Bits Bucket And Craigslist Finds For April 21, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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I have received a lot of e-mails recently wondering where Paladin is and if everything is O.K. Rest assured all is well. The meltdown of the sub prime lenders has accomplished 50% of what I planned to achieve. The other 50% of my work is now best handled below the public radar and that is all I can say at this time. I wish I could share more with you today, because keeping you all informed is the most fun for me. Please rest assured I have a journal which I will link to Ben’s blog at the appropriate time, probably in mid to late 2008.
You may still send me e-mail reports of mortgage fraud, particularly in CA and I will do very good things with them. Until I can say more, keep the faith. Fascinating events are happening on many different levels which will make you all very proud. Blog on…..
Paladin
Have Gun Will Travel
Wire Paladin San Francisco
PaladinReports.com
Great to hear, Paladin. Wish we had someone like you in Florida. dimedropped is on top of the appraisal fraud here, though.
Take Care
Paladin,
Now I can finally have some sleep again…
…at least if your the real Paladin…
Richard Boone was the real Paladin. I am just a cheap knock off looking to carry on in his tradition!
Paladin,
How odd…..I was wondering about you this morning while I was reading yesterdays’ posts. I’m happy to hear it is going well for you. I’m doing my little part in getting fraud info to the Bexar County Tax Appraisal District (San Antonio). “Snitch” is not something I want on my tombstone……but, hell, if I pay my taxes, these cheats need to chip in as well. I’m talking about people who build their manse and somehow keep the RE docs off the deed records so that they stay under BCAD’s radar. So far my efforts have snagged and bagged two of these cheats on my street in the last couple of months. And please (certain) folks, don’t jump on me about how screwed up taxes and govt spending are……I know, I know.
You know, if the authorities would just start a web site, let people report to it, and then publish suspect transactions and place calls to the suspected participants, it would scare 90% of the fraudsters out of the business and prevent a lot of crime. However, the strategy I see is the authorities all act in secret and stay low, building cases against the felons over a period of months and years, so they can put them away for long periods of time at a great expense to the government.
“A stitch in time would save nine”. I wish they would let private enterprise handle it. The majority of mortgage fraud would end tomorrow if I was in charge. Then we could focus on the few really bad criminals.
“A snitch in time saves nine.” - Ben Jones Franklin
Paladin .Good to see a post from you . I was wondering if the right agency knows that the builders are making borrowers go to their “special lenders” to get incentives and price reductions? IMHO this practice reeks of funny business .
keep up the good fight Paladin!
It’s great to hear from you and I had hoped things were going well. I suspect your investigation will uncover large scale market manipulation much like the energy market manipulation strategies that were discovered in CA earlier this decade. I’m really looking forward to hear about everything you uncover.
What is Paladin’s project that he is working on ?
Uncovering and reporting mortgage fraud. He was the first poster (and perhaps the only) to persist until he made first-person contact with authorities, at the federal and local or state level, who care about and have the authority/portfolio to pursue such fraud.
Paladin,
Any progress on the Indio cases? If you recall, about 10 homes worth 400,000 were suddenly going for 585,000 within about 6 weeks of other. Coincidentally, all owned by the same property management company.
Nothing was selling here before or since. Stinks to high heaven.
Paladin-
Based on what you’re doing, do you think that any of these efforts by the government to prop housing prices up (Fannie/Freddie buying subprime, the new FHA loans, etc.) will work?
AAAccchhhh, I hope you can answer this!
I believe the events leading to the housing bubble, which peaked in mid 2005 caught many by surprise (except Ben’s bloggers). Yes, the bubble was driven by greed and stupidity on many levels, but it was a “perfect storm” created by multiple factors. Never has a housing market peaked without fundamental economic factors creating the change in direction….until 2005. I believe a lot of people are concerned that housing has peaked with the economy still firing on all “8 cylinders”. If the housing market downturn now leads us into a recession, the downward pressure on values is just getting started. Katy bar the door.
I don’t think Fannie and Freddie are trying to prop up values as much as I believe there have genuine concern for 2,000,000 FB’s who bought in 2005-2006.. While the government and the agencies may try to save them, it is really water under the bridge at this point. You can not underwrite $500,000 loans with $350,000 assets, no matter how meritorious is your desire.
