who the heck would give their money to poorly financed homebuyers with no risk premium !
Your and my pension fund, maybe? I know it’s sad, but those fund managers are hunting returns like everybody until a market crashes - they know that they have to be only as good as the other fund managers.
Posted this in the past, but:
http://www.calstrs.com/newsroom/2006/news090706.aspx
California State Teachers’ Retirement System is adjusting the target for RE holdings. The idiots saw big numbers in the past 5 years and, accordingly, “chased returns” by deciding to UP the percentage of real estate holdings from 6% to 11%.
Oh, and just so people don’t think this is a “defined benefit” program (though that’s what THEY call it), $506.55 was deducted from my paycheck last month for STRS. That, plus the $92 monthly union dues, is quite a hard pill to swallow. I get no say in how the STRS money is invested, and I have essentially no control over the union (nor over the fact that it uses my money for politics).
I have no problem with taxes (more than my rent at over $1200). I have no problem paying for my grandmother’s medicare ($91). And, I choose to funnel a bunch into the 403(b).
But, I can’t stand having six grand a year going toward a retirement fund that will very likely not pay out all that I will have put in - to say nothing of the juice that should be compounding over the decades.
Pisses me off.
yeah i know - teachers always get screwed. BTW, how much are they withholding from your paycheck for FICA? Think about that this July and August.
We haven’t seen this for a while on here, so I will post it for the newbies.
From http://query.nytimes.com/gst/fullpage.html?res=9E05E3D71538F93BA35751C1A962948260
Yes, this was written by this Ben Stein : http://www.imdb.com/name/nm0825401/
This is from 2 SoCal bubbles ago, but still incredible relevant.
By BENJAMIN STEIN ; BENJAMIN STEIN’S LATEST BOOK IS ”FINANCIAL PASSAGES.”
Published: December 8, 1984
My pal Jerry P. just bought a condominium in Century City, in Beverly Hills, for 60 percent of what it sold for in 1980. Down the street from me here in the Hollywood hills, four houses have been on the market since 1981. The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title.
New Yorkers do not like to believe they could learn anything from California, but perhaps in this one case they might try.
The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ”It can’t go on.” But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ”But the rich will always be able to buy.” Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ”Never mind, the music business people will buy anything.” The music business fell into a depression in 1979, and the brokers said, ”The
foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.”
Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ”The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.”
Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.
The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.
Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW’s and are now working as ”financial planners” or public-relations people, dreaming of the days when they worked for 6 percent of infinity.
Not long ago, I was in New York City looking at co-ops, talking with recent buyers, would-be buyers, brokers. The conversation is eerily familiar. Listen to the buyers: ”Of course, we’ll take two extra jobs and avoid having kids to buy this studio apartment facing an airshaft for $150,000. Next year, it’ll be $250,000.” And the brokers: ”Of course, there aren’t many Americans who can afford to buy here any longer. But there will always be rich foreigners. New York is the most exciting city in the world. New York is unique, and two bedrooms on the West Side should cost half a million dollars.”
Do not believe it. Trees do not grow to the sky, and the great New York co- op boom will eventually go the way of the great L.A. bubble. Yes, New York apartments were underpriced for years. Yes, New York is an exciting place. Yes, there are a lot of rich people who like New York. Yes and yes and yes. But no real estate bubble ever goes on forever, and the day when everyone agrees that it will go on forever is usually the day it ends.
Maybe this boom will go on a little longer. Maybe, as some of my banker friends tell me, it has already started to totter. Who knows, exactly? But when buyers consider tying themselves in knots to get onto the housing merry-go-round, in the certain belief that they have a sure thing by the tail, they might remember the housing boom in L.A. and the shuttered condos in West Hollywood. The only thing certain about housing bubbles is that they never last. B
Very interesting read.
“Buyers disappeared. Asking prices stayed high, but nothing sold.”
I’d say we’re somewhere in this phase right now.
