No Quick Exit In California
The Wall Street Journal reports on California. “Last November, Allen Harper says he made an offer of $390,000 for a brand new three-bedroom house in a development sprouting here in the desert east of Palm Springs. Home builder Lennar Corp.’s response: No thanks. Six months later, Lennar jumped at the opportunity to sell the home for that very price to Mr. Harper.”
“So he scooped it up Monday in a rare online auction that attests to the lengths a major builder will go to jump-start sales of vacant homes. The event also signaled there will be no quick exit for home builders from their current doldrums.”
“The 14 houses Lennar has been selling online come only from the more expensive 84-unit Marquesa neighborhood. The other Marquesa homes had already been sold conventionally, some for more than $500,000, but new residents say they received sharp markdowns. John Nelson moved from a nearby town two months ago after Lennar accepted an offer, he says, that was $85,000 below list price.”
“Seattle resident Ken Crow decided to bid after monitoring the area’s steadily declining prices. A year ago, he considered making an offer for a Lennar Marquesa home that listed for $530,000. On Monday, his highest bid was $377,000, but he was beaten out by competing offers.”
“He says he’s out of the running for now. ‘I would only buy one of those houses if I could get it at a ridiculously low price where I couldn’t get hurt in this market,’ he says.”
“Mr. Harper, the successful bidder, ended up with the high offer for four of the 16 homes. Even as he agreed to a price for one, he received emails from Lennar offering a discount on an even larger home.”
The Orange County Register. “Think corporate bankruptcies are the worst Orange County has to fear from the collapse of the subprime lending industry? Think again.”
“While just 21 percent of the county’s home purchase loans in 2005 were subprime, well below the statewide average of 26 percent, pockets of the county are much more dependent on high-priced credit. In parts of Santa Ana, 75 percent of the money people borrowed to buy homes was subprime.”
“Subprime was also big in bedroom communities in the Inland Empire, where tens of thousands of Orange County workers live, and elsewhere in Southern California.”
“In a wide band stretching almost to downtown L.A. from the Los Angeles-Long Beach harbors, residents borrowed a staggering $2 billion from subprime lenders. Those loans all were made in 2005, the latest year for which complete data is available, according to an analysis of federal data by The Orange County Register.”
“Before, subprime borrowers ‘had the market as (their) silent partner,’ Aliso Viejo loan broker Paul Scheper said. ‘They could refinance again. They always had the equity.’”
“Not this time. ‘Now they’re kind of trapped’ by stagnant home values, Scheper said. ‘They don’t have their silent partner anymore.’”
The Sacramento Bee. “Budget forecasters watched with concern as state income-tax revenues dipped below expectations during the first months of the current fiscal year.”
“The Legislative Analyst’s Office in January said the administration was too optimistic about property-tax revenues and urged the governor to count on about $200 million less than he had projected.”
“Statewide home sales in March were down 31 percent compared to the same month a year ago, according to DataQuick Information Systems. And in some counties, such as Sacramento, prices have dropped to December 2004 levels.”
The Daily Bulletin. “Maybe they have to go away. But they don’t have to go away mad. I’m talking about all the people in the Inland Empire who have bought houses they can’t afford, and now are facing foreclosure.”
“Sadly, the housing boom of recent years has been followed at the heel by a foreclosure boom. In San Bernardino County alone, 909 foreclosures were recorded during the first three months of this year. That’s double the number for the last quarter of 2006.”
“Inland Empire housing prices are the most affordable in the Southland, which means we have attracted a lot of first-time, inexperienced home buyers. Many of them succumbed to the lure of gimmicky financing plans that inevitably plunged them over their heads and left them unable to make their payments. Now, they are being shown the door.”
“I keep wondering if there’s some way we can spin this, to avoid a public-relations disaster. I mean, as future Emperor of the Inland Empire, I do not wish for our region to become known as America’s Foreclosure and Eviction Capital.”
“Maybe we should give them fruit baskets. You know, like welcome baskets, sort of, only these would be more like farewell baskets.”
“Naturally, each basket will include a nice card inscribed with some appropriate words, such as ‘Better luck next time,’ or maybe ‘If at first you don’t succeed, try, try again.’”
“Or how about this: ‘Tis better to have mortgaged and lost, than never to have mortgaged at all.’”
“Let’s add real estate brochures that show current listings in Los Angeles and Orange counties, just to remind our departing friends that the Inland Empire still offers the best deals, when they’re ready to try again.”
“The baskets also should contain a number of practical items, including a passbook for a savings account at an Inland Empire financial institution. Maybe the account could come with a dollar already in it! This would encourage our friends to save, and save locally.”
“There also should be a handy pamphlet with common-sense advice on buying and financing a home. You know, for next time.”
‘The Santa Barbara school board laid off 48 teachers Tuesday night, largely in an effort to find money to give the rest of the K-12 school system’s 800-plus teachers a raise. Underlying all the anxiety is a key factor: declining enrollment. With fewer and fewer students attending schools on the South Coast, the Santa Barbara school system gets less and less money, because the state allocates tax dollars to most districts based on student head counts.’
‘Greg Hernandez is proof that home ownership is possible for many people who don’t think they can afford it. He combined a conventional bank loan with two home-buying programs available through the city of Fresno — and tossed in a small grant from the Community Housing Council.’
‘He used a home buyer assistance program that provides a no-interest 40-year loan of up to $75,000. The house that Hernandez bought was originally listed at $239,000. It was lowered to $228,000 and then sold to him to him for $215,000.’
‘Even with the city programs, his house payment totals $1,046, well above the $725 he paid each month in his apartment. Refinancing the auto loan shaved off $237 per month, which made up much of the difference.’
Mr. Hernandez’ is an exceptional individual. Perhaps he over paid, but he kept the purchase within his means and the creative financing that he used was incredibly smart. He did his financial homework.
Within his means? The article doesn’t say, but based on the fact he could only qualify for $150K in conventional loans, he probably makes $30K per year.
Exceptional? Did you miss the “Fresno” part?
LOL, no I read the whole article. Frankly, I find little difference between Fresno and the rest of the state - it all sucks. Exceptional in that Mr. Hernandez sought professional help to coordinate the loans, grants and the terms. How many others have we all read about that were looking for a quick profit, with little if any thoughts about repayment, and are the new bag holders?
Remember that tongue in cheek mini-series “Fresno” about 20 years ago?
http://www.imdb.com/title/tt0090435/usercomments
Funny stuff…
Geez, I really should post something about my hometown but what can I say that hasn’t been said before? My ‘hood is toast. Burnt frackin’ toast.
What’s wrong with Fresno?
Errr, prices are out of whack. Are you new here?
No, I wasn’t talking about prices. That would be stating the obvious. Fresno is, well, an absolute nightmare. I’d rather be castrated with a butter knife than take up residence anywhere along the 99 between Stockton and Bakersfield. Fresno is where the nightmare hits a crescendo.
LOL ever spent any time in Redding or Yuba City? The stinking valley is a crime scene.
Don’t forget Los Banos, literally “The Toilet”.
Modesto, a modest town with much to be modest about.
Or Kettleman City.
Observer, is your name Bud? Did I turn you on to this site?
laid off 48 teachers Tuesday night to give the rest of the K-12 school system’s 800-plus teachers a raise ??
Excuse me…Am I missing something here ??
Nope. It’s like when a merit or cost of living raise is handed out to UCD staff, the union always pushes to have the whole pot of money go to COL none disbursed to folks who earned their merits. That way the blue-hairs, who are already maxxed out in their classifications, always get the majority of the funds and the newer hires are always behind the inflation curve.
unions sck, especially muni unions
Always been a union girl and always will be. This one just needs some real leadership.
yep
Did Mr. Hernandez figure in property taxes, insurance and maintenance? Doesn’t sound like that’s in his $1,046 per month payment.
‘Refinancing the auto loan shaved off $237 per month, which made up much of the difference.’
How much was his auto loan originally?! WTF
Yeah no kidding. Someone who can only afford $218K for a home borrowed with government subsidized interest free loans has no business having a $237 car loan period. Never mind a refinance that saves $237. Wouldn’t surprise me in the least to see him in a $50K truck bought with a 9 year 12% loan.
And to make matters even WORSE, its not used for business so he has no deductions on that $50k truck!
