“Significant Further Price Declines Are Likely”
Reuters reports on California. “Andrew Thompson fears his mortgage lender is poised to foreclose on his Folsom. California, home because he will not be able to make his monthly loan payment when it jumps to $3,200 from $2,100. ‘As of May 1, I’m dead in the water,’ said Thompson, already behind on payments as the deadline nears for a higher interest rate on his mortgage. ‘I don’t think I’m going to be able to keep it.’”
“Thompson met his mortgage payments until an accident at work in September. Expecting he would fall behind on payments, Thompson listed his house for sale late last year. It’s still on the market.”
“Thompson bought it in 2004 for $289,000 and won praise from neighbors for at least $60,000 worth of renovations. Thompson is resigned to losing money on the house. He has cut its price from $360,000 to $307,000, which would provide enough for him pay off his mortgage and other debt he took on for the house and prevent a default. ‘I would have $1,000 left over to move,’ he said.”
“But a sale before foreclosure is uncertain. Seven similar homes within a two-block radius have ‘for sale’ signs on lawns and Folsom has an abundance of new homes for sale.”
“Deutsche Bank analyst Nishu Sood painted a bleak picture of Sacramento’s homes market: ‘New home inventories remain elevated, while resale inventories are even more worrisome, with significant investor overhang and mounting distressed listings.’”
“‘And all of this is before the effects of the subprime situation have begun to be realized in the market. Significant further price declines are likely,’ Sood wrote.”
The LA Times. “Steve Nguyen bought his first home, a three-bedroom ranch house in Lakewood, three years ago with a no-interest sub-prime mortgage. Since then, the sub-prime market has virtually collapsed.”
“But Nguyen is feeling confident. Though he figures his home’s value fell at least $40,000 during the last year, he gained $200,000 in equity during the five-year boom. He’s qualified for a conventional 30-year fixed-rate mortgage on a $750,000 house he hopes to move to in Orange County after he sells his current home.”
“‘It’s at a good state right now,’ Nguyen said of the housing market. ‘It didn’t completely crash on me.’”
“Many homeowners like Nguyen also became wealthier with the run-up of the housing market, borrowing against their homes and refinancing their mortgages to fuel spending. Homeowners cashed out $640 billion in home equity last year, according to David Wyss, chief economist at Standard & Poor’s.”
“Failed sub-prime mortgages and the resulting supply of homes on the market could even have a silver lining, some analysts say. They would slow the rise in rents, a major contributor to recent inflation.”
“Jon Emery hopes that happens. Emery has been driving around Los Angeles for the last few weeks, hunting for a two- or three-bedroom apartment for his wife and two sons waiting in Cincinnati. ‘I’m kind of hoping that prices will go down some, especially now with so many people having to default on their mortgages and whatnot,’ Emery said last week.”
“Back in Cincinnati, Emery’s wife, Katie, was reminded of 1992, when the housing market bottomed out and her brother-in-law sold his Pasadena home at a deep discount.”
“‘I don’t want my friends’ houses to lose value,’ she said. ‘But I kind of wish that does happen, for our sake. All these foreclosures kind of make me hopeful.’”
The Desert Sun. “Home sales across the Coachella Valley dropped 25 percent last month compared with February 2006, fueled in part by a nearly 43 percent decline in new-home sales, a new report shows.”
“‘The fact is: Fewer homes will be sold; it will take longer to sell them; and in most areas and price ranges in the valley, asking and selling prices will decline. Having said that, it is still much too early in 2007 to speculate how the year will finish,’ said Greg Berkemer, executive vice president of California Desert Association of Realtors.”
“Both sellers and buyers are cognizant of mounting home inventories, which climbed to 8,852 homes on the market by mid-February compared with 7,046 at the same time a year earlier, according to the California Desert Association of Realtors and the Multiple Listing Service.”
“That compares with an inventory of 1,400 resale homes in the spring of 2004 and about 3,200 homes in spring 2005.”
“‘Probably a big unknown out there are the fairly significant changes in the sub-prime (lending) market and what the overall implications will be on long-term housing in the Coachella Valley,’ said Fred Bell, executive director of the Desert Chapter of the Building Industry Association.”
“Coachella Valley’s home sales figures are in line with cities across Southern California and the rest of the state. Home sales last month in the six-county area, Riverside, San Bernardino, Los Angeles, Orange, San Diego and Ventura, dropped 19.8 percent to 17,680 new and resale homes sold, DataQuick reported.”
From Bloomberg. “New Century Financial Corp., struggling to stay in business after a wave of defaults by subprime mortgage customers, said yesterday its home state of California ordered a lending halt, and Fannie Mae stopped buying its loans.”
“The state accounted for 37 percent of New Century’s loans in 2005, the most recent year for which data is available.”
“The California order ’spells doom for the company,’ said analyst Matt Howlett. ‘That is the crux of their operations. What little hope was left is gone now, in terms of ever coming back and operating as New Century.’”
The Orange County Register. “The subprime meltdown continued Tuesday as one local lender filed for bankruptcy and another laid off workers. Irvine-based People’s Choice Home Loan, a unit of People’s Choice Financial Corp., became at least the second subprime lender to file for bankruptcy protection in the county in the past two months.”
“Separately, subprime lender ResMae MortgageCorp. of Brea, which filed for bankruptcy Feb. 12, cut more than 100 jobs Tuesday, though workers will be paid through May 19, said Debra Batista, one of the workers sent home.”
“Batista, whose job at ResMae was to handle closing documents on loans, said she may give up on the mortgage industry after 20 years.”
The Lookout News. “Risky mortgage practices rocking the nation are coming home to roost for one Santa Monica-based lending institution. Fremont General confirmed Tuesday that nearly 2,400 employees nationwide could lose their jobs by May after the company reported it was withdrawing from the sub-prime lending market.”
“Spokesman Daniel Hillary said he did not know how many of those 2,400 branch employees may be based in at its Santa Monica headquarters.”
The Bakersfield Californian. “McMillin Realty’s Bakersfield office will close at the end of the week, another sign that the real estate industry is tightening its belt as the housing market stalls. More than two dozen jobs will be lost as a result of the closure.”
“McMillin officials said that while the local office’s performance played a role in the closure, there was also a decision to consolidate company resources amid a stagnating market.”
“‘We were approaching break even. It certainly wasn’t highly profitable. If it was, we would still be in business,’ said Don Cohen, the general manager of McMillin Realty in Bakersfield. ‘We couldn’t count on the other offices to carry us because they are at break even.’”
“McMillin’s eight other realty offices are located in the San Diego area.”
The Union Tribune. “Apartment complex vacancies in San Diego County rose to their highest level in 12 years, spurred by new construction, condo converters caught with empty units and a growing number of individuals renting condos to upwardly mobile tenants, MarketPointe Realty Advisors reported yesterday.”
“MarketPointe President Russ Valone said the vacancy rate is rising because more rentals are on the market. ‘A couple of new projects came out, and there were some conversions that went back to the marketplace,’ Valone said.”
“His research director, Robert D. Martinez, added that the low vacancy rate set last September may have been an aberration because so many tenants had vacated apartments being converted to for-sale condo status.”
“‘(Converters) kick everyone out, rehab to get ready to sell and realize they’re not in a good position to sell,’ Martinez said. ‘All the people in the units are gone, and they’ve got to start from scratch again (to re-rent the property).’”
“A third element affecting vacancies is the rise in investor-owned condos and houses that are rented to tenants who would otherwise be living in commercial apartment complexes.”
“‘They have not been able to flip these for profit and (have) put them in the rental pool,’ Martinez said.”
Never have so many walked on such a thin razor’s edge…
Post Market headlines:
“At least 83 American hedge funds shut last year”
“Beacon Rock Capital, a Portland, Oregon-based hedge fund, has been charged with defrauding mutual funds of $2.4m, in the first criminal case in US history against a hedge fund for deceptive market timing”
“Now the Austrians are railing against private equity”
from FT alphaville
Reminded of the insult “if you put your brains on the edge of a razor blade , it would look like a BB rolling down an 8 lane hiway.”
From the SD Union Tribune article
“But Valone said rents are likely to increase over the next few months because of the wide gap between lower rental costs and higher mortgage payments.”
Where did these clowns learn their economics. More supply = less demand = higher prices????? Welcome to the New Economy
parts of CA are back to 2003 pricing ?
yikes
Let me know when it gets back to 1998 pricing
:)
Welcome to Michigan….we’re probably getting close to mid-90’s.
Never going to happen.
However you may see 1998 pricing approached in REAL dollars.
Depends on the area.
Probably not in the bay area or better parts of LA.
But Sacramento, San Diego, Paldale, Lancaster. Oh, they’re on their way.
But I hesitate on the bay area and LA. Why? Their property values have historically been inflated by the ability to sell a small home and transfer that equity into a larger residence. Due to MEW, that isn’t going to be the case for a long time. Not to mention the technical worker flight (engineering, medical, etc.).
This state will take it hard; only Florida is in worse shape.
Got popcorn?
Neil
“Never going to happen.”
Never? If I would have told you in 2001 that San Diego prices would triple in five years, you probably would’ve said the same thing. I ain’t predicting the future here, just keeping open the possibility in my mind.
2007 is going to suck.
-Rent
Not to mention that the market will probably OVER-correct at some point.
Never going to happen? Prices won’t even pause there on their way down.
Never going to happen? Why not? I’ve got 1998 rents, why not 1998 housing prices? (Silicon Valley, and no, I’m not kidding)
The LA Times. “Steve Nguyen bought his first home, a three-bedroom ranch house in Lakewood, three years ago with a no-interest sub-prime mortgage. Since then, the sub-prime market has virtually collapsed.”
“But Nguyen is feeling confident. Though he figures his home’s value fell at least $40,000 during the last year, he gained $200,000 in equity during the five-year boom. He’s qualified for a conventional 30-year fixed-rate mortgage on a $750,000 house he hopes to move to in Orange County after he sells his current home.”
There is some flaw in this slaw! First off Nguyen has only owned the house for three years of the five year boom. What makes him think he’s got so much equity? Second, why not sit tight and pay off what he owes since he’s feeling so confident. Why buy in O.C. now while it’s tanking.
Beat’s me. Maybe he had good cash flow but little savings so he bought a starter home with a high risk mortgage.
Clearly he wants a “better home” and is smart enough to want a 30 year fixed loan to buy it. The rub is he needs to sell to get that 200k equity. He hasn’t committed to buy a new home with the same garbage he used the first time.
I bet he stays put.
There’s a simple rule-o-thumb in LA. If someone says they have XXX amount in “equity”, they mean they have a XXX HELOC. Therefore, he has to sell at the higher price to realize his “equity” he probably already spent. If you want to see this in action, just read Casey Serin’s story where he liberated 30K in instant equity on his first house to role it over into more sweet deals.
Suzanne, you are so right. People have the most bizarre notions of what “equity” means. Most seem to think it is a pile of money that they have somehow magically “earned” and can now spend. The idea that equity is simply an estimate of unrealized gains is so far beyond most homeowners comprehension that it’s laughable.
