“An About Face” In California
The Orange County Register reports from California. “Realtor Mary Fry said the past month’s turmoil in the subprime mortgage industry is shaking up one of her deals. When the buyers went into escrow on the purchase of two homes in Placentia, the lender required that they have three months of loan payments in the bank. Now, the lender wants the buyers to have a six-month reserve before approving the loan.”
“‘The lender is looking for more protection (against) the buyer defaulting,’ said Fry, an agent in Yorba Linda. ‘Some challenges have surfaced while in escrow.’”
“Agents say a reviving market made an about face in recent weeks either because buyers are being scared off by the bad publicity from the subprime mess or because they no longer can get financing for a purchase.”
“The number of new escrows fell to 2,195 for the 30 days ending on March 22, down 24 percent from the year before and the second yearly decrease in a row, according to broker Steven Thomas in Aliso Viejo. One week after that, escrows fell even further, to 2,079.”
“Mike Hickman, president of Seven Gables Real Estate, reported that his company had about six deals fall through companywide out of about 100 transactions in a week, because borrowers couldn’t qualify for loans or because their loans were offered by lenders that shut down. While that’s just 6 percent, if that occurs countywide, the effect could be significant, he said.”
“Cases in which buyers got 80 percent of the loan from one lender, then 20 percent from a second have vanished, one agent said. Some 100 percent loans still are allowed, but they’re more scarce, and only available to borrowers with high credit scores.”
“‘The idea is all the ‘dumb money’ is out of the market,’ said Ken Straw, broker in Lake Forest, using a slang term for subprime loans. ‘Right now, things are pretty quiet because … all these people wanting 100 percent financing (can’t get it).’”
“Those who have seen signs of a slowdown are disheartened since buyer inquiries and open house attendance seemed to have picked up after the first of the year. Thomas called the change ‘an about face,’ which he attributes mainly to fears about the market generated by bad publicity.”
“‘Some buyers who are able to purchase are sitting on the fence,’ he said.” “Hickman said one buyer canceled a contract and walked away from his deposit out of fears about buying a home right now. ‘I think there’s a lot of misinformation,’ Hickman said.”
“Brea mortgage broker Jack Williams, president of the California Association of Mortgage Brokers, worries that the effect could be more significant in Orange County when you take into account all the local jobs lost in the subprime industry. He said it could create a situation similar to the early 1990s.”
The Orange County Business Journal. “After rebounding for the first quarter, sentiment among the group slipped for the second quarter, according to California State University, Fullerton’s quarterly business expectations survey.”
“35% of executives said they believe subprime problems will have a severe or high impact on the economy, hitting office landlords and taking away a group of buyers for homebuilders.”
“‘The subprime business affects consumers,’ said Paul Mittmann, vice president of a privately held commercial real estate manager and developer in Irvine. ‘In an economy where 66% is based on consumption, one doesn’t have to do a whole lot of math to figure out that it’s going to affect it.’”
The Voice of San Diego. “Bureau of Labor Statistics indicates that San Diego added 19,900 jobs between February 2006 and February 2007. However, the housing boom sectors continue to drag down overall employment growth at an increasing pace.”
“Annual construction industry losses amounted to 6,100 jobs, which represents a 6.6 percent shrinkage of the sector. The financial activities sector, in which the BLS includes real estate and mortgage-related activity, lost 2,600 jobs or 3.1 percent.”
“The retail industry also lost 2,600 jobs, which represents a retail sector contraction of 1.8 percent. A year-over-year contraction of 1.8 percent in retail employment is notable because consumer activity is such a big part of both the local and nationwide economies.”
“Losses in the housing boom beneficiary sectors were steep enough to cut overall job gains by more than half.”
Inside Bay Area. “Construction employment losses linked to the faltering housing market may slow the East Bay job market, university researchers warned. More than 3,000 construction jobs are expected to vanish in the East Bay from 2007 through 2009, according to a new report from the Business Forecasting Center at University of the Pacific.”
“‘The weakness in housing is slowing job growth,’ said Sean Snaith, a consultant for the Stockton-based forecasting center and a University of Central Florida economist.”
“‘The East Bay will be weaker than it has been the past year and a half,’ Snaith said. ‘The East Bay bucked the trend for a while and was stronger than the rest of the state. But the area’s economy is finally cooling off.’”
“The construction slump could hound the East Bay and California for a while, said Chuck Williams, dean of UOP’s Eberhardt School of Business. ‘New-home developers have to work through their inventory and it will take them some time to do that,’ Williams said.”
From News 10. “With home sales slowing down, mortgage defaults and foreclosures are hitting record highs, and all indications are that the dark side of the housing boom could get worse.”
“‘The sky is not falling yet and if we work together, we can prevent that from happening,’ said Mary Harman from the California Association of Mortgage Brokers. ‘We are trying to provide solutions to correct things.’”
“‘There is a certain amount of responsibility that needs to be assumed by everybody in order for us to correct this and get the state to get back on the right track,’ said Harman.”
“California has the second highest number of foreclosures in the country, trailing only Florida. Some experts believe the problem is too many people getting into homes that they couldn’t afford.”
“‘People have gotten over their heads so the mortgage payment itself is higher than they can afford,’ said Mike Himes, Director of Homeownership Services for NeighborWorks in the Sacramento region. ‘Most of us heard, ‘Get into this loan and in two years you can refinance,’ but they don’t know what that really means.’”
I am waiting on the sidelines for the big CA housing crash. where the popcorn ?
