A Transitional Time For California
The Orange County Register reports from California. “In the first three months of the year, lenders handled $89 billion in subprime loans, down 41 percent from the end of last year and 47 percent from the same period in 2006, according to National Mortgage News. That follows an 18 percent drop for all of last year.”
“In early 2006, just as the industry began a major downward slide, Orange County boasted four of the Top 10 subprime lenders in the nation. New Century alone did about $60 billion of loans in 2006.”
“New Century today is bankrupt and has sold its major assets. It’s the most dramatic example of a decimated industry. About a dozen subprime lenders in Orange County have shut down, filed for bankruptcy or otherwise scaled back.”
“Tim Rush, a VP with Prudential California Realty…in Cerritos, said account executives working on commission at subprime lenders earned $10,000 to $15,000 a month during subprime’s heyday, and some top producers $20,000 to $30,000.”
“Unfortunately, part of the fat profits came from consumers being steered into higher cost loans, Rush said. ‘You are dealing with people who in most cases don’t have many options,’ Rush said. ‘There have been some heinous abuses.’”
The Sun Post. “Dolores Morales brings up five grandchildren and an adopted daughter on a combination of welfare payments, foster care payments, child support payments and food stamps, worth a total of about $2,500 a month.”
“She lives in a four-bedroom house in Lathrop that she bought in 1975 with her husband. He died in 1992, leaving her the house and a $53,000 mortgage to pay off.”
“Morales had piled up a lot of old bills since the death of her husband, and her credit rating suffered, but in 2005, Town & Country Credit Corp. offered her a high-interest ’sub-prime’ loan Morales thought would help her buy new furniture, a dishwasher and a refrigerator. The total amount of the loan was $195,000.”
“After a year of struggling to cover the $1,390 payments on her loan, Morales sought another loan, hoping it would help lower her monthly payments. The result was a $278,000 loan from California Mortgage Solutions. It required Morales to pay $2,347 a month — a payment that would rise after two years.”
“But Morales didn’t make it through even a single year, and now she is almost certain to lose her home to foreclosure before the end of 2007. She missed her first payment in April and hasn’t made another since.”
“Asked how Morales could get a loan with payments that totaled her monthly income, the office manager at California Mortgage Solutions, Reyna Quilenderino, said that her company had offered a stated-income loan, though she couldn’t remember the details.”
“‘I think we went stated income,’ Quilenderino said. ‘I think she said she made $5,800 (a month), I don’t know. We went off what she stated to us.’”
“She said $37,000 from the loan was set aside for Morales to make her mortgage payments for the following year, but Morales failed to follow the plan and instead spent some of the money to buy a $6,000 van, which Morales said was true.”
“‘It wasn’t a bad loan or a bad loan officer,’ Quilenderino said. ‘She went and spent the money.’”
The Daily News. “The Santa Clarita and Antelope valleys are in strong economic shape, but there are potential bumps in the road from the sluggish house marketing and potential strikes in the entertainment industry, according to economists.”
“The key questions are how many homeowners are in trouble because of difficulties with their subprime loans and how willing will the financial institutions be in working with those distressed homeowners, said Jack Kyser, chief economist for LAEDC.”
“‘Any place where you’ve had a lot of new construction open up is vulnerable,’ Kyser said. ‘The cloud over the Antelope Valley is housing construction.’”
“Mel Layne, who heads up the Greater Antelope Valley Economic Alliance, noted that the forecast shows the housing market starting to recover in 2009. ‘I hope he’s right,’ Layne said. ‘The last time it lasted about 10 years. We’re still in pretty good shape, but we’re heading in the wrong direction,’ Layne said of foreclosures.”
From NBC 11. “A foreclosure crisis in Contra Costa County has caused one congressman to issue a warning to lenders who might take advantage of prospective homeowners, NBC11’s Damian Trujillo reported Friday.”
“Loan defaults went up by more than 200 percent in the first three months of 2007. Almost 1,500 foreclosure notices went out in Contra Costa County in June, according to Neighborhood Housing Services.”
“‘The question of housing foreclosures is plaguing every community,’ said Congressman George Miller. He represents portions of Contra Costa County including Richmond, Concord, Martinez, Pittsburg, Vallejo, Benicia and Vacaville.”
The Valley Chronicle. “San Jacinto has Riverside County’s third-largest percentage increase in assessed property values for 2007-08, according to a news release from county tax assessor Larry Ward.”
“Ward said the appraisal market in Riverside County was strong despite the downturn in the real estate market. However, only sales that recorded before Dec. 31 are reflected in the 2007-08 assessment roll.”
“‘We are in a transitional time between an up-market and a declining market. Our office is proactively reviewing residential home values for any decline in market value,’ Ward said.”
“He said values were reduced on more than 31,000 properties. ‘Of those properties, 6,350 were new for 2007 and a result of a request for review by an owner or our own analysis of the market. The average reduction on these residential properties was $39,953,’ he said.”
The Bakersfield Californian. “The company proposing a controversial housing development in the bluffs of northeast Bakersfield has defaulted on a $3.3 million loan backed by the property, according to county records.”
“Such defaults, if not righted, could send the property to the auction block.”
“Michelle Beck, the co-chair of the Bakersfield Bluffs and Open Space Committee acknowledged the real estate market is slow statewide. ‘I guess when investors make bad decisions, these things can happen,’ she said. ‘Considering all the other defaults we’ve seen around town and some of these other things, it’s not surprising.’”
“They write rent checks each month to Crisp & Cole Real Estate. Some thought the payments were bringing them closer to homeownership through a lease-to-buy program.”
“Instead, the homes are in default, at least a dozen of them, along with more than 50 other Crisp-related properties in Bakersfield.”
“Since the beginning of the year, however, current and former employees, family members, business associates and customers have defaulted on at least 67 homes, mostly in southwest Bakersfield, Californian research of public and industry records has found.”
“Chris Horton and his young family bought their Blue Meadow Court house new two years ago from HomeCrete Homes. Some nearby houses were never occupied. Others had tenants for a couple of months, then became vacant again.”
“‘We started seeing Crisp & Cole signs going up and we thought, ‘Oh, God, here we go,’ Horton said.”