Minor correction. 2 BR in UWS of NYC costs $1million, not 1/2 million
-ed
It’s amazing how these stories from previous bubbles are written as if they were describing the current bubble. Same thing with the bubble stories from SoCal in the early 90s. Just change the dates and dollar amounts, and you would think these old stories were written today.
It seems like it takes 1-2 years from peak to the time you START to see meaningful price reductions. Different markets peaked at different times in this cycle (e.g., SD appears to have peaked in Summer 2005, while OC appears to have peaked in June 2006), so while the price reductions are clearly evident in SD, they are still masked (by the mechanics of the median price) in OC; but OC will show its price reductions pretty soon.
How long it takes to hit bottom is anyone’s guess (although past declines should be the starting point); IMHO I think it will happen a little faster this time than previously because so many FBs have little or no skin in the game this time and so many FBs will be facing a loan reset (which was not really a factor last time). But, I acknowledge that my opinion is just that, an opinion, and that it is biased towards what I hope will happen (both because I want to buy a home and because I think it will be better for everyone if this market gets back to normal faster rather than a slow, drawn-out process).
The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million.
Damn. The current bubble almost looks tame by comparison!
I would hate to have bought a crappy Santa Monica bungalow for $400k in 1980. That’s about what they were selling for (in some cases even less) when I moved to SoCal in 1995. What would that be, nearly a 50% loss over 15 years once you account for inflation?
Thats when the stock market was in a terrible bear market. Inflation was way up as well.
You hear that Mr. Anderson?… That is the sound of inevitability…
“Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.”
The inflation of the seventies drove housewives into the workplace as family’s budgets were squeezed. As soon a Reagan took office the battle against inflation was launched, and interest rates were jacked upward until the prime rate stood at 18%; the construction industry was stopped dead in its tracks.
Speaking about a 4000K/month mortgage on a home whose rental value is 2000K/month, mortgage lending attorney Pamela Simmons says it’s **nearly impossible** to recoupe on your investment.
Let’s call a spade a spade here: It is **totally impossible** to recoupe on your brilliant investment.
“But none of this matters to the IRS, which knows only that a 1099-C was distributed as taxable income. ‘They will assume it’s taxable until informed otherwise,’ he said. ‘And you don’t want to wait for that notice in the mail.’”
Everyone knows you can’t squeeze blood out of a rock, but that never stopped the IRS from trying to do so.
NFI DOWN 26% AFTER HOURS!!!
Could be that the insiders are dumping previous to NFI anouncing something bad tomorrow.
Unlikely since they announced a 4th quarter loss after close today. It’s just reaction to that.
Further update: NFI down 5.76 to 11.85 a loss of (32.52%) in after hours trading.
NFI reports (i) fourth quarter loss and (ii) no taxable income for 2007 - 2011 span. As NFI REIT shareholders receive 90% of the taxable income NFI is mulling whether to do away with their REIT status.
http://www.marketwatch.com/news/story/novastar-mulls-reit-status-change/story.aspx?guid=%7B23609BD8%2D0EED%2D4930%2DA729%2D858B2D479D89%7D&siteid=yhoo&dist=yhoo
No taxable income for the next four years? That’s gotta be bad!!
I’d say that this will soon be recorded on the Implode-o-Meter.
It’s already out there. So is an article about Wells Fargo laying off 250 in Fort Mill, SC. Fort Mill took a nasty shot to the balls thanks to the textile industry. Now they are going to get a shot to the throat courtesy of the subprime industry. Maybe Fort Mill could start building stagecoaches.
Bwahahahaha! That’ll kill all geniuses who’ve been buying the dips since last week. Fools and their money.
This hasn’t been posted in a while here, so here it is for the newbies.
Yes, this was written by this Ben Stein : http://www.imdb.com/name/nm0825401/
This is from 2 SoCal housing bubbles ago, but it’s still relevant.
