The Bottom Line Is The Buyers Determine The Price
The Voice of San Diego reports from California. “While unsold condos pile up on the market, foreclosures mount and developers stall construction or try to sell projects entirely, it’s clear the region’s housing malaise has a home in downtown San Diego. Sales for new units downtown numbered 82 in second quarter 2007. That’s a little more than one-third as many as were sold in the same quarter two years ago.”
“‘Right now, you’re not running into a sales office into that frenzy where you have to bid it up to get it,’ said Russ Valone, a market analyst. ‘But we have to ask the question: Is, fundamentally, downtown a place where people want to live?’”
“As of the end of June, 577 new units were complete but unsold, according to MarketPointe Realty Advisors. Where builders once dreamed of delivering thousands of units this year and next, several projects have stalled construction. Lenders are reluctant to issue massive construction loans. And so some projects are shifting gears, changing planned condo units to hotel rooms.”
“Valone said that 45 condo projects have sold out since 2000, representing 6,000 new units. And another 26 projects, 4,439 units, are under construction. Of those units, about 2,500 have open escrows: buyers who’ve put usually 10 percent down to reserve the unit while it’s built.”
“In the first half of 2007, the 92101 downtown ZIP code had 175 properties in some stage of foreclosure. Many units are listed at prices at or below the prices those owners paid in 2004 or 2005, and the addition of agent commission costs leaves dozens of owners selling at significant losses.”
“But local analyst Gary London said developers aren’t to blame for poor consumer choices. ‘If anyone’s stretched themselves, they should’ve known that,’ he said. ‘That’s not the developer’s fault.’”
The LA Times. “For months, the deteriorating market has been taking money out of millions of workers’ pockets. Real estate agents are selling fewer homes. Appraisers and construction workers are scrambling for assignments. Mortgage loan company employees are being laid off by the thousands.”
“Christopher Thornberg of Beacon Economics in Los Angeles, for example, has estimated that California could lose more than 200,000 real estate-related jobs before the housing market bottoms out.”
“Home appraiser Michael Mathis bought a Redlands fixer-upper in 2003…when the housing market was on fire and he was doing as many as 20 estimates a week. His income soared into the mid-six figures. Now his pay has fallen to less than $75,000 a year, and he is lucky to do even a dozen appraisals a month. What’s more, his work has convinced him that things will get worse before they get better.”
“‘I don’t see anything positive happening in this market until effective demand picks up — and prices come down,’ he said.”
“Mathis, who has borrowed heavily to finance his dream, worries about being overextended on his under-construction home and the one he is living in but trying to sell. That home, also in Redlands, has been on the market since December. He’s cut the price twice in hopes of getting an offer. ‘I’ve already lost $80,000 more than I planned,’ he said.”
From NBC11.com. “There were more signs Friday that people are having a tougher time securing home mortgages in the Bay Area, NBC11’s Marianne Favro reported. Realtor Pegah Lavassani said lenders are making it tough for her to close deals.”
“‘The last three transactions I’ve had have fallen through because of financing,’ Lavassani said.”
“Chief Investment Officer Mark Duvall with Opes Mortgage Banking in Palo Alto said lenders are now much more cautious. ‘Lending standards were greatly softer for awhile, but with delinquencies on mortgages rising, lenders are backing away and that is leaving us in a credit crunch at the moment.’”
“Many Bay Area homeowners can no longer afford their mortgage and have had to abandon it to the bank, Favro said.”
From Palo Alto Online. “Even affluent, good-credit-risk Palo Altans are feeling spinoff effects of the national and international collapse of the subprime mortgage market. Local experts said today that even the financially fortunate are not immune and that the subprime collapse may even affect the venture-capital market and hence start-up businesses.”
“‘Even if you have great credit and make a lot of money, it’s becoming more difficult to qualify for a loan,’ Chris Iverson, an agent in Palo Alto, said.”
“Since documentation of variable income is tricky and time-consuming, consultants and investors in Palo Alto have been drawn to such stated-income loans. But the shattered subprime market has made lenders more cautious, Iverson said.”
“‘People who have really good credit and really high cash flow, your typical Palo Alto buyer, are encountering more stringent requirements. Lenders are saying, ‘I want to see stuff backing up what you’re telling me,’ he said.”
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce. Wei also speculated that subprime troubles abroad could affect the local start-up venture-capital economy.”
“‘We have a lot of venture funding here on Sand Hill Road,’ she said. ‘If there are international investors feeling the squeeze because generally the economy is affected by the subprime news, they might pull out funds,’ Wei said. ‘We all know someone who works for a start-up.’”
“Palo Alto is experiencing more foreclosures, Iverson said. He cautioned against drawing dire conclusions from the rising numbers, however.”
“‘Percentage-wise, you could say, ‘Oh, foreclosures have gone up 200 percent,’ but that’s an increase from a very small number to a slightly larger one,’ he said.”
“Wei also pointed out that the rising number of local foreclosures and more common short sells, which indicate cash-flow problems, are part of a larger market cycle. ‘We didn’t get those calls for the last seven or eight years. I had the novel experience of dealing with a paralegal who didn’t even know what a short sell was,’ she said.”
“‘But as far as these problems [of short sells and foreclosure] we’ve seen them a decade ago. And also in the savings and loan crisis of the early ’80s and late ’90s,’ Wei said.”
The Press Democrat. “Struggling to sell new Santa Rosa town homes, a Novato builder hopes an auction will clear out the condominiums, Sonoma County’s first such public sale since the housing market began its dive nearly two years ago.”
“Bidding for the 23 town homes left in Chanate Village will begin at 35 to 44 percent below original asking prices. Centennial Homes expects sales to come considerably closer to current market values, though the builder is committed to selling at minimum bids.”
“‘We’re hoping to get as much as we can. I feel pretty comfortable that we will be able to pay the bank,’ said Jim Clifford, the builder’s Northern California division president.”
“‘The builders are sitting there looking for ways to speed up their sales process and this is the best option they have,’ said Rhett Winchell of the Beverly Hills auctioneer for Centennial Homes. ‘My projection is you will see five to 10 more in Northern California.’”
“Homeowners in Chanate Village have mixed feelings about the auction set for Aug. 26. ‘I wish we had waited a couple of months. My concern is if the houses like mine get sold for less,’ said Justo Lao, who purchased a town home for $410,000. Another worry, he said, is that ‘a lot of people will buy units for investments.’”
“Lynn Lott, however, said she welcomes the auction after buying one of the live-work units. ‘I didn’t move here to live in a ghost town,’ she said, referring to the many empty units.”
“A few buyers were enticed by price cuts and free upgrades and offers to pay closing costs and mortgage payments. But the promise of a new $18,000 Honda Civic didn’t produce a sale, Clifford said. ‘It was timing and it was the breaks of the market,’ he said.”
“Condominium sales have slid alongside houses in the county, down 10.7 percent so far this year compared with the same period a year ago. The typical condo sold for $345,500 in June, an 11 percent drop from the peak of $390,000 in October 2005.”