“The Hortons paid $355,500 for their home in the summer of 2005. It recently was appraised for about $325,000, Horton said. ‘The property values are dropping,’ Horton said. ‘My wife and I have our heart and soul in this house.’”
The LA Times. “Eddie Cuevas and Michelle Siqueiros Cuevas have come a long way from their humble upbringings. Now, they want another piece of the American dream: a house. ‘My mother asks me when are we going to buy a house every month,’ says Michelle.”
“The Cuevases so far have managed their finances handily. The downside: They have just $13,000 in other savings. ‘They’re almost ready to buy a house. But they’re not quite there,’ says Jennifer Hartman, a fee-only financial planner in Los Angeles.”
“In a year or two, however, Hartman believes the couple could save enough to put down 5% to 10% on a home. The Cuevases had considered diving in and buying a home with a faddish zero-money-down loan. That made Hartman wince.”
“Patrick Veling, president of a real estate research firm in Brea, says the market is woozy after soaring home values earlier this decade.”
“Although some communities are seeing values continue to rise, the residential real estate market overall is in a slump, and some experts believe it has not yet hit bottom. In June, home prices were lower in two-thirds of Southern California’s ZIP Codes compared with the same month a year earlier, according to DataQuick.”
“For the Cuevases, this means that there is no rush to buy, Hartman says.”
“And if they don’t find a home they adore, they’ll wait. Reflecting on his finances, Eddie remembers the lessons he learned growing up in a family of immigrants. ‘You have to work hard for everything,’ he says. ‘You have to earn even the little things.’”
‘in 2005, Town & Country Credit Corp. offered her a high-interest ’sub-prime’ loan’
Had she read this blog the problem might have never gotten started.
Ben:
That is a great move. Linking to the older archive posts. I like that angle.
Actually, the best and first post I did on subprime was dated November 23rd, 2004 on a blog I deleted. (Note to bloggers; never delete posts).
I went back and found my first post under my real first name in April 2005.
Anyone else browse the older archives in 1995-96
Lots of fun reading…
http://www.dqnews.com/AA1995OFA06.shtm
California Homes Being Sold at a Loss
June, 1995
Million-Dollar Home Sales in California Down from 1994
June, 1995
California Foreclosures up from 1994
July, 1995
San Francisco Bay Area Home Sales on the Rise
August, 1995
Out-of-State Nevada Home Purchases
September, 1995
Southern California Home Sales Up, Prices Down
September, 1995
‘The median loss was $23,500 on a house sold for $203,000, originally purchased for $226,500.’
Huh?
Here’s what I don’t get.
New loan - $195,000
Payoff 1st mortgage $53,000
Loan fees $8,000
New furniture $10,000-15,000?
New fridge $2,000?
New dishwasher $600?
That leaves around $117,000 for “old bills.” Either my math is off, or this lady had a *huge* amount of debt, or something else has been left out of this story.
I know what my theories are, but I don’t like to make assumptions. However it is really hard to feel sorry for someone who was handed over $100,000 and still can’t get their finances in order. That money should have bought her a lot of time to work on paying things off, improving her credit, and refinancing into a better loan later, not a worse one!
I wonder why the reporter didn’t provide a ask and answer for the looming question of just wtf did you do with in excess of 150k in 2 years.
Your forgetting that she is the victom
“…Your forgetting that she is the victom…”
Of what? Her stupidity.
A lot of the money apparently went to pay old bills. My problem with here is that with the $5800 / MO she makes she should be able to meet her obligations. If she lied on her application and does not make this amount, she belongs in prison for grand theft, along with the rest of the idiots who thought they would jump in and make a quick buck.
She makes roughly 2500.00 +/- a month. If she had roughly +/- $150k in bills to pay off making that kind of money something is seriously wrong. I wonder how many trips she took with that money. I bet she couldn’t even tell you where it went.
I read what she actually makes in the article. My problem is that she lied on her application stating she made more than twice the amount she really makes. This used to be a serious crime with jail time the works… Does no one take fraud seriously any more? Granted she would not have been given the loan had she told the truth, and indeed the whole bubble may never have happened at all were it not for stated income loans, but in reality this loan did her no good at all.
In the days of sanity a bank or loan company “actually” verified your income.
How involved does anyone think organized crime or the mob is?
possibly some; however, I think this is mainly greedy lenders and borrowers. And yes, this fraud should not go unpunished or else I am going to take out a huge personal loan and never pay it back / let it default. That is essentially what these people are doing. I am ripping pi$$ed that so many ppl thought they could get away with this. Are there no morals at all anymore?
“How involved does anyone think organized crime or the mob is?”
I’m thinking that you should take a trip to Brighton Beach and do some research. I’m guessing that you would find out things that would answer your questions.
Do you remember Tony Soprano’s HUD scandal in Season 4?
Dont forget, her entire income is based on OUR taxes.
Wow I just realized how welfare should work now. At first I thought it was a good idea to just give these people stupid jobs like picking trash off the streets, scraping gum of the sidewalks. But maybe welfare should start at a certain number and then every month get less and less until it hits zero. I am sure all those welfare people will just sit around, do nothing and just die right???
I also didnt put the math together on that article. Maybe she bought platinum and blinged out fridges??
That was my first thought as well … what happened to the rest of the money?
Her creditors will never recover much of the principal from her. Looks like another drop in the pain bucket for the CMO investors. How sad.
“That leaves around $117,000 for “old bills.” Either my math is off, or this lady had a *huge* amount of debt, or something else has been left out of this story. ”
I think the answer is that “something else has been left out of this story.” I would not be suprised if this lady got totally screwed by these loan people. She should probably have a lawyer look over her documents. There are some people out there that will rob old folks and be happy about putting them out on the street.
Screwed by the loan people, thats rich… More like screwed by her stupidity. I’d wage large money on the fact she has every designer piece of crap made in the last 2 years in her house and on her back and on her kids back as well
She could very well have gotten screwed by her stupidity but there are many loan and real estate agents out there ready to rob anybody they can. Once an old lady friend was getting the runaround by her agent with whom she was trying to sell her house. Fortunately, an agent from a potential buyer told her that her agent was up to some funny business. My sister was able to get this old friend out of here agent’s tenticles. The last straw was when the old lady was trying to get some documents back from the agent and they asked her for a check for something like 2K in order to give her copies of these documents. My sister knew that all they really had to do was make photocopies! For this they made her sign over a $2K check. Fortunately for her, she paid with a check, allowing her to put a block on it before it was cashed. The point is that there are a lot of crooks in this business who are looking for potential victims to screw them dry. How should this be handled?