The crash is already underway, but don’t get excited — it is probably another four years minimum to go until prices bottom out on the biggest price bubble in California history, and the avalanche is moving so slowly it would be more exciting to watch paint dry. Of course, it took Japan’s RE market from 1990-2005+ to even offer a hint of bottoming out, so the 2011 time horizon may end up underestimating the eventual duration of the correction.
Computers didn’t spit out information, whether we want it or not…
Back in ‘90
Ditto: gStucco
I think the Japanese history is very enlightening to the future of housing & the economy.
In the 80’s we kept hearing that the Japanese were the BEST stock market traders. {It is probably true now, for those that have survived their 20 year BEAR}.
I am most intersted in watching if our Central bankers head their own advice, which was TAKE THE WRITE DOWNS, let the bank fail.. So far they aren’t following their own perscription. The bankers are buying out the bad sub-prime loan companies, using their large debtor position, while trying to ” Contain their damage”, just as the Japanese did.
Problem for US banks, as I see it? Japan has & had a current account & trade surplus. We don’t
These bad debts should implode on one another.
Just think for every $200,000 default nearly $10,000,000 in nominal values are sent into the gravity black hole of implosion.
With only 3 months into the liquidity reversal, GStucco is probably right we are in the 3nd inning of a 3 game series.
“So far they aren’t following their own prescription.”
The right action was easy to identify when looking across the Pacific, but harder to face when it applies back home.
Jesus’s advice is applicable:
“You hypocrite, first take the log out of your own eye, and then you will see clearly to take the speck out of your brother’s eye.” (Matthew 7:1-5, NASB)
The Japanese model is a terrible one to use to compare to the current situation. Remember that in Japan, losing face is far worse than losing money. People who owe more on their properties than they are worth can’t admit it. Banks that have bad loans can’t admit it. Bond holders of those banks can’t even consider the possibility of anything being wrong. In Japan, the mere possibility that anyone in the financial system might lose face simply locked then entire system into a frozen state, where it remained for years. Now in America, the lender is going to the borrower five minutes after the payment is late and screaming “where is my f#$#%! money? And the shameless borrower simple replies “Forget it - I ain’t paying it and I don’t care”. Meanwhile, the bondholders are shutting the whole market down. My point is, things will move A LOT FASTER in the USA than they did in Japan. We’ll flush the toilet and the whole thing will bottom out in three years and then we’ll move on while the Japanese will be nursing their neorosis over the 1980’s well into the 2080’s.
I 100% agree, this is going to be a whole lot faster than with Japan.
Three years? Maybe. Its going to be scary when it really begins to correct. 2007? Not much of a correction. 2008? HUGE!
I’ve already seen people walk over $600/month. What the heck will happen when resets are significant and lots of foreclosed properties are returning to the market? This August with be interesting… but it won’t be until Fall of 2008 before we can buy.
And I’m sharing the popcorn.
Neil
Just keep in mind that for the 3 year correction to take place, we would have to have back-to-back 15% losses per year.
Such a loss would be so great that it would likely sink the US economy into another great depression. That would mean we wouldn’t climb out for 10 years anyway.
Everyone’s probably better off with a 5-7 year correction. That way, many keep their jobs, but houses get a heckuva lot cheaper in the meantime.
Chuck Ponzi
http://www.socalbubble.com
What most people don’t realize on this board is that their jobs will be nonexistant, and when the time comes, will no longer be interested in buying a house, just paying for food.
US crashes historically move quite quickly once they get going. We are in the early stages, just past denial. Give this one until 2008 until the denial phase is done, and panic sets in. Once panic sets in, things will move quickly. Prices will be led by bankrupt lenders liquidating thousands of properties, not greeds homeowners. Like in the 90’s crash, they will tough it out until the next time.
I think we’re just passing denial now. The MSM’s reporting of the “subprime implosion” (which they now rant about nearly 24/7) was when denial truly ended.
I’ve seen some light hints of panic in some areas, but nothing major. Wait until the “spring bounce” turns into a “spring thud” and then watch the fireworks.
You must be crazy to buy right now. Funny in Yorba Linda, agents are trying to “lie” and tell prospect at open houses about the market going up. Don’t be fooled by them. Only un-informed Asian foreigners are buying and its going to be a hard lesson to be learned by them. I feel bad because I am Asian and I know how mis-informed can destroy your assets. Yorba Linda, Placentia and Brea are looking at 40% hair cut. I want some Pop-corn too…
150K, agreed, but I would say 40% haircut in Brea & Yorba Linda is being generous. With those areas on the cusp of Fullerton, Orange and Santa Ana, once the illegals all lose their construction jobs, you will see crime take off. It will be like L.A. was about 15-20 years ago - lots of ghetto with a few upper middle class cities sprinkled in between.
Too bad for being ignorant. Let them catch the redhot knife if they have the money. It’s amazing how clueless the masses can be. Everyone I talk to is still in denial.
No denial here in Seattle, just pure cluelessness.
Me too - When will Bay area correct? More and more 2000 sq ft homes for 1 million+ coming on the market. Is there no end to this madness?
It took from 1990-1996 for the Bay Area correction to play out last time; so I would plan to keep renting until 2011 or so if you are serious about purchasing a Bay Area home at an affordable price.
“I would plan to keep renting until 2011 or so if you are serious about purchasing a Bay Area home at an affordable price.”
I’m afraid you’re right GS. If I’m tempted to buy before then I probably should throw privacy to the wind and publish the details of any offer on this site first. That way you guys can talk me out of it. Kind of like what AA does when a member is about to go off the wagon.
