Everybody Wants A Deal In California
The Sacramento Bee reports from California. “First it was individual homeowners who turned to the auction block to sell fast at a discounted price. Then home builders. Now come the banks. Home loan lenders, stuck with rising numbers of repossessed homes, will auction 242 houses next month to bidders in Sacramento, Modesto and San Mateo.”
“It’s the biggest home auction in Northern California in the wake of a five-year housing boom. The auction especially signals a new sales rival to home builders, investors and individual sellers: the banks.”
“Robert Friedman, chairman of REDC, said buyers typically get a 10 percent to 20 percent discount from asking prices, while banks get quick results. ‘It’s just a business decision. You sell them quickly and take your hit,’ Friedman said. ‘In the long run they do it better by taking this route.’”
“Keith McLane, who runs a separate Carmichael-based home auction firm, said the sheer number of houses being auctioned next month “illustrates the quantity of foreclosures that are out there.”
“Foreclosures.com reports that banks owned 661 homes in April in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That’s up from 92 in April 2006.”
“Statewide, banks owned nearly 5,500 homes in April, according to the Web site. The same month in 2006 it was 1,111. Many of those still haven’t reached the market, said Foreclosures.com’s Alexis McGee.”
“Demand is high when they do, said Luann Richardson, a Fair Oaks-based real estate (agent). ‘Everybody wants a deal right now. There’s very strong demand for a deal,’ she said.”
The Santa Barbara Independent. “Why isn’t anyone talking about it? I’m talking about the rapidly oncoming tsunami disaster of 250-300 condos coming to market in the downtown business area this summer and fall and into 2009.”
“One project with six affordables and six market-rates has failed abysmally. The affordables were immediately filled, while the market-rates are still on the market as prices plummet a year after completion.”
“Common wisdom tells us the same is likely to happen to many, if not all, of the high-end units coming to market downtown this year and next.”
The Santa Monica Mirror. “According to Santa Monica City Manager P. Lamont Ewell, Santa Monica’s economy continues ‘to improve modestly.’ With Santa Monica’s varied tax base, the City should be able to withstand economic fluctuations.”
“These mixed economic pictures have caused the City to propose a $16.7 million decrease in expenditures, which is 3.7 percent less than the current year’s revised budget. Property transfer taxes are being projected to decrease by 21 percent due to the increase in foreclosures.”
The Central Valley Business Times. “A slowdown in housing demand in the Central Valley and in the Riverside-San Bernardino area of Southern California is being cited as the reason for a drop in projected new home starts this year.”
“‘Residential permit activity had been projected to be in the 155,000-175,000 unit range for the state. Based on activity for the first few months of the year, we have modified the projection to the 135,000-155,000 range,’ says Alan Nevin, chief economist for the California Building Industry Association.”
“He says because potential homebuyers are sitting on the sidelines, hoping prices will drop further, the market remains soft. The entire estimated drop is in single-family homes.”
The Marin Independent Journal. “A Novato mortgage company has laid off nearly all its employees, becoming the third Marin brokerage in just over a month to issue pink slips. Pro30 Funding laid off about 40 staffers last week, retaining a handful of others while the company cleans out its 22,000-square-foot office.”
“While the mortgage industry has been buffeted by defaults nationwide, particular in the ’subprime’ sector, Pro30 founder Bill Coleman said 99 percent of his clients had good credit records.”
“In many cases, he said, borrowers were defaulting on the loans without making a single payment, perhaps so they could live without housing expenses for six to nine months during the foreclosure process.”
“‘The appreciation started to decline, and people looked at their payments and said they’re not going to make money,’ Coleman speculated. ‘It wasn’t a business issue; it was the fact that the industry turned upside down almost overnight.’”
“The closure of Pro30 Funding follows 36 layoffs this month at Paul Financial LLC, a San Rafael-based mortgage company that had 180 full-time workers San Rafael, Santa Rosa and Irvine.”
“Late last month, Novato-based GreenPoint Mortgage laid off 70 employees, nine of whom worked out of the company’s headquarters. Paul Financial and GreenPoint said they are not subprime lenders, but felt the residual effects of nationwide problems in the subprime mortgage industry.”
“When prices began dropping in many markets in late 2005, borrowers’ options narrowed as banks tightened lending requirements, pushing more people into default and foreclosure.”
“Coleman said he gave employees a warning ‘a while ago that things were not looking good.’”
‘Home loan lenders, stuck with rising numbers of repossessed homes, will auction 242 houses next month to bidders in Sacramento, Modesto and San Mateo.”’
But I thought San Maeto was different because it’s in the Bay Area >; )
“Late last month, Novato-based GreenPoint Mortgage laid off 70 employees, nine of whom worked out of the company’s headquarters. Paul Financial and GreenPoint said they are not subprime lenders, but felt the residual effects of nationwide problems in the subprime mortgage industry.”
And I thought the sub-prime melt down was “contained” to sub-prime….hmmm. Could it be that the MSM and NAR were being optimistic to fairy tail standards?
You can call them “optimistic” — or perhaps they are just paid straight men who lie to the public for a living.
San Mateo is no different then anywhere else when your stupid…Just saw a short sale in Woodside where the lender took a $345,000. haircut….
Was that on a $ 2 Mil house?
Geez EVERYONE in San Mateo County thinks it’s different here…just like Santa Clara County. Seriously, these folks just don’t believe that this downturn will have any affect whatsoever on thier home values and they are NOT reducing prices to any great degree. These homes just sit on the market and wait and wait for a buyer who makes 150K and wants to buy thier 30-40 yr old 3bdrm/2ba 1200sq.ft. shack. for a mere 700K..
Even that is 4.6 times income, no thanks.
“Coleman said he gave employees a warning ‘a while ago that things were not looking good.’”
I thought Marin was different too, and I live here. You know, we’re “immune” from the mortgage mess and we don’t have any subprime loans. I’m sure Coleman’s mortgage brokers weren’t writing any local loans -);
And given the arrogance here about how special we are, wanna bet those folks don’t have savings for that proverbial rainy day?