==================
Wouldn’t surprise me in the least to see him in a $50K truck bought with a 9 year 12% loan.
Why is this called “creative financing”? The guy had tax-payer funded government handouts. On his part-he had to sit thru a four hour class on “hard chairs”. If he’s going to sponge off the taxpyers you’d think they’d provide him with comfy seating.
Yeah, that 75K 40-year no interest loan sounds like a good deal. Can I please have one of those?
The free 10K ain’t half bad either.
I want one too!
Me too pleez……….
He “refinanced” the truck by rolling it into the mortgage is my bet - instead of paying $237 for 5 years he’s going to be paying a much smaller monthly nut for 30 years.
Hope he bought a car that’ll run for 30 years….
I had a 1970 240z that I sold in 2004 after owning it for 18 years as the third owner
… only car i had from 1988-2001. Wife got the 1990 new BMW 325i which we used for trips for 11 years, etc…
Financed neither in a HELOC…paid cash for the Z. Sold it for almost 2x despite some deterioration over the years - 225K miles.
Underlying all the anxiety is a key factor: declining enrollment.
Yeah-
We’ll see how wealthy everybody is, when the public education employed spouse in all these dual income households start gettin’ shit-canned.
Ya see in the Globe all the time in the engagement notices.
One spouse is nearly ALWAYS employed by a school system. Gotta have those health benefits and summer’s off to keep it all together.
Thousands of households are gonna take it up the wazoo when this declining enrollment trend kicks in.
And since it’s always the public teacher’s union policy of last in-first out…
meaning those kids just a couple years outta college…
Who’s the next gen who’s got the dough to pony up for all the $600k starter homes?
That is a flawed analysis. The declining enrolment in SM will be made up somewhere else. Just cuz house prices go down doesn’t mean kids stop going to school. 48 teachers get canned in SM means 48 just got hired in another district to teach the kids that have moved out of SM. Zero sum game.
Probably true to a point, but there are also probably plenty of classrooms that just had to fit in one or two more new students.
The declining enrollment in SM will be made up somewhere else. Just cuz house prices go down doesn’t mean kids stop going to school.
- Would these be the kids of illegals?
Not necessarily. As incomes rise, family sizes go down. What young family can afford to live in Santa Barbara?
Also, the average tenure of a new teacher is about three years - they leave the profession after that.
Have you been to Santa Barbara lately? here is a large Hispanic population that doesn’t mind having 2-3 families in the same household.
“the average tenure of a new teacher is about three years”
It’s b/c parents are clueless assholes.
One of my best friends is a teacher. She’d agree with you. She received her master in primate behavior then went back for teaching. Her husband is a teacher too. The stories she could tell you.
Not necessarily; if the teacher’s spouse doesn’t want to move the couple is hosed. Also, the most recent Census data shows CA had negative net migration between July 2005 and July 2006. That means that people leaving the state exceeding people coming in (primarily from south of the border) from other countries. So those teachers might have to move out of state as well.
Besides, I doubt that people leaving Santa Barbara are buying in the Inland Empire; and a SB teacher probably doesn’t want to commute to a school in Riverside. I could be wrong, though.
There is that pesky out migration data again. We know people are leaving, why not teachers?
Now if you check the city stats forums, you’ll see that a lot of the people who are looking at moving to places like Lexington, KY and Lawrence, KS are opening discussions with the same question “how are the teaching positions in >?” They also tend to have a husband in the trades.
What’s really hurting school districts in my area (CO) is the slow-down in new builds. Enrollment in our neighborhood elementary is declining and the district has begun moving teachers to other areas. They were ramping up for a surge that didn’t arrive because the builders have halted development. Adding the impact of foreclosures, the principal told me recently that for every two children they gain, three leave. On the positive side, they’re pulling out all the darn portable classrooms.
Empty flipper-owned houses have no children in them.
“‘The Santa Barbara school board laid off 48 teachers Tuesday night, largely in an effort to find money to give the rest of the K-12 school system’s 800-plus teachers a raise. Underlying all the anxiety is a key factor: declining enrollment. With fewer and fewer students attending schools on the South Coast, the Santa Barbara school system gets less and less money, because the state allocates tax dollars to most districts based on student head counts.’”
This doesn’t surprise me at all. There are only two children in public schools in my Santa Barbara neighborhood of about 75 houses, a couple more in private schools. Almost everybody here is either an empty-nester, semi-retired, or retired. Santa Barbara is so expensive that young families cannot afford to live here.
Agree…mostly. Wealthy young families in SB send their kids to private schools. Public schools generally are for the kids of the illegals and low-income persons who work as housekeepers/lawmowers.
SB is called a “golden ghetto” for good reason: it, like Newport Beach is basically a blue-hair/white shoe community - and add to that the aged hippies who are retiring there in droves. The young adults that are seen on State St. are mostly students at UCSB.
~Misstrial
Man next thing you know the sun will stop rising in the east because of the housing downturn. Come on everyone, time to get a grip here.
Nah, it just decided to stop rising because Housing Never Goes Down. Now it rises according to the laws of nature.
LOL!!!
“Almost everybody here is either an empty-nester, semi-retired, or retired. SB is so expensive that young families cannot affofrd to live here.” Agree. Everyone I know in SB is 60 to 80 years old.
Just an update on my neighbor here in Ventura, Ca. He moved out of the house and sent in the keys yesterday. Couldn’t sell his house after 60 days for 510,000; 110,000 less than what he paid in 2005. The general mood around here isn’t like it was during the MANIA…
He moved out of the house and sent in the keys yesterday.
Just to be clear… He (or the bank) were willing to take a ~20% loss and that wasn’t sufficient.
Also, just to be clear:
That is Jingle keys?
Yikes. Bummer. But we all know that this will happen to those we care about. Cest la vie.
Got popcorn?
Neil
Bank wouldn’t accept the only offer of 480,000.
Atleast the late night Mariachi music will stop…Still dealing with the large amount of weeds in the yard, starting to look like Oxnard around here…
Bank wouldn’t accept the only offer of 480,000.
Whisky Tango Foxtrot? 5% under… oh, do let us know what it sells for. I’m guessing… 450k (assuming the bank gets smart)
Atleast the late night Mariachi music will stop…
ROTFL
Got popcorn?
Neil
F*CKIN SHELL GAME IS WHAT IT IS….
wont be long till houses are gonna be givin away at the 3 card monty table.
The loans are fixed rate, so the rates won’t increase. “He’ll never go upside down on the house and the payment will stay the same,” Pacheco said.
It’s official then, prices have bottomed in Fresno, because Pacheco said so, there’ll be no upside-down here.
Oh no they haven’t! Fresno has so very very very far down to go based on every metric we have all discussed for the past 12-24 months here. Imagine that you are on the Superman ride at Magic Mountain in Valencia and your car has just hit that peak near the glowing “S.” You feel weightless for that ever-so-brief moment. But soon enough as gravity takes hold . . . your heart wants to leap straight out of your throat. Yep, enjoy the popcorn folks while the train wreck unfolds.
Check out “L.A. Land”….
My friend Audrey*, who’s shopping for a condo, has a budget of $350K and growing sense that she’ll never own a condo in LA. She writes:
“Every day is another test in real estate purgatory. I’m still waiting for Realtor to call and deliver some good news, or at least some closure. It’s been 2 weeks since I submitted my final offer for the
condo, and all I’ve heard is my impatient, well-heeled toe tapping on the floor.
TinyURL.com/3xevdv
Another one bites the dust…and another one’s gone..
http://blogs.ocregister.com/mortgage/
From the article:
“But none of that was supposed to happen to Impac, the nation’s 10th largest Alt-A lender, which survived through good and bad markets since being founded in 1995.”
Now, can somebody tell me how many bad RE markets California has seen since 1995?
“So he scooped it up Monday in a rare online auction that attests to the lengths a major builder will go to jump-start sales of vacant homes. The event also signaled there will be no quick exit for home builders from their current doldrums.”
One of the sure signs that the RE market is getting worse is the increase in auctions. As the market is getting worse, it is no longer economical to have sales reps standing around with no orders to take. Look for more homes being sold through auctions. Next are the BK builders inventories through auctions.
“Next are the BK builders inventories through auctions.”
Thanks for the insight. I have been wondering what will happen to all the empty, overpriced new home inventory in the Santaluz valley (92127), some of which is still currently under construction. There has been a trickle of this onto the MLS, but I believe the broken dam and ensuing inventory flood is yet to clobber the market.
