A Market That Is Somewhat Seized Up In California
The Daily News reports from California. “Home prices in Los Angeles County fell from their year-ago levels in 65 of 92 markets in August as sales continued their steep decline, a trade association said Tuesday. Castaic recorded the county’s biggest decline, by 23 percent, to $465,500, and West Hollywood had the biggest increase, 35.8 percent to $930,000, according to a report prepared for CAR by DataQuick.”
“‘Price softness is even more pronounced when we look at different segments of the market,’ said association president Colleen Badagliacco.”
“‘Basically you have a housing market that is somewhat seized up from the flood of bad news that keeps coming out,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Department. ‘I would not be a bit surprised by the end of the year (that) Los Angeles County could have a year-over-year price decline.’”
“Robert Kleinhenz, the association’s deputy chief economist, said that sales fell by a bigger margin in August on an annual basis than in June and July. ‘I attribute that to the credit crunch. Qualified buyers can’t get their loans funded,’ he said.”
The Orange County Register. “Sales of existing Orange County houses fell 20.5 percent in August from the same month a year ago, CAR reported. Also out Tuesday was the July version of the S&P/Case-Shiller home price indexes. For L.A. and Orange counties, this index fell in July on a yearly basis for the sixth consecutive month. July’s drop (4.75 percent in a year) was the worst performance since July ‘94.”
“At one time, developers envisioned nearly 50 residential high-rises towering above the Orange County landscape, citing an appetite here to live in skyscrapers like New Yorkers.”
“But after two years of sagging home sales, Orange County’s new urban boom is having trouble getting off the ground. As many as 17 proposed high-rise condos out of 37 may be delayed as developers wait for better market conditions. Others may never get built, some experts say.”
“Condo towers aren’t the only types of developments facing delays. Virtually all homebuilders have reduced staff and delayed projects, said Kristine Thalman, CEO of the Orange County Building Industry Association.”
“‘Projects have been delayed because the buyer’s market came to a complete halt,’ Thalman said. ‘Everything has slowed down. Everything.’”
“Housing consultant Mark Boud said that with price tags of $500,000 and up and homeowner’s dues starting at $600 a month, condo towers in Orange County are overpriced, in part because of the success of the Marquee towers.”
“The reason Marquee sold out, he said, is 40 percent of the units sold to investors and speculators. ‘So the market wasn’t as deep as the sales rate at Marquee suggested,’ Boud said. ‘I still feel that high-rise can do very, very well in Orange County, but not at the current pricing structure.’”
The Daily Bulletin. “The long-anticipated ‘adjustment’ in housing prices hit the Inland Empire with a vengeance last month, with CAR reporting Tuesday that year-over-year home prices fell 7.4 percent in Riverside/San Bernardino.”
“They fell even further in the High Desert, off 13.7 percent from August 2006. The median price of a home in Riverside/San Bernardino was $377,130 in August, while the High Desert slipped to $287,390.”
“Economist John Husing of Redlands said none of this was really that unexpected, and that the overall effect of it probably wouldn’t be as bad as some people think. ‘In the decline of the mid ’90s, we saw a 35-40 percent drop in prices,’ he said. ‘I think when all of this is done, we’ll see prices 10 percent lower and then they’ll stay there for a while.’”
“‘The people in trouble now are the ones who bought in 2005 or 2006,’ Husing said. ‘Also the ones who refinanced and took out all their equity.’”
The Recordnet. “Home sales prices dropped off in this region, falling 11.5 percent in the Central Valley, to $309,740, and 12.1 percent in Sacramento, to $332,510, the CAR report said.”
“Central Valley sales were down nearly 34 percent year-to-year, the state association’s report said. Real estate agents and brokers in San Joaquin County complain that the increase in foreclosures is the top reason the sales market is so slow.”
“According to RealtyTrac, financial institutions took foreclosure possession on 1,501 single-family homes in San Joaquin County from January through August of this year. That’s one of every 18 foreclosed homes statewide. Last month, almost 6,000 houses were on the market in San Joaquin County.”
“Mike Collins of Collins Realty in Stockton, said asset managers for the banks are being so hard-nosed and demanding, if not irrational, about what they’re expecting for their foreclosures that it’s shocking.”
“Collins cited a $350,000 cash offer this summer for a foreclosure house listed at $360,000. That offer was turned down.”
“‘There doesn’t seem to be any given common sense on how to dispose of these liabilities,’ he said. ‘They’re really not cooperative, and right now, that’s standard.’”
“‘All they’re doing is stacking up more and more foreclosures in the market, which just means that they’ll get less and less for their property,’ said Jerry Abbot, co-owner and president of Coldwell Banker Grupe.”
“They are getting offers, but they’re not accepting or making reasonable counteroffers, he said. ‘They’ll put in at $250,000, get an offer for $230,000 and counter with $249,000,’ Abbot said.”
“Mike Oldham, an agent who specializes in Stockton foreclosure properties, said asset managers for financial institutions do seem to overprice foreclosures to begin with but then start reducing prices in about 30 days in a panic.”
“Currently, they will consider offers within 10 percent of asking price, he said. Even then, they’re not slashing prices, although that might evolve months from now, he said.”
The San Mateo Daily Journal. “In 2004, South San Francisco resident Esthela Baldovinos paid just $2,300 a month for her house. Today, the payments ballooned to $7,500 and will reach $8,200 in November.”
“Baldovinos entered into an adjustable rate mortgage not realizing how high the costs could get. Now she and many like her are asking local entities to pass foreclosure moratoriums.”
“‘I am delinquent on my mortgage because I was given an adjustable rate mortgage. I started out paying 6.5 percent. Now my interest rate is over 12 percent and I can’t afford the payments,’ Baldovinos said.”
“Combined Baldovinos and her husband bring in $6,500 monthly, $1,000 less than the current mortgage payment. ‘I need time to work out a loan modification with my lender so that I can stay in my home. We want the South San Francisco City Council to do everything in their power to help people like me stay in our homes,’ she said.”
“The South San Francisco City Council is considering such a resolution. In addition, the resolution urges lenders to work with affected homeowners. However, the measure holds no authority.”
“‘Nobody should lose their home, nobody,’ said Mayor Rich Garbarino. ‘The thing that concerns me is we can all agree, ‘yes, this is terrible.’ But that’s all we’re doing.’”
The North County Times. “As leaders of two Realtor associations prepare to launch a task force on fraud today, agents and others in the industry say recent publicity and the threat of prosecution have iced some shady real estate operations, while driving others underground.”
“Mortgage lenders, at least those that remain in business, have created ‘blacklists’ of mortgage brokers whom they suspect of orchestrating fraudulent loan applications, said Todd Lackner, a San Diego appraiser who has advised state and local law enforcement agencies investigating potential real estate fraud in Southwest County.”
“And some title companies have become wary of certain real estate agents, Lackner said.”
“The initiative comes amid an unprecedented wave of foreclosures that threatens to swamp housing markets in outlying suburbs that were booming just three years ago. Lowered lending standards helped hundreds of thousands of families buy homes, but they also drew shady investment groups that hoped to make easy money in the market frenzy, according to real estate professionals.”
“Such investment groups may have helped to drive prices higher in 2004 and 2005, helping to put extra money in the pockets of ordinary sellers at the time, appraisers said in recent weeks.”
“In Southwest County, about 5,000 houses are in the foreclosure process, according to foreclosureradar.com.”
“Real estate agents have said they’re concerned that the rash of foreclosures has many potential buyers sitting on the fence until prices fall further, a situation that makes selling a house even more difficult. Fraudulent sales have become a particular target of frustration, said John Giardinelli, a Canyon Lake attorney who advises both Realtor associations.”
“‘The Realtors sense that they’re being affected to the extent that this strike force has become a necessity,’ he said.”
The Sacramento Bee. “A federal grand jury has indicted four Sacramento-area mortgage brokers and real estate agents on charges they engaged in a mortgage fraud scheme that has sent an estimated 19 Elk Grove homes toward foreclosure while they collected $277,000 in commissions and payments.”
“Indicted were James Martin; Mario Fellini III; Gabriel Viramontes; and Joseph Gallo, on charges of bank fraud and conspiracy to launder money, the U.S. Attorney’s office in Sacramento announced Tuesday.”
“Martin, Fellini and Gallo also were indicted on charges of making false statements on loan applications, while Martin, Fellini and Viramontes were indicted on mail fraud charges, U.S. attorneys said.”
“The four Sacramento County residents are alleged to have recruited six buyers to purchase homes in Elk Grove last year with no money down and promises they would fill them with renters who would cover all the expenses. Buyers were told that after two years the renters would buy the homes, the indictment states.”
“After the defendants allegedly received loan commissions and real estate fees for the transactions none of the renters materialized, court papers state.”