Even if the broker was not making any loans in Marin (yeah, right), what this tells me is:
1) If 99% of his customers had good credit and he still had to close shop, then the so-called “subprime meltdown” has spread in a big way to Alt-A.
2) The “sub-prime meltdown” is affecting businss in Marin.
I am planning on making a blog entry tonight that basically says just what I said.
I am planning on making a blog entry tonight that basically says just what I said.
I would love to read it, again.
I think you just did.
First, they are subprime lenders. Second, much of what is called Alt-A is subprime.
I cannot speak for all prime lenders, but the California bank where I work, we are very busy and business is increasing. We have not lowered standards, we are a strictly prime/A+ retail lender.
Only about a third of San Mateo is in the Bay Area. The rest is southwest of it. That’s the part that’s tanking. All the folks I know who are selling (to upgrade to bigger digs) are still doing so within a few months (instead of earlier when the process would end in a week or two).
It will be interesting to see how many bidders show up and actually buy anything…
It will be interesting to see how the pricing is for these REO’s. I don’t expect many great deals at this stage of the cycle. A year from now there will be even more auctions.
As there will be the year after that.
Add to that 2010 and 2011 when the second wave of resets, inc. the Alt-A’s & Prime, hit the beach.
“Robert Friedman, chairman of REDC, said buyers typically get a 10 percent to 20 percent discount from asking prices…..”
Translation: You ain’t gettin’ one for less than 20% off the wishing price.
it would also be interesting to know how many of the “bidders” that actually do show are shill bidders hired on the down-low by the banksters and mortage companies to ensnare unsuspecting “sweet deal” hunters.
That should be Casey’s new gig.
If you think about it most of the potential bidders for this type of product are not in play anymore (Sub-prime & Flippers)…That leaves mostly, IMO, pure investors/speculators that have cash….Seems to me that a 10-20% discount is not enough to generate large volumes of interest…I guess will see….
True investors or speculators understand the “numbers” and the current prices are still way too high to be attractive. Even with a 10-20% haircut!! They need to go 20-30% more in many areas to become viable investment property.
I’ve been tracking Westlake Village where almost nothing is selling these days. Many of the listings are now both for sale or alternatively for lease. The wishing prices are well over $2 million on many properties (avg. $2.5 million), or they can be leased for between $6k-8k per month. Shows you just how far we have to go.
dwr,
i really like the westlake village area and would love to move there. let me know if prices ever make it below the 500K mark.
thanks,
really like the westlake village area and would love to move there. let me know if prices ever make it below the 500K mark.
Oh yea, let me know if North Ranch goes section 8.
The min bid prices I saw (the ones that were listed - some were not) were at 50% of the last 2005 price. In one case it put a 4br 2800 sqft monster into my shopping basket. I doubt it will go that low but you never know. The Mello Roos and HOAs on that monster were nasty.
They had minimum bids, then the only one’s who will be attending those auctions are greater fools and unless they are offering financing they’ll just rotate to the next auction or auction house. What a gimmick get a write-up in the paper draw in some suckers and try to recoup your loss. That’ll work untill the end of the year. Then all bets are off. Too many holdings in the coffer.
I have to agree. This is just the opening volley. A 171 houses is a drop in the bucket when you take into account everything the banks are already holding. If they go at min bid, then they bought at a 2003 price. You need a 2000 price to get back fundementals and inflation adjusted prices here.
To me this is like watching knee replacement surgery. It’s gorey and brutal and I always end up muttering “so that’s how they do that”.
“Keith McLane, who runs a separate Carmichael-based home auction firm, said the sheer number of houses being auctioned next month “illustrates the quantity of foreclosures that are out there.”
1) What is the best way to obtain auction sales results?
2) Do they show up somehow in the comps (through MLS records or otherwise)?
3) What about in market indexes like DataQuick’s or Sandicor’s (I am guessing the auction results are not included)?
4) Does the County Assessor or other govt entity record selling prices for auction sales?
“Do they show up somehow in the comps”
Something tells me they mysteriously don’t make it.
That would help explain why “Real estate always goes up, at least in retrospect,” wouldn’t it?
they won’t be so easy to hide this down cycle with zillow et al.
Why, zillow zestimates the zuture by zadding in 20% appreciation to the comps. That will hide the zownturn pretty well.
They’ve never been hidden they are just unuseable.
You didn’t mean appreciation, you meant, zappreciation!
that’s what makes the downsliding charts on zillow today so, so, soooo delicious!
“Do they show up somehow in the comps”??
Yes they will Stucco as far as the appraisers are conserned…I am not sure what they have, but there data bases allow them to get County recorded data…I think most counties have transfer tax effectively tells you what the sales price was…Can’t cheat on the transfer tax….However, what is not known is if there were any concessions….
Somehow I doubt in the last down cycle appraisers were using foreclosures as comps. I think the realtors likely had a thing or two to say to any appraiser who tried.
I am going to contact Redfin.com and see whether they plan to make foreclosure auction sales results available to buyers using their site. This would be a huge marketing advantage over traditional liars, er, I mean, realtors.
Why?, how does it benefit you?
“…how does it benefit you?”
On the outside chance I ever decide to buy a home, I would like to know the real comps, not what some lying schmuck says they were.
How does a Forclosure auction (ie: Trustee Sale) or an Auction in itself determine market value. That doesn’t make any sense. Especially if you have one or 2 auctions in your selected area. The logic is faulty.
“The logic is faulty.”
The idea that any one or two comparable sales determine value (often promoted by realtors) does not make sense. One should use the fullest set of recent sales data, conditional on quality and terms of the sale (including time on the market, use of incentives, seller’s level of desperation, whether the home sold at auction, etc) to get the most reliable estimate possible.
GS-
What you describe is a full blown appraisal. Which costs more than your standard appraisal. For sake of argument let’s say it costs 800 bucks per for an appraisal like that. How many times would you be willing to pay 800 bucks for every property you were considering to buy?
I’m with Stucco on this. I want absolutely all the data I can get my hands on, the good, the bad, and the ugly.
If Redfin won’t list it, then I guess I’ll be spending some afternoons at the courthouse. But I don’t think it’ll come to that this time.