Yes, the S will truly HTF when a second company snaps up BK builder inventory at a fraction of the original list price (without most of the cost of the land), finished the unfinished places and dumps them at rock bottom prices for a profit. The FB will then be truly sunk.
That’s probably one of the last to fall, GS, if it falls at all (which it very well may.)
That said, Spring Valley, Chula Vista, Encinitas, Escondido, Fallbrook … those areas are starting to feel some serious pain.
“That’s probably one of the last to fall,…”
Why would you assume this? 88% of the used SFRs currently listed on the MLS for 92127 are recent construction (built since 1998), and there is a gaping chasm between median list price (currently at $1.3m) and the March median sale price for 92127 ($850,000 according to DataQuick). And construction continues apace.
These builders seem to be hoping for cargo drops of money which are unlikely to materialize, given a general demographic trend of wealthy white family outmigration and poor hispanic family inmigration to San Diego over the first half of this decade, and the recent heavy reliance of the local economy on job creation in real estate, retail and tourism. The really wealthy are already sitting pretty in large estates in La Jolla and Rancho Santa Fe, and there are not enough wannabe-Rancho-Santa-Fe households to snap up all this new $1m+ construction.
Just MHO here — it is hard to get the statistical evidence one would like to have to back this up, such as exactly how many newly built homes in 92127 are sitting vacant and have never been occupied.
Also forgot to mention — as shown in last Sunday’s SD Union Tribune Home section, there are 129 competing “New Home Communities” in San Diego County for Santaluz to compete with. If they keep trying to sell their myriad homes at $1.3m, they may price out all the buyers to competitors.
“Mr. Harper, the successful bidder, ended up with the high offer for four of the 16 homes. Even as he agreed to a price for one, he received emails from Lennar offering a discount on an even larger home.”
And now Mr. Harper gets to learn all about the winner’s curse.
http://en.wikipedia.org/wiki/Winner’s_curse
Another wannabe vulture is born. I’m sure Mr Harper is telling everyone he can what a real estate genius he is.
Harper Valley P.T.A.P. (paid the asking price)
“Mr. Harper, the successful bidder, ended up with the high offer for four of the 16 homes. Even as he agreed to a price for one, he received emails from Lennar offering a discount on an even larger home.”
When somebody is trying to sell you another house after they’ve burried you 6 feet under in another, there might be something wrong with your bidding strategy…
And how does one “scoop up” a house?
Same way they used to “snap up” stocks?
“And how does one “scoop up” a house?”
I assumed it was similar to “scooping up” things in the dog run…
Apparently he wasn’t quite as bright as he thought he was…
Hope you caught the hilt, Mr. Harper.
“Not this time. ‘Now they’re kind of trapped’ by stagnant home values, Scheper said. ‘They don’t have their silent partner anymore.’”
Ah, the silent partner. That illusory wealth effect that made every FB feel warm and fuzzy and kept them spending way beyond there means. Even now, as the markets spiral out of control, the idiotic denial that their “silent partner” will right the ship and come to their rescue has them piling money on credit cards as a temporary fix. Very soon a whole lot of people are going to figure out just how poor they are.
Agreed. As has been mentioned by some people here previously, the amount of money that I am not losing by not having overpaid for a POS home, makes me a lot wealthier in contrast.
My bank keeps increasing the credit limit on my Visa. Using FB logic, my credit card is also my “silent partner”!
“Not this time. ‘Now they’re kind of trapped’ by stagnant home values, Scheper said. ‘They don’t have their silent partner anymore.’”
This is where the FHA bailout proposal comes in: Now that Wall Street is running towards high ground and away from the subprime tsunami, Congress is stealthily trying to put the U.S. taxpayer out on the deserted beach as the replacement ’silent partner.’
If you really believe that, you should be buying as many houses as possible to get your share.
Just curious: What do you believe the intentions are behind the “FHA reform”? Do you believe they are really just trying to help a few thousand people and not reignite the housing boom? Ignore whether the implementation will be successful, I’m just curious on opinions regarding intent.
If the intent is there, then I think it’s good to discuss it. I don’t know why everyone is so hostile to open discussion here.
I spend a few hours a day researching housing markets, and I haven’t seen anything to make me believe that any bailout is possible, much less from the puny FHA.
IMO, congress doesn’t want it, the taxpayers don’t want it, the mortgage industry isn’t interested and most important of all, the FB’s don’t want these debts.
Where taxpayers better watch their wallets is in regard to the GSE bonds. But even those are backed with derivatives and guarantees from companies like AIG.
Nobody has a problem with discussion, but this monotonous hand-wringing is getting old.
OK, Ben, I will drop the subject. But I will say “I told you so” later on if it turns out to be a major factor in transferring tax dollars into the hands of lenders and FBs…
“Nobody has a problem with discussion, but this monotonous hand-wringing is getting old.”
———————————-
I agree
Ben,
Great blog…aggregating the MSM stories is very valuable. With respect to the GSE’s; my understanding is they have always had a lower cost of capital due to an “implied” guarantee of their bonds by the federal government. There is no statutory guarantee. So the way I see it, due to the factors you just listed, the GSE bonds aren’t going to be bailed out either.
Ironically, the biggest buyers of all of these MBS’s in all their varieties are pension funds and fixed income funds sold to people for their 401k plans. So the public is going to take it in the shorts as their home values drop, and as the returns on their pension funds and 401k’s drop. The only thing holding this whole house of cards together is the fact that the Chinese need us to buy their stuff; so the Chinese central bank is piling up US Treasuries which is keeping a lid on long term interest rates. The carnage that would result if the yield curve reverts to a normal shape is pretty scary…
“…my understanding is they have always had a lower cost of capital due to an “implied” guarantee of their bonds by the federal government. There is no statutory guarantee.”
This is true of most agencies (Freddie Mac, Fannie Mae). However, FHA, VA mortgages, Sallie Mae are among entities that are guaranteed with the ‘full faith and credit of the’ government. These are explicitly guaranteed.
Won’t happen, can’t happen in any ‘bailout’ fashion. Maybe a little cherry-picking of the the absolutely most foul RE scams, but in general the bar to appeal will be so high, and it’s effect take so long that those it purports to help will be dust. Those politicians that have looked at the problem are treating it like the third rail.
Of course the intentions are to reignite the housing boom. The reason the Fed dumped the rates to zero and poured liquidity into the market was to ignite a housing boom, and thus reignite the economy. The reason the Fed and everyone else turned their back to the easy-money lending standards was that it was accomplising what they wanted - a way to get that liquidity into Joe Sixpack’s hands so he could start spending (yeah, they knew what was going on. Maybe idiots like Dodd didn’t, but those who mattered did). But here’s the point - there’s only so much juice in one lemon, and this one has been wrung dry. I have no dought there will be one attempt after another to reignite the boom, but it’s doomed. At the very best they could keep the price levels flat, which still means disaster. In order to create the psuedo-economy of the past few years was to have massive appreciation (thus the Ponzi anology). That’s how we got the money in the peoples hands. In order for them to hold off disaster they’ve got to manufacture another insane run-up in appreciation. Not gonna happen. No one has ever invented a pyramid scheme that continues on in perpetuity, and i seriously doubt our govt will be the first.
Nice post. Thanks.
Getting money into J6P’s hands is no longer going to be possible through bubble blowing. I’d look for a return of the WPA. Perhaps we can at least put J6P to work renovating our delapidated public infrastructure. We need him out in the desert building solar thermal power stations, etc.
Pyramid scheme of getting liquidity into the system is create money out of thin air with bookkeeper federal reserve throwing paper money at federal government, banks, Wall Street, consumers, and anyone else to borrow this instant federal reserve note with promise to pay the holder the perfect Ponzi scam. Unlimited supply with no true accountable ability and the public in the dark asking no questions makes this a true Ponzi scam that it is. When the dollar becomes worthless and inflation has destroyed it, then and only then will the public eyes see and ask.”what the hell happened”.
If I had to inject money into the economy, a series of infrastructure projects would be my choice.
We need him out in the desert building solar thermal power stations, etc.
Or upgrading sewage treatment facilities so our beaches and ocean won’t be fouled so often!