“Homes that don’t sell go back on the market, Clifford said. ‘The bottom line is the buyer’s determine the price,’ he said.”
It’s nice to hear something from the Palo Alto area. Check out how one (potentialFB?) person chastises the PA Online in the comment section.
I have to say this comment is dead on. The lady quoted in the article doesn’t know a venture capital fund from a hedge fund. VC’s fund start-ups by writing checks. VC’s don’t carry liquid assets for redemption purposes. VC investors can’t “redeem” funds; rather they wait for seven years for a payoff if there is any.
As for day laborers purchasing homes: There are 36 homes on the market in Palo Alto. Only two are under $1mm. Day laborers are not a significant part of this market.
“Day laborers are not a significant part of this market.”
I was going to say the same. Actually, other than Trona, I do not think there is anyplace in California where a migrant worker or day laborer can afford to buy residential property using time-tested methods (20/80).
~Misstrial (accidental post below, sorry)
Nice! Getting Trona aka Land-o’-the-Mutant-CHUDs into the blog makes my day!
Don’t knock Trona. It’s the Golden Empire on crack. Good cold beer in the one bar. Help me with the name bloggers.
lol
You know CV-guy, my dad used to poke around out there every so often. He found Charlie Manson’s hideout in the Trona area after the “Family” had been long gone. Told me that the FBI found Manson hiding in the cabinet under the kitchen sink.
FF to 2005, hubby & I went on a trip to DV, passed through Trona. The whole place has gone downhill from the dusty but orderly Kerr-McGee company town that it used to be. Those were the days.
~Misstrial
Stauffer plant til bought out by Kerr-McGee. Worked there during the summer to pay for college. Great job and pay for someone getting a degree in Chemistry. Only liquid mining plant that I know of.
out out dammable italics!
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce.
Yeah, so? I grew up in Palo Alto, in the 1960s. I haven’t been able to afford to live there for a good twenty years!
‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
Gee. Don’t these people have income tax returns they can use to prove income? No? Well they certainly aren’t good tax payers then. What? They only started working this year? Well what’s wrong with waiting a year to own a house?
Now let’s close those italics up here, where I should have done it in the first place.
Agree Vermonter. For some reason, everything came out in italics even though I just selected certain text to copy. Wonder what I’m doing wrong here. I dislike too much italics because I find it hard to read.
~Misstrial
Start up are indeed important.. but at the peak in 1999 only 1 out of 5 or 6 went public… that was the first leg of the housing bubble. Start ups dont pay that much to begin with and ofter give stock options as supplement to compensation.
But now SO are discouraged by IRS and Congress. Compensation isnt enough to purchase in Palo Alto or elsewhere in Bay Area. The risks and hardships working in start up is far to glamorized by the media. The media glosses over the huge number of failures.
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
If they can’t produce a tax return as some proof of their income, because their cheating on paying their income taxes, why should a lender feel confident about lending them hundreds of thousands of dollars? Statements like Julia’s demonstrate how absurd lending standards became. No wonder no one wants to own the MBS out there now.
My heart bleeds for the tax cheats. Really, it bleeds. It bleeds pure black outrage.
There’s a reason it’s known as Shallow Alto…
It was a fine place to grow up in the ’60s before all the money moved in. Now ordinary people can’t live there.
Shallow Alto? OMG that is perfect.
Maybe Julia Wei can lend money to those stated income borrowers. Why are investors and banks obligated to take the risk?
No Wei
So where are those high paid engineers and google people…
LOL No where to be found…
The locals are going to be in a state of schock if/when prices drop in Palo Alto and its environs. The Bay Area did not take the beating that SoCal took in the early 90’s, so folks think it is literally impossible for prices to drop here. They believe this despite the fact that the house price to income ratio is just as bad here, if not worse, than just about anywhere else in the country.
As for the hedge fund/VC issue, there has been plenty of hedge fund money flowing into Silicon Valley for the past couple of years, and to think that that trend won’t be affected by the implosion or underperformance of funds that are also exposed to MBS’s, etc. seems unrealistically optimistic.
state of shock, not schock
“so folks think it is literally impossible for prices to drop here.”
That’s the same snobbery that I get from the people here in Salinas. Everyone says that prices won’t go down, they’ll just stay flat and then start going up again. Gotta lov ‘em. They have the lowest per capita income of any place here in CA. Some friends that were very, very smug in 2004 when I moved here and decried the insanity are now quietly saying maybe housing prices are too high, but they aren’t going to go down, just flatten out.
Actually SV suffered a 40% drop in prices in 1991
Back then the issues behind the NoCal Decline were seperate from SoCal price declines.
Los Gatos and Saratoga suffered a 25% drop in 2001
Decline in local property values is hurting schools
http://www.community-newspapers.com/archives/lgwt/05.22.02/propertyvalues-0221.html
About 1,400 properties in Los Gatos and Saratoga lost value last week, but the real losers are the schools that depend on high property values for funding.
The Santa Clara County Assessor’s Office on May 13 announced that, because of the local economic downturn, it has temporarily reduced the assessed values of nearly 29,000 properties, about 28,000 of them single-family homes, throughout the county. The reductions total about $3.7 billion dollars and a 15 percent decline from last year.
However, the assessed value of all the county’s properties actually grew by 6.27 percent, down from the 13.75 percent growth of last year and the 11.09 percent growth the year before that. This year’s number of property devaluations is the highest since 1998, when there were about 30,000 devalued properties, but pales in comparison to the nearly 100,000 properties devalued in 1995.
In Los Gatos, 730 properties declined a total of about $143 million, or 18.6 percent. In Saratoga, 695 properties declined a total of about $278 million, or 22.4 percent. Those two communities are among the county’s top five to have the highest percentages of decline.
Nice find. People have very short memories.
Ben the bottom is line. Where will the buyers qualify for a loan. As we get closer to real oversight and abilty to repay. the lender is the house and seller/buyer are shills. Vegas was the first to fall and look at the game from the casino angle.
Lenders are saying, ‘I want to see stuff backing up what you’re telling me,’ he said.”
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce.
- I guess that you could call money lent to illegals ‘Venture’ capital like they do in Northern Ca. Down here in So Ca we call it a mistake.
We now have institutionalized illegality. The lending industry was catering to tax and immigration law breaking people by the millions.
The Feds should SHUT DOWN stated loans by simply cross checking tax records on that guy then whatever income he states make him pay tax on it if he paid no tax. No money to pay? take the house and sell it or rent it out.
I would imagine if the feds audited every stated incomed loan from the last five years and compared to the tax records it we could get a gazillion in tax revenue and/or put a million people in jail for lying on loan app.
We have become as corrupt as china people!!!! The government is aware of massive law breaking and willfully WILL NOT enforce the laws due to they are in the pocket of industry. Gov run by business is fascism.