Not disputing Stucco on this, he can have all the information he wants. But it’s more likely than not that he will spend his time as you suggest at the courthouse or one of their entities web based or not gathering it. I would be very surprised with the thin margins that RedFin probably has that they will be providing it. Unless the various counties change their delivery system. That’s a lot of work to sort through all of that each and everyday. I don’t see it happening.
“How many times would you be willing to pay 800 bucks for every property you were considering to buy?”
800 bucks on a property priced at $400,000? That would be 1/500 the value, to avoid potentially large losses due to misleading information feeds from lying Realtors.
You didn’t answer the question, How many times would you do it before you made an offer on a house? What if the seller or market doesn’t agree… +/-. How many times?…
First of all - $800 is way too much for a good appraisal, even if it is worthwhile. Heck a thorough inspection costs way less than that, and is a lot more work.
Second of all - exactly *why* would auctioned properties not be considered valid comps? To think such is ludicrous. If a house sells at auction for $400k, and a nearly identical house in the same neighborhood has an asking price (based on an “appraisal”) of $500k - what is the true value of this house still for sale? It’s $400k, not $500k.
In a strong market where auctions are few and far between, and are usually the result of people who went bankrupt due to job layoff or their meth lab failed, then yes most foreclosures aren’t valid comps. However we’re entering a market where there are or will be *tons* of auctions, and most of these will be new or nearly-new houses in tract neighborhoods where nearly every house is identical. So they very much will be valid comps.
Just take a look at some of the listings on foreclosure.com and you’ll see what I mean.
“However we’re entering a market where there are or will be *tons* of auctions, and most of these will be new or nearly-new houses in tract neighborhoods where nearly every house is identical. So they very much will be valid comps.”
Exactly. Moreover, in some neighborhoods, they may be the only true comps, as anyone who can hang on will and anyone who can’t will be foreclosed with subsequent auction on the courthouse steps.
a property sold at foreclosure auction will necessarily sell at a large discount if only for the buyer’s inability to fully inspect the property. So I can see a realtor pointing to the auction price and saying “the foreclosure discount amounts to 20%” when in fact it should be 10%. I guess my point is that at the end of the day they truly aren’t “comparables”
I’m guessing the original idea behind not using foreclosures as comps is that foreclosures were outliers. Since there will be so many of them, they can no longer be considered outliers.
Patience people. Not everyone buying at foreclosure auctions are going to live in the house long term. Many are just going to try to re-sell at a higher price soon after purchase.
The difference is they won’t be saddled with a high price that they “need” to get to cover their debt. So, they’ll still be well below the rest of the listed houses. They’ll sell in a normal process, and those comps will CRUSH anyone trying to sell on the market.
Foreclosures are just starting to pick up speed now. I say we start seeing resales of foreclosed properties in large numbers toward the end of 2007, and into spring selling season in 2008.
THIS is what will crush next year’s “selling season”. You can’t sweep low prices under the rug for too long.
I’m pretty certain that since Prop 13 requires that property tax amount is updated to reflect latest sale of property, sale price must be recorded and is public record in CA, regardless of transfer tax charged is some areas.
That would be ‘…in some areas…’
All sales show up in public records, if they are flagged in other way than a straight up sale then they will not be used by an appraiser. So if it shows as a partial, non hands length, or any other variant they will not be acceptable comps. But the sale will show up in public records.
“…if they are flagged in other way than a straight up sale then they will not be used by an appraiser.”
It is never wise to throw away information.
True enough, but the typical appraiser makes 4 to 500 bucks a deal. Do you really think he’s going to take the time to fish through all of that to make sense of it to give a buyer a value on his property. When he can pull three clean comps in a matter of minutes. I don’t think so…
True enough, but the typical appraiser makes 4 to 500 bucks a deal.
hehehe…nice fee if you can get it.
My mother just had a 1004 appraisal done 3 weeks ago.
$395.00 from a company operatin’ within spittin’ distance of Boston.
With a 60/40 fee split (at best) means a gross of $237.00
less self-employment tax levy, state income tax, and transportation expense.
So say…less 25% for expenses, that’s a whoppin’ $177.75 net to the appraiser.
That amount will get ya a high school educated newbie trainee who can barely write a coherant paragraph.
Professional narrative appraisals for the masses?
Not in this fookin’ life.
As the sayin’ goes ya get what ya pay for…or…garbage in garbage out.
Credibility’s totally shot in the appraisal professional.
“Do you really think he’s going to take the time to fish through all of that to make sense of it to give a buyer a value on his property.”
No way. Which is exactly the reason that good appraisals belong in a publicly accessible source like Redfin.com. I am not talking about zestimate’s zany appraisals here, which often times are wide of the mark.
lots of appraisals are drive by
seen it
not worth spit
inspectors aren’t worth much more
“In many cases, he said, borrowers were defaulting on the loans without making a single payment, perhaps so they could live without housing expenses for six to nine months during the foreclosure process.”
Maybe there were saying up for a rent deposit. If these people were paying over 1000/mo in rent they could have saved over $10k in some circumstances. I would if any of these people were truly owner occupiers living off of the system. Perhaps 0-down loans to people with good credit, isn’t such a great deal after all; everyone needs skin in the game.
Or they are cash-back frauds
In other words, there’s no need to save $1000/month in rent, when you can get $50-100K at signing for nothing!
Kingpins are filling the subprime void. Are they anticipating monopoly rents when the dust settles on the subprime collapse, or is it just that they are the last playas left on the field? Or do they have some kind of off-the-books incentives we don’t know about related to the “subprime-is-contained” mantra?
———————————————————————————
JPMorgan quietly climbs subprime ladder
Tim McLaughlin, Reuters
Published: Thursday, May 31, 2007
NEW YORK (Reuters) - JPMorgan Chase & Co. is downplaying its role in subprime lending even as spectacular flameouts in that sector have turned the Wall Street bank into one of the biggest originators of risky mortgages.
“We don’t do much in the subprime business — at all,” JPMorgan Chief Executive Jamie Dimon told investors earlier this month at the company’s annual meeting. “It will be a good business, by the way.”