The FHA bailout won’t do much to keep the bubble inflated. Only FB with non-negative equity and who could afford a 40 year fixed interest loan will be eligible. The changes in FHA standard practice are (1) lifting the ceiling on the loan amounts, thus allowing FHA to refinance loans in high priced areas (2) 100% LTV instead of 3% down (but requiring PMI) (3) 40-year fixed interest, interest rate somewhat subsidized for higher risk borrowers. Most of the FB will be so underwater by the time this even passes that it won’t help. And people barely scraping by at their 9% ARM rate, interest only, will not be able to float a 40 year at (IIRC) 7.5% fixed, either (that includes PMI). Also, the FHA bill contains a ‘poison pill’- if defaults increase by 25%, downpayments and other modifications can be imposed to keep the whole mess solvent. This won’t hold prices up, but it DOES have the bad side effect of possibly entangling FHA in a few billion dollars worth of defaults, which the taxpayer will have to pay for.
My main reason for disliking this bill is that it will help the MBS holders buy refinancing loans that were headed for default. I want to say to the MBS holders ‘LET EM BURN!’
Agreed - The stakeholders need to get theirs - otherwise it will just happen again.
But new buyers/specualtors will use the new FHA loans and this zero down BS will continue . A clause that says that if 25% defaults take place than the FHA can require more down is a policy of responding after the cow is out of the barn . I guess people do not realize how big a default rate of 25% is and how bad the lending would be considered if it was that high ,( I’m talking from a perpective of prior lending cycles on what would be to many foreclosures .)
Once hyperinflation shows up signifigantly enough, i’ll be buying as much real estate with old yeller’ by my side, as I can…
It’ll be like matter and anti matter.
Real estate plunging in value and old yeller’ going in the exact opposite direction.
Once I make a very small initial down payment, i’ll let gravity do the rest.
I expect some properties to cost me a few Cents on the Dollar, versus current values.
You still sweatin’ over the FHA thing? I’m telling ya, no worries on that “proposal”.
Along those lines, I noticed an interesting thing talking with one of my A/Alt-A reps the other day. It’s seems that 100% ALt-A is all but bye-bye, no mas. 100% pretty much has to be full doc right now - with one exception: Option ARMs. That’s right. You can still go stated 100% Option ARM with a lot of our Alt-A lenders. After displaying my astonishment, I asked my AE why. Her answer was that the default rate on the OpArms is still way low, lowest in their portfolio in fact. My response was to chuckle and shake my head. Of course the default rate is low right now you friggin moron! These folks are making the NegAm payment and living on borrowed time. Have we lost all forsight here? I amazes me. It’s for reasons like this that I rant on about how we’ve just seen the beginning of the meltdown. First subprime, then Alt-A, then OptionArms, then repeat until someone finally gets it.
I agree with you, that is, without intervention. I think you are severely underestimating the irresponsibility of our gov’t. We have close to 50 trillion dollars of unfunded liabilities, what’s a few trillion more for a housing bailout? Do you think they announced they were signing up for trillions of liabilites when they expanded medicare? These things get swept under the rug, as horrible as it is.
I second that, and that is why I engage in hand-wringing — to hopefully shine some light on the dark places some politicians will gladly take the country if they believe nobody is watching.
Same here, I do it for the same reason. I’ll drop it too.
Instead of hand-wringing you should be watching in amusement. I really need to find a pic on the net of a monkey workin’ a football. That way every time this comes up I can post a link. If I can’t find one, it might be photoshop time. Look out - I’m feeling creative
http://www.monkeyf^ckingafootball.com/
(In case the actual post does not clear spam filters…)
The antidote to hand-wringing is making sure a sizable fraction of your savings are in foreign-denominated bonds, if you don’t like direct investment in commodities (I don’t).
I have a small chunk of money on foreign bonds, including emerging markets. After being in for a few years, my observation is that this is something that you need to time - not a buy and hold sort of investment. I have done much better with my investments in commodity producer’s stocks.
ex-,
Did you pull out the Credit suisse report and show her why the option arm default rate is so low. From that reset schedule the option arms don’t start resetting en mass for another 3 years. This with the long term Alt-A arms creates the second hump in the bimodal distribution.
No point in trying.
So is it time to open up the puts on the Alt-A boys? Or are buyout fears justified?
It looks like someone is going to buy Countrywide.
As the old saying goes: (roughly) “We have already established what you are, Madam; now we are merely negotiating the price.”
The housing bubble is all just a lot of static BS and will have no effect on the economy.
Just go ask Warren Buffett.
First Greenspan and now him.
Are all these 80-something suits goin’ senile or what?
Sorry hd74man, you may be right, but when it comes to investment advice, I think I’ll take the “senile” Warren Buffett’s over yours. No hard feelings though…
If Buffett said it, then it is so. End of story. Never mind if some of his investments will tank along with the subprime collapse unless everyone keeps the faith and behind-the-scenes bailouts replace private sector subprime lenders with taxpayer-funded subprime lenders.
Its another case of the magician saying “watch the birdie” and not the magician.
To understand this in real life scenario, just recall that subsquent to 911 the markets were closed for two or three days. Then on the following Sunday night, four guys including Buffett and I believe Jack Welch told everyone during a primetime special that when the markets opened in the morning, that we should all not panic sell and be good Americans. But we later found out that Buffett was one of the first to temporarily divest some major holdings…he got out in front and sold before everybody else.
Do you have a link to support this, or should we take your word on it?
Knockwurst, I am in the middle of a big audit, so I am sorry that I dont have the time to give you the backup, but I usually dont say stuff if it isn’t true. You may need to go an research yourself - if I recall it was widely reported - try Drudge or Savage to start.
Buffet has not done well managing money since Berkshire hit 86,000. in 1998. It currently is 106,000. for a 2.6% compounded rate of return over the last 9 years. Big deal. It will tank like everyting else in the coming deflation. Buffet does have 43 billion in cash so he is not stupid to the situation.
I no longer listen to Buffet after he lost his shorts in his silver shorts. Where did it all go???? Youd’ve thought someone with 60 years experience would be smarter than trying to manipulate the market down.
Remember when the Governator had him as an advisor and he said , ‘We should can Prop 13′. The grey panthers ate him alive.
they SHOULD can prop.13. It’s unfair as hell. I couldn’t believe, in a state of renters, that it even passed. When it did, my landlord gave me a $60 rebate - then, two months later, my rent went up $30.
Yep They want tax protection on the way up and then tax reductions on the way down… it’s like having your cake and eating it too. Socialized risk at it’s best.
Help me out with this one. How is Prop 13 unfair?
Do you think it would be a good idea to have your taxes raised just because some fool way overpaid for the house next door? Should speculators and investors have that kind of control over your taxes? Do you feel you don’t pay enough taxes? or do you think the state would lower everybody’s taxes if Prop 13 was repealed.
If I didn’t pay as much for my house as my neighbor, should I be forced to pony up more money to keep everything fair? If I buy a new car, should I have to buy a new one for my neighbor too? If I get a raise, should I give part of it to my neighbor?
It’s not possible to be fair to everybody, because everybody has a different definition of fair. All Prop. 13 does is put a limit on how much the State can raise your property taxes. If this were not the case, ARM resets would pale in comparison to what the state would do, and has done.
IMO all this talk from the State about the dire consequences of Prop.13 is just propaganda to cover up there poor money management skills. The State has gotten a huge windfall from this housing boom, as from the other housing and .com booms since the 70’s. They have also profitted handsomely from all the HELOC paid for cars, plasmas, toys, etc. in the form of sales tax. Where is this money now? The problem is not how much they receive, but how they spend/waste it.
State revenues will take a hit in the near future, but they will NEVER have enough. If everyone’s prop. tax was raised to 3%, they would back to pleading poverty inside of 5 years.
Limits on the goverment’s ability to extort money from my neighbors and my pocket is generally a good idea.
Never mind, Mr. Ex. You will never convince the anti- prop13 people that it was necessary, or even the least worst solution to what was going on at the time it was passed.
There is a fundamental philosophical disconnect between those of us that believe in limited government and those who do not. Debating Prop 13 is an exercise in futility, because the discussion always veers off into attacking and defending the imperfections of the act, while the underlying philosophical issue is basically unresolvable. This is a perfect example of why we had to resort to majority rule in order to move forward with governance.
Some people feel that successful people owe everyone else a living, and others disagree. That is the real debate.