So I’m not the only who thought that Mr. Nguyen pulled that $200k equity figure out of his arse.
“…liberated 30K in instant equity on his first house to role it over into more sweet deals.”
Sweet deals, Wayne’s World, excellent!
The $200k is simply based on the highest price someone listed their SIMILAR home for…or the appraised value for when he took out the HELOC.
“Steve Nguyen bought his first home, a three-bedroom ranch house in Lakewood, three years ago with a no-interest sub-prime mortgage”
The vast majority of homes in lakewood are 900-1200 sq ft ’starters’ built around WWII. I bet this ‘ranch’ house is this type. Lakewood has long been a clean well-kept middle class burg, but it may be declining as are lots of aging LA Suburbs. Did extensive zillowing on current sale prices in lakewood and have noticed some SFH’s on ample 6000 ft lots selling in the $450,000-$500,000 range. THat is relatively low compared with other decent kept-up centrally located LA suburbs within 35-60 minites drive into DWTN/westside and 30 minites to the OC.
This Nguyen thinks he gained $200,000 in equity last 3 years! He may be desperate to sell before his rate adjusts(and his ‘equity shrinks further) on his no interest subprime, perhaps also due to his home being a pint-sized WWII-built starter. The only buyer for his home would be a first time immigrant hispanic family but they will not qualify with the new stringint lending guidelines, and Hispanic Familias can get a home twice the size for 1/2 price anywhere in IE or Palmcaster fringe areas.
this clown will get his ass handed to him like he deserves
The Bakersfield Californian. “McMillin Realty’s Bakersfield office will close at the end of the week, another sign that the real estate industry is tightening its belt as the housing market stalls. More than two dozen jobs will be lost as a result of the closure
____________________________________________
Bakersfield Realtor Implosion #1 - with more to come!
That’s McMillin as in Corky McMillin… You know, the company that bought NTC in San Diego for $1 but didn’t make any money on the hundreds of condos and SFHs they built there… BTW, what’s happening to the City Attorneys investigation into that?
Amen….Whats taking so long? Could be those big dollars they gave for relection of council members. How long will the corrupt city government officials continue to look the other way if McMill. funds start drying up and can no longer hand out the “cash” to them? Perhaps, the one bid on contracts for the city “might” stop?
I’m glad we’re finally seeing a light at the end of the tunnel with regards to insane vacancy rates. IMO I’ll need to have at least one more lease (possibly two) before I take the plunge and I’m looking forward to driving some hard bargains.
Wait until the banks get overloaded with foreclosures. Then they will have to start dumping. We have 1 more year to go, give or take.
But realistically, a 10 year boom isn’t going to bust in 1 or 2 years. And then we have a massive wall of baby boomers needing to unload.
This baby bust is going to be brutal. Bottom line: don’t jump too early.
I have 18 months left on a 2 year lease I took, so I’m not in any rush. Good advice in any case.
Don’t buy yet, that’s for sure. My list in coutrywide foreclosures is getting BIG.
http://countrywide-foreclosures.blogspot.com
Overloaded, not yet. Patience is a virtue.
This baby bust is going to be brutal
$172k for tuition and fees to send my now 23YO kid to Rensselaer Polytech for 4 years.
Another $60k for an MBA.
No McMansion buyers here.
Why are you paying for the MBA? It used to be understood that a student was responsible for the cost of his/her graduate education. Only undergraduate education is ever covered by the parents. When did this change?
“Thompson bought it in 2004 for $289,000 and won praise from neighbors for at least $60,000 worth of renovations. Thompson is resigned to losing money on the house. He has cut its price from $360,000 to $307,000, which would provide enough for him pay off his mortgage and other debt he took on for the house and prevent a default. ‘I would have $1,000 left over to move,’ he said.”
$307,000 - $289,000 - $60,000 = $1,000 (and I guess he is selling w/o any closing costs)?
It’s that “new math” we’ve deluded ourselves with…
And Reuters is cool with Andrew Thompson’s showing off his prowess~
GetStucco: I think your math sucks (j/k).
$307,000(sold) - $289,000(paid) = 18,000
18,000 - 60,000(renovation) = -42,000 (loss) + closing cost
I was just trying to show how he came up with his $1000 gain
Hopefully his “$60,000″ in renovations really isn’t cold hard cash, but a couple of buckets of paint, a new fence, and maybe a toilet — kinda like when car dealers put in their “$4,000″ of add-ons which amount to $150 worth of floor mats and window etching.
GetStucco: I think your math sucks (j/k).
$307,000(sold) - $289,000(paid) = 18,000
18,000 - 60,000(renovation) = -42,000 (loss) + closing cost.
It means we are already by to 2004 price.
GetStucco: I think your math sucks (j/k).
$307,000(sold) - $289,000(paid) = 18,000
18,000 - 60,000(renovation) = -42,000 (loss) + closing cost.
It means we are already back to 2004 price.
Do you repeat yourself much? LOL
Dude, what did you expect from David Lereah (dl)?
“…and won praise from neighbors for at least $60,000 worth of renovations.”
What a sick, sad state our country is in if that’s how you get praise from your neighbors.
I don’t give a crap what my neighbors think of me!! We just got a notice from our HOA for leaving the trash barrell in front of the house too often!! Thankfully this is a rental and I don’t care, but complied cause I don’t want to pay stupid fines.
I know some of my neighbors don’t think much of me because I had the AUDACITY to tell them that they need to control their dogs. (I really don’t enjoy listening to barkathons.)
I know some of my neighbors don’t think much of me because I had the AUDACITY to tell them that they need to control their dogs. (I really don’t enjoy listening to barkathons.)
Ahh glad to be in the country
Anti-bark sonic device.
Only goes off when the dog barks.
We had one dumbass barking in the house behind us. Took about 30 days for complete silence. Only activates when the dog barks.
I loved being out there when I first installed it… “Bark” “Bark” “Ba-whine whine whine.”
I always wondered if those things really worked. How close to your neighbor’s yard did you install it? Just curious. I had a barking dog problem in my old house but fortunately the neighbor was cooperative and kept the dog inside most of the time. I have no problem at the moment, but you never know…
I mounted it on the fence separating the yard. The dog was never more than 40 feet from it.
Basically… if it’s close enough to irritate you it’s going to be close enough to irritate the dog back.
Listen you need to give your neighbors a hug.
Buy a bag of huggies.
You know what goes in them.
After the Garbage is taken
Deposit huggies in your neighbors can.
Let them look inside and go “ugh..”
You will not be praised.
HOA = the new suburban gestapo
“don’t give a crap what my neighbors think of me!! We just got a notice from our HOA for leaving the trash barrell in front of the house too often!!”
In Scentral LA you can leave a huge pile of dung out in front of your house and neither the city nor your immigrant neighbors would give a rats ass. Hell you can use the adjoining alleyway as the neighborhood trash dump.
SCentral LA is one gigantic latrine for the illegals/locals to piss on. No HOA in LA inner city sewers,no ordinances, no zoning controls,lack of effective policing,taco vendors all over the place, yada yada!!
Beverly Hills and Santa Monica also have no HOA, and they don’t seem to have a problem keeping the area pretty decent.
Speaking of SCentral La I was at a large Condemned lot at Western and 46th st in LA zip 90037(one of the LA inner crapzones where 12 homes sold for average $469,000). This 10-acre lot and the 20 or so 80-100 yr old crapshacks on it was purchased by the LAUSD via eminent domain and the entire lot, homes and all, were razed to the ground. The LAUSD has EDomained about a dozen tracts throughout inner LA for building new schools. This is Your Cal tax dollars at work!
This lot and the hood around it is a filthy rotten ghetto, which makes Tijuana look like a posh resort. Have been to 4 of these LAUSD EDomained lots, and all of them are in despicable trashed-out barrio areas of LA. BTW i Go to some really trashed out environmental slimezones all over LA/IE as part of my work and see the dark underbelly of LA, the wasted trashed-out dump sites in the inner city hoods, as well as vacated old commercial bldgs/sites.
Uhh… What’s your point? That there are nasty parts of a City? There are nasty parts in NYC, Boston, Chicago, Detroit etc. etc… LA is big, but it ain’t that special in the nasty dept. Unless you’re threatened by Mexicans, Puerto Ricans, Dominicans, Jamaicans… Ya know… People who aren’t white…
South Central is beautiful, compared to what it was before.
what I understood is that he got the house + 60k in renovations (maybe I’m wrong)
so he first lists at 360 (307 + renovations) at around 360—-> when he realizes renovations are worth s*it he lowers to 307-18K(comissions) comes out to 289k.
I assume he paid down a whopping 1k of the total morgage which he was hoping to use for moving.
to clarify –> he bought the house and told that 60k was spent on the house
I see reading comprehension is poor here. It says “Thompson is resigned to losing money on the house.” and “would provide enough for him pay off his mortgage and other debt he took on for the house”. Why do you assume his original mortgage was $289000? What if he made a downpayment originally?
He is not as bad off as many. Sounds like he may need to pony up some more though to get out. His state of indebtedness does not a property value set. - Only a mind set
Uh, we don’t know what he paid originally in 2004, He bought at 289k but he may have had a substantial down payment to make the final payment 289-x. if he did, then $1,000 gain after sale is possible, it just means he lost all of his down payment
This thing is looking more and more like Enron every day.
Enron was a dust speck on a gnat’s ass compared to this monster.
so poetic
it’s so beautiful (..sniff, sniff)
“dust speck on a gnat’s ass”
Nice name for a garage band.
Nycityboy,the HBB’s poet laureate…
What the heck. No article on FL? I actually have to work all day and not a single article on FL?? Ben, say it ain’t so!
Thanks again for a great blog Ben; all of us living in the bubble areas, or those looking to move into/out of them are in debt to you!
Hey this is a Ca thread, don’t thread-jack on CA like we DO to ALL threads!. LOL
Yeah. It’s different out here. We’re just so very special, and we’ll sing that tune till we play lemmings into the surf. LOL
I leave for the east coast at the end of April. Calif will not fall off into the sea before that. WIll I once again escape without buying any RE? looks like the answer is absolutely yes.
Well, in another thread, I had an interesting one about how Florida’s beaches are running out of sand:
http://www.miamiherald.com/467/story/47863.html
This one is very good, too:
http://www.miaminewtimes.com/2007-03-15/news/paradise-lost
this is a hypothetical person but probably there are more than a few:
1- bought home in 2003-2006 with subprime loan or ARM
2- works as a realtor, loan officer, some REIC
3- bought stock in NFI, NEW, or LEND
4- HELOCed to make home improvements, vacation, consolidate debt
5- bought investment propert(ies)
6- seriously ramped up lifestyle in anticipation of future wealth- BMW, Hummer, boat, etc.
7- zero personal savings: what for?
can you imagine the shock when all 7 choices go splat?
I know I have to talked to several real estate whores at condo highrise towers in San Diego who have several units. They are SCREWED!! I bet those commision checks aren’t coming anymore either! I wonder what it feels like to be on the draw?
draw?!?!? bwahhaaaa errr what’s that??? draw?!?!? bwahhaaa.