My god if i miss $100 of a income that i forget to report to the IRS they catch it and charge me penalties and interest!!!! These tax flaunts are stealing from us all massively. Now they are also defaulting on loans stealing even more.
The whole point was to get people into debt - so as easier to control. Maybe I am a tinfoil hatter - but there isn’t any other explanation that I can see as of right now. Millions of people cheated and lied on loan apps, but hardly any are being prosecuted. FBI knows but does nothing. IRS knows but does nothing. One of the largest fleecings ever - lots of money changed hands from working class to wealthy. Then when wealthy start to even think about losing some money - FED comes in with hundreds of billions in bailouts for the wealthy-owned banks (trust me it will be hundreds of billions before its done).
There is definitely a pattern here.
First of all, I’m non-partisan, I think we have the illusion of choice when it doesn’t really matter who we choose as our leaders. They will serve who put them there and to us voters that will look like hyprocrisy when in fact they are doing exactly what they were put there to do.
Doesn’t is seem odd the George Jr.’s dad didn’t warn him about RE … since George Sr. was in office when the S&L crisis went to hell? How can the same BS happen on a father’s and son’s watch … and even getting worse on the son’s watch (it’s global this time)?
“The whole point was to get people into debt - so as easier to control.”
Debt ridden dumb a$$es deserve no better - they’ve already proven themselves incompetent to run their own lives, might as well let the ‘elite’ do it for them.
I would support increasing loan portfolio limits for Fannie and Freddie if they would go back into the stated crap they bought and provide that info to the IRS. If we are going to take an increased liability as taxpayers (implicit bailout guarantee), then we should get higher premiums in the form of tax payments from these tax evaders.
I should have added that I think a condition of Fannie getting to continue its operations after these years without timely financial statements, Fannie should provide this info to the IRS. Even without the carrot of higher portfolio size.
Fannie/Freddie, bring your financials current before we talk about increasing limits. If they stay at 417k the only sales in my town will have owner carry back 2nds. Oh, you mean the buyer has to come with 20-30-40 50% downs to pay off the upside down current mtgs. Good Luck on the coast.
“..that are maybe getting paid in cash..”
she may be defending something illegal, but maybe not.
‘I’ve already lost $80,000 more than I planned,’ he said.”
Oh? And when you went into this, just how much did you plan to lose?
It’s only the monthly loss that matters.
That’s truly funny.
LOL!
Michael Mathis ( appraiser) complains that his income has gone ” down” to around $75,000 a year
I don’t know about you, but I sure wouldn’t be complaining if my annual income was $75K . Amazing what some people consider a hardship.
Well, BJ, sometimes it’s hard proving to your friends and neighbors that you are better and more important than they on $75K a year. Mathis is probably suffering because he realizes he won’t be able to get Apple’s latest needless and irritatingly intrusive gizmo.
Then again, Mathis’ cell phone bill must be dropping due to less appraisal business, so maybe there will be room on his credit card to “afford” that latest needless Jobs gizo afterall.
And we all know that REIC related layoffs are just about to get going.
The kids who were earning $120k to $500k will suddenly find out what its like to live on $50k to $75k.
Since OC is going to get “hammered,” I’m watching the Shady Canyon flips with much interest! (Schadenfreude!)
Got popcorn?
Neil
Just to elaborate on shady canyon area. That entire section of irvine wich basically borders around UCI campus is really hi-end. I do not think that any SHF there is less than a million. Was at a site in 2006 when they were just completing a new phase of homes in turtle rock/shady canyon. All million $ units and yes, many buyers were flippers.
Must cost a fortune just to pay the mello-roos in that entire area, which has a guard shack entrance in every development, not to mention the well-groomed parks. Typical of most recent South OC planned communities such as shady canyon/turtle rock/coto de cata/dove canyon.
Agreed. Most of these kids have no clue how bad it is really going to get. They will soon be fighting over low-paying jobs at McDonald’s as asst mgr or lower, and be happy for $2750 per month. There are very fews jobs around that pay $50 - $75k for people with no skills other than grifting. LMAO
Yeah, I thought $50-$75K was rather generous, too.
ok ok…
Maybe generous, but those kids are in for a world of pain. Note: I happen to think they earned it.
Yea… many will earn $30k a year and go back to living with mom.
Got popcorn?
Neil
Hmm I make over $75k, am 28 and still live at home. I have no clue how people can afford to buy anything making less than $200k. When I was at UCI (civil engr major), we did a senior design project for part of Shady Canyon. I still have pictures of that area around when they started the grading. Its amazing how much Irvine changed when I went there from 1997-2002. Mella Roos is my most favorite scam of everything housing related.
Just hung out with one of those kids. He was waving $100 bills around at the bar two years ago. He’s going on a honeymoon in Australia and he was talking about just not coming back because his $700,000 mortgage isn’t working anymore now that is income is $60,000 a year.
The guy just looked crushed.
It “had” gone down to $75k a year. With the new, tighter lending standards that hit last week…. stick a fork in him.
LMAO. That would make one hell of a caricature drawn up and put on the cover of Time or Money magazine.
Just out of curiosity .. if he does only 12 appraisals a month or 144 per year, or if he used to do 20 a week or 1000 year how much does each one earn him. Does each one get him about $500.00. That sounds like quite a bit. I have never heard of a appraiser getting $500.00 per appraisal….
Where do you live? 75k is like what a baby sitter makes in Calabasas, California.
Funny coincidence that Angelo Mozilo would start a company based in a town that means “Pumpkins” in spanish.
http://www.hno.harvard.edu/gazette/2003/01.23/photos/11-dunlop1-225.jpg
He planned to make $100K. He is down to only $20K. That means he’s lost $80K from what he planned to MAKE, not lose.
“lost $80K from what I planned”
When it gets to $0 gain, he stops making payments and lives in the house for 3-6 months waiting for the sheriff to show up at the door. Then he just walks.
Hell, I’m a born and bred American and I rent!! Why the hell should these illegals be given special treatment? I am extremely happy with the latest developments and cannot wait until this fall. What’s going to happen to all these idiots here in CA who need to refinance their “funny” loans?? A guy my husband works with in East Bay said that the only way anyone can buy a house is with a “funny” loan. I say it is high time we get back to fundamentals. I think reality will really start sinking in around October. What does everyone else think?
I wonder how much more money the government is going to print over the weekend to help the mortgage market next week? I think they tossed in 35 billion friday.This is a joke people. What a total trainwreck the lending industry is. Leverage at it’s finest.
Agreed, let the lending industry get itself FLUSHED down the toilet (especially COUNTRYWIDE). The US fed blew $24B on Thurs, followed by $38B on Friday, and the European Central bank $130B and $83B.
275 BILLION DOLLARS AND COUNTING
From the WSJ:
Central Banks Again Intervene
Europe, Japan Join U.S.
To Provide Liquidity;
Betting on a Fed Cut
Central banks pumped money into distressed markets for the second day to relieve strains in money markets, while investors concluded the Federal Reserve is increasingly likely to cut rates soon and that rate increases in Europe and Japan may be deferred.