And I bet they have cable TV with every movie channel, cell phones for all of the kids, a PS3, XBox 360, flat screen TV, stainless steel appliances. What else am I missing?
I’m sick of seeing tw#ts like this sing the blues and they have nicer stuff than I do. There is a concept called living within your means. We did it when I was a kid and we had nothing. They can do it today and not call everybody a “snob” or a “racist” that expects anybody that is poor or a minority to work their way up.
testify!
Dude… listen I would be the last person to try to convince anyone that all agents and loan offices are saints. There is a certain amount of bad seeds in any industry. All one has to do is look at the current scandals in the NBA, NFL, and MLB to see that. Happens in every industry. There are a certain number of people who no matter what amount of money they make they are going to steal. It happens
No matter how many fingers are pointed, 9 out of 10 times the finger pointers need to look in the mirror. Even in your example above with your sister. Are you 100% sure that transaction was on the up and up. It’s been my experience that birds of a feather flock together.
This lady blew the money plain and simple no one stole from her. No one gave her a bad deal. I’d put long money on the fact she walked in asking for the very thing she received, because the money was way too easy and greed was rampant with no thoughts about repercussion of action.
“I’d put long money on the fact she walked in asking for the very thing she received, because the money was way too easy and greed was rampant with no thoughts about repercussion of action”
Great point!
“After a year of struggling to cover the $1,390 payments on her loan, Morales sought another loan, hoping it would help lower her monthly payments. The result was a $278,000 loan from California Mortgage Solutions. It required Morales to pay $2,347 a month — a payment that would rise after two years.”
Out of the frying pan, into the fire she goes… This is yet another of myriad MSM anecdotes Ben has posted that stretch the limits of credibility.
And she’s a real genius at work!
Hmmm….I focused on the “hoping it would help lower her monthly payments” part.
Perhaps I need to revisit 30 years of math education, but isn’t $2347 more than $1390?
Ben-Do you have a web site that we can go to, to buy HBB tee shirts ?
“Dolores Morales brings up five grandchildren and an adopted daughter on a combination of welfare payments, foster care payments, child support payments and food stamps, worth a total of about $2,500 a month.”
I think this is a big part of the problem. People who don’t actually have to earn money never have much respect for it. Apparently she thought she just had to get another ‘hand-out’, this time in the form of mortgages, and finance herself out of her mess. Only now the game is up.
By the way. Where are her own kids? You know, the ones that had all her grandchildren and dumped them on her? Why don’t they help her? Or are they to busy out making more babies?
‘The property values are dropping,’ Horton said. ‘My wife and I have our heart and soul in this house.’”
I know my view of home ownership may differ from many, but for the life of me I can not understand why so many people tie all of their hopes and dreams into a house! Especially in new soulless cookie cutter developments.
Could be worse…
You could be D.R. Horton and have a veritable s-load of unwanted houses that nobody wants, instead of just one.
My guess is because it’s their entire net worth. These people live paycheck to paycheck.
That’s called “negative net worth”. Love your kids. Live in your house.
I agree i would miss my 2nd floor apartment with it’s plaster walls, real old wood molding 9 foot ceilings….a large private foyer at the bottom of the stairs so i don’t have lug my dj equipment up a flight of stairs at 3 in the morning after a gig…..but it’s still just a very reasonable rental, and it still it has plenty of charm for us not to be in a hurry to move.
We are bombarded with messages 24/7 in subtle and not-so-subtle ways, that owning a home is “the American dream.”
The media helped perpetuate the idea that going a half-million dollars into debt is a wise idea in order to get a piece of the American dream, because everyone knows RE always goes up.
Everybody profited from the bubble, the Chinese, Wall Street, US politicians, bankers, everybody except Joe and Jane 6-pack.
“We are bombarded with messages 24/7 in subtle and not-so-subtle ways, that owning a home is “the American dream.””
DeBeers has nothing on the NAR campaign…the latest twist (last 3 years) is that *every* house is an “investment”, to capitalize on the recent (since 1997 or so) realization by mainstream America that there is more places to put your money than just savings accounts. That (partially) led to the stock boom (and bust), and helped real estate in the pst few years as everyone was talking about what a great “investment” they made.
Gotta somehow keep discovering the next generation of GFs to keep the Ponzi scam afloat…
Disagree! DeBeers is the only company that should be taught in marketing programs. Essentially, if you can make your product almost obligatory and directly proportional to the love that you feel for someone, you win. Cue faux classical music…
Then again, DeBeers has never said that now is a good time to buy or sell a diamond. Their business model is predicated on people not selling them back. If all of those stones went from safe-deposit boxes to the market? Look out beloooooow!
Diamonds are a huge waste of money. There are other stones that are indistinquishable from diamonds for as little as 10% or less the price. And besides diamonds are of no use to me
Also, natural diamonds aren’t really that rare. The market is controlled by debeers.
which is exactly what this corporate controlled White House had in mind for Joe and Jane Six-pack. We are all nothing more than walking wallets for the White House and their cronies.
This is why you are no longer referred to as a citizen, but a “consumer” Now run along and buy something…
“Everybody profited from the bubble, the Chinese, Wall Street, US politicians, bankers, everybody except Joe and Jane 6-pack.”
Not true.
From mrincomestream’s post:
“I wonder why the reporter didn’t provide a ask and answer for the looming question of just wtf did you do with in excess of 150k in 2 years.”
Morales was able to blow $150k in two year’s time - sure sounds like a profit to me. Of course, now the dumb greedy _______ is broke (with a $6k van to show for it), but what she did with the money isn’t a concern - the fact is she got her greedy paws on it and that is a profit.
As far as I’m concerned , I don’t want the money gatekeepers to hand out money to people like this women ,who should of kept her loan at 50K to 80K .
