The Yin And Yang Of The Housing Bubble
A report from the Bakersfield Californian. “Wednesday marked the first time in five years that Hudson & Marshall held an auction in Bakersfield. National lenders hire the company to market and move large volumes of bank-owned properties that have been foreclosed upon. When foreclosures were few, Hudson & Marshall had no reason to come to town.”
“As the market fizzles, buyers have more auctions to choose from. Hudson & Marshall might return to Bakersfield twice before year’s end. ‘Our phone doesn’t stop ringing now,’ said Mike Grigg, an agent and auctioneer with a franchise of Pacific Auction Exchange.”
“In Kern County this year, four times as many default notices, auction sale notices and bank repossessions were filed by the end of May than were filed over the same time period last year, according to RealtyTrac.”
“High-end, custom homes are popping up on auction blocks as well. A 2,680-square-foot, four bedroom Shilo Estates home with a pool comes up for auction June 30, Grigg said. ‘The luxury homes are just not moving at all right now,’ Grigg said.”
“Conrad Nizynski, an investor from Los Angeles, arrived at the Bakersfield Sheraton on the heels of a Hawaii vacation. ‘It was a last-minute thing,’ he said.”
“He left the auction, his first, having placed winning bids on two homes and looking just a bit shell-shocked. ‘That’s what I wanted to do, I wanted to invest,’ Nizynski said. ‘I hope it’s a good investment.’”
The Fresno Bee. “Real estate agents and representatives of the federal Housing and Urban Development Department lamented the skyrocketing number of foreclosures in the central San Joaquin Valley.”
“A soaring foreclosure rate is the fallout of a five-year real estate boom that tripled home values and sparked the creation of new subprime loan programs that helped families buy those more expensive houses.”
“When prices stopped accelerating so rapidly, many of those home buyers couldn’t refinance to a more friendly loan, and defaulted. Since 2006 the situation has gotten worse and many houses have even lost value.”
“In 2006, 1.4% of all houses were in foreclosure, according to RealtyTrac. A recent study calculated that in Fresno a foreclosure lowers the value of homes within one city block an average of $2,259, according to the Sheltering Neighborhoods report.”
“In addition, the foreclosure crisis has caused lenders to tighten standards, making it even more difficult for families facing foreclosure to refinance or buy another house if they’ve already lost theirs.”
The Orange County Register. “It was January, maybe February, when it sunk in. A lull in the car-selling business turned into a noteworthy slump.”
“To Mark Parkinson, who runs a family business that sells five brands of vehicles at the Tustin Auto Mall, it became clear that everything from luxury cars to trucks to fuel-efficient models weren’t selling like they had been. And not just at his lots, at most of his competitors, too.”
“Parkinson has got a good hunch that a troubled local real estate market is one culprit.”
“‘I’m not an economist, I’m a car guy,’ says Parkinson, a 37-year veteran of auto-buying cycles. ‘But in my opinion, when people have all this equity (in their homes) they feel good. They’ll spend. When that equity becomes at risk, they tighten their belts a bit. They’re afraid, ‘I’m losing my savings.’”
“The Big O’s property index has fallen in each quarter for a year now, as dramatically falling home sales and a depressed lending business take their toll. This slice of the Big O index is falling at the steepest annual rate of decline since 1996.”
“The banker index, heavily tied to real estate, is also troubled. It suffers from rising counts of missed mortgage payments and an increase in local bankruptcies. This spring, this measure of local debt collections hit its lowest mark since 2003.”
“Orange County payrolls are growing this year at a 1 percent rate, according to state job stats. That’s not bad, but it’s still half what we’ve seen in recent years.”
“A bulk of the slowdown is linked to real estate woes, as lenders in particular retrench their staffing along with dramatic drops in mortgage-making volumes. In Orange County, for example, lenders made $85 billion worth of loans on local homes and land in the last 12 months, down 22 percent in two years.”
The North County Times. “As lenders begin to seize houses that were purchased in an unusual series of transactions two years ago, investors are attempting to arrange complicated sales and several are beginning to struggle with difficult decisions on whether to file for bankruptcy.”
“Nurses and other middle-class investors bought more than 100 Murrieta-area houses in 2004 and 2005 through a Murrieta mortgage brokerage. The first of those houses fell into the foreclosure process last fall, and the owners began filing lawsuits in January.”
“Stonewood clients often paid far more for their houses than did buyers of comparable houses nearby and, according to numerous neighbors and real estate agents who followed the purchases, $50,000 to $120,000 more than the original asking prices, a pattern that raised eyebrows in the slackening market.”
“At the time the investors bought the houses, prices in surrounding neighborhoods were still rising, a fact that buyers said led them to conclude they were making solid investments. But market prices leveled off without catching up to the investors’ loan balances, leaving them ‘upside down,’ in real estate parlance.”
“Vicky Reiss, the Temecula resident who filed the first lawsuit Jan. 5, bought five houses through Stonewood, according to a local real estate database. She still owed more than $600,000 on her house on East View Way in Murrieta’s Copper Canyon area. A seller offered about $500,000, she said, but the lender didn’t bite. It seized the house earlier this month.”
“‘One down, four to go,’ Reiss said, ruefully.”
“Rising numbers of foreclosure properties coming onto local real estate markets threaten to weigh on home prices at a time when they’ve slipped from record highs.”
“As of June 4, nearly 1,050 lender-owned properties were listed for sale in Riverside County, up from less than a half-dozen in June 2006, according to ZipRealty. Such properties account for about 3.5 percent of the properties for sale in the area, according to the company’s data.”