I’m smirking.
I really should have some pity for these folks. I know people laid off last week (non-brokers, but still in the REIC). Sadly, I have concern for friends… the rest?
Kicking back. Smilin’. Debating on if dinner would go best with another Cab or maybe a Zin tonight.
My biggest worry? Moving on sunday to my new apartment and setting up the DSL/Sat TV.
Everything else is taken care of! 
Got popcorn?
Neil
Go for a blend:
http://www.stsupery.com/wines/eluandvirtu/elu_blend.html
Exactly - I am renting a 3000 sqft new (Centex=crappy) home on an acre for only 10% of my gross pay. No money worries at all.
Which winery should I visit tomorrow?
ROTFL.
Our discussions are about beverages of choice.
I doubt homeowners of recent vintage are in that frame of mind.
Oh, my sister in law’s sister just went into escrow. She was holding out for more, but finally decided to take her 1st offer. Whew! I thought she had taken that bullet… I’ve convinced her to rent for a year. (No hope of a longer term delay of gratification. At least that will give her a 10% to 20% relief from the worst.)
Got popcorn?
Neil
Yup yup yup. I just moved from duh O.C. to Kern County for a 30% increase in pay and a 40% decrease in rent. No kidding. The people are nicer here. It’s sunny all the time… well…ok, it rained here today, and I just learned that we have a disproportionately large number of burglaries and thefts. Oh well, at least now I can afford an alarm system and a gun…or two.
By the way, Damn it Neil! Everytime I read one of your blog entries I think to myself “No. In-fact I don’t have a bowl of freshly popped buttered popcorn in front of me. I’d better fix that.” I’m trying to lose weight and your not making it any easier. Why don’t you change your signature line to something like “Got Broccoli?” or “Got Trail Mix?” or anything that doesn’t make me gorge myself on a bag of Orville redenbacher’s finest.
Got Flu-like symptoms?
Greg
See. Is that so difficult?
snicker. BTW if you can stand it, get an air popper and make your popcorn that way. Sprinkle a little parmesan cheese on it — just enough to give it some flavor. You can eat cups and cups of this without worrying so much about calories. (And actually it has enough fiber that you’ll stop before you overeat it…)
what I forgot to say: most microwave popcorn is just junk. Chemicals and oils with popcorn to convey them.
I wonder. If you sold 40 condos in a new tower as an agent, and they never close, what kind of commission do you get paid? Any? Half at signing of the contract, half later?
I imagine there are lots of folks that thought they were going to have income coming in…and aren’t.
Splat to the seventh power!
If they jump at the same time, they can save the City a lot of money on the clean-up.
You don’t need all to happen in the same time. Any combination of 2 is a trait of a classic “FB” act.
Even “2- works as a realtor, loan officer, some REIC” is bad as it is because will be no income.
7- zero personal savings: what for?
hahahahaha
good one! (FBs never entertain the possibility they may need to bail themselves out of a jam. Some GF was supposed to do it for them.)
add #8 - married to fellow loan officer, mortgage broker, realtor
Funny thing is I’m paying less than 1K a month on my mortgage, make decent income and have damn few bills and almost no debt. Yet I don’t feel all that great…of course that could be the residual of reading this blog every day…but to be so completely under water - drowning on our own debt vomit - must be a tough tough deal.
Well, I can make a good analogy based on the Casino Royale flick: This FB-speculator is like James Bond seating on the bottomless chair, naked, and the market is the swinging rope with a huge knot at the end.
“New Century Financial Corp., struggling to stay in business after a wave of defaults by subprime mortgage customers, said yesterday its home state of California ordered a lending halt, and Fannie Mae stopped buying its loans.”
Occasionally a poster here has chimed in to claim that Fannie Mae does not buy subprime mortgages. But NEW was a subprime lender. What gives?
Even a subprime lender writes a few prime loans, and Fannie’s Timely Rewards (or whatever the heck they call it these days) takes the very top end of the subprime market.
From Bloomberg
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.C3LiNqFP1k&refer=home
Fannie Mae, in addition to stopping loan purchases from New Century, said it was severing the company’s billing-and- collections contracts. Washington, D.C.-based Fannie Mae alleged the lender violated terms of a loan sales-and-servicing contract, New Century said. Fannie Mae spokesman Brian Faith declined to comment.
“From an operational standpoint, it’s not huge,” because New Century sold few of its loans to Fannie Mae, Howlett said. “It’s a blow from a symbolic sense. If they can’t deal with Fannie Mae, the writing’s on the wall.”
I hate to say it, but people need to seriously ask themselves if they even want to be home buyers. If you have saved up for a down payment that means you are better off than most. And if the economy takes a nose dive you may need every penny of it.
I’m just sure people want to use their savings now. The house you buy isn’t going to sell again easily. And if you need to move out of the area you could be screwed.
Renting with lots of disposable cash may be the smartest way to go.
I disagree with a lot of your other posts, but I fear you may be right about that. I know I’ve had that thought cross my mind more than once. Now if I can just convince my wife……..
It may be hard to admit for us, but we are all affected by the culture of the “American Dream” and as the housing bust causes more misery & pain for others, we can’t escape developing increasingly intense revulsion to the same idea of buying and maintaining a house. That is why it won’t be easy for most of us to buy at the bottom.
At least we can agree on one post!
That’s the point of this blog. Folks from across the political spectrum agree on one thing: we don’t want to get hosed in the current RE market. Some of you have been hanging tough for a long time. Cap tip to you all.
We are all very different politically. Quite a few different mind sets. I have to agree, hat tip to seeing it far in the future.
You guys are kidding, right? We may be staring at the biggest buying opportunity of the century, and you might not want to get in on RE at all? If I see these 40-50% declines we keep talking about come to LA, I’m in like white on rice.
Buying a home is a chick thing.
tarvos -
so buy units
touche, investorgirl.:)
The only thing is that the “buying opportunity of the century” may last a decade.
The sense of FREEDOM that I have now that I am renting is immeasurable right now, especially in the current environment.
It seems like some people look down on me as a renter, but by my math, they’ll be envious shortly.
The irony, of course, is that when I start hearing people say that they wish they hadn’t bought, that’s when I’ll start looking to buy.
Wait a bit after they say that. Wait until the “buy now or get priced out forever crowd” tell you real estate is the stupidest investment you could make.
Then go shopping. But don’t forget to low ball.
Got popcorn?
Neil
“when I start hearing people say that they wish they hadn’t bought…..”
Right Neil. Owners are saying that right now, but only in the shower.
Here’s the dialog stages for Shopping:
1. I wish I hadn’t bought
2. I need to refinance again
3. Sleepless, did I here you say you were looking for a hummer?
4. Yeah, I’m waiting tables…. thought I’d do something fun
5. Got rid of the house. Moved back in with the folks to help them out
6. Man I hate my folks. You looking for a roommate Sleepless?
7. Can you believe that bitch Pamela? She bought a house and her payment is less than my rent. How the hell can that be?!
(2010: Sleepless goes shopping)
(by the way, #5 was a foreclosure or short sale with the help of mom & dad)
LOL, lefantome.
Wait. Did you say Hummer or hummer?
Hummer!
(Didn’t even see that. They’ll probably cost about the same in 2010!)
Damn! What am I going to do with one of those? Although…I suppose I could live in it.
Kitchen over here…..bathroom over there….bedroom back there….
I agree with the sense of freedom. No maintenance costs, no liability on an asset that could cost several years of my wages, no time-consuming housework hassles. All I need to do is make a phone call and that takes care of things.
Exactly my thoughts. Sold in May/June last year - in a rental for 50% of what it would cost to buy. Have a bunch of cash essentially paying the rent.
Sleeping better, too.
I hate to say it, but people need to seriously ask themselves if they even want to be home buyers.
I started thinking about this when I used to get tired of the maintenance and constant attention my house required. Renting is much less of a worry, that’s for sure. But at some point I’m going to want to do some gardening and landscaping again. (I’m talking about the backhoe and tractor kind of gardening.) So until that urge returns and coincides with reasonably priced RE - I’ll have to be satisfied with a few pots of petunias and a window box.
Joe Mamma you make an excellent point. I too enjoy renting. Sure, I would like to own, but only if it means making the twice annual payment, albeit small ones, to the tax man. I would also like to live where there is no state, or very small, state income tax. No HOA crap, either. Leave the trash can out and get fined. What garbage, pun def. intended. For the time being, renting is not that bad. Even with property tax and no mortgage, you still have to pay the piper. With renting, I also have more felxibility with moving. Break a lease, one month penalty. Try that with ANY KIND of mortgage and see what the bank and tax men do!
Even with renting, you can’t leave the garbage out.
how do you break a lease and get a one month penalty? my landlord said he’d sue me for thousands if i broke my lease.
im in charge of finding another tenant.
Check your local state law on the matter. He can’t sue you for 1000s if state law sets a maximum charge. Typically they can charge you for the rest of the lease term, however.
If that’s the case, negotiate with him. If the rest of the term is 6 months, agree to pay him for 2 or 3.
Depending on his situation, he doesn’t want to go to court. By the time everything is settled, he could have had your 3 months of payments plus a new renter in place (i.e. - a double payment for a few months)
Sorry sleepless It is ILLEGAL for a landlord to collect full rent from 2 tenants at the same time on the same apartment..ie double payments…..I can’t think of any state where that is legal.
(i.e. - a double payment for a few months)
aNYCdj,
I’m not sure they’d consider my scenario full rent from 2 tenants. In my scenario, if the tenant wants to break the lease, the landlord would collect all or a portion of what is remaining on the lease.
Is he then not allowed to find a new renter?
Interesting, I’ll have to ask an RE attorney I know.
Yes….A landlord cannot force a Tenant to pay the rest of the lease……..that is illegal
A landlord must mitigate his losses by finding a new tenat ASAP….but the person who broke the lease is still responsible for the rent and costs to re-rent the aprtment. advertising credit checks etc.
And if the Landlord is GREEDY and jacks up the rent, and claims it cant be rented….that is a valid LEGAL defense to bad faith on the landlord part..
WHEN THE LANDLORD JACKS UP THE RENT IT MEANS HE MADE A BUSINESS DECISION TO TERMINATE THE LEASE….AND YOU ARE OFF THE HOOK FOR ANY RENT OWED ON THE LEASE.
Neat Kewl!
YOUR LANDLORD HAS SPENT YOUR DEPOSIT ALLREADY…..
so naturally he will sue to hide that fact!!!!!
Truth is anyone can break alease anytime they want…you canpack up and move tonight at Midnight……but that is not the question.
The question is how can you break alease without costing you thousands….
Well your landlord is partially correct, you would have help him find a new tenant….think of it this way The Lanlord has a LEGAL RIGHT not to lose even one days rent ON YOU!
So you move out Mr 30 and a new tenant signs a new lease at the same price starting on April 1st…the landlord has lost NO MONEYON YOU , and must give you back your deposit….