Explaining that it was “providing liquidity to facilitate the orderly functioning of financial markets,” the Fed injected $38 billion, following Thursday’s $24 billion. The European Central Bank, saying that its “liquidity-providing fine-tuning operation” was aimed at assuring orderly market conditions, added $83.56 billion following the $130 billion it injected to euro-zone markets Thursday.
WSJ’s Phil Izzo and David Wessel, and David Resler, chief economist of Nomura Securities, talk about the global credit and the Fed’s pledge to inject more liquidity into the markets. (Aug. 10)
The Bank of Japan, meanwhile, put in one trillion yen ($8.46 billion), while central banks in Australia, Singapore, Canada Norway and Switzerland also pumped money into their markets. Others said they were prepared to do so if necessary.
As of 6:pm tonight cst it is 326B and change - still growing.
China has been noticeably absent in the contributions…
Wasssup?
“China has been noticeably absent in the contributions…
Wasssup?”
they gave at the office….
China is waiting until the summer Olympics is over to throw their weight around. After the U.S. is in a depression and they run the world economically it’ll be:
“Ok Mr. America. You want eat? You give us Taiwan. Very good. Now, you want iron ore? You give us back Blackstone loss. Very nice. You want oil? We got oil. We got oil for, uh, 2 hundred dolla. You no want? Ok, we sell to vietnamese. Oh you want now? Price go up to 210. You want play game? Chinese much betta at game.”
Self-righteous traditional lender with low LTV limit brags as usual that none of her clientele is behind in making payments. They all have Skin In The Game, that’s the answer. Nothing to do with their credit ratings, which I don’t even check.
I would assume the stock market will only get worse with Accredited Lenders not getting bought out by Lone Star and probably going bankrupt this week. (LEND)
“Mathis, who has borrowed heavily to finance his dream, worries about being overextended on his under-construction home and the one he is living in but trying to sell. That home, also in Redlands, has been on the market since December. He’s cut the price twice in hopes of getting an offer. ‘I’ve already lost $80,000 more than I planned,’ he said.”
Chances are ’cause i’m wearing a little thin
The moment 2 inland empire house payments came into view
Chances are you think i’m in love with debt too
Just because my mortgage payments kind of slip
The moment that i’m close to being under the line
Chances are you think renting would have been better… i’d opine
–
“Homes that don’t sell go back on the market, Clifford said. ‘The bottom line is the buyer’s determine the price,’ he said.”
How soon people forget. Sellers determined the prices in many areas for some period of time.
In truth, the supply and demand do determine the prices except that people don’t distinguish between Speculative versus Fundamental Demand. What we had during 2002-2006 was primarily the Speculative Demand driven by reckless lending.
Jas
Both buyers and sellers get a veto on the price. Price is only established when a buyer AND seller agree.
Diemos,
You are technically correct. But you only have a market if enough buyers agree on the price and that is today’s problem. Or should I say solution?
Got popcorn?
Neil
Shift-key Overuse Syndrome. Old Habits die hard.
English needs to capitalized more often. I prefer the Germanic way myself.
It wasn’t buyers or sellers that were determining the price here in AZ for 2003-2005. It was the appraiser. If you could get it appraised for $x, someone would buy it for $x… with $0 down, I/O ARM with low teaser rate.
In fact, the more overpriced the house the better for the buyer because it created market velocity that would inflate all the comps that they hoped to base their appraisal on 6 months from now when they brought the place back to market.
I buy a $1 million home for $1.1M. This causes the next house to go for $1.2M, meaning mine can appraise at $1.3M when I flip it. It will be bought by someone that hopes to sell at $1.4M…..
With the market velocity gone and flippers turned into out right fraudsters, it is no longer “whatever you can get it appraised for” that is setting market price.
“With the market velocity gone and flippers turned into out right fraudsters, it is no longer “whatever you can get it appraised for” that is setting market price.”
It’s not gone. It’s just “negative velocity!”
Mathis, who has borrowed heavily to finance his dream, worries about being overextended on his under-construction home and the one he is living in but trying to sell. That home, also in Redlands, has been on the market since December. He’s cut the price twice in hopes of getting an offer. ‘I’ve already lost $80,000 more than I planned,’ he said.”
Hey, Mr. Mather. I think you might need to be planning on losing more than $80K. I sure it is going to be a multiplier by at least 2 or 3. Maybe more. What is your maximum to lose? You would have had better odds at the casino. At least there is a chance you could walk out with more than you enter (unlikely, but a chance).
per the LA Times article, Mathis is trying to turn it into his 9,000sf dreamhouse.
wonder what the market in Redlands is like for 9,000sf dreamhouses???
Bwwwwaaahhhaaaaa
I love how the LA Times now has an ongoing section called “Mortgage Meltdown!” It took up a good portion of the front page of today’s paper. And of course all week (month? quarter?) it’s been a constant drumbeat of doom and gloom in the Business section. Am I wrong to feel happy about this?
But you know, it still has not sunk in to the populace. We’re still asked on a weekly basis when we’re going to buy a place here in LA. My realtor-friend spent 30 minutes on the phone with me this week arguing that prices will never ever go down on the West side. There is SO much Kool-Aid to drain out of the pools here in Southern California.
“Am I wrong to feel happy about this?”
No. Many of us have been waiting in line for the big game. Well, it’s now game time!
We’ve accepted our schadenfreude a long time ago.
When people are hurt doing something stupid you either laugh or cry. We’ve chosen to be laugh.
We’re still asked on a weekly basis when we’re going to buy a place here in LA. My realtor-friend spent 30 minutes on the phone with me this week arguing that prices will never ever go down on the West side. There is SO much Kool-Aid to drain out of the pools here in Southern California.
Don’t worry, the Kool-Aid punch bowl has run dry due to the lack of Jumbo mortgages sans large down payments.
The evidence is so overwhelming I just laugh when someone suggests buying now.
Grab a good seat. The show’s started.
Got popcorn?
Neil
No, you are not wrong to feel happy about it. I am happy about it too. I was teased by all my homeowner friends about not having a home, or investing in one during the boom. I didn’t give in to the pressure because I had a bad feeling about the whole thing, “Buy now or be priced out forever.” What crap! I’m glad I held off because if I hadn’t, I would be in the same sinking boat as all these effed borrowers whose credit is in the process of being wiped out. And I don’t feel sorry for them either because the reason they did it, was mainly because they were greedy. Murphy’s Law: if you get too greedy, you end up losing. It’s about time the market began to correct itself.
I would say get a new friend and trade up. LMAO
Oh but he gives me so much fodder for this blog!
I have a friend who told me that I should buy a commercial property in Encino near Oxnard and Kester that was 12K s.f. and was only $1 million dollars. She said it was cheap. I just said “Actually that’s Van Nuys and it’s overvalued. WAY overvalued!” She didn’t seem to care about the cash flow of this property.