“Several plaintiffs in the lawsuits allege that they refinanced their primary residences to fund investments. These plaintiffs say they now find themselves struggling with monthly mortgage payments as much as double what they were paying before.”
“‘That’s where I live,’ said Temecula resident Mercy Ferido, who is watching her three investment properties slide into foreclosure. ‘I took another job just to keep up with my payments.’”
The Record.net. “What do you get when you combine a huge number of interest-only and subprime mortgages with a skidding real estate market? Foreclosures, that’s what.”
“And in the case of San Joaquin County, you get the highest metropolitan foreclosure rate in the nation. No. 1. That ranking comes from data out last week from RealtyTrac.”
“How bad it is it here? This bad: In the last year there has been a 49 percent increase in foreclosure activity in San Joaquin County. In two years filings in the county are up by a factor of 18, from 120 to 2,157.”
“Foreclosure notices have been filed on one of every 88 household properties in Stockton. Our foreclosure activity rate is now 7.5 times the national average.”
“Foreclosure notices require publication of a legal advertisement, the agate type notices that fill two or three pages of this newspaper each day. We receive about a dozen new notices each day. Each day.”
“When Sean Snaith headed the UOP’s Business Forecasting Center he liked to predict the housing market here, at a time when the bubble was about as big as it seemed possible to get, would not burst. In fact, he likened the housing market to a soufflé that would slowly sink as it cooled.”
“He was wrong (though hardly alone in that category). The market didn’t just cool. It turned cold even as the weather turned hot. Early spring optimism about the market spooling back up could charitably be described as, well, optimistic.”
“Earlier this month, the California Association of Realtors predicted that statewide sales would drop 14 percent this year. Utterly beyond rational explanation is CAR’s corollary forecast of a 1.8 percent increase in home prices.”
“What’s wrong with that picture? What’s wrong is that home sellers are still stuck in 2005, still believing their house can defy the sucking sound of prices being pulled south by a market that’s stepped off a cliff.”
“When the lines on the graph are headed upward, everyone looks like a genius even when you’ve acted like a dummy by, say, buying more house than you really can afford.”
“No more. Now, homeowners are actually losing their homes. Lenders aren’t just filing notices of foreclosure, they are foreclosing. Keys, please (and sometimes they don’t even say please).”
“Markets boom and markets bust. This is part of a cycle. San Joaquin County may be No. 1 in the nation for foreclosures now. A couple of years ago we were near the top in home price appreciation. That’s the ying and yang of the housing market, any market.”
‘The city of Lancaster experienced a 0.5 percent decrease in sales tax revenue in the fourth quarter of 2006 compared with the same period in 2005, recent data released by the HDL Companies showed. The drop came after revenues hit record highs in recent years.’
‘A decrease in sales from new auto dealers and contractors was partially responsible for the decline, while higher fuel prices and increased sales from discount department stores and restaurants with no alcohol offset the losses.’
‘The decrease in contractor sales reflects a slowdown in the statewide housing market, which experienced a 5.7 percent decline in the fourth quarter.’
I’m certain that the amount of sales tax collected from alcoholic beverages purchases nationwide is poised to skyrocket.
Isn’t Lancaster kind of a craphole? My former employer had an office there and closed it because it was out in the middle of nowhere. People would commute an hour and a half for a $15 an hour job. That doesn’t sound like a place where $600,000 homes should be plentiful.
Scroll down through some of the pictures posted on this link and you’ll get a feel for Lancaster/Palmdale. The two cities have become one big blot mid-nowhere. (The Tejon stuff is the other way, heading toward Bakersfield.
http://leblog.exuberance.com/antelope_valley/index.html
The flowers in any of the pics are a once a year for about a week. Quite often, it looks more like this.
http://www.flickr.com/photos/eternalsunshine13/457288414/
and yeah, $600K homes there are ridiculous.
Wow, you’d think you actually lived there!
You’d kind of question a buisness plan like that.
Hope this Los Angeles Times article comes through OK. In today’s LA Times:
http://www.latimes.com/news/local/la-me-antelope17jun17,0,2130552.story?coll
that is just disgusting that people would be commuting to LA 140 miles round trip everyday. What a huge waste of Gas. The dinosaurs must be rolling over in their graves.
That whole area of Lancaster, Palmdale, and Antelope Valley definately are known for being places to not move to.
Isn’t Lancaster kind of a craphole?
Thank you Misstrial for that LA times article.
Putting section 8 single moms out in lancaster, getting the Fed to pay 2/3 of the rent while their teenagers commit robberies and burglaries while they allow their unemployed gang-bangin boyfriends to shack up with them. What else is new!
This kind of crap is very common in LA inner cities: very common for welfare moms-section 8′ers to have boyfriends shacking up: most likely the boyfrinds are criminals/former convicts. What this proves is that throwing free money to assist the poor welfare moms often results in more anti-social criminal behavier among the welfare siblings, who have no motive to go out and earm a living since they are all getting freebees from the fed: they just need to go out and commit robberies/burglaries for some extra spending money to supplement the gov’t handouts.
As for lancaster: it is indeed a forelorn wasted desert suburban hellhole, at least on the eastside of the 14 highway. A burning furnace in summer, and windswept in winter. Nothing but home tracts and shopping malls, intersperced with large expanses of desert scrub: it is pretty open desert land, and many homes lots tend to be large 1/2 acres or more. Actually average prices of all homes are probably around $300,000 now: only in a few better areas far to the west such as quartz hills are there $500,000 homes, but these will go down.