My whole point is that the lenders agents and borrowers did not have the right to take the investment funds of this Nation and commit fraud and bet that real estate would keep going up ,and that would hide all loan sins . We are having such record breaking foreclosures because of this fraud that its scary the degree of how widespread this loan fraud was .
The RE industry/loan industry had no right to screw up the entire real estate market by a high % of fraud loan applications and toxic loans that set people up for a big fall if the market didn’t continue upward . If you think about it ,the housing industry wants to raise rental rates and pass on the undeserved burden of their fraud to the renters of this Nation .The fraudulent borrowers want bailouts and favorable loans they don’t deserve and all the while some people had to move because their tax burden went up higher than normal inflation would of increased it .
The easy money funds of this Nation was the sole reason why the demand for housing went to bogus extremes in the majority of cities ,while affordability was solved by appraisal fraud and loan application fraud . Crazy ratings on loan risk ,borrowers on a mass scale getting easy money by fraud , appraisers being blackmailed into hitting the mark ,realtors selling anything to anybody knowing the loan agent would get it done .Pure anarchy.
Great post, Housing Wizard. I would add to the the issue of how some great areas have been screwed up and made ugly by gulag architecture as a result of all of this.
I’d love to get me a big backhoe and just go to town on some of the developments around here.
I know my view of home ownership may differ from many, but for the life of me I can not understand why so many people tie all of their hopes and dreams into a house! Especially in new soulless cookie cutter developments.
Bingo! Your view of home ownership is the same as mine. I lived in a soulless cookie cutter home. No way in hell could that ever be my dream home. I was hoping to move up to a custom eventually. But I totally got out of home mortgage-paying and got into renting in 1996. I lost $20,000 plus the excess interest payments (paid $966 per month mortgage - going from $475 per month rent back in 1990).
Why would it matter if the price of the property goes up or down if you are living there paying off the loan? If I could afford something right now I would buy it and be happy. Thats what my friend in London is doing knowing that there is some sort of bubble there. I live at home, my mom paid off the loan a while ago and won’t sell because what is she going to do. Go buy another more expensive place? She also is one of the older generation who doesn’t believe in renting (she got lucky on each house and bought and sold at the exact right periods)
Uh, the older generation that doesn’t believe in renting? How old is she? If you still live at home, I assume she is a baby boomer, or you are a loser. if you talk to the generation that would be her parents (if your grandparents are no longer around), then you would see that they are NOT against renting. This is how most of them grew up - in rentals. And many of my relatives in their 70’s and 80’s are going, guess what, back to rentals. Not having to maintain a property is a big draw. Plus, many of them think “these kids nowadays” are idiots for paying so much for a house.
Yep, it is a transition time for that little house in da hood that thought it could….be something worth much more.
“The Orange County Register reports from California. “In the first three months of the year, lenders handled $89 billion in subprime loans, down 41 percent from the end of last year and 47 percent from the same period in 2006″
I think now would be a good time to bring back that reality TV show to Cota de Caza, that OC “community” where everyone is a mortgage broker…Imagine the fury as those OC wives have to cut back on Coach handbags and plastic surgery.
Nice sampling of OC short sales and REOs:
http://orangecounty.craigslist.org/rfs/361841208.html
Let’s see… loans down 47 percent…
Less profit per loan.
That’s what a 60% to 70% haircut in gross pay? I know people laid off from Ameriquest. They all have new jobs. But they had skills.
The stupid salespeople get to go back to circuit city, furniture stores (oops… sales down), Home depot?, …
In the words of Thornberg, “Orange county is different, its going to get hammered.” I’m not sure all those range rover, massarati, Porche, Bently, BMW, Jaguar, and Mercedes drivers are ready for what’s about to hit them. Cest la vie.
Got popcorn?
Neil
We had done some work for a major CA furniture store and they just had layoffs. Car sales are down, furniture, appliances etc. All benefactors of our recent bubble.
The biggest mistake in personal finance is to forget that it is during the good times when you should be preparing for the bad times. Acting like the good times will continue forever is a disastrous mistake that those Porsche drivers will learn the hard way.
“Save in the good times so you can spend in the bad times.” That is a quote I stole from a contract engineering consultant’s message board signature. But I applied it earnestly and successfully. There are wise people in the personal finance world like that contract engineer, but they are few in numbers. I have some friends who live that quote, but hate to admit it. They are so sure the stocks will go up forever. I think stocks will go up too, but go down a lot before they go up a whole lot.
The problem with this is look at how many poor people there are. Whenever I ask others about how rich everyone seems and yet there seems to be a huge portion of poor, what happens when the recession hits. And most people that think housing will go up forever know that is going to happen if it already hasn’t.
Woo Hoo, Maserati! Go Neil! I want to eat popcorn in a Maserati with a DVD player that I got for 5 cents on the dollar.
“The Hortons paid $355,500 for their home in the summer of 2005. It recently was appraised for about $325,000, Horton said. ‘The property values are dropping”
This is what I hear from my neighbors in Redondo Beach all the time: “The homes on the lower end in SoCal ( $600K or under) may take a big hit, but not the homes around here that are close to the beach.” These homes are in the $1M+ range. So far I haven’t seen big price drops in my area. Homes that are selling for $1.5M or higher with ocean views have been selling within a few months, although a few years ago they were selling within a few days.
Volume precedes price…always. You can take that to bank…unless they aren’t giving out no-doc 100% loans anymore that is…..
What has your observation been in SD, which is supposed to be ahead of LA in the downturn? Have there been substantial price reductions on higher priced homes (ocean views, Coronado, etc.)? Many of the articles I’ve read from SD have been focused on distressed sellers of lower priced condos and starter homes in outlying areas.
I don’t watch Coronado, but the areas I have poked around in along the coast and in North County do show some price reductions on higher priced homes. Many sellers are still using wishing prices too. I’ve come across several trying to sell for substantial amounts below what they owe on the place, let alone all the money they poured into new cabinetry, granite, and travertine. Investors and flippers bought plenty of properties in these areas. Condos and outlying areas which were bought up at the height of the market are taking a beating.