If the landlord tries and screws the new tenant by advertising at at a higher price, You paid $1400 new rent is $1800….YOU would have a legal defense to the landlord in court in getting your deposit back……It’s really call “Bad faith” by the landlord, and a judge will usually order the landlord to give you back your deposit……..
This is why the government’s war on savers must continue, despite the negative savings rate (I think!)…
GS, can you explain this war on savers. Sorry, but I am missing the point. Speak layman for I am a simple man (Skynard ref.)!
One way the government can screw savers is by having the price of everything go up from inflation caused by the fed printing money. The more inflation goes up, it hurts savers because their money is worth less. It helps borrowers because the money they owe is worth less.
The other way is to directly steal taxpayers money by bailing out people who bought homes they cannot afford.
Either way, the saver/taxpayer/frugal citizen is screwed.
War on Savers:
The manufacture of dollar denominated credit aka debt aka money reduces the purchase power of held savings. If you believe John Williams at Shadow Statistics, price inflation is running at about 10%. This is a more reasonable number than the CPLie provided by the rulers. So those who save have only 90% of what they saved at the end of one year. Under such circumstances folks start looking for places to get better returns and bubbles begin as a result.
This hidden tax covers everything you own that had a value at the beginning of the year. Home, car, stocks, cash, because the cash has been devalued. Check out the DJIA in Euros sometime, or in gold if you want to scream. So we can play fun games like,”What is the yield on a T-bill and are you above water compared to 10% inflation?” or “What rate are you getting in your money market savings account and how much cash are you losing daily?”
Small unnerving questions that just make you sleep so well at night.
Inflation is the death of a thousand cuts, engineered over many years, never discussed, progressive and deadly. Leading in the end to social chaos and strife.
And I see by the hand “chaos and strife” watch on my wrist that its about that time!
Pass me some OPM,
Neil.
My thoughts exactly.
I’ve asking myself that question lately. It seems to me that prices should have to go waaaay down for me to jump in after this mess. When the time comes, I will have to do the math very carefully.
Cash is great. Where is it? 100k in an insured bank? Bonds? Stocks or a hybrid?
The scare for me is that this bubble was huge because it fueled a lot of growth besides inflated homes. These crappy loans have been bought and sold within wall street such that a severe housing market crash could impact non-home owners by bringing on a severe recession and cause large losses across the board.
I don’t see a big firewall seperating renters and home owners. Both have assets that can lose value in a crash. That’s why this bubble was and is such a bad thing.
“Renting with lots of disposable cash may be the smartest way to go.”
I agree with you Joe, especially with all these new natural disasters like tornadoes, floods, hurricanes, quakes, wild fires, etc. It only takes a couple of disasters for your home insurance skyrocket and eat disposable income.
Damn, another reasonable post Joe Momma. What’s gotten into you?
We’re all pretty much convinced getting a killer future deal will involve a large down payment, but I have serious reservations about parting with large chunks of cash that can be used productively elsewhere. Why turn an income-generating asset into an expense-generating liability?
The only way out appears to be buying nice properties for other people to live in…
I love this vacancy rate article! I can stick it to my landlord! Thanks Ben!
Fingerpointing fest…
=====================================================================================
Senator faults Fed on subprime mortgage crisis
Wed Mar 21, 2007 6:03PM EDT
By Kevin Drawbaugh
WASHINGTON (Reuters) - Connecticut Democratic Sen. Christopher Dodd on Wednesday laid blame for the subprime mortgage market crisis at the feet of federal regulators.
The chairman of the Senate Banking Committee said in a statement that “a pattern of neglect by federal bank regulators … precipitated the subprime mortgage crisis that could cause 2.2 million homeowners to lose their homes.”
Dodd, a presidential hopeful, will hold a hearing on Thursday looking into a recent jump in default rates in subprime mortgages, the riskiest segment of the U.S. mortgage market which serves borrowers with poor credit histories. At least 20 subprime lenders have gone out of business amid fears of negative ripple effects on the wider economy.
Dodd said that in late 2003 and early 2004, the U.S. Federal Reserve’s internal analysts noticed lending standards were slipping, raising default and foreclosure risks.
At around the same time, he said, Fed leadership was encouraging the development of alternative mortgages, such as adjustable rate mortgages (ARMs).
“Soon thereafter, the Fed embarked on 17 consecutive interest rate increases, meaning that people with ARMs were now facing substantial payment shocks in the future,” he said.
He described the combination of events as “a perfect storm that has contributed to the hardship and heartache that millions of homeowners now face.”
http://www.reuters.com/article/governmentFilingsNews/idUSN2131747520070321
You gotta hand it to Dodd - he really has managed to capture political territory over the housing bust / foreclosure / predatory lending crisis. Not bad for an otherwise boring politician.
It is very unfortunate because his proposals are not to help the borrowers but to help the lending institutions. Just another tool.
Exactly — Dodd gets a ton of money from banking interests. His ultimate goal is not saving homeowners — it’s keeping funds flowing to financial institutions. Cynical politics at it’s best — catering to moneyed/big-biz interests in the name of helping plain ol’ Americans.
Let us keep our eyes on these developments.
PDX, Dodd is making a huge political blunder by getting so closely entwined with this mess. If you are going to crusade against something you need to make sure that the stain of what you are crusading against is nowhere on you. This will be turned back on Dodd. Somebody, at some point will ask, “and what the hell were you doing to stop it?” This is a massive miscalculation on the part of Hillary and Dodd.
Now I have to write something to please the partisans on this blog. I think Bush has been a complete failure. I don’t trust the Bush administration at all (and I even voted for it. Hey, you Dems put up Al “if your baby had a fever” Gore & John “the guiltiest of the guilty white liberals” Kerry. Great choices.). Alberto Gonzalez should be tossed out and forced to do remedial constitution classes as a community service. I am now balanced in my criticism for all of these louts.
So you voted for the worst president in the history of the USA and it is our fault we could only come up with:
1. The man who had the vision to fight for funding for the Internet before it was the Internet…
and…
2. A decorated war hero
You saying what I think you are saying? If so, that makes sense!
Really.
Go back to the woods, partisan.
I confess to also voting for Bush as well as RMN years ago. I have always voted republican - except 2006. If the elections were held tomorrow, I would vote for Sen. Obama…. my hand quivers as I type that.
Frankly, I believe that the country is past the point were one individual can change the downward spiral.
If the elections were held tomorrow, I would vote for Sen. Obama…. my hand quivers as I type that.
Your hand is trying to tell you something.
If the election were held tomorrow I would get a big jug of Jack Daniels and not vote at all. I no longer believe it matters one bit.
I personally would *never* put my hope in one individual. I worry about this recent tendency to think we need one super strong individual at the top to “set things straight”. That’s not what our form of government is all about. I like to vote for a number of individuals (local, state, national) who I think will do the best job, realizing that they are human and are likely going to have a certain number of failures.
I really think Mr. Dodd should read this blog and The Economist article about this housing bubble being a *global* phenomenon, and not try to make political hay out of it.
The worst thing to do for the country would be to prop up insane real estate prices.
If the elections were held tomorrow, I would vote for Sen. Obama…. my hand quivers as I type that.
Stop! Don’t drink that Kool-Aid!
“I worry about this recent tendency to think we need one super strong individual at the top to “set things straight”.”
Interesting open topic of discussion “The Great Man Theory”
Could Chrysler have survived without Lee Iacocca?
Sometimes I favor the great man theory Abe Lincoln, Harry Truman and other times find the great man theory to be the product of the environment. JFK became an effective president upon his death, prior to his death not 2 bills had passed but never would be considered a great president in any category. Without the news media adoring Kennedy, most would regard him as sub par at best.
Abolish all political parties.
Unfortunately, the majority wins the votes….they also are the ones that cause things like this housing bubble. I’ve come to the conclusion at least 51% of the people in California are idiots and have no understanding of basic economics or much of anything else outside their little bubble of life.
Read “Empire of Debt” and it’ll give you a whole new perspective on what constitutes a “great” president.
tj,
Currently doing so. So many books about the coming disaster, so little time….
“and what the hell were you doing to stop it?”
‘And what about all those campaign contributions you received from investment banks that were fueling the subprime lending and profiting richly on predatory loans to low income buyers and people of color?’
Bingo!
If I ever voted for a Republican, it would be for Ron Paul. If Al Gore runs again, he will get my vote. If Nader ran again, he also would get my vote. Since none of these have any chances to win, I will take a vacation during elections.
Wow, I didn’t know this Blog was soooo Republican. Kind of disappointing, I guess.
Again, abolish all political parties.
This US vs. THEM crap is so tiring. Take out the evangelists and extreme left wing, and I’d say the majority of the U.S. wants the same things. 2 choices is BS! They’re forcing us to pick a side, then playing us against each other.
Wasn’t it another person who couldn’t win, Perot, who said this would happen?……
Coke or Pepsi?
RC.
tarvos, I’m not a Republican, I never voted Republican in my life. But let’s agree that there is a difference btw the Republicans posting here and the clown in the WH. It makes you wish that all of them were like that.
I mean, I wish all of them were like the ones posting here…
Again, abolish all political parties.
Actually, we’re probably going to have some represntative government for the next two years. One party in the White House, the other in Congress. At the worst, the more time they spend fighting each other, the less time they have to screw us.
I firmly believe that’s what made most of the Clinton years good.
Sen. Dodd has inspired me to write a “no bailout for the irresponsible” e-mail to Sens. McCain and Kyl.
I’m getting frustrated with the letters. Every one I sent got returned with a shitty reply that was a form letter about affordable housing.
At least your reply was related to your letter.
I got a “I know Chris Dodd” canned response from his wife…all about the family sacrifices they made…
Tried to post on Hillary’s blog, but they rejected it for some reason.
Totally getting tired of it, but we have to keep trying.
And it really was a massive failure to regulate. We all know greedy people aren’t going to stop being greedy tomorrow. And stupid people aren’t going to stop being stupid either.
Some industries are so ripe for fraud and excess that you absolutely must have regulation (rules). Housing is one of those industries.
Big business hates rules. Enron did. Lay fought for deregulation for almost a decade and when he “won” we all know how that ended.
Big business hates rules. They always have.
I just find it hilarious that the very people that would benefit most with some basic rules (the average Joe) are here every day arguing against it.
Pass the Kool-aid!
I agree with Joe Momma.
In every social group there needs to be a voice that can and will say “No” and be heard and obeyed when something stupid is about to go down.
This is true of families, corporations, governments … every social group.
Pass the Kool-aid!
I think you’ve had more than enough Kool-aid Kommissar.
I can’t wait to see Dodd’s tune change when he finally gets the memo that he has NO chance of becoming President in 2008.
I agree with Joe that regulation is necessary in the lending industry .
If you have real estate prices that run up to quick you also get the problem of long term owners being priced out of their homes by property taxes .There are many home owner that are on fixed incomes or they only get income increases in tune with inflation .