“Assistant U.S. Attorney Matt Stegman said the case is one of several mortgage fraud cases his office is investigating in the wake of a fallout in housing prices that experts have partially attributed to subprime mortgage loans and inflated housing prices.”
“”All but two of the 19 homes have gone into foreclosure, said Tim McDaniel, one of six people recruited to buy the homes. ‘I lost both mine and I’m ready to lose a third now,’ said McDaniel.”
Today’s Master Of The Obvious (MOTO)
“‘Basically you have a housing market that is somewhat seized up from the flood of bad news that keeps coming out,’ said Jack Kyser, chief economist at the Los Angeles County Economic Development Department. ‘I would not be a bit surprised by the end of the year (that) Los Angeles County could have a year-over-year price decline.’”
Could be worse?
http://www.bossanova.com/kia/angeleno/archives/foto/bombay-pearl-stewart.html
Pearl Stewart bites, obviously! And she even stole the propane tank!
“At one time, developers envisioned nearly 50 residential high-rises towering above the Orange County landscape, citing an appetite here to live in skyscrapers like New Yorkers.”
I have never understood why anyone would want to live in a high rise in the middle of earthquake country.
It gives them a place to jump from, when their Neg. Amort IO ARM’s teaser rate adjusts and the loan goes into full amortization.
We were in Mexico city a couple years back visiting friends who live on the 8th floor of a 12 story high rise condo unit. We had the pleasure if experiencing a 5.6 while in that apartment. You should have heard the mad dash down the stairwells.
I was later talking to another friend who is a civil engineer there. He did extensive work on the metro in his day. He refuses to live in any building over 3 stories. He says that despite the extensive rework with added shear walls in those high rises after the ‘86 quake, his personal calculation shows that 1 in 10 will fail if/when another big one hits.
“He says that despite the extensive rework with added shear walls in those high rises after the ‘86 quake, his personal calculation shows that 1 in 10 will fail if/when another big one hits.”
Lesson from the Alaska Earthquake- even if the building does not fall, it is no fun being ANYWHERE near a tall building in an earthquake once the hung concrete slabs and/or shards from the windows start raining down on the streets…
How true - daughter’s father lived there then - house is cover of the hokey earthquake tourist mag. Now that was an earthquake.
Actually, a high rise properly built (I assume meet earthquake requirement) is your best protection in an event of an earthquake.
Do you remember the twin towers? They were built correctly with asbestos insulating the steel. The retrofit to remove asbestos left them vulnerable.
One of the most difficult aspects of engineering is dealing with the rule of unintended consequences.
Additionally, we are talking about building finished during the bubble years. Do you really believe there aren’t serious defects and/or deficiencies in the finished product?
Dude,
“One of the most difficult aspects of engineering is dealing with the rule of unintended consequences.”
I think the same can be said for the governmental responses that they come up with to “fix” this credit/housing bubble. I think we’re going to be dealing with the consequences for decades to come.
Lip
The only high rise that MAY remain standing in the big one in LA is the Texaco Tower at Universal City. Built by paranoid Getty and poured tons of $ in it to withstand quite a bit… Rode the Northridge quake like a surfer. No problemo.
Oh Yeah… As the horizontal and vertical STRESS fractures suddenly appear..YOU LIVE in it !
“‘I attribute that to the credit crunch. Qualified buyers can’t get their loans funded,’ he said.”
1. Geez, I guess they’re not that qualified then are they ?
2. Baloney, you still have neer-do-wells trying to buy houses with no money down, piggyback, seller pays all closing costs deals. Those are the loans they suddenly slammed the door on, the rest of us real “Qualified” buyers are sitting this one out.
Its kind of funny what happens when all the paper has to be filed out.
You earn how much? And want to borrow WHAT?!? rotfl
NEXT!
Got popcorn?
Neil
“‘I attribute that to the credit crunch. Qualified buyers can’t get their loans funded,’ he said.”
When they stop having those Countryfried commercials during Spongebob (I couldn’t believe it but my 7 year old was correct), I’ll believe this insanity has finally ended.
I heard Spongebob got foreclosed on, down under…
Please give your kid my condolences
Actually, the guy whos voice is Spongebob lives right around the corner from me, about 4 houses away. He just built himself a nice new mcmansion last year here in Studio City.
“Qualified buyers can’t get their loans funded.”
1. Geez, I guess they’re not that qualified then are they ?
Ha! Beat me to it.
–
If one takes into account the distortion in the median price due to the mix of homes being sold (larger and in expensive areas) prices are declining in at least 95% of the zip codes. There are at least 25% of the zip codes where the prices of the same homes are down more than 25% from the peak during 2005-06.
It will take another year or two, after the economy has been in recession for some time, to show the actual extent of the price decline across the board.
Jas
Don’t forget to account for inflation, as well. More areas have a drop after taking into consideration the distortionary effect of inflation in driving up nominal prices relative to real prices.
Inflation is low. Salaries are flat so inflation is actually low. In fact we should see salary declines as the high end construction workers and financials get cut.
I think commodities are going up so purchasing power should drop dramatically.
Not sure if that is inflation or deflation.
That would be stagflation. Hello 1970’s…
Maybe the Vikings will win a f-cking Super Bowl during this second set of ’70s. That might make it all worthwhile.
Get out your disco shoes!
“Get out your disco shoes!”
Dude… You mean you actually took yours OFF?!? Heretic!
Wage inflation is low, but check out food, energy and shelter prices — not so low for consumer staples (stuff households need to consume in order to survive in a modern society).
test
It’s all local baby!!!
er…location, location, location!
and % % %
Leigh
Inflation, inflation, inflation !!!
It isn’t all local NOW baby !
Jas haven’t seen your articles on financial sense for a while. esp re bay area RE. thnx
–
Looks like my last article laid down the situation pretty well and not much has changed in that scenario — high-end doing well due to Scam Options money and lower-end doing poorly as in the rest of CA.
Jas
“All but two of the 19 homes have gone into foreclosure, said Tim McDaniel, one of six people recruited to buy the homes. ‘I lost both mine and I’m ready to lose a third now,’ said McDaniel.”
So he bought at least 3 of the 19? Hmm.. where to begin? ok..how about asking if he told the lending institution that 2 of the 3 were investment properties?
No, of course not! They are all owner occupied. Every third day he moves. hehehehehehe
Every third day he moves..
he just needs more roughage
‘I lost both mine and I’m ready to lose a third now,…’
I’m impressed. Most guys only have two…
And here again we see probable mortgage fraud. Lenders thought all the loans were owner-occupied. Lets see if the FBI actually does something about this case…probably not IMHO.
This is one of the most frustrating things. Lawmakers, like the Mayor of South San Francisco, want to bail people out. But at least half–maybe more–of the people who need “bailing” have committed some sort of fraud.
Agreed.
Not the FBI! It will be the FTB or IRS when he sells (if he can) who will ‘get’ him. Investment property, he can take a loss with some restrictions. Owner occ home cannot take loss. Let’s see how it comes out.
Ever see “Big Love”?
“Qualified buyers can’t get their loans funded”
Wouldn’t that mean that they are not qualified?
–
There is a shortage of qualified suckers that lend money. What is needed is unqualified lenders to match the demand of “qualified buyers.”
Jas
There is a shortage of qualified suckers that lend money. What is needed is unqualified lenders to match the demand of “qualified buyers.”
No insult intended, as this was not your original thought.
The quote is however mighty damning to our financial infrastructure. No offense Jas, (to you personally) but this double speak (better yet, nonsence) attempts to confuse (intelligent/ignorant) us.
Best,
Leigh
–
Leigh,
It was meant to be facetious.
Jas
You have identified another conundrum!
That would be deadbeats from last year who would have qualified.
So true Reminds me of old history textbooks talking about how we had to go off the gold standard because “sound” financial institutions were brought down by bank runs during the Depression. If they were truly sound, then they wouldn’t have had a problem.
The walk on the Rock is interesting…
I’d imagine close to $4 Billion has been withdrawn, across the UK.
My bank, probably like a lot of banks in our country, has almost no cash on hand. Perhaps $20k worth of withdrawals and game over for the day.
When’s push gonna meet shove?
ATMs typically can hold $60,000 - $100,000 nowadays. Your bank has more money on hand than you think. Just be first in line.
“When’s push gonna meet shove?”
Let George Baily explain it:
http://tinyurl.com/2dnj53
It’s only paper. They will print more to hand out to customers. Will it be worth the paper it’s printed on?
If a bank were expected to have even a small fraction of savers money on hand to stop a run it would be impossible for them to make any money. Don’t you remember the scene from It’s a Wonderful Life? The Bailey savings and loan was a sound institution, but the deposits were loaned out for homes.