Let me help you out on why Prop 13 isn’t really that good of a deal.
1) It discourages turnover of a product (called housing), which limits supply and drives up housing. For example, if I was a speculator that bought in early 2003, it would not cost me that much money to hold on to my house while prices are going to the stratosphere. The carrying cost are significantly reduced so the urgency is just not there to sell. Encouraging the tight supply.
2) Prop 13 does not keep up with inflation. It cost money to pay for those roads, parks, schools, welfare recipients, senior centers, police, and fire departments. Without property taxes, local districts are having to rely more on sales taxes and income taxes to balance out their budgets. Unlike a lot of states, where a majority of property taxes are kept in local districts, California takes a majority of taxes and then redistributes the money back down.
Now, you complain that the state mismanages money. Unfortunately, you must research how much the govurnator and the legislators can actually choose where to spend the money. I can guarantee you that it is significantly less than what you think. Over 50% of the budget is spent on education alone (a complicated method of calculating how much is a law, of course). Now, think how much is set aside to pay for bonds for roads and “clean water” (not wastewater treatment plants, or something sensible like that, nope just “clean water”). Californians have this love affair with the Proposition to spend money on things that make them feel good.
Now, removing yourself from the insane case California has been in the last few years, explain to me why it is right for a person just starting into a house, or having to move to a new location for a job, should be paying more for the same services that you both enjoy in equal amounts, essentially supporting your lifestyle (you know, like “welfare”)?
Prop 13 is unfair because it doesn’t stop the state from extorting more money from the people, just old people (long time owners) and business. So they get the balance they need from new buyers. Its like going into a store and charhing old people one price and young people another price for the same service. Also, if your neighbor overpays for his house and your taxes spike up, they will go back down in the correction that everybody here is talking about. In total averages out to the same so who cares. Also, even the goverments inflation numbers are higher than the prop 13 increase so in real dollars long time owners are getting a tax cut. Also, don’t argue against every tax because its just more tax if in the long run the total tax paid may be less. Example, if you tax gas instead of taxing income to pay for road consruction people will use less roads because it will be so expensive to drive a McHummer.
OK, let’s talk about the gas tax. It was originally put in place to pay for roads. Now it pays for mass transit, which does not benefit gasoline users in cities. In, fact, money for mass transit works against the interests of automobile users by funding busses, which cause traffic congestion far in excess of their utility. Each bus route reduces the carrying capacity of one lane on that route by about 50%, and also reduces the carrying capacity of one adjacent lane by about 25% due to veering and weaving. This reduction in capacity is due to the reduction of the average speed in the primary bus lane from about 30MPH to 10MPH. Some of that is offset by the increased carrying capacity of the bus, but not enough to result in anything close to a net gain of people throughput when you account for the increased congestion and the losses due to the fact that busses do not pick people up where they are coming from, nor do they drop people off where they are going to.
If, for example, a Prop 1024 were to restrict the use of gasoline taxes to only improve roads, we would see an improvement in transportation utility. But since the gasoline tax has been subverted to pay for public works boondoggles such as busses, it no longer serves its purpose.
This is the logic behind Prop 13: Starve the beast. Kill the funding sources for the boondoggles. Force the politicians to spend money on the things that we actually need, and things that work. Don’t feed monsters like the “Bus Rider’s Union” (yes, ther actually is such a thing in Los Angeles).
Do you think it’s fair for someone living in a $1.5 million house to pay $1400 in property taxes, while his next-door neighbor pays $14,000?
“Do you think it’s fair for someone living in a $1.5 million house to pay $1400 in property taxes, while his next-door neighbor pays $14,000?”
If this inequity causes the aggrevied neighbor to question where his tax money is going, and to demand relief, than that is a desirable outcome.
Politics is not about fairness, it is about achieving a desired outcome. This is a point that most neophytes miss about the game. Politicians are working every day to figure out how to control more of *your* money to use for their political gain. The other side of the game is to find ways to thwart the b4st4rds.
Mr. Landlord, your point is very well taken. I have always had difficulty with the concept that all of society’s problems can be solved by giving more money to an organization that has repeatedly demonstrated its financial ineptness and inability to solve anything. I know I’m tilting at windmills here but I’m a glutton for punishment…
Mr. Renter,
1) If this arguement carried weight there would not be a housing glut at this time since Prop. 13 has yet to be repealed.
2) Most of the services mentioned are now covered by user fees, new taxes and bonds that did not exist 30 years ago. We now have Mello-Roos, toll roads, measure M taxes, a lottery, and Eminent Domain to put in that new big box store just to name a few (even the Fire Dept. sends a bill if you need them). I sure wish I could supplement my income so creatively. As for welfare, that is a topic best left for another day/blog.
Other) I’m not complaining, just making an observation. If 50% of the budget goes to education, why are the schools constantly begging for money? Why do I have to pay to see my daughter’s recittal from dance class when the class was extra (not a play or big production, just something for the parents that makes the kids feel great)? As for environmental concerns, the government agencies all charge for their services, and the cleanup costs are borne by the landowners and polluters. DTSC is not a charitable organization.
Mr./Ms. School, first this is one of the most anti-business states in the country, so I believe that item should be left out of the discussion. Next, I agree that it’s like charging old people less in the store, however, in a store you have a choice whether or not to buy, brand name or generic, paper or plastic. This also holds true only if they don’t sell. All those babyboomers downsizing have been removed from this pool of unfairness.
The point here that people seemed to have missed is that property values have tripled in the last 7 years. Do you really expect me to believe that you would be completely happy in having your property taxes triple in the same time period? If you really feel that way I’m sure the State would be more than happy to take your money if you sent it in.
Why is it that prop 13. says taxes can be UP to 1% of property values… and THEY ARE 1% EVERYWHERE!!!
Kind of like having a gate against that beast that wants to devour you. And thank god they are out of titanium zinc for now…
Actually, in California you can take your tax basis with you when you move if you’re over age 55.
From california property tax website:
Homeowners who are at least 55 years of age may transfer the base year of their existing residence to a new residence within the same county under certain criteria.
Homeowners who are at least 55 years of age may transfer the base year of their existing residence to a new residence to another county if the other county has adopted an an enabling ordinance. The California Board of Equalization issues letters listing the counties that have enabling ordinances. The link to the most recent BOE Letter is: LTA 2004/65 REVENUE AND TAXATION CODE SECTION 69.5 ORDINANCES
The point here that people seemed to have missed is that property values have tripled in the last 7 years. Do you really expect me to believe that you would be completely happy in having your property taxes triple in the same time period? If you really feel that way I’m sure the State would be more than happy to take your money if you sent it in.
Which is why any kind of repeal of prop 13 would need to limit AGGREGATE tax receipts instead of INDIVIDUAL tax receipts. If you set the tax RATE at a level such that total returns increased only by population increase and inflation indexing, neighbors would be paying equivalent amounts but the RE bubble wouldn’t give a windfall to local governments.
I don’t live in CA, but MD has a somewhat similar law.
Buffet wrong? Can’t be. After all, he advised Coke to pass on Quaker, which had Snapple and other non-carbs. Pepsi took it and pull ahead about a year ago on market capitalization. The now eat (drink?) Coke’s lunch in every category except carbonated drinks.
Quaker had Gatorade, a huge winner.
Buffet in 2003 was just pointing out the obvious inequities in Prop 13. I give him credit for acknowledging that rich old people can in many cases afford to pay more.
This is from 2003:
Buffett’s home in Omaha, Nebraska is valued at about $500,000, and recent yearly property tax on the home totaled $14,401, he said in the report.
He paid $2,264 in annual property taxes on his $4 million home in Laguna Beach, California — about 16 percent of the tax he paid Nebraska for a much cheaper property.
Buffett said in the interview that taxes on his Nebraska home grew by $1,920 this year, while those on the California home rose by only $23, thanks to limitations on increases in property tax established by Proposition 13.
“In effect, it makes no sense,” Buffett told the Journal, in reference to wide swings in tax assessments by region.
“He says he’s out of the running for now. ‘I would only buy one of those houses if I could get it at a ridiculously low price where I couldn’t get hurt in this market,’ he says.”
I would venture even at 377K he could get pretty badly hurt in this market. I would venture these same properties will be in the neighborhood of 200K in a few years, given the amount they recently went up, driven by liar loans and speculation.