You know I think about this quite a bit. What prevents me from jumping in is the obvious downside risk. As this plays out over next couple..few…several years there will be a point in time where the downside risk won’t be so prevalent. in other words if we get past the worst part of this and still have some downside risk and I find a place I want I may be willing to take some loss for a few years. Of course how do you know if the worst is over???
My prediction is the Fall 2008 for the bottom in Florida. I can not see Florida hanging on any longer than that.
SKB
So what are you saying will happen after that? Are Florida prices going to start rising again in 2009? Personally, I bet they don’t rise in 2009, 2010, or 2011, so there’s certainly no hurry to buy. After all, even if prices are flat instead of falling, you’re still better off renting.
Jbunniii,
You called that right. Keep in mind until buying makes after tax sense versus renting, keep renting. The market will not turn up for years after we hit the “bottom”. So unless you want to throw money away, save the $2,000/mon in cash flow while renting. That is good money in your retirement account or down payment fund.
” Personally, I bet they don’t rise in 2009, 2010, or 2011 ”
I think you are correct albeit, maybe early still. I was just in the Oralndo area and they are building right now like there’s no tomorrow….There will so much inventory, and so much farther to go…then again, after this fiasco you may have a hrad time finding a bank in Fl. that is solvent with money to loan…
Lots of good rules of thumb have been offered here:
1) Don’t buy until median home prices are between 100-120 X median rents for comparable properties;
2) Don’t buy until median home prices are around 3X median incomes for the area where you are interested in buying (6X for California).
So, for instance, my wife and I rent for $2300/mo; the rental rule of thumb suggests not buying until comparable homes are priced between $230,000-$276,000 (recently selling for $500,000 - $520,000), while the income multiple rule of thumb suggests that, with a median SD household income of around $65,000, don’t buy until the median SD home costs less than $390,000 (currently around $500,000).
I would also suggest waiting until it is common knowledge that the economy is in a recession, which can always be detected in real time by a 2% increase in the unemployment rate off the cyclical low — IT HAPPENS THIS WAY EVERY TIME (with the possible exception of the early 2000s recession, which was interrupted by a housing bubble). In terms of the number of jobs lost, we are talking about a 2m+ increase in the number of people out of work. It may sound mean spirited, but this is the optimal time for an individual with patience, sufficient savings and/or job security to buy, as riskloves are either too financially strapped or fear-stricken to compete.
Forget the “6x for California” exception — it won’t apply after this bust.
In 2000 (according to Robert Campbell) it was 4.2x median household income for San Diego vs. 3.2x for the rest of the nation on average. Why wouldn’t it be 4.2x again?
Formerly at 210K for 2000 sq ft in 1997.
LOL… at best 350K and not 1M… yes even in BA
a 50 % or greater is needed.
“The idea is all the ‘dumb money’ is out of the market,’ … all these people wanting 100 percent financing (can’t get it).”
Then the market is dead in the water.
Don’t forget those who have or will have defaulted. They won’t be able to get back into the dance for quite a while. Their partners aren’t going to risk it.
Betamax -
Can you believe the stupidity and audicity of the quote — “The idea is all the ‘dumb money’ is out of the market” — you cited? That jumped out at me, too. Like a ton of bricks.
The ‘dumb money’ already in the housing market won’t filter out of it for perhaps an entire decade.
I guess Mr. Stark is referring solely to his real estate niche - finding greater fools to buy into a grossly over-inflated market.
I can only conclude that he’s surprised that the greatest fool made his way to his office sometime in 2006.
It should have read “the rate of dumb money entering the market has slowed.
But it hasn’t even stopped. And watch out when dumb money panics… But its not until despondency that the best deals are out there.
Got popcorn?
Neil
Just came back from visiting the daughter in Fresno. Seven or eight NODs in the paper per day. Only one out of eight have DOT dated before 2004. Still building like crazy. Now still building, west of 99 and Herndon (crap area in past) and east on 180 north of Selma. No equity in the F’Bs properties. Lenders biding $100 at the court house.Continuing advertising 100% loans . Let’s see what the shills in the Times ect say tomorrow. Good night to all.
Seems to me that we are entering the “fear stage”. Where is that graph again?
With teaser rate:
‘People have gotten over their heads so the mortgage payment itself is higher than they can afford,’
After teaser rate expiration:
‘People have gotten over their heads so the mortgage payment itself is higher than their gross income’
Taser Rate Explanation?
“Teaser Rates” refers to a mortgage that starts out with a low rate (”Finance $500,000 for $237/month!”) but adjusts upward later. Same as buying a car and paying “no interest until 2008!”
I must have been thinking of a more painful outcome…
The shock of the ARM resets
“‘Some buyers who are able to purchase are sitting on the fence,’ he said.” “Hickman said one buyer canceled a contract and walked away from his deposit out of fears about buying a home right now. ‘I think there’s a lot of misinformation,’ Hickman said.”
I think what he meant to say was “there WAS a lot of misinformation (when people were buying using a$$hat financing) now there’s a lot of INFORMATION.”
That’s funny. He sounds like an idiot.
“‘The idea is all the ‘dumb money’ is out of the market,’ said Ken Straw, broker in Lake Forest, using a slang term for subprime loans. ‘Right now, things are pretty quiet because … all these people wanting 100 percent financing (can’t get it).’”
The idea is that California residential RE is toast, as a majority of the “unaffordable” purchases made in the past two years were only possible with one or another form of 100% financing (including 80% w/ 20% “piggyback”). The silver lining: No more 100% financing = no more unaffordability.