She lives in Santa Monica and is delusional about property values always going up. I guess compared to the westside $1million is cheap.
The part of Ben’s post that sticks in my mind is the story of the poor overextended appraiser whose income has fallen to $75K and who feels lucky if he gets a dozen appraisals a month. This seems to mean he is charging about a thousand dollars per appraisal. Is that typical? What a racket. How can it take him more than (say) 5 hours to figure out how much a house is worth? Why is his skill worth two hundred dollars an hour? Hmm, I think I see deflationary possibilities ahead. Any of you may wish to argue with me.
I’m assuming mind you, that because a appraisal for a church was mentioned. That he is a commercial appraiser. I am assuming this…because the average appraisal for a house is 500 bucks.
The part of Ben’s post that sticks in my mind is the story of the poor overextended appraiser whose income has fallen to $75K
The part that sticks in my mind is:
he was doing as many as 20 estimates a week. His income soared into the mid-six figures.
Mid six figures? Does that mean an appaiser is making $500k a year?
I gotta think we’re talking about $150K. Since “six figures” usually means $100K I’m guessing this is sloppy writing and editing. No how no way can an appraiser earn $500K, right? RIGHT?
I’m going to accept that it is $150K because my mind simply won’t allow me to believe he was making $500K.
If he was making $1000 per, he’d have to have been doing 2 per day, every week day, for it to be $500K a year.
Hmmmm….. maybe that was possible.
24 per week for $150K… I HOPE this is more accurate!!!
I was struck at what the article said the appraiser was making in 2003: “His income soared into the mid-six figures”.
Uh, isn’t “mid-six figures” something like five-hundred thousand dollars?
After 4 years of college, 4 years of medical school, 3 years of residency, and 7 years experience I earn about $100/hr for my time. Of course I can only kill you or save you with my mind and hands, an appraiser is far more important to humankind than a lowly physician like myself. Sarcasm off.
LOL!
No better yet, LMAO!!!
Even better still, CMBUL!!! (cough my balls up laughing)
That’s gotta hurt! Maybe ExNorCalNative can fix that.
Hey, wait just a minute there, Doc. How can you be an ex- native of anywhere? Once a native, always a native.
By Ex I mean no longer residing in the Golden State. You are correct, I can not be an ex- native. However, I do feel like an expatriate of Northern California.
Many ex-strippers and ex-burger flippers were making more than you from 2003-2006 selling homes and mortgages. The industry is a joke and needs to be reformed very badly
Yes, lots of realtors, mortgage brokers and appraisers collecting several hundred thousand annually during the boom. Add in the construction guys hitting six figures (through heavy O/T) and you have some serious juice in the system. Easy come, easy go.
All that money just fed the boom and eventually created over supply of all things RE. Now the FED is working to hold it all together. I wonder all those emergency billions injected the last few days will that money be removed at some time? Or are we all diluted and on the hook to pay for it along with a costly overseas war. This can’t end well.
My ex-wife is an appraiser. In So. CA you can “bang out” an appraisal in about 20 minutes. I’ve seen her crank out 6-8 reports in a day and still have time for the gym, shopping and friends. The appraisers started “value” pricing their reports with the boom in real estate. She was charging .1% of appraised value. When things were cranking, 8K in an afternoon was not very hard to do.
I saw it first hand, it was/is pretty much a scam. 1 week “accredited” course and join a couple of “organizations” (i.e. pay some dues) and you too can make $150K a year without a whole lot of effort. Just need to know some people in the industry.
She was an independent, the big money is in the appraisal companies. Get 5-6 flunkies, pay them a couple of hundred per report and watch the $$ flow.
The beauty of the business is that there is zero overhead. All you need is a digital camera, a tape measure, a copier, cell phone and computer with an appraisal program on it and it can be (use to be) a license to print money. The industry is filled with people who are failed Realtors and mortgage brokers. Those who can’t sell appraise.
Why is everything italicized?
Because someone forgot to close their italics…lets see if this helps..
“Day laborers are not a significant part of this market.”
I was going to say the same. Actually, other than Trona, I do not think there is anyplace in California where a migrant worker or day laborer can afford to buy residential property using time-tested methods (20/80).
~Misstrial
Oh California, the devil fools with the best laid plan
Swing low California,
You got no spare change - you got to feel strange
California - you got the 90-mile commute
That’s breaking your back
Your SUV, has got a wheel in the ditch
and a wheel on the track
Oh California,
Mortgage brokers jumping through the broken glass
windows down in California
See the REOs. Empty condos.
Breathe the ozone. Don’t it take you down home?
OT…
Ed Haas is a decidedly libertarian writer who lives at Mt. Pleasant, SC.
A stock market that should have probably dropped 500 points yesterday closed down 31.14. Independent financial analysts put the actual value of the stock market at 8000 or below – not the fake, inflated, manipulated 13000 to 14000 that is reported by the corporate insiders.
Meanwhile, no similar relief is on the horizon for the anticipated 2 million home foreclosures in the next 6 to 12 months – nor should there be. However, when the Wall Street elite is able to protect their own while 2 million families lose their homes – something is terribly wrong – and that thing is the entire fiat money system that is the Federal Reserve.
http://muckrakerreport.com/id484.html
While we can share Ed Haas’s sense of annoyance at the banks and the Fed, probably all of us need to feel that the money we have in (whatever) bank is safe. We do know the FDIC is inadequately funded, so it is necessary for banks in general to remain solvent, lest all of us lose our collective shirt. In my individual case, the majority of my assets are in Merrill Lynch’s custody (though I own NO stock), so I am not sorry that ML was protected against having no cash. The system can afford for some big outfit to fail (Bear Stearns??) but not for all to fail.
While we can share Ed Haas’s sense of annoyance at the banks and the Fed, probably all of us need to feel that the money we have in (whatever) bank is safe. We do know the FDIC is inadequately funded, so it is necessary for banks in general to remain solvent, lest all of us lose our collective shirt.
Sorry, that’s called “moral hazard”. If people had to consider the safety of a bank before putting money in it, the banks would have to act prudently. The FDIC’s primary effect is to allow the banks to act imprudently. This is not a desirable state of affairs.
There is no moral hazard in a nanny state. Just watch out when Mary Poppins finally decides to fly away or when the brats finally kill her.
I watched “Chanate Village” being built last winter,There is a peet’s coffee on the corner of chanate and mendocino ave about a block away that i occasionally stop at.I was not impressed with the quality of construction,and would suggest a 15 year loan if you buy one of these overpriced units on a very busy street.KB homes has a development on hwy 101 in s.petaluma overlooking the freeway where they are finishing the grading now and i suspect you will be able to buy one of these for less than a townhome in Chanate Village costs now when they are built.At least the loans are conforming (less than $417k) so potentail buyers may be able to qualify ……wells is at 8%,20% down for prime jumbos….
“‘The last three transactions I’ve had have fallen through because of financing,’ Lavassani said.