Sound institutions can and will go down because of this. Come to think of it, that might be a good place to start looking for a short…..
The media would like you to believe that the Countrywides and Wells Fargos and Wachovias of the world are out there trying to make the community a better place, just like George Bailey and the Baily Building and Loan.
The truth is, home lending today is all about the fees, all about the points, the commissions. The loans are packaged and sold to overseas investors and pension funds. There is no one along the food chain who ever stops to wonder, “Is granting this loan good for the community? Is this loan going to be a good investment for our community and make our community a better place to live ?”
Likewise, few homebuyers take on a mortgage thinking about ways they can make a good community better. Instead, they are more likely to be looking to turn a profit a few years (months?) down the road by selling to a greater fool. Or they are so frazzled by commute and hefty mortgage that they need stress medication just to make it through the day.
Thank you for making those points!
None of my clients qualified to get a reasonably cheap loan from a bank. Yet I can go on with my usual boast: not a single one of them is in default. Not a single one of them is even one day behind at this point. Evidently the securitizing lenders are using the wrong set of criteria.
Hey AZ_Lender,
i remember you talking about forking over a few hundred dollars to get people to leave rather than having to do the full foreclosure process.
Your comment was that apparently the lenders lacked the few hundred bucks….
Just Tuesday, I was watching CNBC and they were talking about foreclosures in Stockton/Sacramento. They talked to a guy that had been a realtor but is now working for a bank…. offering people $500 to $1500 cash plus a couple months free rent if they leave without a fight once they go into foreclsoure. The state of the house when they leave determines how much they get.
It seems you are quite the inovator.
“Qualified buyers can’t get their loans funded,’ he said.”
I’m seeing this tag line over and over again. Of course the truth is that UNqualified buyers can no longer get their loans funded.
But the NAR strategy from Yun on down is clearly to paint mortgage tightening as a temporary blip that will vanish once this “credit crunch” thing passes. THe reality of course, is that mortgage lending still has a bit further to go until we reach traditional standards with regard to income, debt load and downpayment.
Quick question..
Is there any chance that a borrower with a 700+ FICO, 20% down, PITI = 30% of W2/1099 gross, 3 - 6 months reserves, zero/low other debt would NOT be able to get financing?
No……..but you’re describing a borrower that does not exist (except on this blog, and we ain’t buyin’)
funny..
what about the same but at 36% of gross with zero other debt and 12 months reserves?
I’m thinking that if things get truly discounted here (40% off from peak), then it might not be a bad idea to “leverage up” a bit, go for the premium property/town, lock in a 30yr fixed (plan to prepay) and get a property that would be good for 20+ years.
Thoughts?
Wait for 2 consecutive months of price increases (locally, not national numbers) and then jump. But that is still a long, long, long way off.
Did I just say months?……my bad. I meant quarters, or 6 months.
I’m amused at this question…
You see, its going to be a bit before we buy. It might not be possible to get a Jumbo. I’m also thinking 25% or 30% down might be required. That’s ok. It just means prices drop that little bit more.
Hey Realtor ™! where is that appetizer?
Got popcorn?
Neil
Neil, we have agreed on much, but I think you might be a bit conservative on the down. My thinking is that we might see as high as 40% in some spots.
remember, when all the resets go through for the next couple of years ALOT of banksters, institutions, etc. are gonna lose their shirts, which means you better have cash.
You see the snowball theory works both good and bad and this one is gonna get so big that anyone left, who can offer a loan is gonna expect serious skin in the game. Who wouldn’t? I can’t blame them. However, as you so succinctly put it, it just means prices shoot much, much lower.
OCDan,
I don’t disagree with you one bit.
Hence why is smartest to just be a spectator for a long time.
This is too big for any one of us to slow.
Got popcorn?
Neil
Those buyers will exist, but in no more than microscopic numbers until prices come down. It’s quite difficult for a first time buyer to come up with a 20% down payment on today’s inflated prices. Once prices come down, it’s at least possible.
Agreed. That borrower will get funded all day long. It is an automatic approval for DU (FNMA) and LP (FHLMC), the computerized underwriting systems for both of those GSE’s. So those comments are just more b.s. and propaganda from the realtors.
The borrowers not getting approved (that have good credit) are basically those that lied on their tax returns (by inflating expenses on schedule C’s, etc.) and can’t prove income (either current or past income).
Question, when you talk about your reserves do you include retirement savings?
no - I view reserves as money in a mmkt, checking account, etc. I’d even say a brokerage account, depending on the situation.
retirement savings are just that..for retirement..
just like home equity is to be left at home..
My bank counts as reserves: 401K, IRA, along with brokerage, bank accounts, etc.
Thanks for the info.
just like home equity is to be left at home..
What an unsophisticated viewpoint!
I cashed out my retirement savings 6 months ago, and will take the tax beating next year…
Decided 60% of something was better than 100% of nothing
Couldn’t you have rolled it over into a self administered IRA and put it into mining stocks or some such?
I’ve even been to site where you can setup an IRA invested in physical gold…
I had 17 years to wait before I could unlock my money, at a lower tax rate
I’ve always known there was a fair amount of fraud in our financial system, but it went far beyond my direst predictions…
Thusly, I trust me, not them.
Thank you!
I’ve tried to explain to people how risky it is to tie up your funds in either 401k or IRA accounts since you are trusting the government to come through on their promises to let you have it back at low tax rates in the future.
Yes, that same future where there isn’t a snowball’s chance in hell that our government will be solvent.
Have governments historically had a good record of keeping their promises, even in good times?
You can get financing now for Jumbo with good rates. But I would recommend waiting if you want a lower price. You did not say where you are looking. In the area where I work, South Bay, Palos Verdes, Long Beach, prices are down about 10% since the peak 2nd quarter 2006. Some price ranges and properties down more, some less. Where they will go from here is a guess , and mine is down 20-30% more, and could take a couple of years.
Shop for your loan at your bank, and then look at others that are direct portfolio lenders.
“You can get financing now for Jumbo with good rates.”
I guess that depends on what your definition of good is. Here is an illustration based on current information from bankrate.com:
30 yr fixed jumbo mtg
Today = 6.92%
Last week = 7.02%
Annual interest cost on a 30-yr-fixed Jumbo home mortgage for $417,001 is about 6.92% X $417,001 = $28,856. That is a bit pricey for the median-income SD household (about 1/2 their pre-tax income). And of course, you cannot even buy a starter home in SD for $417,001.
I know that I have ignored (gradually!) decreasing principle in my back-of-the-envelope calculation, as well as the much-vaunted home equity tax deduction, but then I have also ignored the risk of losing money when prices revert to affordable levels, not to mention other ownership costs (insurance, property tax, HOA, Mello Roos, weekends wasted on yard care, weekends wasted on fixing toilets, etc etc etc).
And you could get a 30-yr fixed jumbo w/ no points or origination fees for 6.00% in October ”06 assuming you shopped around (the rates I was quoted were between 6.00 and 6.75%).
That works out to about a $319/month difference; which isn’t chump change (e.g., a week of day care in NY or a new car).
We have some friends that recently sold their house in San Jose and are now renting. They asked me when they should start thinking about buying again. I said that at the rate they are saving money combined with the rate that prices are dropping, they should be able to pay cash for a house in about 2-3 years.
‘I still feel that high-rise can do very, very well in Orange County, but not at the current pricing structure.’”
Wouldn’t you just love to be one of the 40% of specuvestors reading this little ditty.
your assuming they read
“They fell even further in the High Desert, off 13.7 percent from August 2006. The median price of a home in Riverside/San Bernardino was $377,130 in August, while the High Desert slipped to $287,390.”
“Economist John Husing of Redlands said none of this was really that we’ll see prices 10 percent lower and then they’ll stay there for a while.’
- Please do not get tired of hearing about the Inland Empire. When the dust finally settles and the bottom is REALLY in (in a couple of years) they will probably be the undisputed leader of forclosures. It is like little mexico out there, it’s stale toast.
This guy Husing sounds like a real braniac. 10% lower and then they’ll stay there for a while. LMAO!
“Economist John Husing of Redlands: ‘I think when all of this is done, we’ll see prices 10 percent lower and then they’ll stay there for a while.’”
This opinion is based ON WHAT? It’s really beginning to hit me, listening to financial pundits and “experts” in the MSM, the bulls are coming to the forum with unsupported predictions of good times ahead (pep talks); the bears are coming with numbers, charts - and reasoned argument.
Bingo! Yesterday on CNBC the CEO of Coldwel R/E was on. He’s been through 4 of these corrections, and they’re all the same. Price drift down in bubble areas by less than 10%, then they go flat for a year or two, then shoot right back up again. This one is no different….