GS,
The dumb money is very much still in play. My buddy re agent has a buyer right now with 502 FICO and over 10K in collectings, getting a loan funded from World Savings @ 100% interest only on a $550K purchase price in San Gabriel Valley (SoCal). Went into escrow just last week.
Sorry, should have been collections
Just watch.That escrow is going to be ground to hash and spit back into your buddy’s lap in about a week.
No way that closes.
That’s what i’m thinking. We’ll see, i’ll provide updates.
Agreed. From what I am hearing that below 600 credit score sub-prime paper is no longer wanted, especially with 100% financing. They will probably come back with a doc condition or funding condition that he pay the collections (knowing that he doesn’t have the dough), just so they can get out of funding it. They may also require seasoned bank reserves (at least 3 months payments), so either way he is probably screwed - or maybe saved from disaster without knowing it.
A housing collapse scenario written by a Realtor. Maybe the tide of opinion really has shifted:
http://www.safehaven.com/showarticle.cfm?id=7237
boy, he doesn’t mince words.
His forecast to me is frightening but could happen.
Someones bad is another good…
We hear how the market is turning bad.
But lets face it ….. it turning better and better each day..
This is all good…
That article got me shook up until I noticed he did not mention peak oil. We will never run out of oil. We will run out of cheap oil and the price of oil will accelerate, causing prices of necessities to accelerate, while real estate values will decline, especially suburbs, such as Queen Creek versus central Phoenix, or Palmdale versus Los Angeles. Yeah I will continue buying savings bonds, but I won’t stop buying precious metal bullion and oil stocks.
I looked again at the author. I searched for “oil” and “gas” in his little asset deflation essay and did not find those words.
For all of the California Central Coast Bubble Heads out there … I have started a new blog that can provide a forum for the very specific issues of San Luis Obispo and northern Santa Barbara counties.
http://centralcoasthousingbubble.blogspot.com/
It will likely be more of a forum than a true blog because I may only be able to post a couple times per week. I hope you find it useful.
Thanks Ben for providing the King of All Blogs and being the most useful source of financial discussion in the 21st Century (money is on the way)!
-SLO Bear
SLO Bear:
I am getting a ‘team members only’ message when trying to post on your new blog (using my Blogger account). Any suggestions on how to post?
I have adjusted the setting so that anyone can post comments - sorry, I am somewhat new to this.
“Most of us heard, ‘Get into this loan and in two years you can refinance,’ but they don’t know what that really means.”
People in the business, mostly Realtors, will say whatever they have to say to get you to sign on the dotted line. Combine snakeoil salespeople with clueless suckers and you get a massive bubble.
Watching the NAR commercials during the NCAA coverage disgusts me.
My former sales manager (B2B sales) used to put it this way:
“Your job is to separate your buyers from their money.”
I always remember this line when I’m the one doing the buying.
Except in this case they are seperating some far removed CDO/CMO tranche holder from their money.
Kahuna, perhaps at topic for another time,but I have to think there are alot of Asian MBS holder that are going to be none too happy. Will they take it lying down?
“‘The idea is all the ‘dumb money’ is out of the market,’ said Ken Straw, broker in Lake Forest, using a slang term for subprime loans. ‘Right now, things are pretty quiet because … all these people wanting 100 percent financing (can’t get it).’”
All of the “dumb money” isn’t gone.. just your method of Making money he “Old fashioned Way”…by STEALING It” is gone.
“While the changes in the subprime industry will have some dampening effect on the housing market here, it will be minimal, according to California Association of RealtorsChief Economist Leslie Appleton-Young and Christopher Cagan, chief of research and analytics at Santa Ana-based First American CoreLogic.”
Quote from Ms. Appleton-Young edited out of article: “I can’t wait to see the Easter Bunny next Sunday!!”
“35% of executives said they believe subprime problems will have a severe or high impact on the economy, hitting office landlords and taking away a group of buyers for homebuilders.”
Rhetorical Question: Gee, why at these inflection points is there always such a large gap between what real business operators are seeing in the trenches and what economists are prognosticating from behind their PCs? Let me get out a spreadsheet to analyze that one…
Simple– the economists missed the date for their plexiglassectomy–getting a window installed cause they got their heads so far up their a**.
“Agents say a reviving market made an about face in recent weeks either because buyers are being scared off by the bad publicity from the subprime mess or because they no longer can get financing for a purchase.”
“Those who have seen signs of a slowdown are disheartened since buyer inquiries and open house attendance seemed to have picked up after the first of the year. Thomas called the change ‘an about face,’ which he attributes mainly to fears about the market generated by bad publicity.”
The star is flagging, get me the fluffer.
“Agents say a reviving market made an about face in recent weeks ”
This rhetorical idea expressed above has been spouted alot by RE people. It is rediculous! After 7 years of insane appreciation and very little depreciation so far how can it be rationalized that the worst is over and now we will go back to double digit appreciation? I strongly believe ALL financial markets revert to the mean, so your 200-300% appreciation since 1999 should be more like 25%. So when your house which sold for 200K in 1999 is valued at 250K(plus 3-4 a year moving foward) we can talk (not the 600-700K you think it is worth).