From what I have seen of these modern day adjustable/IO sub-prime loans ,they were designed to increase to a far greater interest rate than inflation on wages could cover for most borrowers .So in many cases with these sub-prime borrowers it was absurb to put these people on loans of this nature .
The old adjustable loans that they use to write years ago were far more conservative in the potential effective interest rate increases . So on these new adjustable loans they set a person up to start at a teaser rate of say 1% with say a potential to go to say 12% in a very short time . A sub-prime borrower is not able to pay dramatic increases and in alot of cases they were hard pressed to pay the beginning teaser rate that they qualified on . So the sub-prime borrowers did not really qualify for these loans or the increases that were in store for them . Also no down-payment loans are absurb for almost any borrower because it’s a know fact that borrowers walk very easy if they don’t have any skin in the game . Also it’s not prudent for a lender to not have a down payment to protect the lender in case of default .In prior lending cycles lenders would insure loans that were not 20% down and charge higher rates because they were considered more risky (plus the borrower had to have A+ credit to get a loan like that .
The industry felt the borrowers could just refinance out of these loans and it was better that they got the real estate now rather than the prices going up more and pricing the borrower out more ( at least that was the REIC spin to get people to go on these loans ). Also the speculators that planned to flip property in a short time and make a killing would go on these adjustable loans because they were easy to get and the teaser rate bought the flipper time with lower payments .Neither the speculator or the unqualified borrower could really afford the loans they took on and they did it to gain by the appreciation in real estate . The sub-prime lender was making the loan also based on real estate going up .
Do we need regulation stating that you can’t make a loan simply based on real estate going up regardless of the ability of the borrower to pay back the loan ? Yes .
I contend that in alot of cases the rules were already there and many a loan package was simply stated income fraud .Does the appraisal industry need to be regulated ? Yes because this last run-up shows that appraisers were just rubber-stamping transactions or they would starve because of pressure from the REIC .
I am going to be very interested in what the regulators have to say about the sub-prime problem . In fact I think the regulators side of the story might be interesting .
Agree 100% with you, Wiz. Also agree with Joe Momma — too many J6Ps who don’t understand where they exist on the class spectrum.
We need regulations (not subsidies) and they need to be fully enforced.
Fannie Mae will buy “conforming” sub-prime loans. Must be less than $417,000 in loan balance. They do sub-prime! Not to worry!
Fremont Sale Clears Out $4 Billion of Subprime Loans (Update4)
March 21 (Bloomberg) — Fremont General Corp., one of two companies ordered to stop offering subprime mortgages, will sell $4 billion of loans to stem losses from homeowner defaults.
The sale will result in a pretax loss of $140 million, Santa Monica, California-based Fremont said in a statement. The buyer wasn’t identified. The loss shows the loans will be sold for 96 cents on the dollar, more than most analysts expected, said Theodore Kovaleff at Sky Capital LLC in New York.
Fremont shares jumped 16 percent, the fifth gain in six trading days, on speculation it may escape the fate of a dozen subprime lenders that failed this year. The industry is beginning to attract capital from hedge funds seeking to buy mortgage assets at distressed prices. Citadel Investment Group LLC said today it owns a 4.5 percent stake in Accredited Home Lenders Holding Co., which disclosed a $200 million loan commitment yesterday from Farallon Capital Management LLC.
96 cents on the dollar? Who in their right mind would make a deal like this?
Your counterparty is on its knees and you “negotiate” all of a 4% discount? In a market undergoing a debacle of historic proportion?
Something doesn’t smell right here. No one can be this stupid can they?
Somebody with a wire to Senator Dodd. Pull the strings and poof instant bailout.
“96 cents on the dollar? Who in their right mind would make a deal like this?”
A lot of fools bought junk bonds and etoys.com too. There is a surplus of stupid people. Give it time.
We don’t know which loans Fremont sold. We are ass-u-me-ing that they are the bad ones.
They may have other higher quality loans that they had to sell along with the crap.
“The loss shows the loans will be sold for 96 cents on the dollar, more than most analysts expected…”
And another company gets infected with loans that will probably have more than a 4% failure rate. These things are spreading like the plague; every company who touches them is going to get torched.
As an aside, that gives me visions of the movie 28 Days Later. Imagine being an FB, in a coma for the past month, and waking up and needing to refinance your house. “Hello? Is anyone out there?”
Just now on the phone, my cousin in Maine was telling me how she needs to re-fi her house to pay off her credit cards. Wanted me to make the loan. I just said I am not making any large loans now. She asked for a small loan, like a few thousand. I said I would consider it. Actually I will end up making it a gift, though I didn’t say so. I told her she should sell the house (ostensibly, $250K equity after all mortgages and even after the credit card debt). She said it’s not a good time to sell. I wanted to scream but was too lazy.
“She asked for a small loan, like a few thousand. I said I would consider it. Actually I will end up making it a gift,”
Boy, god really screwed me when he was handing out cousins. I must have been taking a whiz at the time. My cousins couldn’t fork over a cockroach if I was in trouble.
“My cousins couldn’t fork over a cockroach if I was in trouble.”
LOL NYC, make that my entire family, not only the cousins. Hell, those people don’t even send me b-day or Xmas cards.
az_lender, this is exactly the situation HBBers used to discuss in the winter. Are you the first one who has posted about actually being asked for money? IMO you are being very kind to offer a gift. In reply to her question I just would have asked her if she had the phone number for Gamblers’ Anonymous, since I just blew whatever money I had at the Atlantic City slots.
She can borrow at prosper.com
When the details of this deal come out, I am sure it isn’t going to be as sweet as it looks on the surface. Wall Street is looking to buy time here IMHO.Everyone I have spoken with today on this can’t believe these terms are what they seem.The powers that conceived and profitted off of this if this subprime,Alt-A, 100% financing scheme need to control how fast this thing unwinds, find GFs all the way to the bottom. The outcome is inevitable, keep spinning until the exposure is reduced to zero and WS is setting up phoenix funds to process this dross for the next equivalent of the RTC.
The lenders probably got all the property as collateral.
Good luck inheriting bubble-popped assets.
Could be the ol’ cash back at “refi” on the megascale of the Fremont bonds themselves. You buy the bonds for .96 and we’ll toss back and extra .10 under the table. All kidding aside, Fremont might be secretly and forcibly purchasing some of their non-performing loans under the table in exchange. Win-Win for both. Fremont could be a clearing house for lender-to-lender cashback fraud. Enron isn’t the only company caught playing these type of buck-passing games off the balance sheets.
4 Billion in subprime loans. What is that like 2 or 3 800 square foot LA dumps?
I posted the contact info. in case any r/e bums are interested…lol
Pizza chain seeks ex-loan bosses for work (OCR)
The JoJo’s Pizza four-store chain of Italian restaurants from Chino Hills is seeking laid-off mortgage supervisors to fill managerial openings. Joe Bonafede, owner of JoJo’s, “feels that he can offer these employees a great opportunity. Everyone has been involved in the food business whether they have worked or ate at a restaurant.”
For more information, contact Bonafede (joe@jojospizza.com or jojospizza@hotmail.com or 714-390-4573) or VP Chris Parker (cpden@sbcglobal.net or 714-709-3743) or marketing director Jaclyn Rovida, (jackie_jojos@hotmail.com)
And don’t forget all of those GREAT opportunities!!! in multilevel marketing.
Personally, I think the sign-spinners should be given preference over mortgage supervisors or any other REIC minions. They worked harder during the RE mania.
Yeah, and they get shot too…(don’t know if you read about the sign spinner shooting in Lancaster)
First, I’m sad the sign spinner was shot at. As I posted before, they work hard and are, in many cases, a form of performance artist.
I’d hire one before a Realtor ™ or mortgage broker.
Got popcorn?
Neil
This sounds like a Phil Hendrie skit. This guy’s name should be LLoyd Bonafide.
“You lay your hands on me and you’ll pull back two bloody stumps”.
Maybe Ted Bell will start to hire realtors for his restaurant. He can have them singing his promo song.
Inventor of the serated edge knife, the very same?
Promo song (sung in a lilting fashion): “Ted’s, of Beverly Hills. We want to put our meat in your mouth!”
I got to see Phil do his show live at the Museum of Television and Radio in Beverly Hills. My god, what a comic genius. I actually have tapes of most of his shows.
ha ha
LMAO
God I miss Hendrie!! Lloyd Bonafide was the best!
A strange wonderful talent, a comedy vein nobody saw coming…
Margaret and Frank Grey, being the perfect housing bubble foils~
For the unitiated:
http://www.philhendrieshow.com/
“I’m a gay man and a gay journalist.” Yeah, I miss Phil…
What would Bobbie and Steve Dooley of the Western Estates Homeowners Association say about all of these vacant flipper houses and foreclosures?
I’ve got one on tape where Bobbie was so horrified that one of her neighbors was grilling after Labor Day (which was against the CC&Rs) she hired some thugs to go steal the grill from their backyard. You had outraged J6Ps from all over the U.S. calling in to say that they would shoot anyone who tried to steal their precious barbecue grill.
INCREDIBLE…….Hire people who committed Mortgage fraud falsified documents, cut every coner possible to get at the commission…….
And you think that is a great employee…….??????
We are DOOMED!
I had a thought…
Maybe this employer has a beef to settle? Perhaps he’ll have a high turnover without the ex-employees ever giving notice… nor sign of the ex-employees… Naaaa…
‘New home inventories remain elevated, while resale inventories are even more worrisome, with significant investor overhang and mounting distressed listings.’”
“‘And all of this is before the effects of the subprime situation have begun to be realized in the market. Significant further price declines are likely,’ Sood wrote.”
————————————————————-
pretty much says it all. the world changed within the last 2 weeks with subprime going south. a lot of GFs are going to wish they had never heard of RE.
I never realized that being a vulture was this exhilarating. Who needs to soar with the eagles when you can feast on the carrion instead?!!
ROTFLMAO
Got popcorn?
Neil
This blog just wouldn’t be the same without you, Sammy. Love your posts!!!
Subprime going belly up, Fed issuing gidelines, Starving Realtors crying, Brokers wailing, Used and abused Buyer sob stories…
Auh…the sounds and sights of Spring and the REIC BLOWBACK Panic Mode hasn’t EVEN Started YET. These are just the Wakening HICCUPS of this MONSTER.
Invest in MORE popcorn.
Mikey,
If this is a hickup, I don’t want to be in the firing line if the thing belches or farts.
And yes, I have
Got popcorn?
Neil
ps
I blogged on how mood changed at work. Drastically. This week is not last week. Its like a dam broke or something… yet I cannot fully explain it.
“As of May 1, I’m dead in the water, said Thompson, already behind on payments as the deadline nears….As long as I was working they were manageable”
Does the concept of saving for a rainy day mean anything anymore?
“Does the concept of saving for a rainy day mean anything anymore? ”
My experience with most of these Mortgage Brokers were a lot of young people that honestly felt that the good times would never end. The thrill of buying that first Escalade or Hummer was only the beginning. Next it was leveraging their income and earning potential by investing in RE, IO only please. Only a fool pays principle.