Same here in the ‘nice’ parts of LA. And JWM is right, it’ll happen in the high end eventually. There’s just a ton of equity at the top to cushion the decline. When you bought for 500k, current comps are 1mil +, and you haven’t sucked out all the equity, time is on your side. Plus, people in these areas are buying the dip, so to speak. 10 years of double digit appreciation has created a very strong belief in RE “investment”.
That said, I see a lot of new listings that were last purchased 1-3 years ago. Of course, they’re listed for more than they paid… gotta get that guaranteed 20% appreciation ya know. :-/
When what’s happening in the rest of the state hits the high end, and who knows when that’ll be… It ain’t gonna be pretty. Unless of course, you’re a buyer w/ cash and good credit…
The price drops just haven’t started here yet. When I was in Scottsdale recently I was seeing houses where the agents were telling me that some homes had received price drops of 150k to 200k easy. It’s coming L.A. is just a little behind the curve.
Yeah, it’s interesting to see the disparity even in adjacent zip codes. I have ZIP Realty searches set up for individual zip codes in the areas I’m interested in. Using 90048 as an example, prices are still in nosebleed territory, and there aren’t a lot of NOD’s etc. However, head south a few blocks to 90019 and prices are starting to slowly come down. And there is a boatload of NOD’s and other nastiness.
I feel like zips like 19,34, etc, were the “feedstock” for slightly nicer, 48, 64 etc zips. Once these folks can’t move up… then the SHTF. Currently there are still buyers for the “bargain” ‘hoods, but it’s slowing down. The rest of this year should be telling…
I’m not a big shadenfreude (sp?) kinda guy, but the sense of entitlement and invulnerability around here makes me sick. Can’t wait to see who’s been swimming naked!
They are all swimming naked. I saw an interesting piece on the L.A. Land Blog today. People who made 130k a year who went to foreclosure. When they broke down the numbers like they did it was very telling. It’s something that you’ve always known but when you see it broken down like that you realize just how many people are walking on razor thin margins. Just to have a piece of the sunshine state. It’s insane…
http://tinyurl.com/32lr5w
People who made 130k a year who went to foreclosure. When they broke down the numbers like they did it was very telling.
Gotta love the hubris of buying a $675k house on a $130k income. And apparently they financed substantially more than 100% judging from the monthly payment. $25k credit card debt, $1800/month automobile expenses, yeah, what great candidates for a mortgage! I wouldn’t lend them ten bucks. Also love their apparent need to own a 4-bedroom house despite apparently not having any offspring.
The only mystery is that they didn’t refinance in 2006 into another teaser rate mortgage to extend the pain for two more years. Maybe their credit was even below subprime.
Offhand I would guess there are at least a million other California households in similar straits over the next few years. That should have a gentle corrective effect on house prices statewide.
Location: Orange County
Yearly Income Combined: $130,000 Gross
Net Monthly Income (After Taxes): $8,200
Automobiles: Mercedes E350 Sedan ($599/33 month Lease), GL 450 Suv Purchase ($56,000)
Monthly Auto Fuel Cost (Filling up Once Per Week): $350
Home Purchase: Costa Mesa 4/2 Home, Bought Late 2004 for $675,000
Credit Card Debt: $25,000
Monthly Food Budget (Including Dining Out): $700
Amount of sympathy from NYCityBoy: Not a f-cking ounce
Look at the cars these idiots had to have. I hate spending $76 per month for my Metrocard. Once again this proves what I have been saying. Housing and transportation should be lumped together when figuring a family’s budget. It makes my ridiculous New York rent payment look less ridiculous. My wife and I spend about $200 per month on transporation. This includes recreational trips not covered by our $76 monthly Metrocards. These morons were spending $1,746 per month on transportation.
I am betting that divorce, not bankruptcy, is the next step. There aren’t many marriages that can survive such an ordeal as each person will be blaming the other.
“That should have a gentle corrective effect on house prices statewide.”
more like drinking a whole bottle of exlax
mrincomestream,
Years ago there was a series of Times articles on how “unknown” Hollywood types (i.e., those that aren’t famous but are credited) live on the edge. They work lots of OT to push five-figure incomes into six — all in order to finance bigger houses, nicer cars, etc. Why? To prove they’re A-list material, Hollywood success stories.
L.A.’s always had a large number of Bimmers & Benz, but the explosion of both in recent years has been absolutely mind-boggling. Can’t all be REIC. You gotta know that MEW must’ve thrown these people into overdrive.
I’m convinced the downside will be breathtaking to behold.
“That should have a gentle corrective effect on house prices statewide.”
more like drinking a whole bottle of exlax
More like drinking that bottle of ex-lax after catching montezumas, infected e-coli spinach, and finishing a large Mexican buffet that included some rotten onions and six trips back ending with that day old potato salad.
In other words, not a pretty finish.
L.A.’s always had a large number of Bimmers & Benz, but the explosion of both in recent years has been absolutely mind-boggling
Every ~15 years we see this. Every 15 years we watch the used cars build up on the lots… This time is going to be, as TJ notes, breathtaking
The show is starting.
Got popcorn?
Neil
and whos gonna be able to afford those cars? I probably won’t own a car for a long time if ever. I did the math and figure I can save $2000 a year by walking/biking/carpooling for transportation. For me, that is alot of money!
There are more than 4000 BMWers for sale in SF now. A graph of the numbers increase looks like the 06-07 forecloseure graph.
Just went to a dinner at a partner’s house at my brother’s law firm. Man, what a difference 25 years makes in what an attorney can buy. This partner had basically a mansion, with a fountain the size of a swimming pool, in Beverly Hills. The younger associates are all struggling to afford 850K crackerjack boxes on 5000 SF lots. What a joke. Seriously, I can’t see how there will be much of a correction here, there are just no houses, I mean, you have the beach as one barrier, and then how far east can you go, Robertson? La Cienega? And each day they’re tearing down more and more houses to build tiny little condos. I just can’t see how values will go down here, as much as I’d like to trade up, I really doubt that day will come. The freaking Boomers screwed it all up.
investorgirl, I have a close friend who lost 400K in a matter of months back in the 90’s in the Palisades when he bought the nicer house next door before he was able to sell his own house. I don’t think he could have imagined a correction coming either. (He rents now BTW.)