Found price decreases today in West Ventura, Santa Monica and Venice, including 2 REOs and four “motivated seller” mentions.
lainvestorgirl, You seem to have good knowledge of LA area. I am in market now ( will be for next 1.5 yrs or more ) but wont hesitate if the deal is really good. My email is debo_nair@yahoo.com..If we can exchange some emails and knowhows that would be awsome. I am looking for home in Burbank, Toluca Lake , Glendale , Pasadena neighbourhoods… Thanks
“I am in market now”
You’re in the market NOW?! Dude, you’re hopeless. Scroll back to the top and read Stucco’s remarks on how long this will take.
I think I used the wrong words…I meant I am in the market “just looking at prices going down” and probably wont buy anything for at least 2 yrs or so.
If you want a house, I think you should be “in the market”, at least as far as watching what’s available, so when a decent deal comes along, you’ll know it. I don’t know Glendale or Pasadena very well, but I’ll e-mail you.
You said you hadn’t sold anything in LA. why not? Why not dump it while you still have a big profit?
Bernard Baruch might be able to enlighten you…
“Nobody ever lost money taking a profit.”
Even if prices go down by 40%, I’m still way ahead, and I’m making good cash flow, which is all I really care about anyway, not so much the price appreciation…I have good tenants in place, I already repaired a bunch of stuff and the stuff I haven’t repaired yet at least I know about. If I sell, I’ll have a bunch of cash, won’t have a clue what to do with it, and any RE I purchase will have 3X the property tax. Good reasons?
Executive summary: too much dumb money in RE.
You’d never hear a successful stock market investor say, “Even if prices go down by 40%, I’m still way ahead, and I’m making good cash flow, which is all I really care about anyway”.
A lot of dumb money out of real estate too, looks like.
Prop 13 is the only reason lainvestorgirl needs not to sell. And 1031 requires a turn around quicker than this market will tank.
If the dividend on the stock is high enough that it outperforms any other investment opportunities even with the decrease in price, damn right they would say it. As she said, she has positive cash flow on the home. If we think stocks are going to go down as well, and rents can be adjusted upwards with inflation, sounds like she has a good investment to me.
The only real concern is whether enough inventory is going to get dropped in her area that it forces rents down — enough for her to be cash flow negative. But if she can survive a 40% drop, I doubt that will happen.
IMO, metals are inflated, stocks are risky right now, the dollar you can wipe your “tail” with, so I can’t think of anywhere better to leave my $$ than RE, not that I would go in and buy something now, but I see no reason to tamper with good investments already made. Anyway, we all think prices are going down, I do too, but no one really knows for sure, or by how much, or when, so I’m not going to sell a money making investment based upon conjecture.
If you think metals are inflated right now, I think you’re in for a big surprise in the next couple of years. You ain’t seen nothing yet.
Don’t worry Leslie, the Easter Bubble Bunny is coming and he’s big, mean, and HUNGRY!
Once you take out the 100% financing here in the OC (which made up 80% of all loans in 2006), what are you left with?
Think Wallace and Gromit - The curse of the Were-rabbit
Where did you get that name “Leslie”? I know a Leslie who is looking for a house in this area.
You are left with the very rich buying whatever they want and paying whatever the going price is. This will drive the median price of sales in the OC higher and give the kool-aid gang more ammo to lie to J6P with. But it’s all blanks cause no one else will be able to get financing to buy the ever increasing inventory. At some point, and Get Stucco is on target here with his prediction of several years, prices will come down. Keep your powder dry and sock away as much as you can for your day is coming, but you will need to have cash to get in the game.
Classic Admission and Denial…
http://www.latimes.com/news/local/la-me-dry31mar31,0,4609263.story?coll=la-home-headlines
“‘The sky is not falling yet and if we work together, we can prevent that from happening,’ said Mary Harman from the California Association of Mortgage Brokers. ‘We are trying to provide solutions to correct things.’
“‘There is a certain amount of responsibility that needs to be assumed by everybody in order for us to correct this and get the state to get back on the right track,’ said Harman.”
A certain amount of responsibility that needs to be assumed by everybody? I wasn’t involved. This sounds like baleout talk. She and her cronies need to look in the mirror.
That first sentence is SO disturbing to me.
Yes, if we all come together we can keep this virtual economy moving up indefinitely. As far as I’m concerned, I fulfilled my responsibility by not being seduced by it in the first place.
Fortunately, the forces at work here are immutable. What is said is irrelevent. At best a bailout will put off the inevetible for a short time, and is likely to suffer from the law of unintended consequences.
Virtual economy….makes me wonder how long until the masses start speculating on virtual real estate in games like Second Life?
This really bugs me too…
“‘There is a certain amount of responsibility that needs to be assumed by everybody in order for us to correct this and get the state to get back on the right track,’ said Harman.”
Assumed by everybody?? I’ll stick to being irresponsible by continuing to rent and save. I don’t remember having a civic duty to facilitate someone’s move up home purchase or to fund their retirement by buying grossly overpriced RE!
Dream on, Ms. Harman.
“There is a certain amount of responsibility that needs to be assumed by everybody in order for us to correct this and get the state to get back on the right track,’ said Harman.”
I had to move away from California because of the irresponsibility of the fed and the REIC, and now you want me to bailout the losers? F##k you, Ms. Harman! You and your kind should be hanged from the nearest thing able to support the weight. I’ll buy the popcorn!
Yes I moved away also for the same reasons. Ms. Harman should pay up if thats the way she sees it. That will be the day.
No sh@#!
Here in Oregon, we have $5-700k homes that we must try to purchase $40k salaries because of all the CA locust. It would be insane to provide any false support for such inflated prices. They must crater or the whole western U.S. will continue to be ruined by CA phony money.