Yeah “no different” except that this bubble is 7 times the size of any precious. We’ve already had larger price declines than all those other bubbles, and the rate of decline is still increasing. We’re already at record default rates, and the rate of increase is still increasing. We’re at record vacancy rates. We’re at record fraud rates. We’re at record inventory levels, even adjusted for population growth.
NOTHING indicates that this bubble is like the previous ones, yet he asserts that this one is just like all the others, based on NOTHING!!!!
2 or 3 days
Its a new plateau arguement again.
Heck… with inflation… who knows? When prices align with rents and salaries then its a good time to buy.
I’m getting sold on real estate as a bad investment though. Makes you less mobile and more difficult to persue opporitunities and changes.
Friend was telling me a month or so ago about an article in, I don’t know, maybe “The Economist,” that argued the countries where home-ownership is NOT typical are more productive precisely because the labor force is more mobile, just as you say James.
Highly suspect.
Which countries are these, in which the per capita productivity is higher than the U.S.? I checked: the U.S. ranks 4th or 6th, depending on the source; we get beat by Ireland, Luxembourg, and Norway, and sometimes a couple of other places.
This Husing character is a real tool. Every month he comes out with another rosy forcast. Hell most of the IE is already way farther down than 10%. The only reason it’s not showing up yet is because nothing is selling. There are plenty of homes on the market for 25% less than their peak AND THEY ARE STILL NOT SELLING. Most of the new developments are whacking the prices 20% or more. I really have no idea why the local papers keep quoting this nutjob.
Good call golfproz, the guy’s an imbecile.
You are so right - everytime I read something said by him I’m thinking WTF? I recall just recently he was trying to say there’s no bubble. Out here in the old desert (Palm), we’re seeing lots of fenced off areas with nothing but signs and empty desert inside. Ticky Tacky developments are lopping off a few $K, high end is still moving and there seems to be a complete standstill in the middle. Houses that were $200K in 01 are still stuck above $500K.
“The only reason it’s not showing up yet is because nothing is selling.”
A very simple but seldom understood comment. Thanks. I plan to use this over and over until my friends get it.
Let’s send Husing this link
http://housing-kaboom.blogspot.com/2007/09/comp-killer-80k-below-2004-price.html
here are two identical tract homes in the Eagle Glen community in south Corona. One sold for $779 at the peak in 2006. Now the other one is for sale for $450 (and it’s a nicer house). Lets see that’s a 42% drop in one year Mr. Husing!
Van Daele homes is building a project in Riverside, CA, just adjacent to the 215/60 freeway. Homes are 4400 sq ft and start at the mid 500k level… Riverside, CA, foreclosure central and one of smogiest cities in America…mid 500k…4400 sq. ft. What are they thinking?
Me thinks that Van Daele owns shares of So Cal Edison. Those monster homes use a lot of electric. Tidy side profits from stock shares!
Yep. Husing is not surprised by any of this. The quote below from 2005 (thanks calculated risk) can be reconciled by the fact that, when he said “soft landing,” he meant record foreclosures, double digit price decline, and plummeting sales. I wish all economists were as good as Husing with his “crystal ball-like” number-driven vision powers. Thank god we have these people to help us grope along into the foggy future with some level of understanding. True public service.
“There’s just too strong an economy and too much job growth for much other than the “soft landing” Husing and other economists have been predicting for the end of the five-year housing boom.”
If this is a soft landing, then I wonder what he would call Northern Rock’s situation….a Mild Contraction?
Does a soft landing usually begin with the G-7 Central Banks pumping almost about a trillion dollars into the intra-banking system?
As for those cute Apple Valley desert starter houses with the tiny token white picket fences and the suicide loans.
Nobody gets out of the gets OUT of HERE ALIVE !!!
“‘I am delinquent on my mortgage because I was given an adjustable rate mortgage.”
No, victim breath. You are delinquent because you AGREED to an adjustable rate mortgage.
From the article:
“Combined Baldovinos and her husband bring in $6,500 monthly — $1,000 less than the current mortgage payment. The parents of nine children with seven still living at home means the mortgage isn’t the only bill stacking up. Power was turned off last week with more than $1,000 owed to Pacific Gas and Electric. On top of it all, Baldovinos’ husband left from the pressure. ”
With 7 kids at home and the husband apparently out of the picture, I don’t see how any plan to keep them in the home is going to work.
These people really should have had to make about $26,000 per month to afford $7,5000 under normal FNMA/FHLMC guidelines. This is why the prices have to fall much more than the 10% or so people like Husing are trying to put forth. They could really only afford about a $1800 to $2000 per month house payment based on normal underwriting of 28%/36% ratios. They should not have been able to qualify at the interest only teaser rate but at a true fixed rate (or was there mortgage fraud).
“In 2004, South San Francisco resident Esthela Baldovinos paid just $2,300 a month for her house. Today, the payments ballooned to $7,500 and will reach $8,200 in November.”
It looks to me like she had an interest only loan for the first few years. Otherwise her $2,300 payment at 6.5% would only have risen $3,700 at 12%.
that should have read “risen to $3,700 at 12%.”
Does 12% work out to be 1% of the outstanding principal per month or am I over-simplifying the calc?
If so, OUCH!
Please show me a photo of the SUV she HELOC’d.
My patience for the “victim” stories is wearing thin. Too many have gone through more “bling” in the last five years than I have in my life.
Got popcorn?
Neil
Sorry - this may end up a a double post. My patience level is even lower. She has 7 kids to think about. There’s waay to much on the line to “not understand” her mortgage.
She may have rationalized that she needed more space because of all the kids. Well, sorry, lady your kids would have been much happier 2 or even 3 to a room then: having Dad leave while (presumably) watching you fight about money, have you trot out in front of city hall begging someone “to do something”, and probably having to move anyway.
Responsible parents don’t make headlines.
Hope they like living in that SUV…I’m sorry I just have no sympathy. READ the frick’in loan docs instead of just signing everywhere they put a post-it flag.
It is not PC to be a HELOC hater nowadays. We’re supposed to be compassionate towards the consumer needs of our fellow countrymen. We are supposed to console them even as they drag us all over the cliff.
Pen 12% I/O is certainly 1% per month, but I believe even Uptown’s diagnosis does not account for the huge increase in this person’s mtg payment. It was probably not an I/O but actually a neg-am for the first few years.
i think the right conclusion here is that mrs baldovinos had some type of neg am ARM. the $2,300 payment represented the minimum payment, not the I/O or the fully amortizing payment.
think about it this way. her current payment of $8500/month at 12% implies that the loan balance today is around $825,000. even if her original loan balance (i.e., before accumulating neg am) was considerably lower (e.g., $760,000), then the I/O payment at the teaser rate of 6.5% would have been around $4,100 per month. the conclusion i am left is is that the $2,300 she *actually* paid represents the minimum payment. so the balance ($1800) was added to the principal. over 36 months, that comes out to an additional $65k, which explains why her balance now is $825,000.
i know it’s fashionable to lay all the blame on the mortgage brokers these days, you really have to question how the borrower could have signed this contract without fully understanding what was going on. i mean, what person in their right mind earning $80k per year thinks they can live in a $750,000 house?
what person in their right mind earning $80k per year thinks they can live in a $750,000 house?
Really, I mean why they settled for $750,000 instead of a million blows me away.
“We want the South San Francisco City Council to do everything in their power to help people like me stay in our homes,’ she said.”
What does “people like me” mean in regard to this woman’s situation? It means a situation where the buyer didn’t have the income or nack for comprehending basic economic fundamentals, which given the fact that they pull in $6500 a month means they undoubtedly KNEW what the risks were and gambled anyway. Time to pay the piper.
As far as San Fran actually considering any kind of bail out measure, I wouldn’t be surprised given this city’s history with passing totally inappropriate socialist tilted laws that only hurt more people and benefit those that have “been here” before others. If they bail anyone out… SCREW THEM.
As the story points out, there’s not a whole lot SF can do about it except be sympathetic. I don’t think a moratorium on foreclosures would have any teeth.
I think a moratorium on foreclosures would “lock up” the mortgage market, because it would set a very dangerous precedent.
That’s “South San Francisco” not SF. It’s an ex-working class suburb south of the real thing, but north of the airport (so it’s still in the fog belt).
“‘Nobody should lose their home, nobody,’ said Mayor Rich Garbarino. ‘The thing that concerns me is we can all agree, ‘yes, this is terrible.’ But that’s all we’re doing.’”
So what this does nitwit propose to do? Of course, frausters and greedheads should be kicked out of homes they bought with liar loans. 100 bucks says her loan docs are stated and she came up with some ficticious monthly take-home.
Clearly she’s an innumerate cow…she has nine kids, seven at home and a hubby who just said adios. How does she think this is gonna work out? If she can’t get her two kids who don’t work at home to kick in some of their gang-banger profits, she might think about being a surrogate mom. Dropping kids a specialty, why not make it a business.