400K, that’s a nice chunk of change, even now.
tj-
Most of the BMW’s, Lexus’s and other exotics are either leased or purchased with equity. Very few people in this city can really afford them. The repo man stays busy in this town. In the IE I think Ranch Cucamonga or Fontana I was told by a buddy of mine who owns a dealership that there are lots that hold a football field’s worth of each model ie: one for Lexus, one for Mercerdes, etc etc. that go to auction every month. You are already seeing lots bursting at the sides with these models. The dealers cant get rid of them fast enough.
I don’t know if it’s normal for a 2003 Mercedes or Jaguar to be selling for 16K, but that’s what I saw the other day at a used car dealeship on Lincoln Blvd. and it seemed pretty cheap to me.
“I don’t know if it’s normal for a 2003 Mercedes or Jaguar to be selling for 16K, but that’s what I saw the other day at a used car dealeship on Lincoln Blvd. and it seemed pretty cheap to me. ”
Sounds about right if it is an X Type or C Class. Some of the S Types and E Classes are getting down there too. I’ve always noticed that higher end cars are cheaper in LA than Omaha. More of them there.
MrInc: 150K to 200K off what range of prices? Any idea?
I should add this; my wife was speaking to a ReMax agent that sells properties in our area (Redondo Beach). The agent asked my wife why we weren’t interested in buying after she got a feel for our financial situation. My wife told her that we may need to relocate to NYC in the next few years for career reasons. The agent said to my wife “Oh, alright, I agree you shouldn’t buy right now if you aren’t planning to stay put for at least five years, maybe longer. There is a correction coming to this area and you better be prepared to ride it out.” I have to give her credit for that response.
1-3 million … There’s one on Craigslist just today that had a $112k price cut.
http://phoenix.craigslist.org/rfs/379361007.html
Nothing like the haze of a 110 degree day to be called a “million dollar view”. And, by the way, that might be the ugliest looking “skyline” I’ve ever seen. Maybe they could buy in Fargo, ND. The view is probably better and a lot cheaper.
Mmmmm…. nice brown view with grey, muted tones…. mmmm… I like it… looks nice and dry, and hot, and dirty, er, I mean, dusty…
“‘ Comment by lainvestorgirl
2007-07-22 20:59:15
400K, that’s a nice chunk of change, even now.”
” Comment by lainvestorgirl
2007-07-22 19:11:18
For one thing, 1.2M isn’t even a lot of money anymore.”
come on now, this is worse than having a conversation with my ex…… :-}
Agreed … homes are holding value very well near the beach. I am going to do the cabinets for a new 11 unit Condo project on Artesia Blvd in Manhattan Beach. The prices are to start @ 1.2 Million.
Well, in the case of coastal property, there really is a limited supply in metro LA.
Let’s see how limited the supply of people that truly can afford a $1.2 million home is in 2010. These “rich” people have a lot of investments that are going to go south in the coming years. They include real estate, stocks, hedge funds, etc. And I bet they are leveraged as well.
The million dollar buyer is a joke right now. When things go south their numbers will thin. You can set your clock to that.
You are so wrong.
For one thing, 1.2M isn’t even a lot of money anymore.
The thing is that a lot of the beachfront owners have owned for a long time and are not in a position of being forced to sell (unlike FB’s who bought overpriced POS’s in the IE).
For one thing, 1.2M isn’t even a lot of money anymore.
Not when it’s someone else’s money. But leverage is a bitch when it works against you, as LA will be learning once again over the next few years.
The vast majority of LA doesn’t even have $120k in non-housing-bubble assets, let alone $1.2 million. The dorks with the $675k house on the $130k income with $25k credit card debt and $1800 car payments are the norm, not the exception.
Have you seen the statistics on how many millionaires there are in CA? I don’t remember the number, but there are a lot of them, and they aren’t competing for houses in San Bernardino.
But what type of millionaire are they paper or principle…? I’m sure the study didn’t seperate the two, I would venture to guess most California millionaires are equity cowboys.
Genuine millionaires, as opposed to leverage millionaires, generally aren’t competing in neighborhoods where the vast majority of buyers need to use mortgages. That includes most of the Westside. Marginal garbage neighborhoods like Palms and Culver City will of course lead the descent, but Santa Monica and its kin will follow suit eventually. That is how it happened in the 1990s, and nothing fundamental has changed since then - the numbers are simply bigger this time.
I don’t know, I just happen to know in various social circles: a Spanish radio station owner, a plastics distributor, a partner at a major accounting firm, a few different people who have studios that service the movie industry in some way that I don’t really understand, just different people like that, who could all buy a 1.2M house without blinking an eyelash. Except for the plastics guy, they get rental income too. I don’t care what the median income is in LA, you don’t need every teacher, nurse or cop to afford these prices to keep them up, there are plenty of people at the high end who can do that, it’s just a matter of whether their psychology changes and they become unwilling to do so.
Two of Bear Stearns’ hedge funds collapsed, many more to collapse as well.
West LA saw price collapses before, they will see them again. Mostly anecdotal, but there are a lot of people who bought over priced homes in WLA on voodoo loans as well.
A couple in the apartment building I used to live in, their combined income was what I made )~120k) and they bought a house off of Sawtelle and Jefferson/Sepulveda and paid over 600k for a house with a voodoo loan. I talked to him about it, I couldn’t tell him he was nuts, I just wished him good luck. He has a few more years before his loan resets. I think LA is just late to the game.
BUT over 600,000 mortgages are set to reset in LA County… should be interesting, and I’m sure there not all out in SG and SF valley. I’m sure many are in WLA as well.
But you’re right in today’s goofed up real estate market 1.2 doesn’t go far anymore.
just different people like that, who could all buy a 1.2M house without blinking an eyelash
Or maybe they’re just good at putting on a facade of affluence like, well, just about everyone in LA.
What’s cool is that we’ll all know the answer within a few years - it’s not like the Riemann hypothesis or something that may remain unanswerable for generations. This is as close to instant gratification as it gets. Pretty soon we’ll get to see how many ostensible millionaires have been swimming naked. My prediction is we’re all going to be seeing a lot of shriveled dickies.