Yes, and what does that quote tell us? Even though it’s anecdotal, it tells me those three deals were so marginal, there’s no way they ever would have gone through under traditional underwriting.
I’m not trying to pee on anyone’s “American Dream,” but if the deals were that marginal, they probably shouldn’t be buying a home in the first place.
Now, multiply those three failed transactions by thousands or millions on the way up (there’s your bubble, with prices set on the margins) and on the way down (economic calamity around the country).
The piper will be paid.
– Judge Smales
“You’ll get nothing and like it”
My friends in SW Florida (mortgage brokers) reported to me a few days ago that GOOD applications are being returned unfunded. No reason given. Basically lenders are just not funding loans, period. The applicants had downpayments with good documented income and good credit scores. I don’t have a specific example but my friends are completely baffled and at a loss to explain it. They don’t know how to proceed other than to keep submitting loans that comply with underwriting and hope they fund. Some loans were funded and other were not, no way to ascertain why as there were no apparent differences in quality of borrower. The system is seizing up.
The broker may not have locked the rate. Or the lender is not honoring locks because they will lose if they fund. Most likely, the lender lost the source to sell the loan.
I am loving this. The bank I where I work never did subprime, 100% or neg-am, and we watched as many people/agents ignored us over the past 5 years. Now, as a direct portfolio lender, we have the cash to fund, we do not have to sell in the secondary market, and our rates are beating every other company in the market. We are seeing increased business and are very busy. Sometimes I almost feel guilty about enjoying this market…..
There’s a good point. Maybe I should give up on trailer parks and start making loans on houses. Now that there is no secondary market, I could perhaps compete. Not compete with Sensible’s bank, but it’s a big country.
Must make the mortgage brokers feel like fools. They’re the ones that have to do the face-to-face and they’re shown to be pawns in the whole game without a clue as to what’s going on or the least ability to influence it. They’ve gotta be just hating their jobs.
Saw an article in the NY Times today about divorcing couples fighting over real estate. The article starts by talking about this woman who deliberately waited for the peak in Manhattan real estate prices–so she could get the most money out of leaving her marriage (she and her husband owned an apartment there).
The funny part? She’s now calling her real estate broker “from her new condo in California.” In other words, she immediately invested her settlement in some of the most over-priced real estate in history.
Good luck with that.
I am not feeling too sorry for some bozo whose income has ‘fallen’ to $75K per yr. It sounds like it isn’t at the bottom. I am happy to see it be game time. I have been waiting a few years. Now it is the ‘I told you so’ time. But it is the ‘friends’ back in CA that I would be saying that too. Now, maybe people will think of a house as a place to live, and I only buy it if I can REALLY afford it. The right to a McMansion is not the same as the right to ‘life, liberty, and pursuit of happiness’. A house is only when one has achieved saving and earning the amount of money it takes to purchase the house of their choice in the locale of their choice. And Trona CA is not my choice (same with Needles, Barstow, Baker, Victorhell, Apple Pit, etc).
Did everyone see that Arvin CA got voted the dirtiest air in the country. Guess all that smog from LA, Bkfsd, Fresno making its way over to the side of the mountain.
I drove down the grapevine about a year ago, and I had my eyes burn from the smog. Reminded me of late 70s/early 80s in the IE. Now farmers can’t burn litter because of smog that they have no control over, because it originates 100s of miles and multiple counties away.
“If anyone’s stretched themselves, they should’ve known that,” he said. “That’s not the developer’s fault.”
It was developers that chose to sell only units that were priced well above what local incomes could support. The developers and their local enablers among elected government officials are very much a part of the problem.
I do believe there’s market for the type of housing that is being built downtown as not everyone wants a suburban tract home with a lawn. However, 600K+ for a 2/2 with monthly HOA fees of 500+ is way too much. Price in line with incomes and you will have a sustainable market, not one driven by flippers and greed.
Is the market for downtown housing “empty nesters” though? Do they really want to live in a more urban environment when they never have in the past? I think the bigger market for downtown housing is for younger professionals and people without children, but the pricing must be right.
As for day laborers purchasing homes: There are 36 homes on the market in Palo Alto. Only two are under $1mm. Day laborers are not a significant part of this market.
That’ correct. Day laborers are capped at $720K loans. That is what Juan the Strawberry Picker got for his palace in that highly desirable locale of Hollister. He couldn’t get $721K on his $15K a yr income.
and Hollister to Palo Alto is quite a haul. About 100 miles and at least 2 hours.
and Hollister to Palo Alto is quite a haul. About 100 miles and at least 2 hours.
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce.”
Exactly the type of people that deserve and can easily afford a 1+ million dollar home. Oh the injustice of it all!
So, require at least 25% down. Just like I would do if I were selling a house to someone who wanted owner financing, and the same way I bought my first house with owner financing. Who cares about future earnings power, which may or may not materialize. Just put some serious skin in the game!
Palo Alto is being hyped for no reason. For many older timers look at this and ask … what so big about PA… there is nothing special about it. Most of the Tech industry is scattered arount the Bay Area anyway. The tech boom with started in 1980 well into the mature/declining years. As one VC said .. What can be done .. has been done.
I wouldn’t even know where to begin ranting on this one…
http://tinyurl.com/2csts3
LOL
Pen about which part:
That opportunities are better in Brazil?
That Framingham businesses are going to close because of emigration?
that nobody is there to paint the ceilings?
I live in downtown San Diego. I can see The Mark and the Alta Vista, two newly finished condo towers (22 stories each at least) with maybe 5-10 condo units lit up each night.
The Mark has a monthly association fee of $660. My brother-in-law who visited the sales office with me for kicks once keeps getting reduced price listings mailed to him by the sales office.
I think even when the prices completely collapse in downtown that you still wouldn’t want to live in these units since the association fees will have to be outrageous due to lack of funding (not enough tenants or too many tenants going bankrupt). I’ve already heard horror stories from maintenance men of the poor quality of some complexes. One complex had it’s fire sprinkler system piping burst and flooded many units … it was less than a year old.
Q: When the developers (banks, bagholders, etc.) can’t sell the units from the get-go do they eat their fair share of the monthly fees, some partial amount of the fee, or do they force the entire fee on the few FBs who are actually living in the damn things?
The law might vary by state. In Illinois, developers of buildings I’ve lived in have paid condo fees once units have been sold. However, the developer controls the association until a certain percentage of units are sold; I think 50+ percent but this might be wrong. Controlling the association means that the fees are more likely to be set too low to maintain the building, easier for him to sell the condos and less money out of his pocket each month.
Yes, that is the case, although I don’t know the exact percentage. That is the condo/planned community trap.
When the developer is trying to sell out the fees are set ridicuously low…for only $200 a month you get a guarded complex, a pool, walking gardens, a club house, a fitness club. Once he sells out the majority of the units and turns it over to the association, the grim reality hits.