I do believe there is going to be a huge backlash against Wall Street, the “specuvestors”, and the mortgage brokers in the coming years. When the bag holders get burned for $200,000 per house, it is very worthwhile to get an investigator and a law firm to spec some time chasing down the perp and making them pay: economically and legally. If this market takes another 20% drop, the perps will fry on a large scale from the influx of private industry solving the disconnects in this market.
The current law enforcement agencies are overwhelmed at the moment. Luckily, time is on their side and the statute of limitations runs for a long time. The paper trail is easy to follow for mortgage fraud. Sellers, mortgage brokers, straw men, appraisers, lenders, real estate brokers…they all have their names on the line, in recorded documents. Just because no one cared in 2004 and 2005, does not mean the perps will not be fried in 2008 and 2009 when so many FB’s and bag holders are coming to terms with their personal and economic losses. There is already a huge industry set on retribution. One more step down in values and there will be hell to pay. Heaven help those who committed fraud. The FBI, IRS, IMARC (Google it), Dog the Bounty Hunter….they will all be working to find you for the $200,000 they can hang on your ass.
It will be an interesting time during the next 24 months as this all plays out.
Thanks, Paladin! Glad to hear all is well with you. Keep up the good work!
Washington, VA, MD numbers via ZipRealty:
1/17 - There are 45,595 homes for sale in Washington D.C. Area
4/21 - There are 55,616 homes for sale in Washington D.C. Area
+10k in about 3 months! Wheeeeeeeeeeeeee.
Looks like the spring selling season has morphed into the spring listing season………unbelieveable numbers.
Phoenix too. We’re about to punch through 60,000!
01/31: 51,913
04/21: 59,667
You beat me to it. We’re up about 400 on the week. I originally thought we’d cross 60K in June, but May 1 is looking more and more likely.
I distinctly remember someone in the Arizona market (Ben,Chick AZgolfer?) post around a year ago when listings were in the 20’s or so and predicting they would break 50K…Well it went through that some time ago and now its above 60K…Hazard a guess where it will be by year end ??
Inventory is rocketing higher all across the country. Over at Hardtack we are going to break 1.8M single family homes on the market a little later today I would guess. I would have thought that the climb would have leveled off by now, but it has yet to slow down. As noted yesterday some areas are seeing some large drops in price per square foot. This will only get more interesting as the year marches on.
Locally, i have seen 2 more houses in my area sprout For Sale signs in the last week. The 3 that are (in theory) already sold have not yet taken down their signs. I wonder if the deals are hitting funding snags.
San Diego County’s ziprealty.com inventory (SFR+condos) broached 17,000 for the first time in 2007 only last weekend, and today it is up to 17,404. The 400+ one-week increase in inventory is double the increase rate of 200 homes/week for the ten week period following Jan 31. It looks like the spring inventory dump season is really heating up!
P.S. Inventory was right around 15,000 on January 31.
GS,
I’ve noticed just in the past two weeks, a greater amount of inventory coming on. In O’side, you should see all the foreclosures & NODs coming on line. IMO, this is the bottom of the SD pyramid, & we’ll see thing ripple out from there (and other lower-end areas).
The next couple of years will be interesting, indeed!
The ads appearing on Ben’s site still crack me up. I realize he has little control over the content. At the top of the page I see “$310,000 mortgage under $999/mo.”
Irony is the spice of life…
What are ads?
“$310,000 mortgage under $999/mo.”
If it were a zero-percent-interest loan, you could pay off the principle balance in 310 installments = 26 years. But something leads me to suspect that, despite the lax lending standards which still seem prevalent, there are at least some interest payment requirements.
I just got back from a week’s vacation in Costa rica. The property values down there are insane. Their taking the gringo’s for all their worth.
I know I’ve mentioned this before. I have a lot of people retiring in the next 9 yrs - say half of the faculty of my dept which is big.
2 have already bought out of the country down south and another in China.
Gwynster;…Arn’t you around Davis ??