Lancaster is having a foreclosure tsunami right now, and by end of this year REO large properties will be had for less than $100,000 in the more remote reachs of the lancaster boonies.
I can’t say all section 8 people are bad but but my one un-scientific encounter was not a good one. I was renting out my place in LA and having a hard time finding anyone that would actually fill out an application. One lady approached me and asked if I would consider doing a section 8 city rent subsidy. I asked her what that was and she expained it was for poor people and a subsidy from the city, and that she’d hook me up for more than the reported rent if I was interested. I noticed she had parked a really nice car in the front yard. So I complimented her on the fine vehicle and asked how she had a such a fancy car while she was qualifying for section 8 housing. She said that god had made her slip on the porch of the last house she had rented, and she’d been able to buy the nice car with some of the settlement from the property owner. So by then I realized this was someone I really wanted to avoid. So I gave her an application and said good bye thinking I would never see this person again. Later I came home and my rent sign was in little pieces on the front lawn. My neighbor came out and told me some crazy lady had driven up and tore up my sign and then driven off. No problems after that. I think people by their nature take for granted whatever they are given. You give them welfare, and they figure they’re entiteled to it for some they must have done or endured in the past.
Bill Bonner in The Daily Reckoning, this one is good (scroll 1/2 way down to the article):
http://www.dailyreckoning.com/Issues/2007/DR061507.html#essay
“After having invested nearly $300 billion in prestige properties in the United States in the 1980s, the Japanese quickly decided they wanted out and kept selling for the next 15 years. Prices of commercial real estate in America fell as much as 50% in the early ’90s. The buyers of Rockefeller Center had counted on rising rents; instead, rents fell, vacancies rose and the poor star-crossed samurai were buried in losses. Finally, they lost control of their trophy darling altogether. R.I.P.
It is now almost 20 years later. The drama is still the same, but the dramatis personae have changed. A few days ago Morgan Stanley made the news. All Nippon Airways owned a string of 13 hotels in Japan. It wanted to unload the places for about 100 billion yen and announced it would accept bids. Thirty suitors showed up. One of them, the aforementioned Mr. Gray, offered 235 billion yen. But then, along came another hunk, Morgan Stanley, with 280 billion yen; it won ANA’s favor with a bid 2.8 times greater than the Nips had hoped to get.
Financial marriages, when they result from such fevered bidding contests, are rarely happy ones. Lovers, caught in the heat of the auction, and steamed up by free-and-easy credit conditions, get carried away. A few months later, when money is not so easy to come by, they look over at the unfamiliar head on the pillow next to them and wonder what they have gotten themselves into. Even before Morgan Stanley raised the bar, prices in Tokyo had risen substantially. Dividend yields in Japan’s property sector, compared to 10-year bond yields, have been cut in half in the last five years. Average cap rates in Japan are now only 3.5%. Vacancy rates are below 3%. At the price Morgan Stanley paid, it is likely to soon find itself in a funk, like Mitsubishi Estate 18 years ago.”
Oh, dear. Bill Bonner’s writing for Daily Reckoning is pretty clever I suppose, but his case here is not sharpened by his choice of the word “nips” for the penultimate paragraph. For those with short memories or limited exposure to bigotry, that shortened version of the word “Nippon” long ago became an exclusively derogatory term. Still-living Japanese-American survivors of U.S. relocation camps may recall having heard quite enough for one lifetime, and find it especially unwelcome on an economy blog such as this. Brad, I hope you might scan Bonner carefully before pasting in text from his future writings. Thanks.
Yeah, besides sounding racist it’s out of date … although there are still some institutions which use the term Nippon, the “Nihon” pronunciation is dominant in Tokyo Japanese, so if you want to use an alternate for “Japanese” (people) just say “Nihonjin”.
Btw, in a business/political context, Americans are “Beikokujin”. It means “the people of the rice [producing] country.” We’re Amerikajin anywhere else. Heh.
“…the Nips [sic] had hoped to get.”
My wife is from Temecula and MLS stats are not even half of the story there. There is a major development going on right next to Winchester road. Can’t remember the name but it’s huge (1000 + homes) and, yes, it has it’s own lake/pond since it’s a village in the city. So, including new construction there are upwards of 4K homes for sale in Temecula/Murrieta. There are no real jobs to support that kind of housing and everyone commutes to SD/LA/OC.
If you think it’s UGLY now, wait another year.
Wait till gas prices hit $4 next year. There will be a glut of exurb homes and SUV’s for sale
Oil is hitting $68 right now. But the Asian markets have opened hot so look for another pop in the U.S. markets. Too bad the FBs sold out of any stocks they might have had, and don’t invest in 401k plans, so they could be bigshot real estate investors. Even a rising stock market doesn’t help them at all. The thought of their misery should help me sleep better tonight.
“When the lines on the graph are headed upward, everyone looks like a genius even when you’ve acted like a dummy by, say, buying more house than you really can afford.”
Yes. Ha! Prices tripling in the central Valley of California. Many migrant workers were able to “qualify” for their liar loans. Neighborhood integration of low income with established higher income, along with loud music, men leaning against cars talking all day, while higher income residents commute daily to work. Hmm…This scenario will work in reverse over the next few for the Central Valley. There will be lots ‘o empty houses, many of them trashed, but the neighborhoods will be quieter as home prices revert to their proper values. It will be an extra chilly foggy Christmas in my home town of Fresno this December.
Hey, that’s my home town too! When did you escape the big ‘No?