From http://query.nytimes.com/gst/fullpage.html?res=9E05E3D71538F93BA35751C1A962948260 :
THE DAY LOS ANGELES’S BUBBLE BURST
By BENJAMIN STEIN ; BENJAMIN STEIN’S LATEST BOOK IS ”FINANCIAL PASSAGES.”
Published: December 8, 1984
My pal Jerry P. just bought a condominium in Century City, in Beverly Hills, for 60 percent of what it sold for in 1980. Down the street from me here in the Hollywood hills, four houses have been on the market since 1981. The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title.
New Yorkers do not like to believe they could learn anything from California, but perhaps in this one case they might try.
The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ”It can’t go on.” But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ”But the rich will always be able to buy.” Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ”Never mind, the music business people will buy anything.” The music business fell into a depression in 1979, and the brokers said, ”The
foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.”
Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ”The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.”
Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.
The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.
Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW’s and are now working as ”financial planners” or public-relations people, dreaming of the days when they worked for 6 percent of infinity.
Not long ago, I was in New York City looking at co-ops, talking with recent buyers, would-be buyers, brokers. The conversation is eerily familiar. Listen to the buyers: ”Of course, we’ll take two extra jobs and avoid having kids to buy this studio apartment facing an airshaft for $150,000. Next year, it’ll be $250,000.” And the brokers: ”Of course, there aren’t many Americans who can afford to buy here any longer. But there will always be rich foreigners. New York is the most exciting city in the world. New York is unique, and two bedrooms on the West Side should cost half a million dollars.”
Do not believe it. Trees do not grow to the sky, and the great New York co- op boom will eventually go the way of the great L.A. bubble. Yes, New York apartments were underpriced for years. Yes, New York is an exciting place. Yes, there are a lot of rich people who like New York. Yes and yes and yes. But no real estate bubble ever goes on forever, and the day when everyone agrees that it will go on forever is usually the day it ends.
Maybe this boom will go on a little longer. Maybe, as some of my banker friends tell me, it has already started to totter. Who knows, exactly? But when buyers consider tying themselves in knots to get onto the housing merry-go-round, in the certain belief that they have a sure thing by the tail, they might remember the housing boom in L.A. and the shuttered condos in West Hollywood. The only thing certain about housing bubbles is that they never last. B
Speaking of specuvester woes, I came across this curious rental ad in the Bellingham Herald today:
Lovely blah blah blah…. 1 year lease, 1st four months, $1295/mo, last 8 month $1795/month, $1000 deposit.
Do we have a speculator who finally pulled out their calculator at the 11th hour and is computing his loan adjustment? Will any would be renter be stupid enough to fall for this? the plot thickens…
I saw one in DC the other day that really struck me:
2 bd/1.5 ba Rowhouse
$1,800/mo One-year lease
$1,700/mo Two-year lease
Now, there was a time in America when it was the other way ’round, with landlords getting higher rents for longer leases, right? This whole thing gets more bizarre every day.
My experience has always been that the landlord throws in some kind of concession for a longer lease. I’ve received lower rents, or “free” months (with the amount spread over a few months). The landlord accepts less rent in return for locking in the lease for a longer period of time, thus pushing off the uncertainty of finding a new tenant.
A typical residential tenant has no real incentive to accept a lease with increasing rents over time. Why lock in a long term increase now when you might be able to renew later for less? The worst case, of course, is that the rent will increase even higher than the proposed lease. But for the rent to appreciate that rapidly, the fundamentals have to improve, and if that’s the case, the tenant would be better off buying.
Commercial tenants are a different story, for a number of reasons: 1) they generally take longer term leases; 2) they don’t want to move every year; 3) they get no tax benefit from buying property.
That is absurd… seeing I rent for 650/mo in Bellingham. That is the best laugh I’ve had in a while. Thank you.