New Furniture, TVs, Surround Sound systems, party after party with only the highest end booze.
Most of them that I knew couldn’t afford to pay their outrageous income tax bill, since they weren’t even self-disciplined enough to send in quarterly estimates. And they all seemed to have made a killing, so the tax bills weren’t small.
Needless to say there are going to be some very, very good yard sales this spring and summer as these fools try to keep up appearances and pay their tax bill, property tax bill, HOA fees, Hummer lease, Hummer gas, and finally their Bankruptcy attorney.
To heck with that rainy day.
In the USA, when you get seriously ill or injured you are going to lose your home and go bankrupt. Insurance will not prevent it.
Money managers recommend 3-6 months living expenses cash on hand. He’s within the guidelines.
Steve Nguyen comments on his Lakewood (for C####T’s sake!) home he thinks is worth $200,000 more than what it was 5 years ago:
“It’s at a good state right now. It didn’t completely crash on me”.
Oh God, reading this blog is starting to wear me out. When I think of Lakewood or Long Beach I become depressed. It’s the same feeling I get thinking about Compton, Riverside, Palmdale, Fresno.
You just know there’s some mental basket case somewhere that would be willing to buy in Lakewood for $600,000 or whatever this guy is asking if they could get a teaser loan.
Thank God this zero down, interest only loan crap is coming to an end.
Only a very twisted person would want to own a home in a place like Lakewood. I’m sorry, it’s not the city that sucks it’s the people who live there. I mean, even Palmdale could look nice if the people cared to make it so.
My first thought was, talk to me when the escrow closes, Stevie.
With few exceptions, only people of limited resources are going to live in Lakewood anyway. The only people that could afford a $600K home AND would actually WANT to live in Lakewood would be sub-prime 80/20’s, and we all know that gravy train is dead now. Areas like these are dead in the water now.
Believe it or not, Lakewood has some $1M+ homes near the country club…
So much for the old saying of buying in the best neighborhood you could afford.
Apparently, they just want the ‘hood part….
He figures what he can sell he’s current home for. Has he actually sold and closed for that amount. Looks like he’s math is based on what he or he’s agent feel that the old house can sell for. Geez, sell it first, and then figure out if you have the cash to pay for the new one. This story is not over. The guy could wait years to sell he’s old house at what he thinks is fair value. Geez, at least before you get quoted on the fish wrap, have your bird in hand, and ducks in a row!
It beats Bellflower.
In the case of gangs, that is literary true.
“You just know there’s some mental basket case somewhere that would be willing to buy in Lakewood for $600,000 or whatever this guy is asking if they could get a teaser ”
Virtually all the homes in lakewood are WWII-era starters of 900-1200 sq ft, which would not command even $500,000 in todays market. Lakewood has long been a step above LOng Beach, with abundant parks/greenbelts, a huge centrally located mall,The city college, and wide tree-lined streets. And Yes, there is the huge lakewood county golf course with those ‘million$’ ranch homes surrounding it.
The downside of lakewood is that it borders north Long Beach and bellflower, two marginal districts. Also, the shuttering of the Boeing facility is an economic blow. Before the 90’s the boeing/Mcdonnel/douglas plant employed 40,000 workers and provided a firm economic base as well as tax revenues to the City whos motto is ‘tomorrows city today’.
Lakewood may be undergoing demographic changes as the WWII era retired folks sell out and immigrants move in. Ths may alter the long-time middle/stable working class ambience of this community, though most of lakewood still kept up ok.
One negative feature which has popped up in last few years is the sprouting of more shopping/retail centers, which is seen as the desperate attempt by both Lakewood and Long Beach to get more tax revenues to replace the loss of the Boeing plant. Better that these cities had put up modern hi-tech commercial parks or even any commercial /industrial facilities which would provide decent-paying jobs for the community, which lacks any nearby industral parks.
“Only a very twisted person would want to own a home in a place like Lakewood. ”
huh?
I am getting tired of all of sudden focus on subprime. It is all over the place in media. However, no honest discussion about the unsustainable level of prices, price/income ratio, cost of rent vs. buying.
And the not so subtle, that everybody stretched themselves to buy even if you have a stellar FICO score. You’ll need to use any leverage to get as much house you can at this insane level of prices. I will dare to say that the “real” subprime borrowers will bounce back faster as they are conditioned to live with little and sleeping in a car is not new for them. The typical white-collar, college educated, professionally qualified people will have a hard time to re-adjust after their typical $650,000 loan goes sour.
” I will dare to say that the “real” subprime borrowers will bounce back faster as they are conditioned to live with little and sleeping in a car is not new for them. The typical white-collar, college educated, professionally qualified people will have a hard time to re-adjust after their typical $650,000 loan goes sour.”
Right you are, the “True” Sub-Primer is used to disappointments, and will just treat his mortgage as another bill that just didn’t work out. They will rationalize it as they were a victim, the house was crap, it was an unsafe neighborhood, Bad HOA or a million and one other ways to push the blame from their plate and move on with their lives. It isn’t as though they had any skin in the game anyhow.
The Typical middle to Upper Middle class person will not be prepared for the stress and pressures that must surely come along with losing their homes to foreclosure. Hard to tell what all they will sacrifice to keep pushing the harsh reality of losing their home into the future. Cash in the 401k, IRA, Tap out the credit cards, HELOC, all the way down to gambling with what little is left to try to WIN a few more months. These people will be truly crushed.
This bubble will destroy a lot of families, some deserved and probably even more that aren’t deserved.
We start em down the primrose path of credit destruction early…
Average college student credit card debt is $2300, in NY State.
http://www.senate.gov/~schumer/SchumerWebsite/pressroom/record.cfm?id=260654
Courtesy of Diner’s Club International, I bring you “The First Supper”:
The legendary story of how it all started:
In 1949, Frank McNamara schedules a business meal at a New York restaurant called Major’s Cabin Grill. Prior to dinner, he changes suits. After dinner, the waiter presents the bill. Frank reaches for his wallet…and realizes that he has left it in his other suit. McNamara finesses the situation, but that night he has a thought, “Why should people be limited to spending what they are carrying in cash, instead of being able to spend what they can afford?” In February 1950, McNamara and his partner, Ralph Schneider, return to Major’s Cabin Grill and order dinner. When the bill came, McNamara presents a small, cardboard card - a Diners Club Card - and signs for the purchase. In the credit card industry, this event is still known as the First Supper.
“Why should people be limited to spending what they are carrying in cash, instead of being able to spend what they can afford?”
Sure got away from us in just 57 years?
“Batista, whose job at ResMae was to handle closing documents on loans, said she may give up on the mortgage industry after 20 years.”
Don’t worry, those document handling skills translate well to all-beaf patty burger flipping skills.
Not to be mean, but most should be prepared, financially and skill-set wise in todays economy. Its not like it was back in my working days when layoffs were unheard of. Most jobs should be thought of as “project” based now. Thats just the way it is.
Another reason why renting is preferable to owning right now.
Like Joe said above, there are many benefits to renting. After watching all of this, you begin to question the credit/debt economy.
Life is much better when you have money in the bank, no debt, no maintenance responsibilities, and the freedom to move whenever you want for little to no cost (as in having to sell a depreciating asset).
Life is good as a renter…
In lieu of state categories, i’d suggest Ben just lump anything an hour’s minimum drive from anywhere, as simply:
b.f.e.
for instance, virtually all of interstate 15 from whatever high hellish desert locale, (we are serving up a fine venison victorville, in a ragout sauce, this evening) your little heart desires, down to the outskirts of san diego, say Poway. That’s all bonafide b.f.e.
Where does it occur in your state?
As Jeff Foxworthy said:
YOU KNOW YOU ARE A TRUE WISCONSIN RESIDENT WHEN:
1. “Vacation” means going east or west on US-11 or north or south on US-90 for the week-end.
2. You measure distance in hours.
anything south of I-80 or west of 355/294 (chicago)
actually, anything not the loop, downtown or gold coast as far as I really care
A Trillion here, a Trillion there…
Before you know it, we’ll be talking about real money
C’mon, aladinsane, you know dollars aren’t “real money”.
“Significant further price declines”? Is that anything like a “crash”?
No, it’s like a downhill rolling snowball that picks up speed and lets out a hissing sound like a slowly deflating soufflé.
Or something.
From the Bakersfield story:
“Leslie Appleton-Young, chief economist of the California Association of Realtors has noticed some cost-cutting in the industry.”
Oh, really?
Either we on this blog don’t get it or they on Wall street don’t get it.
Why did markets jump the way they did? Can housing debacle be isolated and not spread to other sectors.
Rentor:
People tend to fall back on what they deem to be “similar” circumstances historically, and right now most of el lay is thinking, “it’s gonna be bad, but we survived 1990 and came back swinging”…
Kinda what the French thought their Maginot Line would do.
It would’ve been the cat’s meow, if only World War 1, had repeated itself.
We are now in the “phony war” stage of the proceedings
Hey leave the street alone I’m not ready to cash out just yet. Keep sucking in the small investor for another 30 days or so!!!
“‘The fact is: Fewer homes will be sold; it will take longer to sell them; and in most areas and price ranges in the valley, asking and selling prices will decline. Having said that, it is still much too early in 2007 to speculate how the year will finish,’ said Greg Berkemer, executive vice president of California Desert Association of Realtors.”
I got one word for you gregor, BAD!
http://www.housingtracker.net/ is showing that the 1 week inventory change in San Jose, CA is -20% and 1 week median change in price is +7.9%. Seems unlikely to me. You think that is an error or manipulation?
What you are saying doesn’t make sense to me. I just went to housingtracker and saw a San Jose inventory at 3796. According to bubbletracking.blogspot.com, the inventory March 10 was 3944, and on Feb 28 was 3774. If all these numbers are right, the 1-week decline in inventory was more like 3% or 4% and in any case could be a “blip”.
What you are saying does not make sense to me. I just went to housingtracker and saw San Jose inventory at 3796. According to bubbletracking.blogspot.com, the SJ inventory March 10 was 3944 and Feb. 28 was 3774. If these numbers are all right, the 1-week decline in inventory was maybe 3%-4% and anyway could be a “blip”.
It’s absolutely an error (or possibly manipulation). I’ve been tracking through mlslistings.com myself and this is what I show for inventory:
3/21/2006 - 3682
3/21/2007 - 4402
Meant to also add the 3/14/2007 inventory, which was 4224. So inventory is up week over week and year over year.
San Jose Stats
9 Days Ago 26 Days Ago Change
Total Properties 1,754 1,654 100
Average Price $870,966.00 $861,954.00 $9,012.00
Median Price $719,950.00 $718,000.00 $1,950.00
Average Sq Ft 1,790 1,776 14
Price / Sq Ft $507.00 $507.00 $0.00
Bugger - just go here
“What little hope was left is gone now, in terms of ever coming back and operating as New Century.’”
Note: it says ‘ever coming back and operating as New Century’, but open that it could come back under another name with its debt wiped clean. Mr. Dodd, if you really want to make an impression, put these slime out of business for good.