Indeed, the No. 3 U.S. bank, along with other Wall Street companies, has stepped into a void triggered by a meltdown in the market for lending money to homebuyers with weak credit.
JPMorgan’s first-quarter subprime mortgage originations, through Chase Home Finance, jumped 11 percent to $3.02 billion, according to Inside Mortgage Finance. The bank was No. 11 in a ranking that included No. 7 New Century Financial Corp., which now is being liquidated in bankruptcy.
Not much subprime business at JPMorgan translates into a subprime mortgage portfolio that stood at $13.2 billion at the end of last year, or about 3.6 percent of the company’s $367 billion consumer loan portfolio. JPMorgan sold most of its 2006 subprime production, offloading risk.
http://www.canada.com/nationalpost/financialpost/story.html?id=474fcd7a-4783-494e-b862-54922c92ff94&k=79449
A month or two ago, some poster here derided our fellow poster “Auction Heaven in ‘07″, saying things were not moving quickly enough to create any such effect. Well, maybe they are.
I think the auctions from these auctions - in 08′ will be even better. =)
I am with Auction Heaven in 07 and Robert Cote.
The speed at which this is unravelling is a bit startling and overall it will be the fastest unwinding of any housing boom ever.
I don’t see the unwinding yet in San Diego county list price levels — it appears they are stuck on a permanently high plateau, in fact.
Ditto West LA.
Interestingly though, if you find a neighborhood with a lot of similar homes and search the county recorders property sales database, you will find sale prices between 10 and 25% off their peak in mid to late 2005 for San Diego. This is particularly true of condo’s.
“…prices between 10 and 25% off their peak in mid to late 2005 for San Diego. This is particularly true of condo’s.”
I did that not too long ago (Dec 06) for a bank-owned condo listed for sale in 92127 (Rancho Bernardo W) at $489K. Turns out the cookie-cutter-similar comps went for as high as $648K in mid-2005, implying at least a 24.5% haircut. And that was before the subprime collapse.
Of course you did specify list prices, and in this regards there is a lot of hoping, praying and wishing going on in the market today. I suspect list prices have stayed high, because most only hear the median BS and price accordingly. This is great if their median size of thier home also increased and it’s median condition improved.
“I suspect list prices have stayed high, because most only hear the median BS and price accordingly.”
Here is some median non-BS from my zip code (92127).
Current median SFR list price (ziprealty.com): $1,372,500
April median SFR sale price (DataQuick): $776,500
Recent median sale price as a percentage of current median list price: 56.6%.
This appears to me like a snapshot of a market in slow-motion free fall, but I am insufficiently motivated to check out the time series in order to confirm my hunch.
One key piece of data being ignored though is sale price as a percentage of list. In my area (NoVA) it’s gone from 100% to 92%. Thus even if list prices had not dropped any, sale prices have still dropped 8%. You can’t go by list prices to judge how much a market has dropped.
“You can’t go by list prices to judge how much a market has dropped.”
I’ll give you your 8%. So after adjustment for 8% discounts off list, the median list price in 92127 is
0.92 X $1,372,500 =$1,262,700,
a mere $482,600 (62%) above the April median sales price.
The 8% is only one factor - there are many others of course. The biggest probably is simply the days on the market. In this market the increased DOM goes hand-in-hand with abnormally-high list prices, because the sellers (”attempted sellers” I should say) that aren’t willing to lower their prices are also having their houses sit on the market longer. Thus the sellers who *are* willing to lower their prices, who normally would be pulling down the listing price average, aren’t actually pulling down the average much because their houses are actually selling and thus don’t affect the listing average listing price much.
Simple example would be a neighborhood with 3 listings during a 1-year period. In a good market all 3 houses are listed for 500k and sell within 2 months each for $480k each say. However 2nd example in a bad market say 1 seller is stubborn and keeps his house at 500k and it stays listed the whole year, while the other two lower their price to $450k after 1 month and the houses sell within 2 months each for $420k.
In the first example the average listing price for all houses was $500k. In the second example the average listing price for all houses was only slightly lower - about $490k (14 total months at $500k and only 4 months at $450k), making it appear from the listing price average that there’s not much difference in the market.
However in the first example the average selling price is $480k - $20k below listing average, while in the second the average selling price is $420k - $70k below listing average but with only $30k delta between the final listing price and the sale price. Thus in reality in market in the second example (a bad housing market) is much worse than the average listing price.
I’m seeing this markedly in one *very* bubbleicious area I’m following - Sarasota county FL. The median sale price peaked in Jan ‘06 at 375k, and dropped to 310k by Jan ‘07 (20% drop), while the median list price went from 440k to 400k (9% drop). Those figures are normalized over a few months’ period, so not anecdotal - it’s a definite trend.
In short (as any stock trader knows) the market isn’t determined by the ask price, but by the sold price.
“The biggest probably is simply the days on the market.”
Your point is 100% taken. One way to look at that big gap between list price ($1.3m+) and recent sold price (
Me too. My admittedly amateur read is that many people are in the midst of the foreclosure process right now, and others sellers are still in the Wile. E. Coyote mode the first second after he looks down. Still in denial, but sphincters are puckering in a rolling wave across the country right now… I think the true desparation (and acceleration of gravity) will begin about time the season is officially dead, say July 1, 2007. Things will get very interesting by October, as I believe Auction Heaven in ‘07 said.
ROFL!
“sphincters are puckering in a rolling wave across the country right now”
you owe a roll of paper towels after cleaning my monitor off
People with little or no equity cannot cut prices. That is why used home prices fell only 1.4% and new home prices fell 10%. If you were a FB who owed $500K on a home that you could only sell for $350K today, what would you do? Would you cut the price and take a $150K loss or live there free until the sheriff comes knocking?
Many here have said that builders would lead the way down followed by lenders then homeowners with equity. The FB’s will have to settle for foreclosure.
“In many cases, he said, borrowers were defaulting on the loans without making a single payment, perhaps so they could live without housing expenses for six to nine months during the foreclosure process.”
Maybe, but more than likely it’s a case of flat out fraud. Early payment default is the red flag fraud watchers should be looking at closely.