“Will any would be renter be stupid enough to fall for this? the plot thickens…”
Renters are too smart to fall for this $hit. Only a would-be owner will fall for this. The saddest part is that the stuck flipper is asking for a $1,000 deposit on the part of the renter. I bet that is $1,000 more than the deposit this “owner” put on this boat anchor.
And of course any deposit that you give to a flipper will go towards this month’s mortgage. You’re unlikely to see it when you move out. ‘Round here, it’s supposed to be put into an interest bearing escrow account, but I suspect that amatuer (after all, they’d need to be making money to lose their amatuer status) landlords don’t have a clue on this.
It’s been a while since this was posted, so here goes for the newbies.
Yes, this was written by THIS Ben Stein : http://www.imdb.com/name/nm0825401/
THE DAY LOS ANGELES’S BUBBLE BURST
By BENJAMIN STEIN ; BENJAMIN STEIN’S LATEST BOOK IS ”FINANCIAL PASSAGES.”
Published: December 8, 1984
http://query.nytimes.com/gst/fullpage.html?res=9E05E3D71538F93BA35751C1A962948260
This is from 2 SoCal bubbles ago, but you should still find it quite relevant.
testing
Sacramento going down in flames?? Yep! Wouldn’t doubt it one bit.
I live in a really small, well established neighborhood. Somehow, we have 3 houses for sale, 1 FSBO, and one rental.
Keep seeing ‘For Rent’ signs coming up (this is all in 95827). And now the residential projects are completely drying up.
This is not going to end well.
Here in Ventura on my street have 2 For Rent signs and 2 houses for sale signs. Within 3 streets there are 9 houses for sale.
“Sacramento going down in flames?? Yep! Wouldn’t doubt it one bit.”
The Natomas neighborhood is in real danger of rising homeowner insurance rates if FEMA removes the 100-yr rating on the area’s levees, which will result in rate hikes of $2,000-plus on average.
If your house is reclassified as being in a floodplain, can your lender force you to start paying flood insurance?
I just found out why there aren’t more sellers in trouble trying to get rid of their home right now in San Diego.
1. Many are unable to sell without bringing money to the table or getting a short sale approved.
2. With the crazy ARMS and NEG AM loans you can make small payments on a mortgage for a long time 1,2,5 years. Without going broke.
3. Some flippers have flipped houses many times so they have cash reserves.
Because they can’t sell, and aren’t forced to move for a couple of years. They might as well just sit back and see what happens. Maybe (not likely) just maybe prices will go back up again and they’ll get bailed out.
If you were driving a car this would be like driving 100 mph down a dead end street and being completely aware that a brick wall is coming up then just giving up kicking back and enjoying the ride.
No, I don’t think they’ll be getting bailed out.
Fortunately the people who *have* to sell will always be around to lower comps even if it is slowly, ie divorces, deaths, sickness, job transfers, and eventually the banks who start to buckle under forclosures.
The market will someday rebound so there is nothing to be alarmed about, and as long as House flippers in California basically have these 4 essentials ready now: dark glasses, a wig, a bus ticket, and a fake passport - they should do fine
Harry D., that is pretty funny…I think though that it’s going to be not just the CA. flippers, but the whole of US flippers who are going to be needing those accoutrements.
That’s the whole problem in a nutshell, this crap has been going on everywhere from Podunk, ME. to San Franscisco. From sea to shining sea.
It’s an interesting question: How many people are going to attempt to “go underground” to get out of this?
I like that image of every 10th American you meet decked out in wig and sun glasses, attempting to go incognito.
Beating a dead horse here: maybe sex change operations wil be the new growth industry? Or an uptick in transvestites at the least.
Just carrying the identity hiding to it’s logical catastrophic conclusion.
“maybe sex change operations wil be the new growth industry?”
Isn’t there “negative growth” in most of those operations?
A cross-country trip like that is not complete without the diaper.
hehe…amazing how a simple diaper can become a piece of americana.