I moved out in 1985 after getting my sheepskin from CSU, Fresno. But my parents lived there until they died. I sold my dad’s house in the year 2000 about 6 months after he passed away. I’m a Fresno fan, although a strong critic from afar. If not for one of the top 3 polluted cities in the U.S., it would be my first choice of where to live. I love its proximity to the highest part of the Sierras and to the central coast.
” If not for one of the top 3 polluted cities in the U.S., it would be my first choice of where to live. I love its proximity to the highest part of the Sierras and to the central coast. ”
I too love the Sierras and it saddens me that pollution levels in the central valley are so bad that the smog now reachs deep into the western slopes of Sequoia NP. The CValley smog/haze blanket which is seen from the generals hwy overlook is as bad as Los Angeles from the San Gabriels mts. The great kaweah river gorge is choked with smog as well.
Not to mention the eradication and bulldozing of CV pristine farm acreage into stucco tracts, which will soon be vast tracts of foreclosed abandoned hollowed shells scarring the landscape.
Those homes will be bought by HUD and rented out as Section 8 Housing. Get used to the new neighbors and their pitbulls.
If you see Michael Vick make sure to get an autograph.
That rings so true, it’s scary.
“When the lines on the graph are headed upward, everyone looks like a genius even when you’ve acted like a dummy by, say, buying more house than you really can afford.”
Or borrowing more from your existing house than you can really afford. They looked like financial geniuses who had suddenly found a way to turn their small income into pricey, depreciating toys. (For those of you not from the Valley, that’s Tahoes, H3s, or dual cab tandem-axle jacked up King Ranch trucks + chrome package.) I know more who fall into this category of local FB.
“…Lucey and other real estate and financial experts have formed a grass-roots collaborative called No Homeowner Left Behind.”
No Homeowner Left Behind? That should be homeower. How can many of these people honestly be called homeowners when they couldn’t qualify for anything beyond the initial teaser rates?! Short of handing out jobs that would pay enough to allow borrowers to actually make the payments they owe, I don’t see what these groups can do to save these people from their own financial reality for much longer.
In a manner of speaking this is about the gov’t, lenders, mortgage brokers, RE industry hoping that the RE market can go on forever or at least until they can make it rich and retire.LOL. The RE bubble has not burst since it is a frame of mind ” RE can only go up”.
When everybody looks like a genius, nobody is a genius. Genius, by its very nature, is a rare commodity. They all looked like sheep but because they were sheep they mistook themselves for jeniuses.
–
“A soaring foreclosure rate is the fallout of a five-year real estate boom that tripled home values and sparked the creation of new subprime loan programs that helped families buy those more expensive houses.”
“When prices stopped accelerating so rapidly, many of those home buyers couldn’t refinance to a more friendly loan, and defaulted. Since 2006 the situation has gotten worse and many houses have even lost value.”
Many here never doubted this outcome. The only question has been: When and how badly.
Jas
And even with the numbers of foreclosures skyrocketing and getting plastered in the MSM most people are still in denial. Foreclosure records are taking place everywhere and yet the locals still think everything will be fine. My only conclusion can be that people are just dumb.
“When the lines on the graph are headed upward, everyone looks like a genius even when you’ve acted like a dummy by, say, buying more house than you really can afford.”
So true. In my neighborhood (Sierra foothills) even the homeowners who bought 10 years ago have gotten so used to thinking of themselves as (mega)geniuses that they can’t let go of 2005 dream prices when they go to sell. For them, I guess it’s like having to climb down from a pedestal before they can go for a walk. Ah, the human ego.
“Vicky Reiss, the Temecula resident who filed the first lawsuit Jan. 5, bought five houses through Stonewood, according to a local real estate database. She still owed more than $600,000 on her house on East View Way in Murrieta’s Copper Canyon area. A seller offered about $500,000, she said, but the lender didn’t bite. It seized the house earlier this month.”
“‘One down, four to go,’ Reiss said, ruefully.”
I sincerely hope that Debtor’s Prisons get re-introduced on this go around. This gal makes a great case for them making a comeback.
We wouldn’t need debtors prison if people gambled with their own money. They would go broke and no one else would be hurt. Why is that idea old-fashioned?
yes, that point is why this mess was allowed to snowball…makes me feel nostalgic for the old ba!!-busting underwriters of yesteryear…
She makes an even better case for sane lending standards. Sounds like some more hedge funds will take a BearStearns caliber beating.
they should - I have always felt that hedge funds were slimy
debtors prison.. why? so she can waste even more ofmy taxpayer money? Or so I can enrich some private prison bulder/operator CEO?
no thank you.
If Joe Arpeo ran the prison there wouldn’t be much cost. Balony sandwiches and pink jump suits in tents under the stars.
well this is true - so let’s just throw them all in a big pit and dump food rations in every now and then (just to be charitable)
What is especially upsetting is that when she and the other folks who bought “multiple houses” were doing so 2-3 years ago, they were not concerned about any of the lending practices or what may have been shady realtor behavior. They all had dollar signs in their eyes and KNEW (in their minds) that they would be in the money in a few years.
Fast forward to the real world where they can’t keep up with payments, can’t sell, can’t rent, and now they are all digging up the suspicious practices and suing….now it’s all about mortgage fraud. People like this Vicky Reiss need a swift kick. She didn’t buy one, but FIVE houses, and she wants people to believe that she was totally taken advantage of? Spare me. My guess is that she knew what was going on and went along with it. What she didn’t understand, she may have looked the other way so that she could get her houses…her road to riches.