Yep >; )
I am thinking about moving there…Possibly Dixon now that the race track got defeated…Either there or near Chico….Got to be close to a Uni…
If I were looking to relocate (I came damn close to it) and I needed to be near a Univ, I would not stay in CA. On a prof salary of 63k, you could live like a king almost anywhere else - NY, Mass being the exceptions. If you need nice weather and liberal research environment like me, look at NC research triangle. If I had a job offer for what I make here, I’d have the car packed tomorrow.
http://www.kansascityfed.org/publicat/TEN/PDF/Spring2007/Spring2007TaxingWay.pdf
This article is in TEN, The tenth District of the Federal Reserve. It’s about future tax increases for the middle class. Defined in the midwest as $40,000-$70,000.00 in adj. gross income.
Under current law, federal income taxes for those with children will double from 2004-2013. Almost ditto for the elderly without children. This is a must read.
Thanks kckid!
The feds are going to take it all, one way or another.
Nice dig
Quick question for the Florida guys. Friends of mine are seriously overpaying for a house and are closing this week. They don’t want to share with me the appraisal report.
Is the value that I see on the PB County Property Appraiser’s website reflect the new appraisal value or the sales price? Also, with the SOH, is their taxes based on the new appraised value, slaes price, or what the PB County appraiser values the house at. I ask this because wht if they buy a house worth $300k for $500k or vice versa. What is the tax based on?
For this example, the appraiser’s office values the house at around $380,000 and the taxes are about $7k. They are buying the house for $480k. Does their private appraiser’s number show up anywhere or is it simply for the purposes of obtaining financing.
If you want to stay their friend maybe you should back off and wish them the best. In that they are withholding from you the appraisal report suggests to me you’ve already told them what they need to know. It’s up to them to listen or not.
I seriously doubt the appraisers website would know or update to the actual sales price. I don’t know florida law so I won’t answer what state tax will be based on. In any case, with a market like this one, and ESPECIALLY the market in Fla, appraisals are just a formaility anyway.
But if apprased at 380k and they are buying at 480k, unless they are paying cash I’d be surprised if their lender didn’t have something to say about it.
Nobody has chimed in so I’ll take a crack at your inquiry.
There can be up to four sections of the County Property Appraiser’s Report posted on the website which show: 1) Sales History 2) Appraised Value 3) Assessed Value 4) Taxable Value. Some websites consolidate Assessed Value and Taxable Value into one section.
The Appraised Value is the value as determined by the county property appraiser and NOT a private appraiser. The value generated by a private appraiser is used in obtaining financing. More often than not there is a material difference between the values generated by the two different appraisers. The county property appraiser’s value is usually lower (significantly) than a private appraiser’s value in a rising market (especially when private appraiser fraud is prevalent in the market).
The Assessed Value is the value of the property taking into account any applicable SOH benefits. The difference between the Assessed Value and the Appraised Value should be the SOH benefits. SOH caps the increase in the initial assessed value to 3% per year. The starting value should be the buyer’s historical purchase price of the home.
The Taxable Value is the Assessed Value less any Homestead Exemption ($25,000 in Florida). The Taxable Value is the tax basis for applying the tax rate (millage) which is determined by the local county authorities.
It is my understanding that at the time of purchase the Sales Price, Appraised Value and the Assessed Value should be one in the same. After this point in time the values diverge due to physical depreciation, improvements, market changes, and SOH benefits as applicable (Mike Fink begins to pull out his hair and Palmetto gets a smile).
I am not a tax expert by profession but have been following Florida housing for a while. Hope the above is useful and invite anyone to correct any mistakes or fill in any holes in my explanation.
I’m in central Florida and watch tax changes, including those for the property I cashed out of. IMO, it is very likely, but not certain, that the property taxes for the property you describe will rise, and probably in proportion to the 480/380 ration of sale price to current valuation. If I were to take a swag at it, I’d guess their taxes will be around $8,600 IF the sellers either bought the property since 2004 or had not claimed homestead on it (meaning no SOH). I base that on my area’s effective 1.8% tax on the sale price, which is pretty reliable here.
Tax assessors miss, or goof on, an inexcusable number of reassessments, from what I see. The buyers could skate, but I don’t think it likely. One thing you can count on is that tax assessors will not be conservative in their assessments because they think prices will be lower next year. All of this is non-professional opinion, based on a fair bit of observation. The biggest caveat is that I don’t know Palm Beach County’s millage rate or assessment practices.