Ah…
The joys of being an intrastate California equity refugee~
http://www.latimes.com/news/nationworld/nation/la-adna-calif1apr01,0,6696549.story?coll=la-home-headlines
What, like some other Californian is going to bag on me?
What the el times was really trying to say was…
Please stay put, don’t leave.
great article about how ex-californians are messing up other states. now people in other states understand how those of us who grew up in orange county, calif. in the 50s and 60s feel about having their area get trashed. it’s not bad now and i still live here, but it sure seemed alot better here when there were fewer people
Talking California
I’d guess very few of you know where the name originated.
http://en.wikipedia.org/wiki/Origin_of_the_name_California
“Know that on the right hand from the Indies exists an island called California very close to Earthly Paradise; and it was populated by black women, without any man existing there, because they lived in the way of the Amazons. They had beautiful and robust bodies, and were brave and very strong. Their island was the strongest of the World, with its cliffs and rocky shores. Their weapons were golden and so were the harnesses of the wild beasts that they were accustomed to domesticate and ride, because there was no other metal in the island than gold”
From the romance novel of Spaniard Garcia Ordonez de Montalvo, written in 1510.
For many centuries afterwards, California was shown on maps, as an island…
All because of a Romance Novel.
History is cool.
“it was populated by black women, without any man existing there”
From the romance novel of Spaniard Garcia Ordonez de Montalvo, written in 1510
Bugs Bunny: eh, What happen?
Got carrots?
“‘The sky is not falling yet and if we work together, we can prevent that from happening,’ said Mary Harman
Get REAL Mary.
Your Golden REIC parachute is all tangled up in a major TOTAL Malfunction with your Reserve chute and you are SCREAMING into Terra Firma without a Prayer baby.
What’s that “we” sh*t, Mary?
Not to mention the “yet” sh*t.
That’s a very reveraling statement from someone from an association of mortgage bankers. I’ll leave you folks to figure it out.
LOL
Some of us are COUNTING on all hell breaking lose Mary, count me out for the “help”.
“California has the second highest number of foreclosures in the country, trailing only Florida. Some experts believe the problem is too many people getting into homes that they couldn’t afford.”
Do people actually pay these “experts” for this kind of dribble?
I thought I was the only person in CA with less than a 250K annual salary
Where were all these “so called” experts when it mattered?
what do you do to earn that much ? Im curious…
Not even close - I feel really left out.
There are not that many who earn much over 100K, much less the income required to buy anything in OC or San Diego.
On an unrelated note, did you know that when you hear about people dying in “gun violence” that it is NOT the gun that actually killed the person, but the BULLETS!?!?!?
Wow! I had never known that people were foreclosing because they could not afford the house, I thought it was that the mortgage payment got lost in the mail, or they just plum forgot to pay it.
My bone to pick is with the FICO people… I am starting to question there un bias “fairness”.
Seems to me you can be best at paying your bills in the world and if you are from any Mid west states, I have a suspicion you are clipped some of the points.
On the other end of the coin, a Caliaforacator gets a bump up because they have the CA on the address.
There just is NO way these guys on the coasts and FLA could get away with this without FICO help. There scores would or should have been toast after the 2nd, 3rd home flip,….. not even counting the 2 home set, the ones that bought before selling the first.
anyone else have this feeling about FICO scores?
You are absolutely right. I moved into the 92130 zip code and it appears to have helped quite a bit.
The PPT doesn’t want higher farmland prices in flyover land, something about keeping ethanol affordable, trade balances, that sort of thing.
Or maybe they deduct points for every grammar error on the credit app
I’m tired of reading about how the “buyers are evaporating” due to tightening credit standards. Truly, these are wishers, and not buyers. Anybody can wish for a house, but that doesn’t make them a buyer.
As we all know on this blog, a real “buyer” is someone who is ready and able. If your credit, income and cash reserves are so low that you cannot qualify for a loan, then you are not a buyer.
A Great Californian you’ve never heard of…
http://www.nps.gov/seki/historyculture/clyde.htm
OT, but cool– from that era of ‘real men’. No pansy ass ultra light weight titanium cookware, packs & stuff. Dehydrated food? yeah, maybe the jerky, the rest in cans!
thx
I still say allot of the housing boom was because of all of the mass invlux of forigners into our country, both legal and illegal. They brin g with them some very extreme and risky business practices. in order to survive in India, Pakistan and Latin America too survive risky business practices are much more common place, plus loans like we have in the USA are un-heard of in the third world. Right now I belive the forigners are the only ones that are still buying. The English speaking Americans are now fully aware of the problems in real-estate and are sitting on the fence, but the immigrants are not and that is why meny lenders and developers are still trying to loans to this group, case in point Bank of America will now give credit cards to illigal aliens, no soc. sec. no. required.
I did not know illigal aliens are putting houses on their credit cards
how many can you put on each card?
My think-tank group is convinced that those ‘illegals’ with be legalized to save the market. When evrything is going down ,what better solution than to have 30 million new happy buyers come out of the darkness…They new term from the administration is ‘migrants’ no illegals, or immigrants. How will the machine turn when theyt is tons of inventory sitting? If I didn’t have my tinfoil hat handy I would almost say it was part of the plan. 2 million vacant homes , a new wave of buyers…goodnight Gracie…..
How do you give the 30 million new “citizens” a $100K+ salary?
they’re not gonna save the market on a dishwasher’s wages, even if there are 100 million of them
Six to a house. When all of those McCookieCutter houses fall in price to their intrinsic value, it will be no problem to buy one on multiple salaries.