Was it an unused one from her trip to outer space? -
Worth putting up for auction on E-Bay? -
A tiny bit OT but…
NovaStar Chief Financial Officer Greg Metz said the company expects to recognize little, if any, taxable income in 2007 through 2011, so “management is currently evaluating whether it is in shareholders’ best interest to retain the company’s REIT status beyond 2007 given the asset, income and other REIT-related restrictions the company must operate within.”
No income till 2011 but DL is calling the bottom in Q2 this year? One of these guys is wrong or lying. The securities market has governance and enforcement including criminal penalties for lying. I’m betting Mr Metz isn’t the one lying…
Listening to NFI call now… Interesting question put by analyst. Something to the effect “Do you see problems with borrowers from 06 vintage being able to re-finance or if not, handle the reset?”. Answer “Not at all. If they’ve been paying the borrower will be able to refi. If the guy has missed a payment here or there, but can’t handle the reset, to say 11%, but can afford 9%, then we will work with the guy”
Interesting call — good questions — make sure to listen to the recording.
Please, tell me you’re short or own PUTS in this PoS stock.
What exactly is there to stop a guy who can’t handle the reset at 11%, who gets an “affordable” 9% break…from saying in a month or two…”gee this 9% is getting kinda tough”?
What will NFI do then? Bust the guy(s)? Eat the loss then?
And who is going to “invest” in this kind of mortgage? Even a hedge fund can’t be that crazy.
I remember a line I was taught in investments 30 years ago; “mortgages are safe because they are the first bills everyone pays”. This “nugget of wisdom” is in the process of being completely reversed now isn’t it?
30 years ago mortgages were the first bills everyone paid because the borrower was protecting his down payment and built up equity in the property.
It’s not that this “nugget of wisdom” is being reversed, it’s the absence of “skin in the game” that’s changed. The borrower no longer has the first loss position.
Exactly!
“NovaStar Chief Financial Officer Greg Metz said the company expects to recognize little, if any, taxable income in 2007 through 2011″
This could read, “Thousands of real estate agents across the country expect to recognize little, if any, commission related taxable income in 2007 through 2011.”
Or if you are the NAR… “The NAR expects to collect little if any dues through 2011. It’s still a good time to buy OR sell, just not a good time to get financing”.
The actual date is 2013, not 2011. They’ll realize it in a few years.
OT, but how is this for a headline?, from http://www.bostonbubble.com (not their words, I think, but rather his words)
This guy just took “office”. I would have hoped that he would have been much more temperate in his remarks and would in no way have alluded to, suggested, implied or in any other way indicated that the market could be set to rebound.
“Chairman of Greater Boston R.E. Board calls the bottom (with plenty of “ifs”), advises buyers to buy now before it’s too late”
From the Q&A…
Q. What advice would you give to sellers , and what advice would you give buyers in this market?
A. Seller, price it right. It’s all about price. Buyer, do not wait and get caught in the squeeze. If interest rates start to rise or inventory starts to drop, you don’t want to get caught.
http://www.boston.com/business/articles/2007/02/18/signs_of_solidity_seen_for_07_housing_sales/
I think the industry would do itself a big favor by being more neutral, at least for the short term. It could go along way for gaining some credibility (or as a defense).
Boy you’ve got that right Pen. The best they could do for themselves is just go neutral for now. Realistically, nobody would expect them to issue an alert calling for a halt to transactions (!), but if they’d just shut up about this supposed/imaginary recovery, at least they might hold on to a shred of credibility in the future.
They are really blowing it with this attempt to jumpstart the spring “selling season”. Which, by the way, when they tried it last year this time, did not work.
Guess they’re too clueless about what happens outside of the street they work on and the car they drive around in, listening to the tunes on the radio, humming along, haven’t heard yet that subprime’s imploding. Can’t connect the dots on how that might affect them.
So higher interest rates = higher home prices, eh?
What a maroon!