When you add in the ‘pending’ payments from preforclosures/forclosures, I expect to see many of these development shutter amenities, and potentially declare bankruptcy, if that is even possible. I am sooo glad I am not stuck in that tar pit.
And so some projects are shifting gears, changing planned condo units to hotel rooms.
Well possibly this *might* be a slightly better business plan than continuing with the condos but explain what city in NA has a shortage of hotel rooms? Maybe, once or twice a year they might be fully booked, or even booked to the years profit point — does this equate to good planning by increasing base supply heading into a recession? Possibly they can steal sufficient market share but I wouldn’t count on that in the present economic climate…. just a way to spread the hurt to another sector.
Actually, most cities do right now. In most cities a decent room at a Hilton/Hyatt/Marriott level place goes for $300+ on a weeknight.
New York, San Francisco, and LA are all short hotel rooms.
That said, travel usually drops in a downturn.
Now about San Diego and Miami…
Got popcorn?
Neil
That cost is a slightly different metric and your point really is not even true — median for a Marriot downtown is $175/night in the US. That is rack and often gets far lower with discounts. Almost any hotel will discount down to even 40% rack for business travellers. Any hotel person will tell you there are almost no cities that have shortages of hotel rooms…. yes, NYC, Washington, San Fran do charge near the top — even in Des Moines you ‘might’ be asked to pay $300/night. Ask what transatlantic airfare is and it’ll depend on when and where you are headed and your ‘flexibility’. Same with hotel rates…. a stand alone ( average — lots of variability) upper end hotel has a break-even occupancy of 65% … dependant on lease a leased property hotel ( or managed hotel through contract) is about 15% less. They all make money in the good times but travel is one of the most elastic industries going.
The manner in which cities are creating shortage of hotel rooms is by allowing more air traffic to be scheduled than what their airports can handle. Thus, last Monday night, the number of flights out of Phila that were cancelled was so large that there were no hotel rooms left in Phila at midnight. (Do you detect that I got stuck there?) Old ladies and cripples slept in the airport lounges. What a racket. I won’t even blame USair, although it’s a horrible airline. The problem is too few runways for the number of scheduled flights, making everything very late, thus putting some crew members over their Federally controlled maximum hours etc. So: hotel rooms needed. At least temporarily, till we all decide to stay home.
“I do not wish to camp out, I want a nice hotel.” (she said)
I have to hand it to the LA Times, it took them forever to finally cover this mess, but today they came through. This more than anything might finally, finally cause some give on prices around here.
YES! I totally agree, today’s paper needs to be rubbed under the nose of Westside realtors and FBers like one does with a dog that has just pooped on the rug!!
Hey, what part of LA were you looking for? If prices start heading south, maybe I can keep an eye out for you. Didn’t you once say Mar Vista?
Yep! A bunch of my wife’s friends live there and it seems like it might get close to affordable for us some day, if things pan out like I expect (hope). I don’t really like being in the direct path of the incoming jets to SM Airport though–it creeps me out looking up and seeing people right above me in the sky.
In Mar Vista, you are far enough away that you won’t even know it’s there. If I see any deals there or Culver City I’ll post them, maybe 2008-2009, best of luck. Then you can be Mar Vista Guy
LA is one stubborn market…but enormous credit crunch that mortgage market is suffering will be enough to melt it down….
I know LAIG and I have both talked about it on this blog but you are absolutely right, LA is unfortunately still holding up so well that residents here kind of have to wonder what all the squawking is all about around the rest of the country. Prices might have stopped rising but they ain’t coming down. YET. The wife and I ponder that little question of “when” almost daily.
The end of non-conforming loans will absolutely kill CA. There are few houses in any of the major metro areas for less than $417k. Wait until August and September numbers come out. OUCH!
The good news for those of us out in the sticks is that when CA markets collapse that will mark the end of the equity locusts that plague our small communities.
Right, sellers will come to terms pretty quickly with the idea that if (IF) they want to sell, loan limits will set the maximum their home will sell for. This is where we start to see prices dropping, but not before sales levels drop to close to zero levels …
Totally, I watch CNBC and other news sources about all the foreclosures and I’m like, what planet are these people on. But I do know a lot of people here have done a lot of cash out refinancing and, if they can’t refi, I’ve got to think they’re going to be in trouble.
Patience, we just started the third inning of a nine inning game.
I think we’re in different innings in different areas.
“The big money is made by the sittin’ and the waitin’ — not the thinking. Wait until all the factors are in your favor before making the trade.”
Jesse Livermore
In L.A. and New York the leadoff hitter has just dug in to the batter’s box and started to scratch his balls. “Batter up!”
Why didn’t you say that before I invested in these MBS POS?
I think we are entering the second inning of a game that will probably go into extra innings.
Could be, it just has a long wayyyyyyyyyy to go.
I was around in the early 90’s crash when prices went down 40% in West Los Angeles. I remember being at work and hearing someone swearing from the other room and banging down the phone. I asked him what was up “My house just lost 50,000 in value!” (He had had an appraisal).
That was nothing compared to what’s coming.
The bubble is so intense in Los Angeles where home prices have gone up 4x, 5x since the late 90s, the wealth that will be lost will wipe out California and possibly the entire country. This thing last week with the credit markets? You’re kidding right? If the market reacts like that to “uncertainty”, just wait until the certainty of 70% value loss sinks in.
The U.S. is finished. We’re toast for the next 50 years. Right after the summer Olympics, the Chinese having proven to themselves they are number one won’t be in a conciliatory mood any more. It’ll be no more “yes sir, yes sir” to the U.S. They’ll make the demands and we’ll comply. “You want pet food less $10 can? You use this. Melamine cost extra. Good for you Mr. American!”.
could lose more than 200,000 real estate-related jobs before the housing market bottoms out.”
dang, that’s going to leave a mark
They have already lost 150,000 that was not reported by the BLS or unemployment (undocumented workers). These will not show up in unemployment figures. Most are contract workers, non salaried positions.
I was down at Home Depot today in Poway … Got what I wanted paid and left. No line, no crowds.. Not at all like a couple of years ago. When all is said and done, layoff’s from other business which also benefited from the bubble will be huge.
Oh great. Get ready for the next crime wave. Or, tsunami, as it were. (Oh great now people are going to call me a racist. Oh well.)
Crime wave may be already here. I’m walking into a Trader Joes in Redlands and a car drives up with two early 20’s white guys, construction looking maybe, “Hey! Want a home theater system cheap? I got two in my van here.”
Ha, last time I saw that was in the mid ’90s in LA. Some guy tried to sell me a speaker from the back of his van. One speaker.
“From NBC11.com. “There were more signs Friday that people are having a tougher time securing home mortgages in the Bay Area, NBC11’s Marianne Favro reported. Realtor Pegah Lavassani said lenders are making it tough for her to close deals.”
Question……..who the heck would even think of getting a mortgage in this economic climate?