I would venture that he will soon feel like the tech stock investors who believed they were “buying the dips” back in the summer of 2000.
Inland Empire - “I keep wondering if there’s some way we can spin this, to avoid a public-relations disaster. I mean, as future Emperor of the Inland Empire, I do not wish for our region to become known as America’s Foreclosure and Eviction Capital.”
Sorry - Inland Empire will soon be #1 in forclosures nationwide.
“He says he’s out of the running for now. ‘I would only buy one of those houses if I could get it at a ridiculously low price where I couldn’t get hurt in this market,’ he says.”
Couldn’t get hurt in this market?
[Yoda voice] “You will be. You wiiiill be…”
““Before, subprime borrowers ‘had the market as (their) silent partner,’ Aliso Viejo loan broker Paul Scheper said. ‘They could refinance again. They always had the equity.’””
Sounds more like the borrowers had a co-conspirator. But as it always works in the world of crooks and thieves, they turn against each other - rapidly and without notice. Now they are pointing fingers and claiming they are victims and searching for sympathy. Who is really left holding the bag?
Palm Springs has already taken a huge hit. Back in 2001-02 you could actually buy an entry level 2/2 condo for about $150-200 more than what you would pay for rent. In 2003 that market went up and up and up, about 80-90% in three and a half years. Over the last 12+ months it has been dropping. I estimate that entry level condos are already down 20-30% from the peak. Probably higher if you could determine how to factor in the incentives that are offered. Seems to me there is room for another 20-30% before this is all said and done. Ouch. We would be so lucky to only go to 2002 prices.
Can I request 1997 prices, please?
can I request 1957 prices, please?
If you look at sacramentolanding.blogspot.com, he has posted a three-part lecture by Thornberg. The thing that was new to me was that he won’t predict whether prices will continue to fall or just stagnate until 2012, when he predicts that they will end up where they are now. I get the feeling from his tone that he thinks they will fall dramatically, but he demurs from predicting that they will.
Several people, including myself, have been warning the governments of Santa Barbara city and county of the coming crash for years. They do not listen. They’re too busy spending tax money making the street lights on Milpas Street look like corn stalks ($600,000), spending tax money on unused bikelanes to nowhere ($10,000,000), expanding the size of County government office space ( $50,000,000), trying to increase sales tax ( which the voters rejected in November), building government subsidized housing for illegal aliens ( tens of millions of dollars), building the underused Granada parking structure ($27,000,000, $12,000,000 over budget), giving tickets to property owners who are victims of gang vandalism while protecting gangbangers and illegals, trying to screw cops out of a much needed pay raise and countless other acts of bull$hit.
Now I understand why my cousin Steve left Santa Barbara.
I’ve noticed that Santa Barbara listings have gone up 17% in the past two weeks alone. A tipping point has been reached?
Gosh, clearview, why do you still live there?
Because I just loooooove those cornstalk streetlights. They’re so, well, whimsical (thank you Mayor Harriet Miller, Ms.Whimsical).
My fond memory of SB was going there with friends during a meteor shower, driving up into the mountains behind the city, where it actually gets dark, and watching the falling stars. (to Alaskans, warm and dark is a very curious combination. Here, when it is warm, it is always light. When it is cold, it is (almost) always dark).
Santa Barbara is wonderful if you like to hike, bike, sail, swim, surf, hang-glide or walk on the beach with your dog. I get up every morning at 6 a.m. so as not to waste a minute of the perfect day. But it’s dead at night. And culturally, it’s very stodgy. My kids (who live in LA) can stand being here about 24 hours before they flee, bored to tears.
UCSB is a beautiful campus and kids who go there seem to love it. And the weather is perfect. I wish I could live there, but no job in my field.
Sound strangely similar to Davis, CA.
Everything is too expensive here and the locals know it so they do most of their shopping outside the city. To try to staunch the money flow out of the city, they have all these downtown business revitalization projects. I wish they’d work on the cockroach and Norway rat investations instead and maybe more people would go downtown.
But shouldn’t someone, anyone, make the residents of Montecito happy??? After all, isn’t it all about them and what makes them content??? After all, someone needs to provide for their servants’ kids’ education (i.e. public schools)!
And don’t even get me started on the misspent funds to widen the 101. Money that taxpayers approved and was duly raised through taxes only to be spent on bike lanes (lol) and promotions for light rail. Meanwhile tens of thousands of people are suffering in traffic ED commuting from Ventura County to SB and back.
Sorry folks, but this is economic warfare.
~Misstrial
Yeah, what happened to that? I was so pleased when they finally built a bypass so that the 101 no longer stopped at traffic lights in downtown SB. But they ended creating the worst bottleneck on the whole interstate.
“They’re too busy spending tax money making the street lights on Milpas Street look like corn stalks ($600,000), spending tax money on unused bikelanes to nowhere ($10,000,000)…”
In my neighborhood, people really use the bike lanes.
I used to drive my bike from Santa Monica to Santa Barbara just to use the bike lanes. The ride from downtown up to Hope Ranch and then to Goleta was wonderful.
i always wondered what would happen if people started taking back their neighborhoods from the gangs and grafiti. would cops really stop the neighborhood from doing that?
and who comes up with the ideas to spend all that money on useless projects?
A friend of mine works for the county assessor. They have been putting their best and brightest to work on projecting revenues. The best estimate they have is property tax revenue will decline through 2011 and then stabilize for a while.
Hello folks, this is a group who wants and needs property tax revenue. They would not be biting the bullet unless it was a forced event. So all this talk about a bottom in 2008 or 2009..two words…get real. The people who know property tax revenue are forecasting a different time table. Reality.
Soon the state, county and municipal governments are going to have to account for their future liabilities. Some FASB uniform disclosure law. Not sure of the year. It seems to me that a perfect storm is setting up when voters realize how much they’re in debt to their public servants.
property taxes are a lagging indicator
The county assessor read the Credit Suisse chart but neglected imploder’s point about the probable time lag.
I am Emperor Norton II, of the Inland Empire…
http://en.wikipedia.org/wiki/Joshua_A._Norton
“I keep wondering if there’s some way we can spin this, to avoid a public-relations disaster. I mean, as future Emperor of the Inland Empire, I do not wish for our region to become known as America’s Foreclosure and Eviction Capital.”
The Peruvian rice bubble burst leaving SF without sufficient quantities of rice thus was created Rice A Roni and the emperor of the United States.
Your Imperial Majesty,
As Sovereign you may want to consider printing your own currency, then handing it out to all the FB’s in your realm.
Wonderful story - only SF would tolerate and promote a nut like that!
Well folks, here in sunny Southern California, the sub-prime scam is still alive. In my mailbox today, an offer from SheaHomes who are yet ANOTHER contracter building masses of incredibly over-priced homes just off the 101 Freeway in what was once prime agricultural land in an area (Oxnard) populated by low income Latinos. DH Horton being another of these contractors who, I hope, will eventually go bankrupt.
The flyer from SheaHomes came in my mail today. I’ll skip the usual, “Now is the time to buy,” crap and get to the finance part. The flyer screams, “WHY RENT? OWN NEAR THE BEACH FROM ONLY $1,600 A MONTH!” The properties are quoted as being in the low $400,000. That means at least $420,000.
Hmmm, $1,600 for a $400,00 + property. Just for fun I have a call into them pretending to be a potential buyer. I want to hear the spin via the numbers. My wife, a CPA, will figure out the REAL numbers but obviously the $1,600 a month is an exotic loan. We seem to be in a period where damp kindling wood is being thrown onto a fire. Once that wood dries out and catches fire - watch out.
This is for Palmetto. I’ve posted a few times about a woman my wife works with who’s husband was one of the “brokers” who dealt with exotic loans. By writing his own deals, probably using a tame appraiser, he turned a $160,000 condo into a $1.2 million ranch home over a period of 5 years by buying, re-appraising upwards, selling, buying, re-appraising upwards, selling, etc. Of course, now the majority of sub-prime crap has hit the fan, he’s looking for fresh scams. Until one arrives, he now has a 9 to 5 ordinary job not related to the real estate industry (at MUCH less money.) He couldn’t afford to keep the ranch house and couldn’t sell it, so he rented it out and moved into a rented condo. I figured he was simply not going to pay the mortgage on the ranch house and eventually, his ranch house renter would be surprised when the Sherrif arrived to post notice of default. I was wrong.
