The Fat Years Have Ended In California
The Bay Area Newsgroup reports from California. “Despite incomes of $150,000 and more, many homeowners in the East Bay are surprised to discover they are unable to refinance their homes. Increasingly, lenders are shunning homeowners who have burdened their houses with too much debt. At the same time, home values have plunged. So, the bottom line in today’s swift-moving credit markets: It isn’t so much what you make, but what you owe.”
“For the once-sizzling housing market, the proverbial seven fat years have ended. ‘The era of unlimited funds at very affordable prices for consumers is most certainly over,’ said Christopher George, president of San Ramon-based mortgage firm CMG Financial. ‘That period of time has closed.’”
“Farid Khan, a Tracy resident, pulls down $160,000 a year. He has tried to refinance his home in a quest to lower his mortgage payments. Even with a top-flight credit report, he apparently can forget about getting a new loan.”
“‘I’ve gone to about 10 lenders in three months,’ said Khan, a Mountain House resident who asked that his real name not be used. ‘They don’t have a loan for me. I have no choice but to sit around and keep making these mortgage payments.’”
“In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”
“Christopher Tassano has approached about 15 lenders to refinance his Martinez home, which he bought in 2005 for $385,000. The $2,200 monthly mortgage pinched his budget. Lenders assured him he could easily refinance in 2006. No such luck.”
“Values are an issue. He figures the house is worth no more than the purchase price. ‘I have tried about 15 times to get a new loan,’ said Tassano, who asked that his full name be kept private. ‘No one wants to talk to you now.’”
“Yet lenders continue to solicit Tassano’s business. ‘I get five or so letters a day in the mail offering a new loan,’ Tassano.”
“Realty insiders hope the Federal Reserve’s cut in interest rates could thaw the frozen mortgage market. ‘It’s not a magic bullet,’ said Jerry Stadtler, a realty agent and CEO of San Ramon-based Bay Area Funding. ‘But it gives us something positive to talk about.’”
The Sacramento Bee. “A car tire, an empty bottle of Wild Irish Rose and a handful of Bud Light cans litter the yard. Shoots of dried weeds stand 5 feet tall. The doors and windows are covered with plywood.”
“Sacramento County officials say, the downturn in the housing market is resulting in scores of vacant uncared-for homes blighting local neighborhoods.”
“Supervisor Roger Dickinson said not just poor neighborhoods are affected. ‘We are seeing foreclosures in neighborhoods that are considered middle class or upper middle class,’ Dickinson said.”
The Santa Cruz Sentinel. “Chavez Furniture, which opened its Main Street store as the Watsonville housing market took off in 2003, will close its doors by the first week in December.”
“Agustin Chavez, owner of the three-store chain, said keeping open the store — one of the largest retail spaces downtown — didn’t make sense given the state of the housing market and economy.”
“‘People are barely making mortgages; there’s not enough money for furniture,’ Chavez said. ‘I don’t blame the customers. Even myself, I wouldn’t go shopping for big-ticket things.’”
“A couple of blocks away on Brennan Street, Baker Bros. Furniture also has seen sales decline, said Debbie Baker. ‘People are losing their homes in foreclosures. They’re downsizing to renting a house or moving back [with] families. They don’t need a lot of furniture to put in a littler place,’ Baker said.”
“Chuck Berg, owner of Senate Furniture Galleries in Santa Cruz and Senate Furniture and Mattress in Soquel, said sales started slipping in the spring of 2006. ‘When people were refinancing, they were spending the extra money in our stores,’ said. ‘People felt they were worth more.’”
“Countywide, 308 homes have been in foreclosure to date this year, including nine added to the list last week, according to the Santa Cruz Record, a weekly business and legal newspaper that tracks property transactions. Last year there were 97 foreclosures by the beginning of October.”
“The number of people who have missed a mortgage payment in the county also has more than doubled to 649, and 163 owners have lost their properties to foreclosure, the Santa Cruz Record reports.”