So where are the two kids that have left the nest? College? Out on their own? Prison?
My money’s on the latter…
Actual agenda item from last SSF Council meeting:
“Resolution requesting subprime mortgage lenders and servicers for properties in the City of South San Francisco to voluntarily work with affected homeowners to reduce foreclosures related to subprime mortgages”
Chairperson: All those in favor say ‘aye’
All: ‘Aye’
Chairperson: Motion passed.
Baldovinos: Gracias! My husband already left, so when do I get my check?
(Puzzled looks)
“Gracias! My husband already left, so when do I get my check?”
LMAO!
I don’t know whether to be more annoyed by the grotesque sense of entitlement of the FB here or the grovelling politico who will attempt to protect people from the consequences of their own stupidity and sloth. Sheesh…this is getting pathetic.
–
“‘In the decline of the mid ’90s, we saw a 35-40 percent drop in prices,’ he said. ‘I think when all of this is done, we’ll see prices 10 percent lower and then they’ll stay there for a while.’”
This guy keeps putting happy face on a sad situation in an area that is pits. Down 80% from the peak is very likely. Not until the economy is back in a recovery for at least a year after the impending recession/depression that one can make any forecast of a bottom in prices.
Jas
may be he means 10% lower than 40 %
10% lower than his last interview
If the decline is only 10 percent, it will only be for non-inflation adjusted prices. I could see inflation adjusted declines of 75 to 80 percent. Such declines are already 30 to 35 percent and that’s without much feedback yet from the broader economy.
‘I would not be a bit surprised by the end of the year (that) Los Angeles County could have a year-over-year price decline,’ said Mr. Obvious.
Mr. Obvious is a bit late. El Aye prices already were declining last month (-4.8 percent YOY from July 2006 to July 2007), as documented here:
http://blogs.wsj.com/economics/2007/09/25/home-prices-tumble-case-shiller-index-reports/
Ahhh… but Mr. Obvious is quoting median prices. Think about what that implies is LA has a drop in the median price. Either the low end has already dropped 35% or more to get down to conforming (even if they raise the limit, down payments will be required) or the ‘high end’ is going for quite the discount.
I’ve been predicting a 45% drop in LA. I might need to anticipate more undershoot…
Got popcorn?
Neil
“Either the low end has already dropped 35%…”
My guess: The low end has just plain dropped out of the market, as the subprime implosion has left most of the HHs that would have qualified to buy last year at under $500K high-and-dry, and low-end sellers are thus far unwilling to adjust to new market reality (still in La-La Land-style denial).
The relative paucity of sales below $500K naturally shifts the median up, reflecting an upshift in the distribution of the quality of homes that are selling more than sufficient to offset the (thus far) small quality-adjusted price decline (as reflected in CSW/S&P 500 index numbers).
If Congress does not succeed in passing emergency “welfare for the wealthy” support for Jumbo loans, then declines at the high end will soon show up in the data as well (esp. since the disappearance of the low end is a one-time distortion to the median). Even with bailout funding, the massive glut of overbuilt McMansion stock is apt to weigh down the high-end, especially once Alt-A and prime reset time bombs start exploding over the next three years.
‘I think when all of this is done, we’ll see prices 10 percent lower and then they’ll stay there for a while.’”
This thing is just getting started and it is not hard to find homes 30% lower than the previous sale.
Yep, looks like Sac and the Central Valley have been hit hard already.
That’s because it is ’special’ here.
Honest to God, if you couldn’t see it coming in SACREMENTO, you we’re blind. Nobody wants to live in Sacremento. NOBODY. It will fall harder than areas where people actually want to live. (but nobody’s immune, of course. It’s not different anywhere.)
reuven, in this morning’s posts you suggested we put stuff on Hillary’s “mortgage bailout” page telling how our “American dream” was ruined by loose lenders and speculators. I couldn’t find any such page at “Hillary For President.” Do you have a link?
I disagree. No one wants to live in the SoCal Inland Empire either. San Bernardino, Riverside, Ontario, Fontana, etc. There’s a reason this area is in the Top 5 bubble-burst nationwide.
I’d take Sacramento in a heartbeat over that area.
Remember, this is John Husing, the man who once said the IE was the center of the universe. This guy is one nifty pud-whacker to be sure. I’ve got a special Joshua tree reserved just for him. It’s currently curing right next to the one with Gary Watts name on it.
Hi there ex-nnvmtgbrkr,
what exactly does your Joshua tree therapy intail?
It involves Ex-NV inviting these characters to hug his Josh-trees. Rather painful.
Unless your hug comes in quotes, you’ve misread the intended purpose of my JT’s.
A lot of squealing, howling, squirming, a bunch incoherent “dear god make it stop”, and a firm “stop your wiggling and complaining and take what’s coming to you. It’s hard enough to carry this thing let alone line it up” coming from me.
Well, I certainly approve of your plan.
Be sure to wear gloves, now. You don’t want to get their germs and stuff on you, as you wield your Joshua tree.
Two words: Botanical Enema.
http://en.wikipedia.org/wiki/Joshua_tree
I’d like to extend the geographical borders of the Inland Empire to include a large chunk of everything within a 50 mile radius of Sacramento…
Sincerely,
Emperor Norton II, of The Inland Empire
Considering current median prices reported seem to be outta phase with actual declines, perhaps the time to buy is when medians are reported as declining by 30% or more? An indication that the top is finally cratering but the bottom is beginning to recover?
“In 2004, South San Francisco resident Esthela Baldovinos paid just $2,300 a month for her house. Today, the payments ballooned to $7,500 and will reach $8,200 in November.”
We sold our house in el lay a few years ago, and the icing on the cake was the nice payment sheet our Realtor made up for prospective clients…
With $250k down, the new owners would owe just $8600 a month in mortgage payments for 30 years.
360 months x 8600 = $3,096,000. WHEW! That is one heckuva alot of cashola to pay some bankster!
A coworker sold three weeks ago to a FB with zero down.
Now that the check has cleared (and been moved on to other banks), he’s smiling.
Oh, he rented a slightly larger home in the IE. He knows he dodged the artillery shell.
Got popcorn?
Neil
Selling our house I’m sure was a much smaller transaction. Still - the day of relief came when I knew the check had 100% cleared the bank and was mine to do with as I wish.
Congrats to your buddy - and I feel sorry for the FB.
“Indicted were James Martin; Mario Fellini III; Gabriel Viramontes; and Joseph Gallo, on charges of bank fraud and conspiracy to launder money, the U.S. Attorney’s office in Sacramento announced Tuesday.”
Nice to hear the Mafia is still alive and well, I was concerned that the Mexican cartel might have cornered their turf.
“Nice to hear the Mafia is still alive and well…”
The real Mafia has cornered the Wall Street and banking. They carry the govt. in their pocket.
Jas
I bet Fellini gets out in 8 1/2 weeks…
FYI “Viramontes” is not an Italian surname, if that’s the case you were making.
“James Martin” is, though!
Maybe, maybe not.
Regardless, the mafia comment was weak.
If you are too lazy to learn about the biggest purchase in your life and you let your broker choose the loan, why should we be sympathetic?
“‘I am delinquent on my mortgage because I was given an adjustable rate mortgage. I started out paying 6.5 percent. Now my interest rate is over 12 percent and I can’t afford the payments,’ Baldovinos said.”
” Now my interest rate is over 12 percent and I can’t afford the payments,’ Baldovinos said.”
Sniff…Sob…
Yeah, yeah….victims, victims everywhere. Everyone’s a victim. Wouldn’t it be nice to see someone step up to the plate and say “I’m the dumbest knob on the planet and I deserve a financial ass-whoopin’!”
Wouldn’t it be nice to see someone step up to the plate and say “I’m the dumbest knob on the planet and I deserve a financial ass-whoopin’!”
That’s pretty funny.
People who feel that way don’t go running to the papers to tell their story, they quietly take their lumps.
First..how does one start an ARM with 6.5% rate?
Second..Wouldn’t it take at least three years to go from 6.5 to 12? (two points per year for three years or are there ARMs that adjust faster than 2 pts/yr?) If so, why not refi after the first one or two adj’s, unless it was too late by then, for whatever reason?
..or must this be a sub-prime product?
Finally, I’d love to get 12% on my money.
Well it sounds like nobody will be getting 12% on their money now that she faces foreclosure!
Yeah. I want 12% on my money too.
Couple more rate cuts and 12% wont be keepin up with inflation.
Think I’m gonna be sick.
If you want 12% buy Canadian energy trusts. HTE for starters. >12% dividend, paid monthly.