The interesting thing is that with no money down loans, buyers really had nothing to lose. So why not buy? Lenders, on the other hand, are getting killed. That is perhaps why this is all unravelling in large measure because lenders refuse to lend even when buyers are still ready and willing to buy homes they can’t really afford.
Where are they getting all these “cash earners” who have no income documentation?
I don’t know what its like in the rest of the country but here in central Texas I know of plenty of Mexican immigrants who are buying houses with cash. They are not cash earners, they are cash buyers. In Central Waco where many older and frayed neighborhoods are rapidly turning Hispanic there are many reasonable houses for sale for under $50 grand and I see some smaller ones going for around $25 grand. Mexican immigrant families snap them up for cash.
In any event, most of the Mexican immigrants around here do pay taxes. They work for big construction companies, or for the local food processing plants. If they are illegal they give some cousin’s name and SS# and the company just withholds taxes and social security like with any other employee. It may be done with a wink and a nod, but they are paying taxes.
The ones who aren’t paying taxes (or underpaying taxes) are all the cash businesses like restaurants and bars where it is easier to cook the books. Or any small business, for that matter, where cooking expenses is ridiculously easy.
In any event, I never did understand this no-doc loan thing. Who has legitimate income or assets with no documentation? I spent the past 4 years working as an independent consultant out of a home office and I always had plenty of documentation of income and assets.
In Central Waco where many older and frayed neighborhoods are rapidly turning Hispanic there are many reasonable houses for sale for under $50 grand and I see some smaller ones going for around $25 grand. Mexican immigrant families snap them up for cash.
Ok, that sounds like a logical market. I have no problem with someone avoiding a mortgage.
Its getting a mortgage when the last two years income tax statements cannot show a supporting income.
But in Palo Alto? Good luck finding a home for under $1M today.
Time to get rid of the “stated income” loans. At least show up with a tax return.
Got popcorn?
Neil
I wished many loans would be in hand of borrowers w/o income verification….those need a 25/30% downpayment.
Is the Zero downs, ARM’s and negative equity loans who gave birth to the beast…
Right, and now the bubble monster is starving.
Things are different in CA. In most other parts of the country, illegal aliens work at traditional blue-collar jobs — in factories, garages, in the construction industry, etc. They get a steady paycheck, earn more than the minimum wage, and are not so different from native-born Americans of 30 years ago.
Here in CA, it’s the third world. Illegal aliens work in all of the above industries — at least the lucky ones do. But there are literally millions of guys who scrape together a living by standing outside the Home Depot and waiting for some housewife with a gardening project to pick them up. There are 20-30 50 year-old men working for cash tips down at every local car wash, pushing paleta carts (little insulated hand carts that sell ice cream), etc.
People stand around at freeway off-ramps and sell flowers and fruit here. That’s what they do for a living. You see all sorts of Third World sights like this in CA, it is awful.
IMO the reason for it is that our supply of illegals is greater than the supply elsewhere.
Double whammy for the housing market
Whammy #1 - Credit. Prices simply HAVE to come down because it is no longer possible (or soon won’t be) to obtain any type of mortgage other than a prime loan. This means that a potential buyer must have at least a 5% deposit (likely 10% to 20% in the near future) AND the buyer must have a verifiable income that is ¼ of the purchase price. Built into this is the issue of the $417k ceiling where the mortgage is saleable to the secondary market.
Whammy #2 - Inflation. The Fed is now pumping billions of dollars into the secondary market by buying mortgage backed CDO’s ( these are bundles of mortgages that nobody wants). If the Fed buys enough of these then the credit crunch may be averted. The Fed will have to ‘print’ billions if not trillions of dollars to do this. This ‘printing’ of cash will cause inflation. Here is an example of how this would affect house values. For discussion, if we create two types of assets with one being housing and the other being all other items (bread, gas, employment contracts, cars etc). If all other assets double in price and housing stays static then it is fair to say that housing has lost half of its value.
I am looking forward to the day I can put $50,000 down (20%) on a nice San Diego home again in a nice neighborhood. These currently go for $600K and need to fall more than 50% to be affordable from where I stand.
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce. Wei also speculated that subprime troubles abroad could affect the local start-up venture-capital economy.”
[Iverson]: “‘Percentage-wise, you could say, ‘Oh, foreclosures have gone up 200 percent,’ but that’s an increase from a very small number to a slightly larger one,’ he said.”
Mr. Iverson and Ms. Wei, these are the worst kind of lies the kind that send you to H - e - double hockey stick if you believe in that sort of thing. These effing REIC cheerleaders spinning like an effing merry-go-round they just can’t come out and tell the truth, can they? Not even to save their lives could they utter the truth. Nothing but spin. Spin spin spin.
Stated income will cause the friggin day laborers to not be able to afford a home in Palo Alto? WTF?
A tripling of foreclosures, to record levels (at least as far as the state is concerned - and I’m sure Northern California can’t be that far from a record level of FCs), well that’s just a “slight” increase? WTF?
Unfrigginbelievable spin. Justice will be served when they eat the shite they are trying to feed to others, with a slice of pickle on a saltine.
“‘If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,’ said Julia Wei, a real estate and mortgage lawyer in Palo Alto.”
“Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce. ”
——————————————————————–
Best place to find a buyer is on the corner of Home Depot. There’s usualy a group of buyers hanging around waiting to buy houses.
low tide approaching:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/12/ccom112.xml
I’m still down with Berkshire as the anti-bubble play
“‘People who have really good credit and really high cash flow, your typical Palo Alto buyer, are encountering more stringent requirements. Lenders are saying, ‘I want to see stuff backing up what you’re telling me,’ he said.”
“If you do away with stated-income loans, you jeopardize an entire industry of people that are maybe getting paid in cash,” said Julia Wei, a real estate and mortgage lawyer at the Law Offices of Peter N. Brewer in Palo Alto.
Cash earners in Palo Alto include day laborers, migrant workers or any other undocumented, often immigrant, workforce.
Hahahahahahaha, is this idiot trying to tell us with a straight face that immigrant day laborers have “really good credit” and “really high cash flow” and are “your typical Palo Alto buyers”? Fact is, anyone who is affluent through legitimate means should have no trouble producing 1040’s for the past few years, unless he is guilty of tax evasion, in which case boo hoo, no mortgage for him.
Uh, back to that appraiser who can’t even sell his own house:
That home, also in Redlands, has been on the market since December.
Nine months! What kind of crap appraiser is he, if he can’t even set the price right on his OWN house?! Oh wait, that ’s right, he’s the kind of appraiser the brokers always called during the bubble… no wonder he made mid-six-figures.
CDOs = collateralized debt obligations. If the Fed is buying these from the banks because no one else wants them, why is that? Aren’t they “collaterlized” debt? What’s the collateral? If it is indeed true that no one wants them, then what’s the Fed going to do with this unwanted debt? And isn’t the Fed a bunch of private banks? Why would private banks want to take something unwanted. I’m very confused about all of this. Intuitively, it seems bad news for the little guy American.