Lereah’s new book. Really. http://www.randomhouse.com/doubleday/catalog/display.pperl?isbn=9780385519229
ha ha ha ha ha ha ha ha!!!!!!!!!!!
a Random House Book … there’s no way you could make something like this up
one problem, if you can’t see an oil rig in your hood, you’re going down
–
David Lereah, the chief economist of the National Association of Realtors, distributed “Anti-Bubble Reports” in August 2005 to “respond to the irresponsible bubble accusations made by your local media and local academics;”[20] among other statements, the reports say that people “should [not] be concerned that home prices are rising faster than family income”, that “there is virtually no risk of a national housing price bubble based on the fundamental demand for housing and predictable economic factors”, and that “a general slowing in the rate of price growth can be expected, but in many areas inventory shortages will persist and home prices are likely to continue to rise above historic norms.”[21] Following reports of rapid sales declines and price depreciation in August 2006,[22][23] Lereah admitted that “he expects home prices to come down 5% nationally, more in some markets, less in others. And a few cities in Florida and California, where home prices soared to nose-bleed heights, could have `hard landings’.”[24]
http://en.wikipedia.org/wiki/United_States_housing_bubble
“Appraiser: Local Fraud rampant”
http://www.bakersfield.com/619/story/124590.html
“…The FBI estimates that mortgage fraud losses total between $1 billion and $4 billion a year…”
Crispy, this is a laughable figure. My basic calculations suggest that there are over 80,000 (1%) transactions per year with major fraud of $100,000 or more. That is $8,000,000,000 and I am being conservative.
No one cared about mortgage fraud when there were GF’s all around to bail out the bag holders. Now that the bagholders are facing huge losses, they are unleashing the private bounty hunters on the fraudsters. $8 billion in fraud and they get 30% of everthing recovered? Beats chasing crack dealers jumping bail! What was “easy pickin’s” is about to meet a p!ssed off wall street bagholder.
Agree! $1-4 billion is a joke!
Wonder how I could become a private bounty hunter. ?
“Neddie” showed up unannounced yesterday to announce that “maybe the next bubble will be in the stock market.” Excuse me, but wasn’t that the last, as well as the current, bubble?
He also said: “Maybe those central bankers have a plan to save housing afterall…”
It is not a plan to save housing. It is a plan to put the top 1/2% of the wealth distribution, who own the vast majority of stock shares, on inflation-protection life preservers, while letting all the little people sink in a sea of negligible annual pay increases denominated in an inflating fiat currency.
Hear, Hear
I was watching the market last week in disbelief. Are we seeing the PPT in overdrive or are investors just that dumb?
Supposedly M-2 growth has exploded since the end of February per a guy referenced on Minyanville on Friday.
Federal reserve estimates for M2 growth from Feb to Mar is 104 billion. It’s the biggest growth in M2 in one month from at least as far back as Jan 2005. I didn’t search further than that. The nearest neighbors in growth were a couple of 60B months.
Speaking of an inflating fiat currency, I just went to the frocery store this morning. Holy crap! Prices are up, up, up in just about every aisle.
I’m starting to think those gold-bugs are onto something….
Yep. Where I used to work, along with your basic family economic data we’d ask questions like “what is your monthly grocey bill?” “did you have to use a credit card or other charge account to pay for groceries you otherwise couldn’t afford within the last 6 months?” etc. They just finished interviewing their 1st cohort. I still have lots of contact with them. I can’t wait to see the data on C2 and the annual population data for 2006-2007 next year.
We were astonished during a family trip last week to see $4/gal+ gasoline for the first time of our lives (in the Sierra region near Yosemite).
$4 a gallon ,and summer season hasn’t started..just wait til they accindently have to shut down a few refineries for safety, er, maintenance, I mean profit increase procedures.
Speaking of ziprealty.com above…I’ve watched their ticker rise faster than a bay area gas station on a holiday weekend..
http://tinyurl.com/2jcads
No more fixed rates in UK?
http://tinyurl.com/2jh5dk
“This week, 11 lenders have increased the rates on the fixed deals by up to 0.30%, according to financial information firm Moneyfacts.”
Whowie Wow Wow!