“Bill Coleman said 99 percent of his clients had good credit records.”
But they didn’t make any loan payments at all? Something sounds fishy here…
I think we need to see Bill’s interpretation of “good”.
Where’s ocrenter, maybe he could look into some of these and find out what the deal is. I’m still not sure why people thinking lending some $500k with a $150.00 down payment makes for a strong business model.
here are just a few from mid 2006 time frame, based on these interest rates something tells me these people were nowhere near prime:
Mortgage Type: NON-PURCHASE MONEY
Lender: PRO30 FUNDING
Lender Type: MORTGAGE COMPANY
Loan Amount: $ 412,000
Loan Type: UNDETERMINED
Type of Financing: ADJUSTABLE RATE
Interest Rate: 8.00 %
Lender: PRO30 FUNDING
Type of Mortgage: ADJUSTABLE RATE
Loan Amount: $ 440,000
Rate: 8.25 %
Term: 2/1/2037
Title Company: FATCOLA
Lender: PRO30 FUNDING
Type of Mortgage: UNKNOWN; ADJUSTABLE RATE
Loan Amount: $ 1,162,500
Rate: 8.50 %
Term: 7/1/2036
Title Company: FIRST AMERICAN TITLE
I tried to post some mortgage info, maybe it was too long and Ben didn’t want it in the thread. In any event most of the Pro30 mortgages from 2006 were around 8.25 to 8.5%, something people with decent credit could probably do better than.
They only way a ‘decent credit’ person is going to end up with subprime-like interest is if they are borrowing way more than their stated income warrants for a traditional loan — or they offer no documentation at all.
“based on these interest rates something tells me these people were nowhere near prime”
Pro30 mostly does Alt-A… Or I should say mostly did .
Contained! I tell you.
Yeah, thought I was having comprehension problems there for a second.
Yep, sounds like some sales were probably made at inflated prices with a kickback to the buyer. The lenders got sloppy and overeager to lend, so this is what happens.
100K-300K for Joe 6-pack. Joe is not that stupid, he signed and walked
away with few 100Ks. It’s the Chinese who’s holding the bag.
Americans (seller/buyer/realtor/broker/WallStreet) pocketed the money.
You give J6P too much credit (pun intended)! He didn’t walk off with anything other than some vacation memories, a lot of toys, and a rebuilt wifey.
Are you sure the index/mutual funds in your/our 401k dont hold those notes? Or pension funds? I know CALPERS owns everything that can be owned they are that big.
I frequently thank my lucky stars that UC has a retirement fund separate from CalPers. It’s Monet (’looks great from far away but up close it’s a big ol’ mess’)
“It’s the Chinese who’s holding the bag.
Americans (seller/buyer/realtor/broker/WallStreet) pocketed the money.”
Not according to Bloomberg
“Seventy-five percent of global CDO (Collateralized Debt Obligations) sales are in the U.S. Moody’s reported in March ….”
“Many of the world’s CDOs are owned by banks and insurance companies,..”
From Ben’s earlier post below…
Early or first payment default is a fundamental symptom of 100% financing. There is just nothing to loose and free rent to gain for months, when the zero equity becomes negative as fast as it has.
Pro 30 and Greenpoint did many loans that were cash back mortgage fraud, sometimes in excess of $200,000 over the purchase price. When you see them show up on the foreclosure rolls as the originating lender, you have to wonder about their business sense. It must have been waive in the deals, take the money and run. They are not victims. They are either criminals or idiots, probably both. Of course, if they get away with it, they could be considered geniuses in some parts of society. Hard to tell yet. But judgement day is coming for some….
Here’s an interesting chart showing option ARM resets by date. It’s going to be a cr*ppy Christmas….
http://bigpicture.typepad.com/comments/2007/05/some_more_housi.html
Are you a newbie? If so, welcome aboard.
That ARM reset chart is old news around here, though we love it dearly. As a matter of fact, someone was talking about putting it on a t-shirt a few weeks ago. What happened to that?
The version we generally link to doesn’t have the “you are here” arrow on it.
I’ve been around for a few months, but don’t post that often. Funny, I’ve never seen it before.
funny, I’ve never seen polly before. But I guess she’s a veterano.
There is a lot of turnover on the blog.
But at least we aren’t beating to death Ca’s prop 13 and recourse vs. non-recourse loans anymore.
Those dead horses could almost drive me away from the blog.
no, but i am sure some other nauseating topic will take its place…
where is robert cote?
exurbannation.com
robdawg
it’s a very funny blog
gracias, dudette
I have it posted on my office door with a large “you are here” ballon taped to it.
“it’s so easy when you’re evil” >; )
It looks pretty ugly for the next five years. Add retiring baby boomers and a likely recession in the mix, and real estate may be the worst investment for the next ten years.
Interesting article titled: The Home Ownership Myth” by Howard Karger frm the Spring 2007 issue of “Dollars and Sense”
http://www.dollarsandsense.org/archives/2007/0507karger.html
We rent in a condo complex, the place down the way was $650K in march, now it’s $625K — the seller has lost an entire year’s worth of rent comparable to what we pay in that price reduction alone (and it’s not sold yet)….and the $25K would be financed over 30-years. So renting for a year has “cost” us nothing if we were to buy this place now. Seems like people are throwing away money owning a home.
same here in tOkas, ca
I rent 1850 4BR2BA Condo
My landlord bought for 465K in 2005
after two year lease , 1850*24. i.e. 44,400
There was one for sale for 380 last year- a foreclosure.
There is one listed for 409.
However, there are some GFs. because the guy who bought foreclosure, fixed it and sold it for 434 early this year.
my taget: 275-300 by next year.
not possible,, will see
or an SFR for under 400K.
In Thousand Oaks…
Dude, With all the equity kings out there someone would burn that city to the ground if that happens next year… LOL
“equity kings”
i kinda like that group… lottsa fancy latin guitar playin and bellowing…
http://www.foreclosure.com/search.html?st=CA&cno=073&z=&tab=f
I do not know the significance of this number, 4,594, except to point out that it is rising steadily (San Diego County Foreclosures). I think it is the listing of foreclosures that are currently available for sale? It is increasing at a good pace, a month ago it was under 4,000, at the beginning of the year it was under 2,000.