While I agree $1.2 M isn’t much anymore…
West LA and the South bay took it in the shorts last time… about two years after everyone else did. Shorter timeframe… but very severe. Too much of LA is posers pretending to be rich or super-rich. Yes, much of it is very wealthy. But for every wealthy family in LA, there are three posers. Always have been, always will be.
I see 15% of the mortgages in well to do areas zero down option-ARM… I see streets in any of the wealthiest areas of LA with four to seven teardowns still under construction.
I go to cocktail parties and wealthy homeowners who are doing $5million dollar rebuilds of their homes out of cash on hand… introduce their neighbors who have everything in a townhouse development. Some will be fine.
Real estate prices are set at the margin. None of us should forget that.
LA might be late to the party… but from midnight to 3am… they’ll set the pace.
Got popcorn?
Neil
“…there are plenty of people at the high end who can do that…”
We’ll agree to disagree… on that point.
“But for every wealthy family in LA, there are three posers.”
yep
“I don’t know, I just happen to know in various social circles: a Spanish radio station owner, a plastics distributor, a partner at a major accounting firm, a few different people who have studios that service the movie industry in some way that I don’t really understand, just different people like that, who could all buy a 1.2M house without blinking an eyelash.”
All these people exist in LA, true. But there are not hundreds of thousands of them, there are not even tens of thousands in this bracket… there are probably thousands…
every one else is faking it
LAIG, I just don’t know about you some days.
“She said $37,000 from the loan was set aside for Morales to make her mortgage payments for the following year”
They forgot this part:
“…so that she could keep up the payments for at least a year, even though she had no means of continuing the loan after that. It is speculated that the mortgage company did this in order to insure that whoever they sold the loan to on the secondary market would not be able to force the mortgage company to take back the loan (via a standard loan buyback provision) had Dolores defaulted within the first year.”
I’ll bet they included the first year of payments so that they wouldn’t have to buy back the loan…as the extra funds would have carried her through the one year “buyback” period. Shouldn’t that be considered fraud?
good catch - the buy back avoidance - not issuing 1090’s selling on the cheap w/o recording losses- all will be revealed soon
Locally, there was a bunch of ads for cheap condos, and they kept advertising “first year is on us - live payment free.” All I could think everytime they threw out that line was that it was a tactic to avoid buyback.
And to get the greedy ‘homeowner’ to sign up:
Morales: I can’t afford that much-a-month
Mortgage Broker: We’ll give you $37k to make the payments for the next year - THEN YOU CAN REFI! and take more money out.
Morales: $$$$$$$$$$$$ Where do I sign? $$$$$$$$$$$$$$
When is it going to come out about how the Mortgage Company loan reps were giving refinance money to borrowers to pay the mortgage payments beyond the buy-back period?
This little refinance stunt reeks of collusion with the borrower to rip the CDO buyers off by prolonging the out right fraud on the underlying loan to begin with . And we wonder why we had repeated refinances from a certain % of people ,or the strange 12 month default disease .
It’s going to come out more and more in the wash about just how much the RE industry pushed up this market by fraud .
I thought hedge fund manager were the smart money?
“‘It wasn’t a bad loan or a bad loan officer,’ Quilenderino said.
She has to be quite the sick person; if ever there were people without souls, these have to be it.
That was the quote that jumped out at me, too. Tell it to the court, lady!
“She went and spent the money.”
Kind of a nice inside look at how the lenders (or at least Reyna Quilenderino) thought these funds should be handled. If Morales would have slowly pilfered at the cash pile, she could have flown under the radar for years. I wonder how many loans California Mortgage Solutions has done just like this one, and the borrower is doing the right thing by financially destructing over a long period of time. California Mortgage Solutions wouldn’t be doing any explaining for years, if it weren’t for the Delores Morales borrower.
“Nice goin’ Dolores, ya went and ruined it for all of us….. lenders.”
“California Mortgage Solutions”
they shortened their name it used to be “California Mortgage Final Solutions”
I would just like to say:
“Thank you Delores, from the bottom of my heart, for exposing these bad loans by burning through your ill gotten money tree in record time. Your efforts and public exposure will save countless financial lives. God bless you.”
“‘It wasn’t a bad loan or a bad loan officer,’ Quilenderino said.”
right, by her definition this is a “good” loan officer (i.e. a “producer”)
Well she is losing the house that she owned almost free and clear. Looks like she will be homeless with 5 children and on food stamps. Serves her right.
Hee Hee! According to bleeding heart yesterday, I should be very sorry for the neavous homeless who were greedy RE buyers since after all, they are homeless. I wimper no tears.
i guess that should be spelled “neavoux.”
No sh!t. Bought in 1975 and still not paid off? WTFN? If she just refi’d the $53K into a 15 year, or hell, even a 10 year, she would have had tiny payments, and just might have been able to keep scraping by. But no, she needed more money. Screw her. Such an obvious serial refinancier.
“if ever there were people without souls, these have to be it.”
Financial dementors?
“Loan defaults went up by more than 200 percent in the first three months of 2007. Almost 1,500 foreclosure notices went out in Contra Costa County in June, according to Neighborhood Housing Services.”
“‘The question of housing foreclosures is plaguing every community,’ said Congressman George Miller. He represents portions of Contra Costa County including Richmond, Concord, Martinez, Pittsburg, Vallejo, Benicia and Vacaville.”
This is actually really good news - several of these cities aren’t very far from San Francisco, so when their prices drop it will be untenable for San Francisco’s to stay aloft. Excellent news for housing consumers in the future!
“All real estate is local” — especially in the SF Bay Area…
The lefty Pol Geo Miller has received thousands of dollars from the Mtg businesses in his district. Now the snake is running around looking for ‘victims’ so he can use them in his ‘08 campaign.
OH THE HUMANITY… LMAO.
This is a shock!?!?!?!?
Crispy:
David Crisp is the gift that just keeps on giving, everywhere you look fraud!
LOL!
“Property records show Monize bought three homes in the neighborhood during one week in July last year.
On July 5 she bought 510 Fern Valley and 550 Blue Meadow for $465,000 apiece.
Two days later, she picked up 559 Fern Valley for another $465,000.
All were purchased with 100 percent financing.