Last one out of the dollar?
http://tinyurl.com/3xd7sp
Has the Fed decided to abandon the dollar in the interest of maintaining the Greenspan put policy during its namesake’s retirement years?
No. The Fed is implementing the the new policy known as the Bernanke Bid. Meet the new boss the same as the old boss.
Off topic: Campaign for a commercial free childhood - “We support the rights of children to grow up – and the rights of parents to raise them – without being undermined by rampant consumerism”
http://www.commercialfreechildhood.org/
But on topic is a book available on your site: Looks like its right up our alley
Psychology and Consumer Culture: The Struggle for a Good Life in a Materialistic World
Edited by Tim Kasser, PhD, and Allen D. Kanner, PhD
Just turn off the TV. It works.
Good site, SD Misfit. Thanks!
20 Months Ago…. Wall Street Journal, August 23, 2005
Foreign investors support US housing bubble
http://infoproc.blogspot.com/2005/08/foreign-investors-support-us-housing.html
Zhu Kai, who helps manage U.S. dollar investments at Bank of China, says in a rare interview that his mortgage-backed portfolio has “plenty of room to grow.” Mr. Zhu expresses confidence in the U.S. dollar and the health of the U.S. home market. Housing is so vital to the U.S. economy, Mr. Zhu and some of his counterparts at other Chinese banks reason, that U.S. authorities will prevent a bust.
Isn’t co-dependency wonderful? China needs a place to park its capital, we need easy credit to buy junk we don’t need. China needs a steady customer to sell the toys it makes.
They must be terrified that the bubble will finally pop. With no more HELOCs how will American’s continue to buy new Chinese made TV’s, computers, clothes, furniture and eventually cars?
Inventory anyone? Palmdale 93552 currently has 17.1 months. Only 29 houses sold in March. Ouch.
OMG, they must be partying in Palmdale like it is 199…..ah…1993? This is deja vu all over again.
29 sold?
I don’t feel so bad panicking a coworker into selling one of his Palmdale flips. Ok, he put the flip on the market. News to follow. He’s way too drunk on the coolaide.
I still wonder, is it just my work or did everyone start flipping? I’m in aerospace engineering; a field mostly full of conservative investors. Yea… we always have a few radicals that make it or go into BK.
Right now I cannot go to a meeting of six or more without at least one flipper entering the room! Whiskey Tango Foxtrot?!? They brag about how they’ve made more in real estate than work… then they talk about how “smart” they were to pull all of their “equity” down to 20% (cash out re-fi) and invest in more real estate.
Do you know how hard it is not to do a Bwaa haa haa when they talk about their latest “can’t lose” purchase? Do you realize that after I’ve done the “cash flow” math in my head that I have to bury my face into my coffee to hide the snicker.
Sorry, but I don’t care what you do for a living, I have no pity on flippers.
This will be really interesting…
Got popcorn?
Neil
I have a co-worker who is going full guns into his own real estate investing. The scheme is that he and a partner get a loan on the house. The only problem is that my co-worker has the mortgage put in his own name - the partner handles the legal and property management stuff. The home is bought after a contract is in place with a lease to own agreement with a person who’s credit needs cleaned up on a lease to own. At the end of the contract 2-5 years, the home is then sold to the tenant at a profit of 15% of the mortgage. Of course here in Portland, OR area, things are different of course. I tried to mention to my co-worker that property can go down. But he is convinced not here. I just wish him the best of luck and tell him how happy I am renting and how “strange” it is that I see more houses around me in Hillsboro for sale and more signs saying “new” price.
For instance, my two back neighbors are sisters that are trying to sell the exact same model home right next to each other. Started out ~400K, now down to 365K. I rent the exact same model for $1500, which is paid for in full by the interest I earn from the money in the bank from my AZ McMansion. Ain’t life grand!