Short sales my a$$. I’m not at all excusing any mortgage fraud if that is indeed what happened and that should be brought into the light. But, on the other hand, if you were lax in handling your financial business, how do you teach the younger generation to be financially responsible when you’re looking for the back door?
These folks just unnerve me.
BayQT~
Yup, QT,
“Several plaintiffs in the lawsuits allege that they refinanced their primary residences to fund investments. These plaintiffs say they now find themselves struggling with monthly mortgage payments as much as double what they were paying before.”
I’m trying to figure out just WHAT these dipshits are suing for. You borrows MILLIONS of dollars to bet on the house, but this time the house lost. Now pay the piper.
Also, who owes 600k on a house in MURRIETA???
-Rent
It may sound chauvinistic or cruel but I would love to see her take a good a$$-kicking in the public square. I’d even pay a few bucks to be able to help. Hey, justice ain’t always pretty but it should be just.
Tatoos are popular, put one on her forehead. A big “DA” for dumba$$. Must walk in public for 1 year for every 10K lost.
Wait until they pull out her loan applications and see that she was fraudulent .This was some investment scheme where someone got away with alot of money by selling these investors overpriced property . The investors might of been promised some cash-back and never got it ,or some weird incentive ,who knows .
I have seen it before ,even in prior lending cycles ,when a deal goes bad everyone starts screaming foul .
Two more things I forgot to mention in Ben’s California-themed post yesterday. I was talking about the house on Tilden Avenue in Palms/West L.A. where the realtor wanted to sell high to maintain the comps for the neighbors. When I asked him why in the world he thought this 1945-era 2/1 SFR in desperate need of work was worth $788K he actually told me that the homeowner had an appraisal for $800K from 2005 and because of that he wouldn’t lower the price. I am convinced that one’s IQ drops in half the moment you close escrow on a home. It’s the only explanation for this nonsense!
To top it all off, the realtor’s description sheet, which listed what some other homes in the area had (purportedly) sold for recently, neglected to mention our friend’s house right next door with the same lot size, floor plan, everything, which they bought a few months ago for $150K LESS than this.
“He left the auction, his first, having placed winning bids on two homes and looking just a bit shell-shocked. ‘That’s what I wanted to do, I wanted to invest,’ Nizynski said. ‘I hope it’s a good investment.’”
Round and round she goes…….
“I hope it’s a good investment.’”
Is it just me… But after spending that kind of money shouldn’t this comment be ” I know it’s a good investment”. I mean have I got it all wrong am I too cynical?
Hoping doesn’t count. Houses have never made sense as an investment. Apartment buildings, OK. But houses, no. Speculation has worked for the last few years, but that is clearly over.
Or, said another way, “hope is not a strategy.”
I disagree on houses not ever making sense as an investment. There was indeed a time when single family houses could be bought and rented to produce cash flow. These days, you have to buy a 20 apartment complex in downtown sh!tsville to do it.
Remind me to bring my own food if I ever get invited to Bill’s house for dinner.
W C Fields would have loved the housing bubble. So many sheep to fleece.
“Nurses and other middle-class investors bought more than 100 Murrieta-area houses in 2004 and 2005 through a Murrieta mortgage brokerage. The first of those houses fell into the foreclosure process last fall, and the owners began filing lawsuits in January.”
It may seem incredible to non-San Diegans to think of “nurses and middle-class investors” as likely candidates for a second career as latter-day Donald Trumps, but this is really par for the course. I have met hairdressers and automobile loan processors with second careers as real estate moguls. I expect a river of incredibly sad stories of novice real estate investers who got burned as this bust gathers steam in the next few years.
Yes. Back in 2005, I heard about nurses and other mental health professionals in S. CA who were buying ‘investment properties’ together (in the area an elsewhere). Some were planning to buy houses near Coalinga, anticipating that this would be the next ‘hot’ place for real estate due to a planned expansion of the state hospital in this area. From what I hear, the hospital is having a difficult time filling staff positions, so anyone who bought houses to rent or flip in 2005 is probably worrying right now. It is sad.
Is this the reason health care costs have gone nuts? Nurses unions are bargaining for raises to cover their speculative “investments?” LOL
funny you say that…my hair person in studio city was talking about investing in……LANCASTER!
wtf…don’t even try explaining to such people - they will not listen.
Median price of a house in Mazzholeland $402,000.00. Toyota 4×4
Tundra pick-up @ $36,000. 4 years at Rensselaer Polytech @ $160,000.00. A month’s worth of solo health insurance @$1000.00.
Taxes eatin’ up 40% of your gross.
Fookin’ world’s gone insane.
When we were in Southie in November ‘05 and I heard all of the stories of the property Gold Rush, I just shook my head. It did not sound like something that could possibly end well.
southie - Boston?
“Markets boom and markets bust. This is part of a cycle. San Joaquin County may be No. 1 in the nation for foreclosures now. A couple of years ago we were near the top in home price appreciation. That’s the ying and yang of the housing market, any market.”
We were at the Long Beach Antique Mart this morning. I overheard a vendor say to a customer ‘If you pick it up - the price goes down!’ Well, my wife found several French letters from the early 1800’s and I asked the price. I mentioned that if a customer ‘Picks something up - the price must go down!.’ I told the story of overhearing the saying a couple of booths from his - he liked the sound of it and gave us a nice discount.
I wonder if there is a correlation between being #1 in price appreciation a few years ago and being #1 in foreclosures now.