July 15, 2003 - testimony of Alan Greenspan before Congress
Households have been able to extract home equity by drawing on home equity loan lines, by realizing capital gains through the sale of existing homes, and by extracting cash as part of the refinancing of existing mortgages, so-called cash-outs. Although all three of these vehicles have been employed extensively by homeowners in recent years, home turnover has accounted for most equity extraction.
Since originations to purchase existing homes tend to be roughly twice as large as repayments of the remaining balances on outstanding mortgages of home sellers, the very high levels of existing home turnover have resulted in substantial equity extraction, largely realized capital gains. Indeed, of the estimated net increase of $1.1 trillion in home mortgage debt during the past year and a half, approximately half resulted from existing home turnover.
The huge wave of refinancings this year and last has been impressive. Owing chiefly to the decline in mortgage rates to their lowest levels in more than three decades, estimated mortgage refinancings net of cash-outs last year rose to a record high of more than $1.6 trillion. With mortgage rates declining further in recent months, the pace of refinancing surged even higher over the first half of this year. Cash-outs also increased, but at a slowed pace. Net of duplicate refinancings, approximately half of the dollar value of outstanding regular mortgages has been refinanced during the past year and a half. Moreover, applications to refinance existing mortgages jumped to record levels last month. Given that refinance applications lead originations by about five weeks and that current mortgage rates remain significantly below those on existing mortgages, refinance originations likely will remain at an elevated level well into the current quarter.
We expect both equity extraction and lower debt service to continue to provide support for household spending in the period ahead, though the strength of this support is likely to diminish over time. In recent quarters, low mortgage rates have carried new home sales and construction to elevated levels. Sales of new single-family homes through the first five months of this year are well ahead of last year’s record pace. And declines in financing rates on new auto loans to the lowest levels in many years have spurred purchases of new motor vehicles.
and from the same testimony:
“The Federal Reserve has been studying how to provide policy stimulus should our primary tool of adjusting the target federal funds rate no longer be available. Indeed, the FOMC devoted considerable attention to this subject at its June meeting, examining potentially feasible policy alternatives. However, given the now highly stimulative stance of monetary and fiscal policy and well-anchored inflation expectations, the Committee concluded that economic fundamentals are such that situations requiring special policy actions are most unlikely to arise.”
So the Fed anticipated the foreign purchases of US debt rendering Fed policy useless. I really wonder what “special policy actions” will be implemented.
Hoz,
That’s scary, IMHO.
I know I can’t be the only one who is smelling a bailout already in progress. Anyone else?
The amount of foreclosures this year is sure to be IMPRESSIVE
Impressive. Most impressive.
Re: the LA Times article, the paragraph that jumped right off the page and hit me…
“Analysts say the U.S. economy won’t completely crash either as a result of the sub-prime mortgage meltdown, thanks in part to homeowners like Nguyen. Their home equity built up during the boom is among several factors that could support consumer spending and the housing market.
Will so many homeowners remain totally clueless and continue to HELOC into new cars, vacations, etc.,etc.,etc.,etc.,etc…?!?!
I don’t see it happening. The economy will contract as consumer spending evaporates. The CPI is rising, durable goods orders are already down. These “analysts” must be the CNBC Varsity Cheerleading Squad.
They will cheerlead this crash just like they did the stock bubble.
All the way down.
As lame and obvious as this may sound, television has truly become an entertainment medium. I remember when it was a source of reliable business information, now it’s really nothing more than the modern-day equivilant of a campfire… something to unconciously stare at and unwind at the end of the day.
Can’t wait to see Dillion Ratigan and all his ilk and Cramer trying to explain to everyone how the whole system went broke in 5 years after the longest bull era in our history. Hopefully, someone will have the cajones to say it was all this debt that everyone had or took on. However, none of these overpaid, overzealous, overbloated egos will probably say it since they make so much money for crap analysis that they can afford anything and everything and don’t understand that 98% of the world and about 75% of America can’t without help or debt.
I agree. The real shock happens when consumer spending slows since that spending has lead the US economy.
Economists say home equity losses have a greater impact on consumer spending habits than stock losses. That is when a homeowner losses equity they curtail spending more than if they had lost the same value in stocks or mutal fund.
If spending drops enough to cause a recession then job losses will cause further problems for housing. More home owners could fall into trouble. Savings are low. Consumers spent more than they saved in 2004 and 2005.
I knew lending was loose, but how did Steve Nguyen find a no-interest loan? Did they really have teaser rates of 0%?
I am sure the reporter meant to say interest-only. I’ve heard folks use those terms interchangeably. Go figure.
The only 0% int loan that is commercially available is the “Islamic Loan” (not being of the right persuasion, I am not eligible).
Hey, maybe that is the govt’s answer to all this mess. Get an Islamic bank started with 0% interest. Think about that. Now that 750K mortgage is def. manageable at a little over 2 grand a month for 30 years.
Wrong, Failing Sub-Prime Loan Originator Breath.
2 grand/month for 30 years pays only for Carnac subscription to Bodacious Belly Dancers of History lifestyle magazine.
Phillygal very good. Now, may your udnerwear be infested with camel maggots.
Phillygal very good. Now, may your underwear be infested with camel maggots.
Phillygal, may your dreams be haunted by visions of hoards of camel fleas attacking your family.
Ha!
P.S. Your subscription to History of Bodacious Belly Dancers has been foreclosed!
Phillygal already suffer from first Carnac curse
Phillygal, here in LA they rerun Carson’s greatest hits and my son watches and gets some of the jokes. However, everyone enjoys watching me roll around laughing in pain when I watch Carnac.
I think maybe there is a good reason why Islamic law prohibits collection of interest. There is also a good reason why we used to have anti-usury laws and consumer protection laws regarding lending. There was also a good reason gambling was illegal in 49 states. Maybe in the next 10 years America will figure out why we had these laws.
Reporter got it correct…Steve has no-interest in paying the loan back
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070321:MTFH35625_2007-03-21_20-36-25_N21286934&type=comktNews&rpc=44
KBH reports earnings tomorrow. My take on it is CEO will come clean and tell us no end in sight, this way he can’t get sued. Having made million over the last few years.
The market should bottom out sometime in 2009 becasue it will take at least two more years to clear out the massive inventory that still exists on the open market. In the mean time foreclosures will probably rise at least another 200% or more from today’s levels as all of these ARM’s reset and the banks foreclose on them. The motivated seller’s will really start to appear in huge numbers as they beg for one simple offer, but the majority of seller’s will chase this market to the bottom. Hold out forever that is great advice for any seller in today’s market becasue the spring selling season will save them….NOT……….I live in Fresno, CA and the spring selling season is a bust so far with sales down 42% compared to the same time a year ago.
That is what I don’t understand, esp. since this will only get worse. Sell now and take the 1099 or lose everything in another year. What boobs.
“The market should bottom out sometime in 2009 becasue it will take at least two more years to clear out the massive inventory that still exists on the open market.”
How can it “clear out” if sellers stubbornly keep their prices high (as they have thus far) and no more subprime loans are available to help households buy stuff they cannot afford? It seems like you would need pretty massive price corrections to the downside to right the market by 2009.
It seems like you would need pretty massive price corrections to the downside to right the market by 2009.
Yep. And it will. I wonder when the bottom will be… but 2009 is possible. This is happening fast. Faster than I thought just a few months ago.
Got popcorn?
Neil
This is going to be a long drawn out process - look at Japan.
Japan had savings.
Japan also did not have an avalanche of new supply (very little land zoned for new construction in Japan).
This market bust, IMHO, is going to take much longer than most people think. I’ve been in the RE business for over 20 years and I say this bust will last a good 10 years or so. This is the biggest assest bubble in our history. It is going to be a long way down. I sold my home of 23 years in Jan 2006, best decision of my life. All our friends were taking out HELOC on their homes, while we were making double extra principal payments for years. We owed almost nothing on the house. We won’t buy back into this market for years to come. And when we do it will be some where much less expensive than Connecticut.
I agree with what you say.
I’m from Australia and really most families here are maxed out with their mortgages.
I’ve been in Real Estate for nearly 25 years here and I’ve never seen so many people living on the financial edge.
My bet is that real estate will be on the nose for the next 5-10 years. Seen it all before, but this time is many times worse than I’ve ever seen before.
Agree with both of you. Family in the RE business for almost 30 years as well.
This is much bigger than most people seem to think. It’s beyond comprehension how loose credit got — so many loans that people have no way of paying back. At what point to they finally understand that they will never “own” anything other than debt?
We’re still seeing too many GFs around here “snapping up” homes that have been on the market for many, many months. Don’t know why, but there is definitely a “spring bounce” (there wasn’t one in 2006, and only a small one in 2005 in our area). It’s busier than at any time since early 2004.
Come on GS, a good chunk of them can’t hang on that long that’s why most of the foreclosure activity we’re seeing now before the big reset waves hit have been EPDs (early payment defaults). You sounded like LA Investorgirl for second there.
Volume always preceeds price…Prices are set at the margins. Any good stock trader knows this.
“Andrew Thompson fears his mortgage lender is poised to foreclose on his Folsom. California, home because he will not be able to make his monthly loan payment when it jumps to $3,200 from $2,100.” “Thompson bought it in 2004 for $289,000 and won praise from neighbors for at least $60,000 worth of renovations.”
Andrew will be paying $3,200 for a $289,000 mortgage? Or maybe $349,000 including his $60,000 “renovation loan”? That should be $2,100 fixed, or about $2,600 for the $350,000 loan, fixed. My guess is he’s tapped that house for more than the renovations, and now he must pay.
Let ‘em foreclose. I hear they have rent-free units available in Folsom.
I I had discussion with my friend regarding SF home price. He thinks price here will be stronger than other part of CA because there is not enough land here, while my argument is that it is the most unaffordable area even the prime borrowers with ARM will have difficulty paying the mortgage bills. Who is right?
Look to Manhatten NY for a model of how SF realestate could evolve. It gets more expensive and more built up - living units get smaller and smaller.
JTZ- Manhattan RE has crashed. It happens everywhere,
You are.
Knew it.
“How can it “clear out” if sellers stubbornly keep their prices high (as they have thus far) and no more subprime loans are available to help households buy stuff they cannot afford? It seems like you would need pretty massive price corrections to the downside to right the market by 2009.”
The words “clear out” were probably the wrong choice in that sentence, but the inventory should come down to a resonable level by 2009; however if the sellers hold onto their unrealistic asking prices it may take until 2011 or 2012 to bring the supply and demand back into balance.
“..it may take until 2011 or 2012 to bring the supply and demand back into balance.”
Great. I’ll be like 50 by the time I buy my first home. Fuck it, I’ll just have to skip the whole ‘first-time homebuyer’ stage and instead check myself straight into an old folks home.
Thank God there’ll always be Social Security, right?.
If the sellers keep their prices up, they might find themselves being undercut (to death) by surviving builders, who will have literally dirt cheap land available in many areas. What sort of price trends are showing up for raw land in the West outside Seattle/SF/LA?