“What a maroon!”
more like marooned, “Here on Realtor Isle”…the S.S. REMIC has a gaping hole in its side….
uh-oh…
Why do I get the sense that someone’s writing new lyrics about the housing bubble that overlay the lyrics to Gilligan’s Island?
PICTURE WINDOW (2nd Ed.)
Picture window but eyes glazed over
Big back yard is growing over
Neighbors envy getting slower
Tract by tract are getting ravaged
The American Dream now getting savaged
Sacrifice must have its yield
Future scars will be concealed
I just got mine; you’ve all had yours
My family and lone friend friend concurs
I lost them all when just a renter
Now I’m back within their center
Picture window but eyes glazed over
We can see the vultures hover
Finally won but didn’t win
Not sure when we can begin
Closed the blinds on picture window
Saves on heat and air conditioning
Like we use them, wishful thinking
Late to the party and hardly blinking
Went in blind and took advice
Stuff to last entire life
Never thought, nor did the wife
Came to the party much too late
And now we have to face our fate
I am wishing whole heartedly for the interest rates to rise one more %. We need deep cleaning and that increase would do the trick. These jerks can not scare the more financially prudent fence sitters or nappers to buy an asset just because rates are rising. If the rates rise you will definitely see more squeeze but the ARM Sqeeze.
Helicopter Ben please raise the rates PLEASEEEEEEEEEEEEEEEEEEEE
You want Japan to raise its interest rates and have the yen go up verus the dollar. That should do it. japan loans millions of dollars to hedge funds at very low interest rates. hedge funds buy US Mortgages at higher interest rates and pocket the difference. Works unless the yen goes up verus the dollar. Japan is exporting there deflation over here and causing inflation for the US. Look up yen carry trade.
ROTFLOL !
What a Talking Ass. His market and his livelihood are crumbling all around him…and still, he wanders through the collapsing wreckage looking for one last fool to purchase his wares.
She estimated that 20 to 30 of her 150 clients in mortgage trouble are from Santa Cruz County.
Good thing someone assured us in yesterday’s California thread that Santa Cruz was immune to price corrections!
no problem, there’s plenty more farmworkers making $15K/yr that will sign for a subprime option ARM on a $700K house.
Today I took a trip to a nearby coffeehouse. Had a little business meeting there.
After the meeting ended, my ears zeroed in on the conversation at the table next to mine. Two guys talking about real estate. Apparently, one of them has a property that is subdividable. So, naturally, he’s thinking of building something that could be rented out.
Well, Arizona Slim’s brain is working overtime at this point. I’m thinking that the guy’s going to finance the construction of something in front of his house, then have all sorts of fun trying to find tenants to pay rent that would cover his loan. And I just didn’t see positive cash flow anywhere in that scenario.
But I kept my mouth in the “Off” position, because the conversation quickly shifted to…
…Tenant Horror Stories.
One of them included a story about nicely dressed renter neighbors who left the house in a shambles after they moved out.
And, thus those two guys at the next table concluded that being a landlord isn’t such a hot idea after all.
So, in Tucson, this is Arizona Slim, reporting on two guys with some semblance of business sense.
Hopefully people in San Jose get foreclosed. The prices are ridiculous. Being a new college grad, there is no way I’ll ever be able to live here unless prices come down 25%
They’ll come down. I don’t know the San Jose market, specifically, but I know it had a pretty good run up, and it will give up a good portion of those gains. So, I don’t think 25% off should be too hard. It will just take a little while (my guess: 18-24 months).
10-15% price-down will start bumping into prevalent rents tho.
Then what, if credit becomes sufficiently tight? Rents won’t be fixed in this market either.
F oreclosures are rising as loan
U nderwriters start to tally their losses
C ompletely surprised even though they
K ept on giving stupid loans
T o people who they knew
H ad no means to repay or
E ven sustain the payments
F inally the reckoning has come
B eautifully! ..and this is just the
‘S tart.