Yes I think the correlation is strong . For instance ,many areas in Florida went up 40 to 50% in 2005 because of high speculation buying demand who were using sub-prime /no down loans . If I remember some articles posted here ,40% of the buying demand was from speculators/flippers going on low down sub-prime loans in the Florida market ,that now has a high foreclosure rate . This same sort of high appreciation rate took place in Arizonia in 2005 based on speculator/flipper demand which is now crashing . A high % of speculation buying on low down adjustable loans is the main factor in driving up real estate appreciation yearly ,but it’s creating a high foreclosure rate because the market turned .These investors can’t afford the homes/condos long term .
Merced is No1., then Bakersfield,Vallejo-Fairfield,Las Vegas-Paradise NV, Fresno, and finally Ocean City,NJ. Will your town be next?
How do you pick up a house?
http://www.slate.com/id/2168417/
BTW, I was just thinking to myself not two hours back, “I wonder if the housing situation will turn into a Presidential campaign issue.” This article suggests it may.
From the link in the article to Lawrence Yun’s housing forecast:
“Home Sales Projected to Fluctuate Narrowly With a Gradual Upturn
WASHINGTON, June 06, 2007 -
Home sales are projected to move in a relatively narrow range with a gradual upturn becoming more pronounced by the end of the year, according to the latest forecast (PDF 136k) by the National Association of Realtors®.”
What on God’s earth is a ‘narrow fluctuation?’ I guess Yun’s forecast doesn’t apply to San Diego, where sales have declined YOY for 35 straight months, and are likely to decline again in June, given that mortgage rates just spiked up.
It’ always about the weather. Prices can’t continue to go down there because it is part of the Golden state where the sun shines all year.
This piece has many useful links. For instance, this Big Picture piece has a fantastic chart documenting David Lereah’s last days at the NAR:
http://bigpicture.typepad.com/comments/2007/06/nar_and_housing.html
“Look at that nice American plane in the sky. I bet it is planning to drop ice cream for all of us.”
If David Lereah had been a Hiroshima resident in August 1945.
“Markets boom and markets bust. This is part of a cycle. San Joaquin County may be No. 1 in the nation for foreclosures now. A couple of years ago we were near the top in home price appreciation. That’s the ying and yang of the housing market, any market.”
Anybody who buys at the moment is a ying yang.
I just think that real estate should of just kept going up with normal inflation . Once you start getting these mania increases in one year you know its got to crash . I can understand that the lower interest rates would of fueled the increases in real estate for a while ,combined with the fact that supply might of been on the lower side ,but ithe market should of contracted in 2002 IMHO based on real affordability . From 2002 onward it was the lending madness combined with the real estate always goes up myths and schemes that kept the market going and increasing year after year, to the point where it spread nation wide .
Why people didn’t take advantage of a 4.75 % fixed rate note when
they were offered is a interesting question to me .These toxic adjustables were just meant to be a short term investment loans or a way of getting equity cash .People didn’t plan to be stuck with these loans .
“Why people didn’t take advantage of a 4.75 % fixed rate note when
they were offered is a interesting question to me .”
Remember that fixed rate mortgages have always been the hardest to qualify for. And, I think people were dependent on those crazy low teaser rates/IO/Neg Am/Pick your payment for the first few years to “get in”.
I had a good adjustable during the 80’s and 90’s that actually averaged lower than the fixed rates for all those years,(23 years ) . When the fixed rate got as low as it did of course I refinanced into the low fixed rate note .A year later I decided to move and I went on the fixed rate note again .
I was going to do that, but Greenspan told me that taking out an ARM loan was a much better thing to do….
Yeah, AG told me to stay away from the stock market in 1996. I listened. I got in late in 1999 once I saw things were different.
The money, fees were in adjustables loans. Why do you think they were favorite push for the lenders? Lenders greed always “comes” first.
Yep. Not just the fees for the originators, but think of yourself as a lender. Would you want to lock in a 4.5% rate on a loan when rates are at all-time lows (i.e.: rates will go up in the future and you’re stuck with all your money in low-yield, 30-year notes)? Not likely.
Ultimately, it was the low rates that caused investors to seek higher yield. A FRM when rates are at historic lows is a death sentence to a lender. You want your returns to float up as rates rise in the future, that’s why they pushed ARMs (and paid the brokers more to sell them).
Our you saying the home buyer wasn’t smart? Wonder why?
What is especially upsetting is that when she and the other folks who bought “multiple houses” were doing so 2-3 years ago, they were not concerned about any of the lending practices or what may have been shady realtor behavior. They all had dollar signs in their eyes and KNEW (in their minds) that they would be in the money in a few years.
Fast forward to the real world where they can’t keep up with payments, can’t sell, can’t rent, and now they are all digging up the suspicious practices and suing….now it’s all about mortgage fraud. People like this Vicky Reiss need a swift kick. She didn’t buy one, but FIVE houses, and she wants people to believe that she was totally taken advantage of? Spare me. My guess is that she knew what was going on and went along with it. What she didn’t understand, she may have looked the other way so that she could get her houses…her road to riches.
For God’s sake. It’s not women like this who made this crisis. It’s the lenders who kept giving them money. In this day and age with all the credit analysis tools available to the industry there is absolutely no excuse for extending credit to folks who are defaults waiting to happen.
There was a whole entire lending industry that just went collectively insane. I mean seriously, would you give this woman $500 grand of your own money to play with? No, me either. So why did all those lenders think it was a good idea?
Greedy borrowers caused by greedy lenders caused by greedy CDO investors.