In May that year, months before they went into Monize’s name, the homes were featured along with others from the neighborhood in a series of ads promoting both builder HomeCrete Homes and Crisp & Cole. They were offered at a “sale” price of $450,000.”
i don’t understand…. they couldn’t sell for 450k, but associate “buys” for 465k, 100% financing? and now are in default….. this seems “odd” like 45k worth of “odd”
Let’s do it by the numbers… shall we? In 2 years this lady pulls out a total of 225k cash out of her house. 6k for a Van, 25k for mentioned household goods, 37k for a years worth of House note. 20k for loan fee’s. That leaves 137k. Where’s the money? Even if she put 40k on old bills that still leaves here with 85k. No one to blame but hereself…
Lots of victims here, if only they had been reading here! A lot of pain would have been avoided.
Do you think she can actually read at a level that would allow her to understand this blog?
No way in hell.
i guess only people buyin houses in Manteca, CA are California Mortgage Solutions….
hope they enjoy it
There was no shortage of “debt consolidation” ads in recent years which gave the impression that it would be possible to use more loans to magically lighten the debt burden of previous borrowing.
Come on Mrincomestream ,you know as well as I do that the loan broker on that deal was a bad apple who preyed on some stupid women by giving her a ATM machine . You know damn well the LO came up with the income figures for this refinance addict .Both the loan agent and the borrower did a greed number and committed fraud ,and it was the LO that showed the dumb dumb borrower how to do it .
How anyone can believe that the loan agents and the realtors didn’t know that loan fraud was taking place ,and it’s all the borrowers fault is just not what happened ,(not to say that borrowers weren’t greedy and stupid and willing to dance with the devils of the industry for perceived gain ).
Ok Wiz… Say you’re right, say the mortgage broker made Ken Lay look like an altar boy. It still doesn’t answer the question of, where did the money go? Take my example above even if she only had 85k left that was three years worth of payments plus the income she was already receiving from the gov’t and child support. If you add the 37k she was supposed to put away for a years worth of payments thats 4 years worth of payments. Where did the money go? I’m just asking…
Where’s the money?
Video poker?
“New Century today is bankrupt and has sold its major assets. It’s the most dramatic example of a decimated industry. About a dozen subprime lenders in Orange County have shut down, filed for bankruptcy or otherwise scaled back.”
Good thing Fan and Fred are riding to the rescue to save subprime with their business of ‘guaranteeing subprime loans.’ I am mystified by this announcement, as I did not know they guaranteed anything. Can anyone offer comment?
Fannie, Freddie deepen involvement in subprime loan market
By Danielle Reed
DOW JONES NEWSWIRES
July 22, 2007
NEW YORK – Fannie Mae and Freddie Mac are riding to the rescue of the subprime lending market.
The two large housing finance agencies are beefing up their business of guaranteeing subprime loans at a time when slack lending standards and falling home prices have translated into rising delinquencies and foreclosures among subprime borrowers.
http://www.signonsandiego.com/uniontrib/20070722/news_1h22fanniee.html
flabergasted.
This action by a quasi-government agenciy is undeniable interference with the invisible hand in a market encumbered with fraud and deceit.
gov created subprime
HUD
in the begining
The taxidermy man(Fanny and Freddy) gonna have a heart attack when the see what…..
“In early 2006, just as the industry began a major downward slide, Orange County boasted four of the Top 10 subprime lenders in the nation. New Century alone did about $60 billion of loans in 2006.”
“New Century today is bankrupt and has sold its major assets. It’s the most dramatic example of a decimated industry. About a dozen subprime lenders in Orange County have shut down, filed for bankruptcy or otherwise scaled back.”
Serves those subprime lenders right. They drank the kool aid too and thought house prices go up forever and got greedy. Now they are paying the piper. I hope they all go bankrupt and the only lending available is prime for great credit + 20% down + verifyable income. This should drive house prices down 50-70% as easy money will be gone and many people will be stuck renting as they don’t know how to save.
A home in Lathrop shouldn’t be worth more than $100K at most. How in the $&^##*# this woman got a loan for over $200K is a mystery. I have zero sympathy for her and the $150K she blew on crap. Now I also believe that the loan people are criminals and liars of the highest magnitude and a slow torture death wouldn’t be a good enough punishment for their crimes. This lady did trump them one by blowing the $37K they set aside as their own CYA when they were going to dump her crappy loan on someone else. I would love to have someone interview both this lying lady and the shady loan people from behind bars after they are prosecuted and imprisoned for fraud.
Does anyone read post this far down? It’s official, prices are back to 2005 in my SoCal hood. A house is for sale $30K **************BELOW************** the 2005 purchase price. I happen to overhear the owner talking to our neighbor. He got a higher paying job near his family in Louisiana. He doesn’t want it to sit on the market for a year or rent it out. He’s ready to sell it now, and take the loss. Unfortunately 2005 prices are still hideously 3x 2000 prices. I won’t be buying anytime soon. Will probably wipe the dust from my shoes when we move from SoCal before the kids are old enough for school.
If the year was 2003 instead of 2005 I would be very impressed. Nevertheless, it’s a very good start. Thanks for your post!
I’m more surprised about the guy getting a higher paying job in La., good for him.
Sounds like the current owner has brains. Hopefully, so will the new one.
But if not, with the early warning of a sale, you wouldnt be caught by suprise.
oops.. i misread that.
my SoCal hood. A house is for sale.
not “my” house.
Went to the auction in Sacramento this afternoon. I know some other folks were there too. Towards the end, the people around me were laughing at the prices. Did anyone else have this happen?
“comeon now folks.. this is a once in a lifetime opportunity.. Give me a bid.”
I have a ha.. do i hear a ha ha?
We have a ha ha from the woman in back.. Folks. Do not let this house slip from your fingers!
Here we go. We have a ha ha ha from the gentleman in front.
People! Is this the best you can do??
What’s that? Haaahahaheee hehe haha? SOLD!
LOL!!!!!!!!!!!!!!!!!!!!!!
Suzanne, I researched this - go ahead. Dust your feet and move from the So Cal hellhole. I am glad I did before the child is old enough for school. Much better here outside of CA.
New Miami Condo glut video.
http://www.youtube.com/watch?v=jIQaQn722QU