(sorry for the off-topic stock recommendation. just pointing out 12% isn’t very hard to come by and carries a lot less risk than bubblicious real estate).
Just leverage up 10 to 1 like the big boys do and you can get your 12-20%
200 to 1
Was the leverage on a hedge fund, as reported on here last month…
Federal govts of Brazil and/or Iceland will pay y’all at least 9% if you don’t mind the currency risk. j (OK, so I’m being boring.)
“Sales of existing Orange County houses fell 20.5 percent in August from the same month a year ago, the California Association of Realtors…”
I never get tired of hearing how Orange County sales are declining. I guess it’s not different there.
79.5% to go
Just wait until the price decline news hits the MSM presses. The best is yet to come.
Just wait until the remaining mortgage brokers are cleared out wholesale. I have two coworkers who live in OC that are getting extremely arrogant about their home values. (They could retire out of state easy per their opinion.) But I just smirk… they are the types to follow the market down. The only question is when will the OC dam break?
“OC is different, its going to get hammered.”
Best Thornberg quote. I love that video.
Got popcorn?
Neil
Just wait. The creep effect from Santa Ana in the north and the San Diego in the south is making its way to south OC. Besides, we have so many condos for sale/lease down here that it isn’t funny.
When the dam bursts this is gonna be one heckuva tidal wave.
Agreed. And anyone who has been to the OC lately knows that the place is going downhill fast. Gangs and illegals will soon be the norm in most of North OC. The rest of the majority of South OC will be FB’s getting evicted (Mission Viejo, RSM, Aliso Viejo - mostly white trash working class making less than $100,000 AGI perpetrating as well to do’s and heloc’d to the hilt).
“white trash working class making less than $100,000 AGI”
LOL
I’m still hoping for a”South Park” episode along this theme. Cartman as a flipper, I think.
Genius!
Can Butters be the FB? “Oh-oh, OK, I’ll just sign. I mean, 20% appreciation every year, oh boy!”
Kenny goes off and does a loan with the Russian mafia in hopes of flipping. After he is killed in a police raid on hit pot house…
Got popcorn?
Neil
I like it… but can they set it up so that a character with a picture of Casey Serin as a head meets the same fate? And then gets assraped in hell for all eternity by Satan and Saddam?
I wrote a primer episode for them and sent it in. Never heard anything. I had the whole town flipping homes to each other and everyone rollin’ in hummers with phat rims. Only the boys (except Cartman) figured that it was a Ponzi scheme.
*****“‘I am delinquent on my mortgage because I was given an adjustable rate mortgage. I started out paying 6.5 percent. Now my interest rate is over 12 percent and I can’t afford the payments,’ Baldovinos said.”****
Should be editted to resemble the real situation:
“‘I am delinquent on my mortgage because I’m stupid and signed papers on an adjustable rate mortgage. I started out paying 6.5 percent which I should have known wasn’t going to last. Now my interest rate is over 12 percent and I can’t afford the payments, but it’s not my fault because I didn’t think this whole thing through.’ Baldovinos said.”
But…but…everybody wants to live in South San Francisco right under the flight path of SFO next to the freeway where it’s always cloudy, windy and cold. So I guess we should just all grit our teeth and bailout the idiots…NOT!
Good Oped from the Seattle Times
‘The American Dream gone nuts.’
http://tinyurl.com/ytp424
Great piece. Thanks for the link.
–
“Mike Collins of Collins Realty in Stockton, said asset managers for the banks are being so hard-nosed and demanding, if not irrational, about what they’re expecting for their foreclosures that it’s shocking.”
In Stockton the banks are paying $500-3,000 for people to leave because evacuation proceedings would cost more. Also many homes are being abandoned after lived in by pigs.
Jas
Hey Jas
My dad lives there !! He is one hell of a scum sucking low life ambulance chasing shyster 
He fits right in for the last 75 years.
Stop getting down on the good folks from Stockton
Projects have been delayed because the buyer’s market came to a complete halt,’ Thalman said. ‘Everything has slowed down. Everything.’”
Like this wasn’t predictable?
Love it, “the buyer’s market.” Pooh. The sellers’ market came to a complete halt! The buyer’s market will kick in when asking prices decline a whole lot further.
Yeah, what was with that?? Someone got it completely wrong or the guy is a REAL lyin’ SOB.
Collins cited a $350,000 cash offer this summer for a foreclosure house listed at $360,000. That offer was turned down.”
How do you spell IDIOT? The person that turned down this offer.
How do you spell RELIEF? The person that turned out not to make this purchase. Hopefully they wised up and are utilizing a better investment/purchase.
I wonder if the way that mortgages are now all tied up in derivative products complicates this process. I mean, if the loan is part of a package owned by thousand of investors, who is able to approve cutting the prices to move the houses? Is that approval harder to get than if the loan was just owned by the bank?
Or will the current and future liquidity injection ‘loans’ allow banks/lenders to carry this crap forever? I can’t believe these people are stupid….. they know something, and their cocky arrogant attitude is proof of it. Maybe this time is different.
(or maybe the $350k cash offer was in $US - which will be equivalent to $250k by the time the loan closes, and that’s why they turned it down)
“…if the loan is part of a package owned by thousand of investors, who is able to approve cutting the prices to move the houses? ”
servicer, but in at least one example (SEC File 333-82904 , Structured Asset Security Corp/Lehman [the conduit creating the REMIC] and Aurora Loans [servicer]), it looks like the servicer can make these judgments. I will quote extensively from the servicing agreement:
“Section 3.16 Title, Management and Disposition of REO Property.”
“In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure…”
[Blah Blah Blah...]
“The Servicer shall manage, conserve, protect and operate each REO Property for the Trustee solely for the purpose of its prompt disposition and sale. The Servicer, either itself or through an agent selected by the Servicer, shall manage, conserve, protect and operate the REO Property in the same manner that
it manages, conserves, protects and operates other foreclosed property for its own account, and in the same manner that similar property in the same locality as the REO Property is managed. The Servicer shall attempt to sell the same (and may temporarily rent the same for a period not greater than one year, except as
otherwise provided below) on such terms and conditions as the Servicer deems to be in the best interest of the Trustee. If the Servicer determines that it is in the best interest of the Trustee to not proceed with foreclosure or accept a deed in lieu of foreclosure, the Servicer shall have the right to do so,
whereupon the related Mortgage Loan shall be deemed to be finally liquidated and the Servicer shall have the right to release the lien of the Mortgage on the related Mortgage Property and the Servicer shall be entitled to reimbursement for all outstanding unreimbursed Servicing Advances and Monthly Advances from the Custodial Account in accordance with Section 3.04(viii).”
[Looks like the servicer can rent the REO out]
“The Servicer may permit an obligor to pay off a non-performing Mortgage Loan at less than its unpaid principal balance or chargeoff all or a portion of such non-performing Mortgage Loan if such discounted payoff or chargeoff is in accordance with Accepted
Servicing Practices and the Servicer believes that such discounted payoff or chargeoff is in the best interest of the Trust Fund; provided that in the case of any proposed discounted payoff or proposed chargeoff, the Servicer shall notify the Master Servicer, by telecopy and telephone, of the proposed discounted payoff or chargeoff. The Master Servicer shall be deemed to have approved the discounted payoff or chargeoff of any Mortgage Loan unless the Master Servicer notifies the Servicer in writing, within five (5) Business Days after its receipt of the related notice, that it disapproves of the discounted payoff or chargeoff, in which case the Servicer shall not proceed with such discounted payoff or chargeoff.
[The preceding paragraph seems to imply that the servicer has some latitude in conducting short sales]
[Here I skip a paragraph basically telling the servicer to avoid taking property that is contaminated with hazardous waste. Smart move.]
“The Servicer shall use its Best Efforts to dispose of the REO Property as soon as possible and shall sell such REO Property in any event within three years after title has been taken to such REO Property, unless (a) a REMIC election has not been made with respect to the arrangement under which the Mortgage Loans and the REO Property are held, and (b) the Servicer determines,
and gives an appropriate notice to the Master Servicer to such effect, that a longer period is necessary for the orderly liquidation of such REO Property. If a period longer than three years is permitted under the foregoing sentence …”
[Blah Blah Blah]
[Looks like they can hang onto these REO for 3 years. Ugh.]
So, to sum things up, it seems that the servicer has a lot
of leeway to rent, short sell or hold the REO if it appears to be in the best interest of the trust (aka ultimately the bondholders for the resulting REMIC).
thanks for this amazing piece of information!
Three years of zero payments and bleeding dollars on property taxes on an inflated value. California is low compared to other places.
So you are getting 6% returns on the performing loans. Then you have a few of these on the books returning -1.5% ven if they don’t sell. Yeild is going to be near to or less than a treasury.