DataQuick/CAR numbers for California cities was posted yesterday:
http://www.dqnews.com/ZIPCAR.shtm
For my neck of the woods:
City/County, month sales, median this year, median last year, % change
San Luis Obispo County 301 $506,000 $565,000 -10.44%
ARROYO GRANDE 39 $622,500 $779,000 -20.09%
ATASCADERO 24 $426,750 $450,000 -5.17%
CAMBRIA 15 $606,000 $847,500 -28.50%
GROVER BEACH 20 $463,000 $469,000 -1.28%
LOS OSOS 18 $465,500 $558,000 -16.58%
MORRO BAY 9 $537,000 $690,000 -22.17%
NIPOMO 29 $590,000 $650,000 -9.23%
OCEANO 5 $310,000 $464,500 -33.26%
PASO ROBLES 51 $406,500 $499,000 -18.54%
PISMO BEACH 20 $802,000 $930,000 -13.76%
SAN LUIS OBISPO 41 $588,000 $695,000 -15.40%
SAN MIGUEL 8 $348,000 $365,000 -4.66%
SHANDON 5 $270,000 $397,000 -31.99%
TEMPLETON 12 $612,500 $633,500 -3.31%
ouch, nice hit on Cambria. One of my favorite little towns.
15 sales in Cambria is a small sample (high end houses not selling?), but the data looks bad for year-ago buyers. It would be interesting to know the year-ago sales volume for the same month.
This data lumps SFR and condos together so many of these price differences may be mix issues. For example, I know Palo Alto is nuts but not thisnuts:
PALO ALTO 23 $1,432,000 $905,000 58.23%
We will see some high end areas with increasing medians for the foreseeable future. There are a number of reasons which might explain this (and both likely pertain to my zip):
1) The subprime implosion has knocked the low-end of the income distribution out of the California market in one fell swoop (they were enabled, though not qualified, to purchase $417K+ homes by subprime loans), so what is left are people who can truly afford the homes they are buying, and those who are still able to purchase homes they cannot afford using suicidal Alt-A and prime loans.
2) The median quality home built in the last few years is much bigger and pricier than the median quality of the existing stock. (We can thank Alan Greenspan for creating the high levels of housing price inflation which rewarded builders and speculators for gambling on high end homes). Now that the bubble has popped, the high end new home inventory is starting to bleed into the market, and pushing up the median, even though the quality-adjusted prices are falling.
3) Incentives are still masking drops in the market value of high-end homes.
4) For data which groups SFRs and condos (like DataQuick’s “All new homes” category), the subprime implosion is likely to have disproportionately knocked out condo buyers. Condos are also dropping in price faster, which tends to give would-be investers cold feet.
For an example of YOY median price changes which seem consistent with my story, check out March 2007 DataQuick info for my zip code (Rancho Bernardo W 92127):
Number Median YOY change
Used SFR 23 $850,000 -18.2%
Used condo 11 $367,000 -23.5%
All new 55 $698,000 1.7%
South of Syracuse:
My town’s inventory numbers are still lower than last year. My westward bound friend’s house sold in a day or two. Lucky her as she closed on the new one last week! Three new sold signs grace houses that sat this past winter….even on 2 in less than stellar condition.
There is pain tho… a spec house built about 15 minutes further into “privacy”/farm country has been on the market since last year. When you buy this home, I noticed, no kitchen appliances are included.
In a growing town north of Syracuse a recent drive thru didn’t bring up a lot of inventory beyond starter home range, ultra exclusive, and new construction. I saw lots of sold signs in established neighborhoods.
We saw 1 home up for auction, an open but unattended model w/literature and bus cards left on the table, and one planned subdivision on hold. (I looked at plans last year but as yet just a lone bulldozer in a field of scrappy bushes)
That town has 2X the number of houses for sale as my town but probably 4X the housing if not more. (They have 5 elementary schools. We have 1.) So I’d say that town’s real estate is still zipping along.
Wow, several paragraphs of standard Realty Times bs. But this one seems even more extreme than others. Nearly every sentence is a lie.
Phoenix, Arizona is the market.
Examples include: “April 2007 is looking to be a good month for the local Real Estate market,” “The current absorption rate is about 6 months,” “Supply and Demand are in balance,” and “There is a limited amount of land for new housing, keeping pressure on the demand for re-sale homes.”
I expected better from Bruce the Moose.
http://realtytimes.com/rtmcrcond/Arizona~Phoenix~brucefraser
Speechless? You?!?
mumbles … “Moose and Squirrel …”
Well, we’ve got the Squirrel for your Moose
“Market Conditions for Las Vegas, Nevada”, Reported by Scott Meservey, REALTOR, Updated April 20, 2007.
http://realtytimes.com/rtmcrcond/Nevada~Las_Vegas~scottmeservey
We never did figure out what planet this guy was coming from.