Brad, I don’t like the possibility of it,but they are already doing it with 10-15 per household. The market only cares about money flow. It dosn’t care where it comes from, or who it destroys.
“new happy buyers come out of the darkness…”
Illegals have been buying on no doc, stated income, 100% financing for a few years now. And being foreclosed as well.
“migrants”?? sounds like Rovian spin. Legally, immigrants refers to those who have followed the law and have legally been admitted to the US. By definition, any person who has jumped the border, overstayed a visa, crawled out of a tunnel, etc., is an alien. There is no such thing as an illegal immigrant, only illegal aliens. The effort to attach the word immigrant to those aliens, is an effort to make criminals more acceptable.
How about 20,000 HUD/FHA loans going to illegal aliens in Denver alone, and most of them end up in foreclosure.
http://www.denverpost.com/search/ci_4228048?source=email
Yeah, before foriegners arrived on US shores, americans never speculated in real estate or stock…
Sarcasm off? Read here about the Father of our Real Estate Speculators…
“Washington As Land Speculator: (Top)
Building a Gentleman’s Estate”
http://memory.loc.gov/ammem/gmdhtml/gwmaps.html#TOP
“The English speaking Americans are now fully aware of the problems in real-estate and are sitting on the fence,……”
Uh, no…too broad a stroke here. There are plenty English speaking Americans still drinking the Kool-aid, or are suffering from a hangover and don’t remember (or care)why they should “just say no”.
BayQT~
“Agents say a reviving market made an about face in recent weeks either because buyers are being scared off by the bad publicity from the subprime mess or because they no longer can get financing for a purchase.”
Another fine example of how the media is undermining the hard work realtors are contributing to our economy… Give me a freaking break!
sorry about the typo, should be influx and many.
Home sales run hot, cold
LOS ALTOS STRONG AS EAST SAN JOSE, GILROY LANGUISH
http://www.mercurynews.com/ci_5564641?nclick_check=1
For you home gamers: Los Altos=Ferrariville, East San Jose=Low Riders& Gang Bangers, Gilroy=Stinky Garlic town with heat and major attraction outlet mall.
The last ferrari shop went of business in Los Gatos a few years ago due to tax problems and low sales. Not an official retailer. They sell Bentleys now. The San Francisco ferrari shop moved to Mill Valley.
There was a exotic car shop back in the 80s called Jim Loose Imports but they went of business.
I do recall many buying ferrari back in 1999, but many were sold back as consignment sales. New owners couldnt maintain the cost of ownership and the recession wipped out weatly effect.
Over the many years I lived in the South Bay, I would say there are a few here and there. Much less than SoCal which has much more.
The same is try with East San Jose, There were many more Low Riders back in the 70s than today. Its all Toyotas in Palo Altos to San Jose.
It may also be that the Ferrari guy (if it was the one in downtown Los Gatos) finally went to Federal prison for laundering money for the Mob….
At least, that was the rumor when I was dating a girl from LG in the early ’90s…
–Shannon
Yes…. good old Brian B…
Yes interesting article. But has one problem…
People moving closer to work is the short of it.
Problem here, where will work move to next …
As company leases expire, 3-5 years leases, many companies move to other cities. So if moving from Fremont to Palo Alto makes sense today because employer is in Palo Alto, it wont make much sense if employer moves to Fremont in 3 years. This is a pretty typical move in the South Bay. Baracuda Networks moved from Sunnyvale to Campbell… they got a better deal on a lease.
They will have to move to India and China soon.
Actully their jobs will they get a pink slip.
Its happened before with mfg in Silicon Valley.
Cutting R&D was a sacred cow so mfg was the first to go.
But as we see no longer a sacred cow…
Thats why we have so much more vacant commercial space available.
It will never be occupied and better off converting to residential.
But But we have no more land to build on… RUBISH
March 9 (Bloomberg) — The nation’s banks are just beginning to feel the pain of defaults on risky mortgages they made at low introductory rates when housing prices were soaring, U.S. Federal Reserve Governor Susan Bies said.
Bies, who has been the Fed’s top banking policy official in her tenure at the U.S. central bank, said today banks are likely to see more missed payments and foreclosures as consumers with weak credit histories begin to face higher monthly mortgage payments.
“What’s happening is the front end of this wave of teaser- rate loans that are coming into full pricing,” Bies said at a risk-management forum in Charlotte, North Carolina. “So what we’re seeing in this narrow segment is the beginning of the wave. This is not the end, this is the beginning.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqAAwB04dV.k&refer=home
According to the OC Business Journal:
“35% of executives said they believe subprime problems will have a severe or high impact on the economy, hitting office landlords and taking away a group of buyers for homebuilders.”
I wonder what they meant by having the subprime implosion impacting office landlords? From reading between the lines, it appears that the whole subprime complex is fast going out of business, leaving tons of vacant prime office real estate for lease/buy?
Sometime in 2005, I thought about renting some office space, but I balked at the high asking prices (average $30/sq. ft.) in South Florida. (Granted, this was prime office space in Downtown Miami/Brickell. I could have looked elsewhere, and probably have found rates 2/3′rds or half that.) I also looked closely at Regus office solutions, and may eventually settle on them if office rents do not improve.
Now, I wonder if office space rental rates have taken a turn towards lower rates? (If they haven’t already.) Would office space eventually rent for under $10/sq. ft. in South Florida, or is that just still a pipe dream?
I agree that immigrants are the only people buying homes in the Cupertino area. When I went to an open house, all the people who came are foreigners and afterwards got a call from realtor saying that the home went for $50K above asking. Don’t know how long this will last.