The person is not an idiot since the more REO property on the books the more work (and overtime) for the REO guys. The guy that turned down the offer may even get promoted if they hire more people in the department. In the 90’s the only way to get an asset manager to sell a property was to give him (or her) and envelope full of cash.
–
“Combined Baldovinos and her husband bring in $6,500 monthly, $1,000 less than the current mortgage payment. ‘I need time to work out a loan modification with my lender so that I can stay in my home. We want the South San Francisco City Council to do everything in their power to help people like me stay in our homes,’ she said.”
No, woman, you don’t need time, what you need to do is stay as long as you can without making payments and then “Walk Away!” Don’t you have time and smarts to watch Cramer?
Jas
Yeah, and do your best not to have another baby while your waiting.
“We want the South San Francisco City Council to do everything in their power to help people like me stay in our homes,’ she said.”
These folks make 6500 per month and they want help from their lender to adjust the mortgage so they can continue to afford a home that came in at $ 7500 per month. This is insane, they are insane, and adult literacy is a real problem in this country. Guess what folks, you can’t afford the house, never could - move, rent, or wait like the rest of us for things to correct themselves.
“or wait” = “and wait”, no?
And you didn’t learn how to read before buying this toxic sinkhole? $8200 would rent the nicest house in the area. When I lived there in San Mateo in 2001-2, nothing was that high. These folks are complete buffoons. Now wanting us to bail them out of their stupidity.
The San Mateo Daily Journal. “In 2004, South San Francisco resident Esthela Baldovinos paid just $2,300 a month for her house. Today, the payments ballooned to $7,500 and will reach $8,200 in November.”
“Baldovinos entered into an adjustable rate mortgage not realizing how high the costs could get. Now she and many like her are asking local entities to pass foreclosure moratoriums.”
“‘I am delinquent on my mortgage because I was given an adjustable rate mortgage. I started out paying 6.5 percent. Now my interest rate is over 12 percent and I can’t afford the payments,’ Baldovinos said.”
“Combined Baldovinos and her husband bring in $6,500 monthly, $1,000 less than the current mortgage payment. ‘I need time to work out a loan modification with my lender so that I can stay in my home. We want the South San Francisco City Council to do everything in their power to help people like me stay in our homes,’ she said.”
Piss me off. These people living in million dollar need help? Get real. STOP LIVING LIKE POSERS, YOU A$$HATS! Geez, instead of the mil McManision/faux Chateux/Garage Majal, get something little more affordable, say 300-350K. Oh, that won’t do! How lower class.
Well, welcome to poorhouse with your bailout complaint. What a bunch of crap. Maybe I should just take a million dollar mortgage and then ask for help.
Mr. Mayor - people that made stupid purchases should lose their home. They knew better (the gut feeling) but let the greed and the mantra (Housing only goes up) overrule common sense and the obvious. I didn’t buy in that area (lived there, know it well) - and my gut told me I couldn’t afford some house at $1M. So yes, they do deserve to lose their homes and let prices come down to reality where average people can afford them without committing financial suicide. No sympathy.
The South San Francisco City Council is considering such a resolution. In addition, the resolution urges lenders to work with affected homeowners. However, the measure holds no authority.”
“‘Nobody should lose their home, nobody,’ said Mayor Rich Garbarino. ‘The thing that concerns me is we can all agree, ‘yes, this is terrible.’ But that’s all we’re doing.’”
with all these stories, one thing that i find interesting is that people are giving these interviews to newspaper about their morg situation.. Dont they have shame? you made a stupid mistake, you gambled you lost, just go hide somewhere.
while initially it was nice to read these stories, I ‘m now started to get annoyed at the shear amount of idiocy in this country.
Un Effin Believable
And many of them dumb enough to go on the record publicly, knowing that they committed mortgage fraud. Sort of like the story of the bankrobber who uses his own deposit slip to write the stick-up note on. LOL
‘i find interesting is that people are giving these interviews to newspaper about their morg situation.. Dont they have shame? ”
It’s their 15 minutes of fame…
“As leaders of two Realtor associations prepare to launch a task force on fraud today…”
—————————————————————————-
I feel so reassured now! (sarcasm off)
‘I still feel that high-rise can do very, very well in Orange County, but not at the current pricing structure.’”
Wouldn’t you just love to be one of the 40% of specuvestors reading this little ditty.
——————————————————————————–
Don’t forget that some of the HOA fees on these high rise’s in Irvine are close to $ 1,000 per month. That’s a steep price to pay for a view of the 405 freeway.
I sent an email to John Husing:
John,
Was your quote for this article out of context?
http://www.dailybulletin.com/business/ci_6998889
“”In the decline of the mid ’90s, we saw a 35-40 percent drop in prices,” he said. “I think when all of this is done, we’ll see prices 10 percent lower and then they’ll stay there for a while.”
It simply makes no sense. The article already says the year over year price decline is 13.7% in the high desert 7.4% in Rvierside/San Bernandino. We already know the following are facts:
1. Sellers are throwing in tons of incentives, thus making the price decline ATLEAST 5-10% lower than the actual reported numbers.
2. The first wave of ARM are just now reseting. There are SEVERAL more waves to come. 80% of the loan over the last 5 years were ARMs during a record sale period. 60% of those are ARMS and it is virtually gaurenteed none of those people realize their mortgage will LITERALLY DOUBLE when the loan resets. It is guarenteed they can’t refinance because they won’t qualify for the higher interest rates.
3. We saw relaxed lending practices and historically low interest rates which allowed dead people qualify for loans, thus inflating the market to a point never seen in history.
How do you actually claim to be an economist and overlook these facts. We had 4900 NODs in San Diego last month and only 3000 sales. HELLO? Isn’t the writing on the wall? If the 90s were only 30-40% we will easily see 50% by the end of this debacle. Nobody is going to want to own our mortage backed securities because they aren’t worth anything thus sending interest rates up, even if helicopter Ben lowers the Fed Fund Rate. Am I missing something obvious here?
You are missing the fact that he is paid for making rosy predictions and keeping the sheeple spending money they don’t actually have and should be saving for the coming rainy days. And by the way, all of your points are valid.
a picture is worth a thousand words:
http://www.smugmug.com/photos/136440158-O.png
“‘Nobody should lose their home, nobody,’ said Mayor Rich Garbarino. ‘The thing that concerns me is we can all agree, ‘yes, this is terrible.’ But that’s all we’re doing.’”
Old economy: Goldilocks
New economy: yes, this is terrible
Newer economy:
City hall is bankrupt
Businesses have shut down
Jobs have left.
I swear, there might be five cities standing when this is all done. None are on the coasts with the possible exception of a battered Houston pulling through. (They are drawing jobs in many industries.)
Denver took its medicine early (not the same as done with the illness), so they are drawing companies from the West coast like mad… I’ve never seen a migration like the one that is going on. I’m including the 1990’s real estate/aerospace downturn too!
Got popcorn?
Neil
“‘Nobody should lose their home, nobody,’ said Mayor Rich Garbarino.
WTF is this dope talking about? Nobody deserves to lose his home? So if I ‘bought’ a $3M mansion along the Malibu coast I will not deserve to lose it if I make friggin $50,000 a year and my inability to support that debt is finally discovered by me missing 23 months in a row?
PEOPLE DESERVE TO LOSE WHAT THEY NEVER COULD AFFORD IN THE FIRST PLACE!
PEOPLE DESERVE TO LOSE THINGS THEY DO NOT TAKE CARE OF!
PEOPLE DESERVE TO HAVE CONSEQUENCES FOR STUPID THINGS THEY CHOOOOOOOOOOSE TO DO!
Geez…I gotta go hit something…that pisses me off too much.
Nobody should lose hishome. You’d expect a Mayor to be able to speak English.
You have to have OWNED your home before you can lose it! I wish they’d get the language right; you don’t own it if you have a mortgage, you are just a caretaker of the property for the bank or mortgage holder and on the hook when disaster strikes.
Most of the people who are losing their home had no down payment in the transaction . These people have been paying low teaser rates or interest only loan payments ,so the skin in the game has be low .
Why is it that lenders never cared before that a FB lost their home ,even when it was due to death ,job loss ,or medical problems .Why all of a sudden is it horrible that a liar borrower who bought to much house can’t really afford the home and is losing it ? It’s horrible all a sudden because Wall Street funded loans are at risk ,that is why .
Again I say ,let the lender that made the stupid loan (or ended up with the stupid loan ) deal with the bed they made .
Can you imagine how upset these lenders are when they either expected a pre-pay penalty yield ,neg amort. yield ,higher interest rate yield on the adjusted up rate ,and they get a loss instead (including all the foreclosure costs ). Let the lender make a deal with the borrower if they want to avoid foreclosure with some FB they took a risk on .