“So why did all those lenders think it was a good idea?”
Remember junior high? “But Mom, every one ELSE is doing it.”
Seriously though. I understand the business model when Casinos willingly extend credit to addicted gamblers and put ATMs in all their casinos. Even when they use chips instead of cash to make it feel like you really aren’t gambling with real money. Because those same casinos are taking the money right back hours or minutes later.
But the business model of these lenders would be like a casino loaning gamblers money so they could walk across the street and play in someone else’s casino. No gaming business on the planet is going to loan money to gamblers so they can spend it next door. But that is exactly what these sub-prime lenders did.
Kent, they weren’t loaning their own money. They were taking the commish and flipping the risk. This was like casinos playing with public money. Think about it.
Many People wonder what lead To the ” Lending Madness” by the Mortgage companies. Pretty simple Really.
1. It isn’t their Money. Poor Smuck Investors.
2. Real Estate was going Up 20% to 40% per Year.
These are the thoughts I think went through their minds at least in the Bubble Areas.
Loan anyone Money that Breathes the more the better.
Example Real Estate going up 30% per Yr.
Loan someone 500k construction loan , 3 yr ARM. I year to build home. Home is worth 650k when finished. 1 Year of Payments , house is worth 840k. 2 yr worth 1.1 Mil. If the Buyer Defaults after 2 years, Mortgage Company makes a cool Half Mill easily selling in such a ” HOT MARKET”, all the while having someone Paying 18k Year Interest , Taking care of the Home , Paying Insurance and Taxes totaling easily 60K interest and all.
A LIVE IN PAYING HOUSESITTER. If they Pay Fine, if they Don’t Pay even Better. This is the Same Racket the Buy Here Pay Here Car Lots have used for Years. It’s Win, Win . Doesn’t Matter either Way.
Only the DumbA**es Didn’t think the Party would end “So Suddenly” and would just Level off Slowly Giving them Time to ” EXIT EARLY ”
with a Wad of Easy Cash. Instead they got Caught with their Pants Down. GOT LUBE?
“GOT LUBE?”
Inquiring FBs want to know…
I mean seriously, would you give this woman $500 grand of your own money to play with? No, me either.
That pretty much sums up my feelings.
One more time: It wasn’t their money.
It’s just like the health insurance debacle, public housing, public schools, public companies, and prisons: if it’s not your money, you don’t care how it’s spent (bad landlord, whack whack, back on topic).
Agreed, Kent. There are MANY players in this game who should take responsibility of the housing debacle. I was just using this woman as just *one* of the players in this mess. Crooked lenders, brokers, RE agents, appraisers, underwriters, along with a few builders, the Fed, and anyone else who wanted “their piece”, are responsible for sure. Oh, and let’s not forget the straw buyers.
To answer your question, I would certainly NOT give her $500k of my money to play with. But, as far as the lending industry goes, they have to have players for them to move their game forward, right?
A lot of people played a part…a lot of people should share in the responsibility. Unfortunately, many of these people are pointing the finger at someone else instead of owning up to their part.
BayQT~
Because values were never going to come down, is why.
The current RE cycle is as been noted here and other blogs a “Credit Cycle” which is why the MSM and most other traditional economy minded citizens have failed to grasp what is happening to these neighbors and why and what the future looks like. Basically its more foreclosures and declining home values for years and years but MSM and others keep looking for those traditional housing issues such as employment levels for instance and can’t understand the why of today’s market.
The cattle drivers in the REIC and MSM, led the herd to buy at any price, without thought or consequence of their actions on both their parts. Suddenly, the REIC and the MSM lost control of the herd, probably do to common sense setting in, at which point the herd realized that the prices were too high and decided to stop buying.
Once the herd begins to scatter in all directions, it is difficult to regain control. In the case of the housing market where housing bulls(sheeple) roamed, the cattle drivers from NAR could no longer convince anyone that real estate was still a good value. Game over for housing.
Some of the housing bulls that scattered from the busting housing market have been led back into the stock market, and are now being led by the cattle drivers on Wall Street, and their mouth pieces at CNBC and Bloomberg.
My point is; bulls are herd animals who have difficulty thinking for themselves, and must be led. I think the majority of our population fits into this category, and the wealthy elite are oh too happy to lead them from trough to trough.
Will the majority of out population ever be capable of thinking and reasionong for themselves? What are your thoughts Hobbson?
“The cattle drivers”
LOL. It’s so true what you say in your post Mike .
if only the Elites were leading us from trough to trough instead of from grave to grave
The stock market dispenses with fools much more quickly than the housing market. Just an observation.
I wouldn’t give her $500, yet alone $500K of my money. The banks were just planning on dumping the bad loans on some other poor schmuck and pocket the lucrative up front fees. This lady (and all of her cronies) should be sterilized (no they can’t reproduce stupid) and locked up in debtor’s prison. They knew it was a can’t lose so they didn’t care - until they became the bagholder. And the debtor’s prison should just be tossing them in the Amboy Crater and let them cook. No sympathy from me for these greedy bass turds.
I posted on the FL thread about how after you add up taxes and insurance and HOA fees, etc there is nothing left to pay on a mortgage so all those FL condos are worthless. A lot of CA subdivisions qualify as well. So far out, add up all the costs and you can’t rent them out at a high enough monthly rate to cover any debt say over 100K, so all these “new” areas will be ghost towns. Can’t flip speculate and can’t own and rent out long term. You will see areas with one or two owners and hundreds of vacant houses all around them. This seems to be the case in many areas of FL, CA, Az, Vegas even here in MD.