I’ve said it before, the biggest demographic change resulting from the bubble is Latino ownership of LA, south of the 10 that is.
Cupertino is mostly Asians… but no matter.
There is no magic potion which will make
Cupertino immune from a downturn. The new buyers too will learn the hard way what an economic turn looks in Cupertino.
Last we forget it was desirable since Apple, Tandem, and few others had their HQ in Cupertino back 20 years.
But since then much of the business died (Tandem and many others) and layoffs over the decades with no expansion today in Cupertino, you hardly hear that as the reason for desirability.
Today it would get you a miracle to work for a Cupertino based HT company. You need luck!
Realtors now use the schools as being the driver of desirabilty. They dont want to even touch HT due its volitile nature. Regardless if the parents can even get a job down the road… Jr will go to Cup school… not to mention it all on a curve…
Based on a grading scale… a “C” student 20 years ago would be a “A” student today. Thats progess in Cupertino folks.
You got to laught…!!!
“When the buyers went into escrow on the purchase of two homes in Placentia, the lender required that they have three months of loan payments in the bank. Now, the lender wants the buyers to have a six-month reserve before approving the loan.”
What happened to Mortgage Insurance?
Didn’t all of those mortgage insurance companies go out of business when the “new era” mortgage lenders made them unnecessary?
I’ve posted this before but here is an update on “the empty house next door,” a microcosm of all that has going wrong in the RE industry. This is in the IE of So-Cal.
1. The next door neighbor bought a new home before selling his old one, and confidently told me the day he moved, I think it will sell fast for 720k.
2. The house has been for sale for over one year.
3. But, you wouldn’t know it, because he just re-listed it today for the 3rd time, a practice the local MLS apparently has no problem with.
4. The seller is also his own RE agent, as is every other person I know.
5. Despite all of this, he has dropped his asking price by a mere 7% to 668k.
6. It has gone into escrow twice, and both times the buyers could not qualify for a loan in this ever-tightening lending environment.
7. He remains screwed.
Reverse wealth effect… got to love it. Any gains is being drained
away fast.
I’ve seen several homes in my area relisted on the MLS with a new listing date too. RE is such a sleazy business now.
if you’re working with a knowledgeable agent, he/she (at least here in orange county), can get the total time a property has been on the market (and at what prices) by checking it’s listing history. also, if you’re working with an agent, make sure that they verify closing prices with the county recorder because occasionally a sales price is reported incorrectly in the MLS (usually higher than the actual closing price)
“What happened to Mortgage Insurance?”
Oddly, it seemed to have gone by the wayside with the advent of 80/20 piggyback loans, which is perverse, as mortgages with 100% LTV are more likely, not less likely, to go into default. One could argue that the primary (80%) lender was protected while the piggyback (20%) lender, in principle, could have charged a sufficiently high interest rate to self-insure against the risk of default.
Random OT question… Neighbor just bought a house (I tried but… ) Anyhoo. He got a 10/1 ARM, not I/O, fixed for 10, then adjusts yearly… I didn’t wanna pry so I’ll ask here…
Why would someone get a loan like that, when a 30 yr *fixed* loan has a lower rate? (Chase did the mtkg, I looked up their rates) Anyone? I don’t get it… easier to qualify? thoughts?….
which loan paid the broker the highest commission would be your answer, I would think.
It is a well known fact that many of todays immigrants Choose riskier or “suicide loans” when they purchase property. I have read about it many times in the last year on this blog and others. I don’t know if it is that these buyers are just less informed about their choices, but it is often described as their realitor who guides their buyers to brokers that push the suicide loans.
My own take on the matter is that many of the immigrant buyers are not fully aware of how they are financing their purchase and they are very willing to take on large amounts of risk. East of west I would agree with you that their is a drive to legalise the illegal aliens for some sort of pay off. cheap labor, profit from the needs created in a huge spike in the population. The botom line is always $$$$$.
the big subprime story for tomorrow:
http://www.nytimes.com/2007/04/01/business/yourmoney/01nova.html?_r=1&oref=slogin
Excellent article, thanks for posting. Shows how this chicanery has been going on for years and is not just a recent phenomenon.
Novastar should get a further drubbing this Monday.
So it is the lawyers, fighting it out, that will even the score on much of the deceptive/loose lending practices. I would prefer this route than a gov. bailout where my taxes have to pay. I take back all the lawyer jokes and associated trade badmouthing I’ve been reponsible for all my life. Anybody know why the lawyers did not do a better job of taking care of things in the S&L crumble? Is there any validity in comparing gov bailout in S&L vs. today’s Mortgage fraud?
Only 142 comments? Where are all the CA RE news junkies?
There’s a lot here about poor illegals buying, but what about wealthy Asian immigrants? I think they’re responsible for propping up the prices in SoCal, esp. OC. Why haven’t median prices gone down in some of these areas? It’s because of wealthy Asians still buying.
And when poor Latino immigrants buy a SFand then cram 15 people into it, whatever happened to zoning laws in CA? How can they do this without violating zoning laws?
The laws are very liberal about how many people can fit into an apt. or house, they don’t want to seem racist. Actually, the worst thing that goes on in south central is putting two houses on a small lot - they just plop a second house in the back yard to fit more people, then there’s no open space and of course parking becomes an issue since the garages immediately get converted.
I heard part of the plan to legalise the illegal aliens will be the option to join the military for some number of years and you and your family become legal. Yes, our tax dollars hard at work.