I wish the MSM would stop trying to make this look like a bail out for FB’s when it is really a bail-out for WALL Street CDO funds and other lenders .
It’s just like with the greedy builders that pushed the prices up by selling to a bunch of speculators and unqualified buyers with the builders “special lenders” ,and they continued to over build planning to continue that trend .
The builder would like to to believe that they didn’t know they were selling to short term speculators and unqualified buyers .Yet,major builders got BB ear recently in meetings
just before he cut the rate .
Still to this day you don’t get the true untold story of the housing mania that was funded by liar loans and promoted by realtor myths and promises of better loans down the pike, or a sure bet profit in selling or flipping down the road.If the lenders agent promised these people they could get a better loan down the road ,than maybe that lender should be the one that gives them a better loan,not the taxpayers .
Just cause I don’t want to work: I think “their” is a perfectly valid construction. English has no single neutral possessive and as a woman, have everything default to “his” gets old.
Can I pay $1000 HOA to have a view of the world’s longest parking lot (one of the many negative names of the 405 Fwy - also known as the San Diego Fwy)
Sorry, largest parking lot known to mankind is the LIE (Long Island Expressway) or the Santa Monica/405 interchange, both at rush hour!
Try the M25 ring motorway around London, semi-officially known as “the road to hell” (See trivia section in the link).
There have been days when the whole thing became a parking lot: traffic backed up so far that the end of the line reached the beginning. Seriously.
The M25 still scares me, even though its 6,000 miles (and 7 years of my life) away. The 405 southbound in the rush hour is less scary than the M25.
{shudder}
Can I pay $1000 HOA to have a view of the world’s longest parking lot (one of the many negative names of the 405 Fwy - also known as the San Diego Fwy)? I would love to live where the fumes of the thousands of cars can come and give me fresh air on the patio while I observe the diesel smoke belching out of the thousands of semis idling for hours. And let’s not forget the regular fender benders because people forget they are sitting there going nowhere and crunch the car in front of them (causing more backups and delays). Oh, how much fun that would be.
HOA = a grand/month.
Good grief!
For that I better get a butler, French/Italian Chef, waiter, wine cellar, masseuse, driver, and a lifetime membership to Pebble Beach and Augusta National, as well as Angel tickets and a lifetime pass to Disneyland and Club 33.
Just got off the phone with one of the bigger retail dealers in Gold bullion, in L.A.
This week has been a rather one sided affair…
My buddy figures he sold $250k this week over the counter, and bought less than $25k over the counter.
10 to 1 ratio
Won’t be long before the Gold Window slams shut…
Hesitation is not an option
last year he worked for Century 21
I attribute that to the credit crunch. Qualified buyers can’t get their loans funded,’ he said
If someone cannot qualify for a bank loan, I would not classify them as qualified buyers. When you sort the wheat from the shaft, calling the shaft qualified does not make it so.
Qualified buyers can get their loans funded. We do it every day. However, I am finding that 3 out of 4 people that I talk with are not qualified. The biggest reason is income….it is too low to buy what they want. Another way of looking at this is that prices are too high. My take on it, is that prices are 30-40% too high based on incomes here in SoCalif. I am basing this on my 25+ years in the home loan business…..
Only 30-40%? Couldn’t you sharpen your pencil and come back with 50-60%?
Good info. Thanks.
Sensible, what do their credit profiles look like? Thanks.
Sensible Lender ….Well, these potential buyers that can’t qualify now would of been a foreclosure in the future or they will find out later that a turn down now will save them money in the future when prices finally go down to affordability levels .
“‘Basically you have a housing market that is somewhat seized up from the flood of bad news that keeps coming out,’
Engines are either seized up or they aren’t…
It’s akin to being pregnant
Help!!! I’m a victim too. I sold my home in June 2006 and now I’m forced to rent. Why wont anyone help me get out of this rental. You dont know what it’s like living with money in the bank, collecting interest.
For god sakes, wont the bank give an ARM up? I’m all alone here.
Pity me.
Please excuse the OT, but I was just checking out the latest Case-Shiller report and I recalled that new construction data is excluded.
This is crazy and I realize the index is based on repeat sales, but if new home price reductions (including free upgrades) were somehow thrown into the calculations, does anybody think it would result in dramatically worse price drops? I only ask because median prices don’t seem to be all that affected by home builders’ big price cuts.
I don’t understand how you could apply the Case-Shiller methodology to new construction… what would the basis point be?
walt526,
You are 100% technically correct.
But I *think* the point bots is making is that, due to incentives, new home construction is leading the market down.
The index just isn’t set up to capture that. Oh well… 
Got popcorn?
Neil
Nevermind… my question was ridiculous. It would just be nice to see an index that fully accounts for all data available. It’s also very frustrating to see my local newspaper spouting out the positive y-o-y Dataquick median without acknowledging that it’s most likely skewed by higher end sales. Even NAR admits this.
Wonder why it has been taking the Calif pieces about three hours to appear on my machine. (Today, yesterday, and the two days before that.) Does this have something to do with the Russian spammers?
“Mike Collins of Collins Realty in Stockton, said asset managers for the banks are being so hard-nosed and demanding, if not irrational, about what they’re expecting for their foreclosures that it’s shocking.”
Folks we need to be very clear now about the stakes. The asswipes that screwed this market are doing their best to keep this racket going. And when they are done here they are going to do it again somewhere else.
And it is our job - no, our duty to our families and our children, to screw these idiots as hard as possible. What is at stake here is the standard of living and quality of life of future generations. What is at stake is the next massive bubble that these bastards are going to blow somewhere.
These people need to be taken out to the shed and giving the financial beating of their lives so they never come back and hurt the rest of us again. Let these asswipes burn. No offers. No negotiating. Just let them burn.
We’ll all be better off for it.
The market need to give these lenders Posttraumatic Subprime Disorder.
Jim Cramer said he is bullish. Well no sh*t. He begged for the FED to cut rates so that things will go up.
Phantom bull market fueled by inflation.
Ben “the Printer” Bernanke
“The four Sacramento County residents are alleged to have recruited six buyers to purchase homes in Elk Grove last year with no money down and promises they would fill them with renters who would cover all the expenses. Buyers were told that after two years the renters would buy the homes, the indictment states.”
all these people need to go to jail. even the buyers were in on this scam. they need to charge the buyers with fraud. maybe if they quit portraying these fraudsters as victims then no more will come out of the woodwork claiming ” HELP ME, IVE BEEN TAKEN ADVANTAGE OF”
all this just makes me sick! i want to be on the jury.
“Housing consultant Mark Boud said that with price tags of $500,000 and up and homeowner’s dues starting at $600 a month, condo towers in Orange County are overpriced, in part because of the success of the Marquee towers.”
This is part of why I think real estate nationwide will take a tremendous plunge (40% - 95% death plunge). Who is going to buy all of these condos (or most of the newly built housing to boot)? If most of the US economy is housing and that falls apart, who is going to buy this? Wealthy foreigners? Pretty rare unlike what the media shills tell you. I suppose your government could seize the properties and make them into housing for the poor (likely to grow in vast numbers) but that would be suicide for any city at the rate this bubble is blowing up. As for the people losing houses due to rate increases…zzz…zzz…wake me up in 2012 when I can buy a whole subdivision of Mcmansions for 150K.
By the way, there’s maybe $850 billion or so of actual currency in the USA (US dollars, mind you). The banks have total ‘deposits’ of around $7.2 trillion (2005 numbers, sorry). Might we have a problem with any kind of run on the bank?
run on the bank.. as in economic anarchy?
Sure, it would be a problem, but not one without a solution. I imagine the solution would be a New Deal #2.. various laws restricting transactions.. a lot of executive orders.. forced cooperation from business/labor.. if it got really bad, a federal takeover of whatever industries need be.. essentially, a vast increase federal power.
ANOTHER FORMER REAL ESTATE MOGUL is RAIDED by THE LAW:
http://bakersfieldbubble.blogspot.com/
Cheers….
http://www.knbc.com/news/14177936/detail.html?rss=la&psp=nationalnews
It’s nice to see some things are still Made in the U.S.A.
Wow… The tv show “The Closer” with Kira Sedgwick as a murder investigator is ALL OVER this housing bubble.
One auditor got killed when she uncovered fraud being used to fund a failed flip in the Hollywood hills.
In another episode, a divorce lawyer got killed when he found the husband owned a second house that was being used to grow pot.
$600 for HOA fees to live in an OC highrise? Wow…..what a bunch of idiots.
The Rock Island Line is a mighty good home
The Rock Island Line is the road to ride
The Rock Island Line is a mighty good home
If you want to ride you gotta ride it like you find it
Get your ticket at the station for the Rock Island home
If EVERYBODY gave, then I could SAVE MY Rock Island Home !