It was ~ 4000 1.5 weeks ago. I have been tracking it since July ‘06. Beautiful exponential function.
Probably more like a logistic growth function:
DF/dt = gF(1-F/K)
g = growth rate
F = number of foreclosures now
K = foreclosure “carrying capacity”
DF/dt = instantaneous rate of growth in foreclosures
When F is “small” compared to K (so F/K is approximately 0), you get:
DF/dt = gF
(not to be confused with GF = “greater fool”) with approximate solution:
F(t) = exp(gt),
which is the “beautiful exponential function” you noticed early on in the foreclosure boom.
Eventually the foreclosures hit a temporarily high plateau at K, at which point the trough in the cycle is hit. Don’t buy until you see the growth in foreclosures end.
After a certain amount of futzing with partial fractions and other long-forgotten stuff, I arrive at a solution that makes no sense:
exp(gt) = F/(F - K).
Since F-K should actually be a negative number, and exp(gt) is never a negative number, I am doing something wrong. Maybe it was just because I didn’t put in any constant of integration (but wouldn’t that just be some coefficient in front of exp(gt)). Hmm, I’ll have to ask u in Bits Bucket.
Oh, I get it.
exp(gt) = [(K-Fo)/Fo] times [F/(K-F)].
Wow. You guys should get some sleep. Anyway, as I said, I have tracked it since July last year and when you ask Excel to put in an exponential trend line, it fit’s pretty nicely. No sign of plateau yet. Actually it’s up 105 since yesterday…..
Judging from the Credit Suisse ARM graph, I would say it will go up for another 6-8 months, easily breaking through 12k from todays 4606.
One word of caution: the foreclosure.com number is probably overstated by 30-50% (many dual entries), but as long as the error is constant, it doesn’t really matter.
“Statewide, banks owned nearly 5,500 homes in April, according to the Web site. The same month in 2006 it was 1,111. Many of those still haven’t reached the market, said Foreclosures.com’s Alexis McGee.”
Off the top of my head, I would estimate bank-owned foreclosures are increasing at a 400% annual rate…
I like the off the top of the head math Stucco. As I was reading I was doing some off the top of my head math. Countrywide has what, fifteen hundred houses in California, so that would mean they have about a third of the REO houses in California. That 5,500 number has got to be way low. Plus, that 1,500 is just listings, I’m sure CFC has plenty of houses in California that aren’t listed yet. As these REOs are rising parabolically, we are heading into territory the likes of which I don’t think anyone has seen before. Maybe Japan has. I think the house and condo are the new pets.com.
While I’m at it, regarding these auctions. I think that these last couple of months are the heyday of the GF. GFs buying houses at auction for ten to twenty percent discounts. GFs buying two houses here in the LA area that I know of for full price (one on my street, and one being sold by our friends), GFs buying, “their first foreclosures,” and GFs buying REOs from banks at wishing prices. It is sickening. People are such idiots. Wow.
How about that action today in the PMs today?
It’s worse than that Stucco and the number of properties held by the banks can not be correct. If you go back 6 months like I have LA County easily has 2500 by itself.
Here is another estimate off the top of my head:
I believe there are at least 1000 vacant never-lived-in homes in my zip code (92127 Rancho Bernardo West), targeted at an average sale price well over $1m a piece (for a total vacant home inventory value of $1b+), just on the basis of highly visible evidence which I see every day on the way to work, and then again on the way home. Not sure whether these are bank-, builder- or flipper-owned, though.
This is what I describe as the proverbial elephant under the rug. And I am only talking about one San Diego zip code; there are 130 “new home communities” in San Diego County, of which only a few are located in 92127.
That’s insane… Are you sure you’re not exaggerating that 1000 number. Come’on rethink it, maybe you didn’t have your glasses. You don’t drink and drive do you… j/k
That’s scary
There are literally 1000s of new homes recently built in the Santaluz Valley. I cannot get an exact read on how many are vacant from a drive-by estimate, but there is very little traffic for the large number of new homes (which explains why I drive this way to work most days
).
And we’re only STARTING with the Credit Suisse ARM reset graph (it takes ~90-120 days to foreclose after default). Wait until late 2007, early 2008. Then we’ll really be humming.
“According to Santa Monica City Manager P. Lamont Ewell, Santa Monica’s economy continues ‘to improve modestly.’
how? when half its “residents” are homeless???
Where do you think they spend all of their panhandling money on booze and cigarettes? In Santa Monica! Sales tax revenues go through the roof!
lol!
The other day I had to go into Santa Monica at 6 am to pick up something for work. I saw no less than *8* homeless waiting outside a jack in the box for it to open so they could start their day. Just their packs and filthy posessions strewn around the business disgusts me enough to never want to live in santa monica.
Not to mention never eating at Jack in the Crack.
It’s always that crummy 1% that does you in…
“While the mortgage industry has been buffeted by defaults nationwide, particular in the ’subprime’ sector, Pro30 founder Bill Coleman said 99 percent of his clients had good credit records.”
Good credit = 600+ ( not too many recent 60 - 90 day lates and collections) BK over a couple of years old.
“The affordables were immediately filled, while the market-rates are still on the market as prices plummet a year after completion.”
You gotta love how the left renames things after they fail. What was “public housing” or “low income housing” is now “affordable housing”. I understand public housing (i.e., the government providing housing). I understand low income housing (i.e., housing for people with low incomes). What I have trouble with is is the term “affordable housing” - who determines it and what does it mean.
To mean, any house that has an owner who can pay the mortgage and other expenses is living in an affordable house, at least to them - even Bill Gates. See how the term “affordable” has been hijacked so as to continue to propagate failed government programs.
I’ve done some very loose stats in W. Colorado, and there it appears to be a ratio of about 1 in 3. But resets will tip all the past numbers, making them anything but relevant. It’s a brave new world.
While I agree with your sentiment about semantics, pointing the finger at the “left” presumably you mean Democrats is just as misleading. Remember the Republican was in charge most of the nineties and well into this decade.