Nice, almost as good as some of the early Haikus.
But not as funny as bubbles the clown.
A thought - If you are a middle-aged FB that gets caught under-water, you are pretty hosed - as you needed to continue building up your retirement assets for your last 20 working years - you are set back to beginning. If you are younger without many assets and at an entry level salary for your profession, what are the ramifications - is this why so many mid-20s singles bought? Just trying to figure it out
Think about it. Last housing downturn was when most of those in their 20’s were in Junior High and early High School. How would they know any better? Experience is the best teacher…..and school is about to be in session.
If I hear another “the outlook for Spring is rosy” spiel I’m gonna barf! From the Reno/Sparks Association of Realtors:
Wilson went on to say that he anticipates we will see a recovery in the spring. Interest rates remain low nationwide, and money continues to be fairly easy to access through loans. “That coupled with the fact that Reno continues to be a desireable place to live should help us bring sales back up,” Wilson said.
http://www.ktvn.com/Global/story.asp?S=6113717
I think it’s the easy money part that makes me the angriest. People wouldn’t need easy money if homes were affordable!! What happens when the sub-prime lenders totally melt down and there is no longer any easy money and all the people given the easy money are upside down? Of course they don’t touch on that scenario.
Yep, the easy money was the problem . I’m so discusted with this so called easy money and how it pushed the prices up . Had the lenders at least made sure that the borrowers qualified for the loans ,it would of kept the demand down and prices would not of gone this high . It’s just absurb that you can say that a sub-prime buyer on a low down stated income liar loan deserves to be even bidding on property .The whole REIC was pushing these easy money loans because of the easy commissions they were getting .
People were so dumb that they were talked into these toxic loans simply by the lenders/realtors that were making the money on these easy going deals . Just in my short dealings with the real estate industry when I moved in 2005 told me that something was really wrong .I have never seen such a greedy bunch of amoral jerks in all my life .I had to correct everything those creeps wanted to do (I had to fight with the realtors to protect my own interest and I could not believe how much they would lie ).One realtor told me I didn’t need a termite report because there wasn’t any termites .I didn’t tell these realtors that I had been in the business before so they felt free to try to con me .
When I asked one realtor about who were the buyers that were able to qualify for these houses the answer was ,”We don’t question that “. Well since realtors are suppose to pre-qualify buyers before they show them homes I found that comment rather odd. i told my listing agent in essence that I wanted proof that the buyer could qualify for the loan or I don’t want to go into escrow with them . The realtors responded to me by saying in essence to me that it was only the lenders business . I said ,”well than I will not go into escrow with a borrower that I’m not convinced they will qualify “,(as it turned out someone paid cash for the place right about the time I was going to fire these jerk listing agents that I had no respect for by that time ).
When I found out later that anybody could get a loan ,I than knew why the realtors were not concerned about the loan .
So, Reno Girl I share your anger about the current state of the housing market . Sorry for my rant .
Just an FYI,
I was present at the Bies speech today at Fuqua in Durham - she gave some pretty honest perspectives I think which of course the media spun. It was actually more interesting to see how the essense of an entire 1 hour speech can be completely spun by the media than the actual speech itself.
In any case, she said that the subprime market that’s at threat is the adjustable mortgage market, which is around 7-8%. But this 7-8% is very alarming because of the early defaults which are happening just 2-3 months into the loans, as oppossed to historical standards of 2 years before defaults show up.
She said that while the demand for housing has bottomed out she’s worried about the supply, because there is a large “hidden” inventory just waiting to come out as soon as housing seems to pick up. For this reason recovery is going to be slow.
Anyways, thought I’d share my in person replay.
Thank you for sharing!
Agree about the hidden inventory. Will bite the bulls in the a$$ when it happens.