It seems he quit claimed the ranch house to a friend (who was also in the sub-prime mortgage game). They paid the mortgage payments for a few months then stopped. It seems the scam is that the property now has a “clouded title” over it and it will take months and months and months for the lender to get the quit claim owner out. Of course, they both know they will end up bankrupt but these fly by night characters who joined in the feeding frenzy now have a LOT of knowledge about real estate and, you can be sure, they will bleed the situation dry. However, with luck the politicians will bail him, and others like him, out.
Ummmm how does a quit claim deed cloud the title enough to prevent a lender from foreclosing. Thats a new one on me…
That was my thought, too. There would not be any cloud - the grantee would “own” the property subject to the encumbrance of the deed of trust, and the “grantor” (the original borrower) would not have any ownership interest in the property. I just don’t see any cloud on title. Of course, recording the quitclaim deed would automatically put the borrower in default and allow the lender to accellerate the payments (due on sale clause). So, the lender won’t even need to wait for the borrower to get 90 days late before starting the foreclosure.
I think you delay the foreclosure by appealing to the judge for a delay. I was told by someone that you can double the amount of time the usual foreclosure takes. In California, it takes about 4 or 5 months, after the first mortgage payment is missed, to get a fb out. That means if one has taken on a quit claim and tells the court that there seems to be a mistake, you can probably stretch that foreclosure to 8 or 10 months. It might be different in other states but in California, they are pretty lenient when it comes to evictions.
I’m going to have too look that up. I didn’t know you could delay a foreclosure by saying it’s a mistake.
I know in the past a BK would stall a foreclosure. But if I remember correctly that was about it. Typically a quit claim deed in California emboldens the Lender more, because in most contracts it activates an acceleration clause.
But hey I’ve been wrong before i’ll look it up to be sure.
Mike, Mr & OC are both right. Further, if the husband and/or friend go to court and commit perjury by stating that there is a mistake (in regards title), when they know otherwise, they will have lots of other issues to deal with, as most judges wont take that kind of game playing in their courtrooms lightly. I think the guy knows not enough to go this route, but just enough to find himself in quite a bit of legal trouble. Further, by doing the quit claim thing, that can be considered fraudulent conveyance, among other things. IMHO
See my post on OpArms above. Still a lot of toxic deals out there, which will make matters all the worse.
Yes, anecdotally speaking, I am still waiting for my wife’s couple friends to file for BK. One is an RE agent, the other a loan officer. They are still in the McMansion, still driving the Hummer and the Benz and just left for Cabo for a vacation (again) and still building a second home in AZ. My wife says it’s because they completely cheat on their taxes. I say they cheat on everything to keep this run going.
Wow. Report them:
http://www.moneycentral.msn.com/content/Taxes/Avoidanaudit/P42263.asp
~Misstrial
My wife says it’s because they completely cheat on their taxes. I say they cheat on everything to keep this run going.
Drop a dime on them. It’s people this that helped create this mess.
Hard to make money by just “cheating on your taxes” if you’re not actually making any money to be taxed !
I probably shouldn’t say this, but you can file revisions on previous returns.
Thanks for the great story, mike. That’s a real “TESTIFY, BROTHAH”! The angles these people work are mind-numbing. I guess I’m too dumb to be a scammer.
Thanks for the update. Sounds like these two guys are Larry and Moe looking for a Curly. Nyuk nyuk.
Article: “House of Denial” - a great read.
http://tinyurl.com/2dwy57
Thank you - a nice antidote to CNBC cheerleading.
“Sadly, the housing boom of recent years has been followed at the heel by a foreclosure boom.”
Sadly? Uhhh, speak for yourself. I LOVE IT! Yeah, I know, sounds heartless and spiteful. I don’t give a rats @ss. Don’t buy what you can’t afford.
Spiteful, perhaps, but not heartless. There’s a bigger picture going on here. The sooner the economy of the last 5 years is exposed for what it was, the sooner eyes will be opened and we can move on.
Something tells me most people still won’t get it….sigh.
Does anyone else feel this is 2001 all over again?
“Sadly, the housing boom of recent years has been followed at the heel by a foreclosure boom. In San Bernardino County alone, 909 foreclosures were recorded during the first three months of this year. That’s double the number for the last quarter of 2006.”
Get it? 909? LOL.
Livin’ la vida upsidedowno in the 909…
HAHAHAHA. Good catch.
So is OC going to have 714 or 949 foreclosures?
Being in the 714 (older and more stable), I prefer that the hipper, richer, had a TV-Series displaying their neighborhoods 949 take the fall. They are, however, attracting more and more corporate HQs. Closer to the beloved beach, too! -
Here’s an interesting article that correlates the Housing slump with the prospect of a stock market crash:
http://www.healthsentinel.com/org_news.php?id=122&title=The+Mother+of+All+Bubbles+%96+Credit&event=org_news_print_list_item
Interesting, maybe. But I don’t quite see the logic of his stock market crash. His prediction of dollar continuing to decline makes sense to me. And that in itself constitutes a prop under the stock market.
I think the point he’s making is that the loose monetary policy of the Fed that helped create the bubble in housing is doing the same in the stock market — people borrowing money to bet on the market.
I think the point he’s making is that the loose monetary policy of the fed that helped create the housing bubble is doing the same to the stock market — people borrowing money to bet on the stock market
I think the point he’s making is that the loose monetary policy of the Fed that helped create the housing bubble is doing the same for the stock market — people borrowing money to bet on the market.
Todays House Hoarders remind me of the yeaterdays old time Gold Hoarders. It’s great to have it, but it’s a real BITCH to LUG IT around
Ooops!…Can I SAY that ben?
The ATM machine is broke!
Here’s a good one from realtytrac.com
### First purchase, back in the olden days, before we even had days…and sub-prime mortgagges.
Recording Date 11/1/1976
Price $18,500
### House is paid off, price is way up, why not splurge a little?
Recording Date 9/23/2004 Lender Name Novastar Mortgage Inc
1st Loan Amount $86,250
### Whoa! Wait a minute. 10 month later and we’ve burned through $86K. Whatever they’re smoking, it ain’t cheap.
Recording Date 7/22/2005 Lender Name Chase Bank Usa NA
1st Loan Amount $108,000
### 8 month later we need another $44K. That stuff ain’t cheap, but I’ve really developed a linking for it by now!
Recording Date 3/20/2006 Lender Name ACOUSTIC HOME LOANS LLC
1st Loan Amount $156,750
### They won’t give me any more $$ bastards. Thanks God for Countrywide…is on my side. Another $38K on a 2nd mortgage. The gravy train is under full steam again!
Recording Date 9/27/2006 Lender Name COUNTRYWIDE HOME LOANS INC
Loan Amount $38,200 Loan Type: Stand Alone Second
### The gravy train has finally reached the end of the line. Nobody saw it coming either.
4/26/2007 12393250 LIS $152,800.00 Beds/Baths 3/1 Opening Bid $152,800
Square Footage 984
THE END
That looks like someone was churning an un-suspecting senior.
I thought you’re supposed to become wise with age. Looks like these folks just became more gullible.
It’s not always the case of being gullible… It could be a case of someone in a nursing home/hospital and them getting raped while they are away. It used to happen all the time here and that deal above smells like it.
Schadenfreude mit geld…
————————————————————————————
But Deutsche Bank wins on subprime gamble
Deutsche Bank made a large profit from betting on the weakening of the US subprime mortgage market, the German bank said on Tuesday as it reported record first-quarter earnings.
http://ftalphaville.ft.com/blog/2007/05/09/4373/but-deutsche-bank-wins-on-subprime-gamble/
In Germany some politicians already suggested stripping the name “Deutsche” (i.e. German) from the name of the bank since they outsourced most of their workforce to India….fine bunch of capitalists they are.
“…stripping the name “Deutsche” (i.e. German) from the name of the bank since they outsourced most of their workforce to India…”
Oh, but that makes sense. You see, Aryans are Indians (I kid you not):
http://en.wikipedia.org/wiki/Aryans
This may be off topic, but I have a question.
When reading the story about Mr. Harper and how he paid what he wanted to pay for the house, is that really so bad?