Cinch
disclosure, I don’t belong to either parties and can’t imagine being in one camp in the near future.
Ever read George Lakoff’s “Don’t Think of an Elephant”? He’s a populist, but the book’s very interesting - the power of language to dictate thought and paradigms. The techniques are used more by the repubs than the crats, but both are old hands at it. It’s amazing how it’s used by the MSM and what’s more amazing is how well it works.
“Don’t you see that the whole aim of Newspeak is to narrow the range of thought?… Has it ever occurred to your, Winston, that by the year 2050, at the very latest, not a single human being will be alive who could understand such a conversation as we are having now?… The whole climate of thought will be different. In fact, there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness.”
- George Orwell, 1984, Book 1, Chapter 5
Let’s see…. Stock Market Ever Higher… yet, lay-offs and foreclosures ever higher… Something does not compute! Today, I read about 4000 motorola lay-offs, 1900 Pulte lay-offs, Hershey’s CA factory is closing to move to MEXICO - 580 out of work, at least 200 mortgage company jobs, etc. TOO MANY TO COUNT! Yet, the stock market is pushing for 14,000!
How is this economy going to grow without goods jobs? I was the last one to ever think that the “great American Chocolate Bar” would be Hecho in Mexico! Yikes!
I wonder the same thing- that Hershey plant is in the middle of bubble central near Modesto. It’s just the beginning!
All this talk about “jobs Americans won’t do”, when they’re referring to construction and custodial work that they propose for “guest workers”. Yet all cities and counties have union labor who happily do those jobs and are well paid for them. It’s only private industry not wanting to pay workers a living wage.
Bingo!
Great conversation on tonight’s Leher News Hour on hispanic immigration on economies. I’ll have to find a podcast of it later and pass it on to some researchers to talking points.
Hey I just got back from England. While I was there a couple of white trash men came by and picked up the garbage, another pair of white window cleaners cleaned the windows. Down the street a mostly white crew was painting a house, and here in America it used to be the same way. Americans would love to have these jobs back. We just are not willing to become one of the 20000 or so migrant laborers living in the valleys and hills around and in the canyons of San Diego. We are not willing to live 20 to an apartment. A friend and I had a long conversation, of course being the liberal he is , he came off right away with the racism card, but after I explained to him that I had hoped immigrants would raise their standard of living by comming here and get educated etc, but instead were just pushing labor rates lower and lower, at everyone’s expense he understood this was a race for the bottom. I don’t know about you but I would happily pay another buck for a hamburger or a head of lettuce if I knew the guy that made it earned a decent wage and could afford to buy what I made, because that is how the world turns. Believe me Americans wopuld love to do many of the jobs that have been taken away by cheap immigrant labor, but cannot afford to compete.
It is ironic that the hershey plant is going to Mexico…considering that Mexico is where chocolate originated…interesting.
“great American Chocolate Bar”
slogan was changed:
“The Great Security and Prosperity Trilateral Partnership of North America Chocolate Bar”
Top’o'the Morning to ya…
The main listing shown below says it was built in 2005 but “never lived in” — makes you wonder how many McMansions will have incurred significant damage from desuetude by the time they are finally owned and occupied.
Check out the variation in list price per square foot in these four white elephants (comps in close proximity — all of them large, recently built SFRs in the 92127 zip code):
1. $499/sqft
2. $462/sqft
3. $633/sqft
4. $392/sqft
Those numbers are all over the place, and are consistent with one of my main hypotheses about current market conditions, which is that the comparable price offers will make little sense for a market in rapid downward equilibrium adjustment (aka crash landing mode). Some sellers will cut and run, while others will inadvertently keep their homes on the market forever. Dutch auction, anyone?
————————————————————————————-
17174 BLUE OF THE NIGHT, SD - Rancho Bernardo, CA 92127**
List Price: $2,335,000 - $2,535,000
ZipRealty will give you up to $14,010 cash back.*
Bedrooms: 4
Full Baths: 4
Partial Baths: 1
Square Feet: 4,682
Lot Size: 19,798 Sq. Ft.
Year Built: 2005
Listing Date: 12/18/06
On Market: 164 days
Type: SFR
Status: ACTIVE
MLS #: 061102242
Price reduction!!/bring all offers…Stonefield model/never lived in 2sty with 100% living downstairs/upper level br/ba&bonus room. Designer furniture/travertine flring, entertainer`s backyard/outdoor grill&bar/red wine closet off kit/butler pantry white wine fridge w sink. Furniture to be neg outside of escrow.
ZipRealty Price Track:
Price Reduced: 03/06/07 — $2,595,000 to $2,495,000
Price Reduced: 04/23/07 — $2,495,000 to $2,335,000
Days on Market: 164
Clients who viewed this home also viewed:
7868 TOP O THE MORNING WAY
SD - Rancho Bernardo, CA 92127
Beds/Baths: 5/7 Sq.Ft: 5,686
$2,627,000
7823 SANTALUZ INLET
SD - Rancho Bernardo, CA 92127
Beds/Baths: 4/5 Sq.Ft: 4,098
$2,595,000
7844 TOP O THE MORNING WAY
SD - Rancho Bernardo, CA 92127
Beds/Baths: 5/6 Sq.Ft: 6,000
$2,350,000
It’s the new paradigm: outsourcing is more efficient and productive than developing internal efficiencies. Layoff’s equate to lower P&L cost hence higher stock prices hence higher CEO bonuses and thus lavish stock option payouts. When everything comes crashing down, just blame the illegal aliens or pretend surprise at the unexpected results.
(Sarcasm off)
From the Santa Barbara “Independent”, a true rag of a “paper”:
” Why isn’t anyone taking about it… the rapidly oncoming tsunami disaster of 200-300 condos…”
Hey, Mr. Blankenship, I’ve been posting about those condos on this blogsite for over 3 months now, where have you been?
Mr. Blankenship, condo prices have dropped to $350/square foot in Santa Barbara.They are not selling at $1,000/square foot as you claim. You, and every other developer in California, are so behind the curve it’s a joke.