It’s funny, isn’t it? Boomers will be used to justify the housing bubble (they gotta buy places) and they’ll be blamed for the crash (they gotta sell their places)…
Glad to hear about all the trouble with McMillin and Centex.
When I lived in Visalia, their developments sprang up everywhere, and the city council would appease their every desire, since deep pockets would solve many of the problems in the central valley, or so they thought.
McMillin bulldozed the farmland behind my former house and turned it into a busy street (Cameron for those of you familiar with the area) that led directly to the new shopping mall. On the other side of the busy street, they built hundreds of stucco $hitboxes, most of which were sold to subprime LA speculators and illegal aliens. It is quite gratifying to see the shakeout currently going on.
“He thinks price here will be stronger than other part of CA because there is not enough land here”
I’m from NYC. Now THAT is a place with not enough land!. Currently I live in (yaaaaaawn) Orange CountyCA and all the rubes here are always spouting the “they’re not making it anymore” mantra.
Bullcrap.
1) There are still extensive, undeveloped and yet buildable hilly areas in La Habra, Yorba Linda, Orange, Tustin, Irvine, Rancho Santa Margarita and Fullerton. Also there are vacant lots interspersed thru-out OC cities, some substantially large. South OC and SD have even more available land.
Outside of OC you have Palm Springs, Victorville, Riverside, Moreno Valley …hell EVERYWHERE !.
2) CA is still in Stage I of urban construction. It is still capable of spreading horizontally. East Coast cities on the other hand have had to build vertically for DECADES already due to the exhaustion of buildable land.
Since CA is a car culture society, horizontal urban sprawl could be virtually UNLIMITED because as long as a freeway exists to get there people don’t mind commuting extensively. Case in point; the recent demographic growth of Riverside due to transplants from OC seeking affordable homes. Anyone familiar with Riverside knows it’s a shithole. Yet every day the 91 freeway clogs up with people anxious to get there.
3) They ARE still making land!. Take NYC for example where hundreds of acres where created thru landfills. Battery Park City downtown is built on 100% landfill. Governer’s Island doubled in size thanks to landfill. Many areas of Manhattan shoreline where landfilled to even it out. I could go on and on with examples and that would be just in NY!.
4) When necessity TRULY dictates, NEW land sources can be tapped for building. Cemetaries, parking lots, agricultural fields, mobile home parks, old military installations, abandoned railroad yards are just SOME of these sources.
case in point a railyard in manhattan where they are going to build a $#@tload of new stuff and perhaps as many as 40 000apts+
and Atlantic yards in Bklyn wiht 6k-12k apts then there is williamsburg where they are building another 10k+ units or so (well planned perhaps 6k will be built). Trump built 4k-5k units on east side recently a year or two ago for rental, lots and lots of crap can be built if there is perception of demand.
Well Dan
A simple visit to San Francisco A city bordered by water on all three sides that myth was busted. As any visitor and lots of natives will say we had a building boom. Lots of new construction off 280 and 6th street near Ball Park. I have seen new lofts/condos in many other parts of the city as well.
In the south bay we have lots of land including the old Moffet Park airfield. I havent seen a P2 patrol fly out since the 80’s. Lots of construnction peppered in many cityies. Sunnyvale, Santa Clara, Milpitas, Mt View and San Jose… etc
You know they used to say there was no more land in South Bay for years since the 70s and builders keep proving them wrong every decade. What gives who are these people? Realtors of coarse.
Louie Louie - Are you suggesting the Moffet Field is goint to transform into a housing development?!? NASA and Ames Research Park with a new CMU campus, UCSC and San Jose St is what’s going on there. It’s also prime business land with MS and Google next door seeking to do on site development - more space for jobs Louie, not homes.
Bay Area home prices, relative other markets, has been and still are stable. Supply is limited and development builds up on top of existing homes. This supports high home prices. You sell a ranch home and they buyer tears it down and builds taller condo/townhome complex in it’s place.
The China Beach development in SF and off 16th and 3rd St. is building up on already developed land. Same as in Sunnyvale and MTV - all replacing small, older homes on large lots with townhomes. The city’s last hold outs are gentrifying. Minorities are fleeing the city and SF is becoming a childless, yuppie land.
This in-building you cite is a sign of great housing demand. It’s not a home market undermined by scores of cheaper track homes. There isn’t the available land to support the kind of development in bakersfield or central valley.
“There are still extensive, undeveloped and yet buildable hilly areas in La Habra, Yorba Linda, Orange, Tustin, Irvine, Rancho Santa Margarita and Fullerton”
Irvine urban development on the rolling hilly spaces astride and south of the 405, in the area known as the laguna hills,is proceeding slowly but inexorably. Irvine is putting up spankin new commercial and mixed projects in area around the 405/5/133 fwy junction. hwy 133 seems to be the projected arterial link, or trunk, for the projected developments.
Fullerton has undergone massive residential tract building along Beach blvd north of rosecrans. The hills north of La Habra, brea,yorba linda, hacienda heights seem to already be saturated to the limits with housing tracts, almost like the hollywood hills are saturated with housing. There appears to be anple buildable hilly land around diamond bar/walnut/chino hills.
IE is where there is still ample open space still left. Some main hot spots are south Corona, southern Moreno valley,temecula valley, ect. The temecula valley astride the 15 fwy south of corona is undergoing rapid urban development. Rancho Cucamonga is still adding more new commercial/residential projects in area just west of the 15 and north of the 10 fwy. Temecula is still adding more projects, and there is plenty of buildable acreage around that area.
what i don’t get is how could it all be dismissed as minor even if it isn’t localized to subprime. (the defaults and foreclosures that is). The estimate was that 1.1 million people in foreclosure is about a 100 billion in losses perhaps less for the banks because while they will have to sell for less the collateral will carry them through. So they estimate 90k or so per event? what if the house bought at 700k using 100% goes to 350? or lower until the actual buying resumes.
I figure 100 billion is just the losses on helocs and other equity suck outs that were made on top of first financed to the hilt. Once those 2nd’s and pseudo 2nds evaporate that will be a 100 bill and then the real hits on 1sts start with 50 cents on the dollar for a trill or so rising in each of the next 3 years.
“Apartment complex vacancies in San Diego County rose to their highest level in 12 years”
I’ve been tracking 6-8 unit buildings in Los Angeles and watching prices (based on pro forma and future projections of rents) fall steadily for nearly two years now. Early arguments on this blog and others are that rents would rise and vacancy rates fall as the foreclosures hit because of the sheer numbers of renters who thought they were home owners being returned to apartments. San Diego may have been more overbuilt with condos than LA, but I think the same thing will happen in LA a year or so from now, especially after all those downtown units hit as rentals. Aside from the under 30 crowd, most professionals with earning potential are taking opportunities to move to states with affordible housing now and we’re seeing a net outflow of population (this means there are so many white collar types leaving that it even outpaces the immense inflow of min wage workers). School districts are losing funds and the demgraphic mix in public schools is going from bad to fatal. Test scores will drop more in the next 5-10 years than they ever have before. However, this will all reverse once housing prices reflect incomes in CA again and within a year or two after the inflow of professionals comes back it will be a flood like it was in the late 90s. It is truly hard to leave CA. Hopefully, by then some baby boomers holding some of these small buildings are going to start bailing in some significant numbers and I’ll be ready to pick up a few.
1. The baby boomers will die in their homes and their children will inherit them. They might sell or live in them or rent them out.
2. Rents skyrocketed in San Diego between late 2004 and late 2006. Example: we rented our house in mid-2004 for $2,000. House around the corner (same model) rented last year for around $2,800. It was rented out within 10 days. Houses for rent are immediately “snapped up” in our area.
Other areas seem to be experiencing different things as they move through the various stages of this credit/housing cycle.
In Massachusetts at least - asking prices generally are still near record high 2005/06 levels or within 5% - with most sellers still in denial
No doubt we are going to get clobbered in New England big time - however some of us who went through the early 1990’s downturn- are setup now to weather any storm
I pity anyone w/o large amounts of cash or carrying large amounts of debt or those adjustable loans - it’s going to be very rough
Anyone with a brain knew this was on the way
This house in Fremont,CA is listed for $1,369,888. Last sold at $1,010,000 June of 2006.
http://www.zillow.com/search/Search.htm?addrstrthood=1395%20vernal%20ave&citystatezip=94539
Hey maybe Congress/Senate/President should freeze all real estate transactions for one year while they figure out what to do ,(just a joke ) . Its always has and always has been a problem with the lending with this mania run-up .
When they say that they created these loans as affordability products they lie . How can a sub-prime loan be a affordability product when the interest rate ends up going up so high within a short amount of time .Maybe a sub-prime adjustable note was good for a quick turn flipper ,until they got caught in a downturn .
Talk about bait and switch with these adjustables . You bait the borrower with the teaser rate and than you sock it to them with the real effective rate that is the switch .
People would not of gone on these loans had it not been for a real estate mania that convinced people that they could not lose in real estate so it didn’t matter what sort of loan they went on . IMO borrowers knew what they were doing but they did not expect a real estate downturn .
It’s really sad when you see people waiting , like little kids for Santa Clause to come ,for the rebounding market that will never come in 2007.
I don’t really know what’s scarier–that people who are dumb enough to sign a toxic mortgage 10X their annual income are driving around my neighborhood and voting or that Wall Street appears to be dismissing the subprime collapse as something that will somehow not cause the whole house of cards to implode and that the effects on the US economy won’t be major! Today’s market action was un freakin believable… But I’ll pick up a few more puts for 2008!
“Many homeowners like Nguyen also became wealthier with the run-up of the housing market, borrowing against their homes and refinancing their mortgages to fuel spending. Homeowners cashed out $640 billion in home equity last year, according to David Wyss, chief economist at Standard & Poor’s.”
Only in the LA Times would “more indebted” be confused with “wealthier.”
many of these buyers were not just taking out crazy loans- they were out buying new furniture on credit and a bunch of other junk
where did just getting by on the basics and trying to live within one’s means all go?
“The huge wave of refinancings this year and last has been impressive” as Greenspan stated in his 2003 testimony before Congress
It’s also “impressive” how much money asian savers were willing to dump into american consumption -while still living way below their means
We will be lucky if bubble regions can hold price hits at 20 to 30% off the 2005/06 peak bubble prices, - that might take a miracle just fo that. No doubt this credit bubble created that last leg of this real estate runup - if not alot more
Sellers holding out for bubble prices are living in a dreamworld and will need fools for buyers, fools with good credit and real down payments
We will be lucky if bubble regions can hold price hits at 20 to 30% off the 2005/06 peak bubble prices, - that might take a miracle just fo that.
For those of us who prefer market prices to be supported by something like fundamentals, this would be a very unlucky outcome. Prices need to retreat to 1998 levels plus inflation in order to achieve rationality.
“Prices need to retreat to 1998 levels plus inflation in order to achieve rationality.”
I totally agree.
Unfortunately, rationality went completely overboard years ago in this country. And I’m don’t mean just in RE.
And once lost, rationality -like virginity- is VERY hard to get back.