Wow, what a dick that guy is. He’s basically telling everyone that it’s better for their “financial future” to carry two houses (hold the current one while buying a bigger one) than to wait for a sale before buying again. His math is entirely dependent on prices rising from here, and he doesn’t even consider the possibility that prices will fall even more (in which case all the “benefits” of his “powerful strategy” turn into equal but opposite losses).
Talked with a guy at work today. He “sold” his house two months ago and moved to a rental during escrow. Subprime borrower buyer fell out of escrow. Now they’re paying mortgage + rent. Better than two mortgages, but he’s pretty upset. I said, “time to lower the price.”
“Now they’re paying mortgage + rent. Better than two mortgages, but he’s pretty upset.”
I was convinced that the sale of my Phoenix area house was going to fall apart in escrow near the end of 2005. I thought that I had simply waited too long sell into the bubble.
As it looked more likely that the transaction would close (about 10 days before scheduled COE), I put everything but my computer, a small television, a couple of chairs, and a bed in storage.
The house sale closed. Since I had made handing over keys/possession as 48 hours after close of escrow in the real estate K, I moved the rest of the stuff and signed a year lease on one of several rental houses that I had pre-screened during those 48 hours. It was a pain to do it this way, but I had no desire to pay for two residences or the costs/hassle associated with breaking a lease. I moved the stuff out of storage a couple of weeks later.
This had me busting up. A bit on the OT side, but still…..
Will Ferrell in “The Landlord”
http://sjl.funnyordie.com/v1/landing.php
Subprime assault on southern California
By Matthew Garrahan
Updated: 10:12 p.m. PT April 20, 2007
Far away from the sun-kissed beaches and palm trees that make up southern California’s idyllic coastline, trouble is brewing in the Inland Empire.
Two years ago the sprawling arid region that lies to the east of Los Angeles was one of California’s property hot spots.
House buyers priced out of expensive Orange County and the more affluent neighbourhoods of Los Angeles poured into towns such as Riverside, Moreno Valley and Perris. Limited housing stock and a relatively benign regulatory environment attracted developers, who built scores of new homes.
For a while, the Inland Empire rode the coat-tails of the California housing bubble as buyers, many of whom had limited financial means, took out subprime mortgages with low “teaser” rates.
But with the subprime sector collapsing, the area is facing a looming crisis, with an increasing number of homeowners delinquent, or failing to make payments on their loans. Delinquency often leads to mortgage foreclosure, or the repossession of the house by the lender.
“It used to be that we would get one call a month from someone needing help [about mortgage foreclosure],” says Vilma Mercado, home ownership centres manager with the Neighbourhood Housing Service of the Inland Empire, which promotes home ownership. “Now we’re getting close to 50.”
http://www.msnbc.msn.com/id/18236263/
New bubble site for Long Island New York. This person posts his link to Graigslist everyday. The performance of the site needs improvment. Perhaps one of you tech savy readers can give this person some help?
http://www.longislandbubble.com/sheeplesguide.html
I like his/her term, “bubble-o-mics 101.” Haven’t seen that one before.
H&R Block To Sell Option One
That’s today’s headline from page 5 of the WSJ. Some Exerpts:
“OOMC Acquistition corp., a newly formed company associated with New York-based Cerberus, will pay H&R Block for Option One Mortgage Corp. a sum equal to the value of the unit’s tangible net assets at the date of closing - expected by Oct. 31 - less $300 million. That value, which stood at $1.27 billion on Jan. 31, could erode amid escalating subprime defaults, analysts said.”
“”A slew of lenders have been struggling to find byers for their subprime businesses since mid-2006. H&R Block, which started to look for a buyer for Option One in November, acknowledged late last month that it failed to meet its self-imposed March 31 deadline for selling the unit.”
“Other lenders are also scaling back their operations. WMC Mortgage Corp., the subprime home-lending unit of General Electric Co., said it has just implemented another round of job cuts, involving about half of its work force.”
Credit is continuing to tighten, folks, which means less easy money to finances RE purchases, which confirms that there will be much lower RE prices down the road.
But, you already knew that.