The real tsunami, Mr. Blankenship, is the tide of illegals which have flooded into Santa Barbara and California over the last several years. Why aren’t you, a self proclaimed community leader, talking about that?
On the foreclosure issue - I see the numbers rising steadily just like everyone else. The numbers, even after triple digit percentage increases, still seem rather insignificant in raw numbers compared to population in these counties. Does anyone have good historical info showing ratios between NODs and Repos that could be useful in predicting how many of the underwater homes missing payments this month will be sold on the courthouse steps in the future? Just curious and as always trying to learn as much as I can from the big brains on this blog. Cheers.
I’ll bet you this loser is from California. Another idiot who knew better than the locals. He’s gonna eat some dirt on this if if he doesn’t lose it in foreclosure
http://dallas.craigslist.org/rfs/342316479.html
mckinney?! better than frisco!!!!
“I recently bought this property in hopes to live in it. Unfortunately I bought this property before I moved here and realized that is not where I want to live”
Now *that* is funny!
Foreclosure fun. If you know your market going to foreclosures can be fun to see if anyone shows up and/or bids. In our foreclosure area (6 n.calif. counties) no one has been showing up for months now according to the crier. Recently some showed on a property I had knowledge of and I was surprised no one bid then I learned still occupied (by former owner now default rentor) and apparently a mold case. Anyway foreclosures (if you know the market) can let you know bottoms or what appear to be bottoms. Prices have to get so investors can rent out and feel good in most areas. The exceptions are prize areas. I see Santa Cruz was dumping for awhile and now apparently ok (correct me) during the selling season. Anyway lots of fun.
Ben, did you catch the discussion on Leher new hour tonight on hispanic immigration in non-gateway states? Very interesting and all stuff we’ve talked about her but making it into the MSM.
More popcorn, please. So long as attempts by Dodd et al. to transfer the cost of the subprime mess onto the backs of middle class taxpayers do not make it past conservative watchdogs in Congress, the subprime disaster may turn into an epic class war between Croesus and Robin Hood.
———————————————————————————–
Funds attack banks’ aid for subprime borrowers
By Saskia Scholtes in New York
Published: May 31 2007 22:10 | Last updated: May 31 2007 22:10
Hedge funds are attacking bank decisions that help delinquent US mortgage borrowers remain in their homes in a move that pits some of the country’s richest people against its least well-off.
The dispute centres on derivatives contracts that pay money to investors when bonds backed by subprime mortgage loans – extended to people with past credit problems – run into trouble. The $1,200bn (€890bn) US subprime mortgage bond market has been hit recently by rapidly growing defaults, and hedge funds have profited from the crisis by buying such derivatives.
Some hedge funds say they are concerned that banks that both sell the derivatives contracts and handle mortgage payments could be involved in a form of market manipulation. The funds fear that banks are making concessions on the underlying mortgages to avoid making good on derivatives contracts that pay off in cases of default.
The controversy pits hedge fund interests against those of stretched US mortgage borrowers and politicians who want to help them keep their homes, underscoring the political dilemmas created by the growth of the mortgage bond market.
A group of more than 25 funds has asked the International Swaps and Derivatives Association, the derivatives industry body, to act on their concerns, according to a letter seen by the Financial Times.
http://www.ft.com/cms/s/3ae806a2-0fa6-11dc-a66f-000b5df10621.html
Summer subprime reprieve may be mirage: analyst
Falling home prices will likely dent subprime-mortgage credit this year
By Alistair Barr, MarketWatch
Last Update: 1:41 PM ET May 31, 2007
SAN FRANCISCO (MarketWatch) — Falling house prices will keep pressure on the subprime-mortgage business in the second half of this year, stalling any chance of a quick recovery, according to a note by Rochdale Securities analyst Mark Morgan on Thursday.
Shares of subprime-mortgage lenders such as NovaStar Financial Inc. (8:14pm 05/31/2007 NF I7.39, -0.32, -4.2% ) and Accredited Home Lenders Holding Co. (8:10pm 05/31/2007 LEND13.99, -0.83, -5.6% ) jumped last week amid signs that the worst may be over for the struggling sector. See full story.
However, a closely watched index of home prices released on Wednesday showed that prices fell 1.4% in the first quarter, compared with a year earlier. That was the first year-over-year drop in national prices since 1991. See full story.
Such declines could exacerbate subprime-mortgage delinquencies and losses, Rochdale’s Morgan said.
http://www.marketwatch.com/news/story/summer-subprime-mortgage-reprieve-may-mirage/story.aspx?guid=%7B254B4DAF-2434-4127-8932-0B318615BDB8%7D
Remember kids, in real life, Mister Potter always wins in the end.
now THAT belongs on a t-shirt…
“A group of more than 25 funds has asked the International Swaps and Derivatives Association, the derivatives industry body,” (snippet)
I do not visual a factory somewhere that produces a product called “derivatives” that you can buy at the local Kam-Apart. Sounds like more phony paper covering over previous worthless paper.
Has there been a meeting of the minds between Seiders and bloggers?
———————————————————————————–
8:45 AM May 29, 2007
Home construction bust may last until 2011, U.S. builders say
By Bob Ivry and Brian Louis
Bloomberg News
New home construction in the U.S. may take until 2011 to return to last year’s level, said David Seiders, chief economist for the National Association of Home Builders in Washington.
http://www.indystar.com/apps/pbcs.dll/article?AID=/20070529/NLETTER09/705290406/-1/LOCAL17
I actually think he’s being optimistic; it will take until 2011 to recover, but it won’t recover to _last_ year’s level (which was ridiculously high)–it will return to “normal” trendline after over-correcting to the downside.
But I thought it was awesome to see someone at NAHB forecasting that recover would take 4 yrs!
It’s a start…
“In many cases, he said, borrowers were defaulting on the loans without making a single payment, perhaps so they could live without housing expenses for six to nine months during the foreclosure process.”
Wow! I thought it had something to do with the $100,000 CASH BACK AT CLOSING the buyers were bribed with - but what do I know.
“$100,000 CASH BACK AT CLOSING”
That covered their other living expenses besides the $0 in housing expenses over the six to nine months.