My point being that, if the cost of the house was what he was willing to pay and if it keeps his payments within his means (assuming this is within his means), then how is that bad? Sure, he didn’t wait for the bottom to drop out and save every last red cent he could, but as long as it’s what he is comfortable with and will actually make his payments, isn’t that good enough?
That’s what we were thinking of doing? We’re in no hurry to buy (we’re renting currently), but the minute we feel the price is right, so to speak, and the payments will be in the realm of what we are willing to pay (with a fixed rate traditional loan), then whether we wait till we “think” we’ve hit bottom is irrelevant. Well, maybe that’s not the right word, but the bottom line is that we obviously don’t want to rent forever, however, we will wait to purchase until prices come down to what we can comfortably and willingly afford — not necessarily at the bottom of the curve. Is that an incorrect strategy?
I agree, when you find what you want for a price you’re willing to pay, go for it. I have certain numbers I’m looking for for my next apt. building, if I find them I’ll buy, I’m not too concerned about what the general market is doing.
You need to do what is within your comfort level. If your a cheapo, then I wait it out before I buy. If I had kids and wanted a secure home, in a nice school district then I would conisder buying, NOT. Read some market timing books, craig hall, robert campbell, etc and then decide.
You don’t want to be the sucker that says I paid 30% less that the going rate at the peak, and then have it go down another 20%.
I guess whatever makes you happy
but if you are looking at it as an investment, the goal would be to get the best price possible
I guess I should clarify that. No, we are not looking at it as an investment. We plan to live there for many many years, perhaps all of them. I’m not one that likes to move around a lot and barring any disaster or job relocation, we plan to get something we really like right off the bat and live there for the duration.
Hailey, I think that’s what a great many of us on this board are all doing. We’re waiting until prices get back in line with fundamental levels of affordability before buying. For instance, my subordinate at work bought a home for just over $1 million in Glendale last year. He makes just over $50K per year (of course I know this). My wife and I still rent because even though we make around $130K together we think it’s utterly ridiculous (suicidal?) to buy when prices are so ludicrously out of whack with what people should be able to afford based on 100-year metrics of affordability. Most people here rail against liar loans and other sorts of real estate-based fraud that has become insanely rampant in the past five years, not honest people getting a rasonably honest deal on an asset they will take care of.
A lot of people here (rightfully so) cry foul against RE people who claim homes are an investment from which to maximize your profit potential. I think it was late last fall I saw a quote here from someone (was it Get Stucco?) who said “A house is what keeps the wind from blowing on you.” I won’t claim to speak for *everyone* but I think we’ve collectively had it up to here with cheerleaders from the NAR who have been pimping property the past few years like there is no tomorrow.
Ya IMHO it’s the wrong strategy. Its like the people that think they know a “fair” price rather than viewing prices in the context of a larger market. Since prices can go nutty over the top, they can go nutty on the down low. If you want to live in a house, live in a house, just rent it, don’t buy it. When in your best judgment you think we’ve hit bottom, THEN buy. Also, these days its difficult to predict your employment far out, you might think you’ve got stable job teaching, then wango, you’re one of the 48 in SB. I have a friend that cashed out at the peak, but now is justifying buying an over priced house because “he can afford it” due to this windfall. Doesn’t make any sense. If he can afford to over pay, he can afford to rent the same or better place. In my neck of the woods you can rent a SFH for little more than a 2BR apt, and way less than the full nut for a real mortgage The place is so big, we joke each cat can have his our room.
Speaking of fair market value wonks
From the HGTV forum, my favorite place to watch completely irrational people wade into the real estate waters.
Someone was asking how to check county records on a property to see what it sold for historically. Then a realtor on the board pops up with:
“But, what does it matter? When the owners purchased and what they paid, has nothing to do with what it’s worth today. Or what they would be willing to accept as an offer. The key is “Fair Market Value”.”
http://tinyurl.com/23kqer
People like that make me nuts and I stomp on them whenever I find them. The problem with blogs is that I can’t physically hurl a coffee cup at their heads when they really need it.
I am renting now but have a 6 month lease. I am also actively looking to buy. I’ve made a couple of lowball offers - real lowball not the 3% below asking that pass off as lowballs in the MSM. So far none have been accepted. However if I get a $600K asking for $450K I’ll go for it. If it falls for $400K next year, so be it. I’m not going to live the next few years of my life trying to time the exact bottom of this thing.
I’m with you Ed. That’s great that you are lowballing (I think may here call it “softening them up.” It’s a perfectly fine strategy if 450K fits your affordability profile. My wife thinks I’m trying to time the bottom but really I just want to buy when “ludicrous” and “West Los Angeles home prices” are no longer used in the same sentence.
i agree with this. i am still kind of looking even knowing that prices will go down. my only problem is my job is really close to the house building industry and the last time the so-cal bust hit a lot of civil engr. firms went under or took extended vacations.
Are ya like me, folks? Wouldja like to get yer hands on some of the bastids who ran these bubble scams?
I want to hang these people palmetto .
investment or shelter it doesent matter “if you buy right going in then you can sell right going out” even certain single family home purchases during certain decades beat the s and p imho
6 times gross and good old fashion 10 caps are the time to get in………………. now its time to run for the hills.
6 times gross…10 caps…stop, you’re getting me too excited.
I hope someone is awake still to comment on this - if not I’ll post it again in the am… this is a local realtor’s opinion on the market, and the math is… um… can anyone tell me it’s as insane as I think it is?
“Regarding the median price, there is really no spin on it. It is the median price. Yes, it might go up because a greater number of higher end homes are being sold, but it is still the median price. It is just a math calculation; it is not someone’s opinion. Month-to-month, year-to-year, the median price will continue to be reported accurately based on the sales. One should however not judge the direction of the market by 1 month’s movement in the median price. Over time the median price will always increase. Twenty years ago the median price for Single Family homes was just over $150,000. Last month it was $665,000. In another 20 years it will probably be over $3 million. “
In another 20 years it will probably be over $3 million.
Way optimistic.
Assume 3.5% YOY gain,
Reasonable PV of the home as $350k (assumption)
I get $696k
In other words, don’t expect the median to budge above today’s level for a long time (excluding hyperinflation).
Got popcorn?
Neil
Thanks Neil… what do you mean PV of 350? Medians today are
665, so do you mean that the pendulum will swing back, to where it should be, and that a slow flat reversion to mean will occur?
3.5% YOY gain, but what about inflation? With 3% inflation, you get a whopping 0.5% real annual return, so in constant dollars your $350k house of today is worth $386k twenty years hence. When will it be worth $696k in TODAY’s dollars? Most likely, never again in our lifetimes, that’s when.
Last November, Allen Harper says he made an offer of $390,000 for a brand new three-bedroom house in a development sprouting here in the desert east of Palm Springs. Home builder Lennar Corp.’s response: No thanks. Six months later, Lennar jumped at the opportunity to sell the home for that very price to Mr. Harper.
What a numbskull. Were I to have been in his place, I would have chopped my offer even more.
“So, you’re willing to take 390 now, eh? Well, being as how it’s been six months since we talked and prices have fallen, I’ll give you ohhhh, 250. No? Okay then, nice talkin’ to ya.”
Ya I was thinking the same thing. In the time that has transpired, his knowledge should have improved on the future value of that house. Obviously the builder’s did because they called him back to try to get the same deal! Sounds like it was some silly point of pride that if he got it for his original price than he was right all along and got his way.
Right on the main page at latimes.com is the following quote from the “Real Estate - LA Land” blog. It is advice directed toward some chick who wants to buy a condo for in LA with a $350k budget. (Which is of course impossible today.)
FROM THE BLOGS
You will be able to buy a nice house for 350K within a year. Save your money and enjoy some nice sushi.
–Matt
“I seriously think most people in Vegas pulled out all their equity and blew it on who-knows-what. Those 10,000 or 11,000 vacant properties on the (Multiple Listing Service) represent anxious sellers that are slowly bleeding to death and would love to sell at just about any price.”
Las Vegas Review Journal
Hey, someone brought this up on another blog, but I have no idea where to find this info…
Does anyone know how to get the figures on the number of people taking pre-retirement, “hardship” withdrawals from their 401(k) accounts? (Getting hammered on penalties and taxes, of course).
If that number is WAY up, at the same time the savings rate is negative, we’ll have a much clearer idea of how “F—ed” the FBers really are.
How can we get that data?
I smell desperation,
MMAB