“…They’re afraid, ‘I’m losing my savings.’”
wtf - Finance 101 - savings is NOT passive. You must live beneath that which you earn and sock it away. Home equity is NEVER savings
Oh, Jeff from the SDCIA board disagrees, and had an eloquent argument for it. Of course, asking him about that now is impossible since he’s MIA. Hasn’t shown his pretty face for a couple of months after announcing he’s near foreclosure on 3 FL properties and was vomiting at the thought of his investments taking him down.
I honestly hope the dude’s alright, though. Seemed a nice enough guy.
Doesn’t he have five kids? Very sad.
wtf - Finance 101 - savings is NOT passive. You must live beneath that which you earn and sock it away. Home equity is NEVER savings
But a home is the best investment you can make, prices always go up, they ain’t making any more land. Sarc off.
Remember Deb? She posted the following over at CR:
Sales fell off a cliff in April or so. Pending sales (or lack thereof) indicate that it’s going to look much worse soon. The Southland Regional Assoc of Realtors seems to be very slow in coming out with their May numbers….
deb | 06.17.07 - 11:22 pm | #
Forgot to mention, the BOM (failed escrow) to sales ratio was almost 50% in April. That’s a huge number! It’s typically around 20%.
deb | 06.17.07 - 11:23 pm | #
Put that in your pipe and smoke it!!!
Wow. Good stuff! Glad to see Deb’s still around somewhere. I wonder if her numbers are what mrincomestream was referring to the other day when he mentioned how “bad” it was & even we’d be shocked.
I guess I am a little bit disapointed in all the financial shinanigans.
Probably should have rode this debt pig like everyone else. Bought a house 100% down and heloced it to death for payments/toys/trips… Yeah, I’d be bankrupt but I’d have lived real well for a bunch of years and would have probably been able to save up and squirel away cash.
Then declare bankruptcy and disapear into the financial armagedon…
It just pains me to hear “hyperinflation” or “bailout” these days
Why do we bother to work/try/care…
because that’s what your parents raised you to be! God bless ‘em!!!!
I work/try/care because it’s the more sensible financial strategy for long-term financial independence. There’s the big plus of being able to look at myself in the mirror, but even if I had no honor, I would still do what I’m doing on just expected financial values alone.
For instance, ethics aside, I don’t like the risk / reward ratio for what you’ve described. And although it’s fun to have nihilistic musings on how the suckers will somehow win, suckers rarely win. Some do, but most simply get fleeced. I don’t like those odds.
I think what people do not realize is that the housing correction is only in the early stages - especially in California. What is happening now is a reflection of easy credit to inexperienced investors. On top of this will come the black swan of homebuilding - that means the demise of many private undercapitalized homebuilders who can’t sell their new homes and are overleveraged. There was an abundance of easy credit to many building companies. The public companies have started to take their write-downs (over $27 Billion of land has been written down or handed back tothe owner and most of these write downs really started coming in the 4thQ2006). The private builders are holding on hoping the market will turn and the banks won’t remargin their loans. Many builders are simply moving loans from one bank to another. When the FDIC or the banks are finally forced to write down or write off these loans, another hit to the housing market will occur. This isn’t unlike what happened in CA in the early 1990s except we aren’t in a recession. We are however in a pricing correction that has not reached equilibrium. California has always had demand for housing and not enough supply. What we need is supply at the right price and we are not near that yet. The private builder meltdown will only depress prices further.
Yeah, Cali has a serious problem: you cannot build what people need anywhere near where people need it. California is not built out, it is instead NIMBYed out. Check out the whining in today’s LATimes from the poor suffering b4strds who bought right next to the 405 and are whining about the expansion. They are fully as pathetic as the whiners who bought property under airport runways and are NOW whining about the fact that (OMFG) AIRCRAFT ARE TAKING OFF AND LANDING OVER THEIR PRO_PER_TEH!!!11!
Cry me a freaking river. My feelings about this are unprintable, but color me unsympathetic.
LOL! Tell us how you really feel, SM LL! (BTW, I agree).
I couldn’t wait to get home and share. We spent the weekend with my in-laws, who live in Santa Maria. They purchased their house many years ago for around $140k; it’s now up around $400k (by some valuation). We’d like to get them to move down to Orange County with us to help with our new baby, whether in a duplex or in-law quarters or even (God forbid) in the same house. My wife keeps floating the idea of “going in together on something.” But they can’t make a decision. Dad is retiring because he’s sick and mom is still remodeling the house.
I tried to tell them that if they want to move down, then NOW is the time to sell, because if they wait for prices to come down in OC, well then they’ll also have gone down in SM. Makes sense, right? I tried to explain that even if they sell now, near the top, and rent for two years, they’ll still come out ahead. If they wait, their gains will go away. In any case, we won’t be buying anything for at least a year or perhaps longer, depending on how the market shakes out.
So, get this: I told Dad that it’s the best time to sell; he countered by saying it’s the best time to BUY. I said you can’t have it both ways. If you buy now, you’re only guaranteeing a loss. His response: “But real estate only goes up.” Gaaaack!
On second thought, getting into bed financially with these people sounds like a monumentally bad idea. Thanks for listening.
P.S. Nobody kicks my dog but me.
Went to a street festival in the Willow Glen area of San Jose this weekend — so the realtors used this as a perfect opportunity to put out their for sale signs with arrows………..OMG it was incredible! I personally have NEVER seen that many signs on each corner. Just a matter of time before Silicon Valley becomes like Southern CA!