Why do some flippers feel complacent about their flips gone bad saying that it is someone else’s money? Sure, they borrowed with 0 down but they are still responsible for the loan amount. With the new bankrupcy laws that took effect not long ago, won’t these flippers be in pain for pretty much the rest of their lifes? The new bankcrupcy laws, as I understand, are not as friendly as they used to be, so you can’t just start clean again that easy. Right?
In California, with purchase loans, lenders can not go after borrowers’ other assets.
All the lenders can do is taking back the house.
But if the FBs refinanced, the protection is gone
But if the FBs refinanced, the protection is gone
——————————–
Precisely! And, I believe, this will be the biggest surprise of all!
“In California, with purchase loans, lenders can not go after borrowers’ other assets”
Even with an investment property? That is just so wrong.
S&P says downgrades 7 bonds backed by 2nd-lien mtgs
NEW YORK, Feb 20 (Reuters) - Standard & Poor’s on Tuesday said it lowered ratings on seven classes of bonds backed by second-lien mortgages in 2005 and 2006.
The company cut ratings on bonds in the MASTR Second Lien Trust issues 2005-1 and 2006-1, leaving three on watch for further downgrade, it said in a statement. The downgrades took bonds to “B” from “BB”; “BB” from “BBB”; “BB-” from “BBB-”; “CCC” from “B”; “CCC+” from “B+”; “CCC” from “B”; and “D” from “CCC.” MASTR is an issuer unit of UBS AG (UBSN.VX: Quote, Profile , Research).
Full story at:
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070220:MTFH26192_2007-02-20_22-32-10_N20216672&type=comktNews&rpc=44
What’s in your MBS? It might not be the same as it appeared yesterday.
Unbelievable, what idiots buy “bonds” backed by SECOND mortgages. Ha ha, I won’t even write a second. Had one bad experience, and have a friend who had a worse experience. Well, yes, I guess I must’ve known subliminally that someone was securitizing seconds, especially now when everyone owes piggybacks … CCC and D sound like appropriate ratings. Not B. I had plenty of B bonds in life and none defaulted.
No clean slate per se is possible with secured debt (e.g real estate) -and unlike unsecured debt (credit cards) which can be discharged by the court - secured debt has to be paid or the borrower loses the property, and usually ends up with a deficiency amount owed for the shortfall plus costs - when the lender sells the property
These flippers generally don’t even even benefit from various homestead exemptions (safe harbours for owner/occupants) if the property is strictly for investment.
Converting credit card debt into home mortgage debt has a risk few mention - much bigger problems for the borrower should things go wrong
As I previously stated many of these flippers need to immediately prepare a checklist to start gathering the following items ASAP
1. sunglasses
2. wig
3. bus ticket
4. fake passport
Median home price is $548,000. Median family income is 49,894. Approx house you can actually afford $173K (no taxes or insurance!!!!!!) Looks like it’s time to leave California. Really.
Roidy
ACH, i am in Vegas today and have seen decent houses for rent for under $1200 a month. Absence of state income tax is attractive. Still have friends in CA but heck, I can visit them, no?
I’d say it was more than the speculators who got caught. Is there something in the snowpack in the Sierra Nevada that gets blended into the drinking water on the west coast?
But if the FBs refinanced, the protection is gone
————————–
Anyone here think we’re only going to see 20% off?
Anyone…anyone?
I didn’t think so.
Ooops! Meant to copy this one:
“Sangani said homeowners defaulting on mortgages aren’t an issue for the bank. ‘The majority of our loans are done with 20 percent down,’ he said. ‘We’re an A-paper lender. … If we were subprime lenders, there would probably be more.’”
Wells Fargo just laid off 200 from their sub-prime division. Add all the subprime defaults (and others) to the skyrocketing inventory and you have more inventory. Even the auctions arent doing well.
Leave one bubble and go to another. The stock market is hot and real estate is not. We will be returning to period of “normal” real estate activity. Like year 2000. And yes, I do see 20% declines or more in some markets.