The Bakersfield Californian. “Foreclosed homes, and those at risk of foreclosure, constitute a major portion of the homes for sale in Bakersfield, which could further pull down local home prices.”
“Nearly a quarter of Bakersfield homes listed for sale in September were ‘distressed,’ meaning they were offered by sellers acting under duress, according to a preliminary copy of The Crabtree Report, authored and released Tuesday by local appraiser Gary Crabtree.”
“‘That figure is pretty stunning,” said John Burns, an Irvine-based new construction consultant with clients in Bakersfield. ‘It tells you that it’s a buyer’s market, and you’re going to have some distressed sellers here pretty reluctantly lowering prices.’”
“September’s distressed listings increased from August, when one in 5.6 homes for sale were distressed, the report states. Last year’s tally of distressed properties was not included in the report. They were likely negligible…Crabtree said.”
“The median price of a distressed sale last month was $228,000 — $42,000 less than the $270,000 median price of standard transactions, Crabtree wrote.”
“‘Buyers are looking for desperate sellers,’ said said Raju Jassar, the broker and owner of Real Estate Professionals of Bakersfield. ‘And they know that some builders, and a lot of banks, have inventory they need to liquidate immediately.’”
“Bakersfield’s market difficulties stem mainly from rapid new home construction and a prevalence of subprime loans, which were especially popular in affordable parts of the state, said Leslie Appleton-Young, chief economist with the California Association of Realtors.”
“The Inland Empire, Riverside, San Bernardino and Sacramento also are being hit hard by foreclosures, she said. ‘The areas that went up fastest (in price appreciation) are going down hardest,’ Appleton-Young said.”
“Sen. Dean Florez is asking the Kern County Board of Supervisors to form a specialized real estate fraud-fighting unit within the District Attorney’s office.”
“At least 14 California counties have similar programs, which are authorized under a 10-year-old state law, the release states. ‘Good for him,’ Bakersfield appraiser Gary Crabtree said.”
“Kern County’s foreclosure rate has jumped 190 percent since last year, making the county fourth in the state for foreclosures, according to Florez’s release. Questionable transactions may be compounding the state’s housing problems, the release states.”
“‘The best defense against a full-scale meltdown of the housing market is to make sure individual homebuyers know as much as they can about lending practices and about resources available to those under threat of foreclosure,’ Florez said in the release.”
From KGET.com. “Foreclosures, fraud, and a slumping real estate market was the focus of a 17 News In Depth Forum Sunday night. With foreclosures at record levels in Bakersfield, home prices falling, and inventories on the rise, the consensus among our panelists was ‘it’s a buyer’s market.’”
“‘Right now we’re seeing sellers willing to participate to assist buyers to get into their homes,’ said Beth Cheatwood, Medallion Mortgage branch manager.”
“‘The buyers are seeking the best possible price, and now the sellers are having to think like the buyers,’ said Jon Busby, Bakersfield Premiere Realty.”
“We pointed out the soaring appreciation rates have far out-paced income levels in the Bakersfield market, so is it really a buyer’s market?” “‘Some sellers are more motivated than others,’ Busby said.”
‘Santa Maria and Lompoc report the majority of foreclosures in Santa Barbara County. Year-to-date home sales in Lompoc are down by 19 percent. In Santa Maria, sales dipped by 33 percent in July, with the median home price down by 12 percent to $389,000. So far this year, Santa Maria home sales are down 21 percent overall and the median home price dropped to $400,000, or 11 percent compared to last year’s numbers.’
‘That can create problems for middle- to lower-income residents who may have taken out non-conventional loans and who are now having problems with their payments. Many homeowners over the past several years have taken loans against the equity in their homes - equity that is now disappearing as home prices drop.’
Credit crunch crushed a developer in Spain — Euribor.
any details on this or a link?
I’d heard anecdotely that Spain was in real trouble in housing.
any details much appreciated
Hi Ben!
I’ve lurked here longer than I care to admit…if I’d have to gander, I’d say back in late ‘05 early ‘06…(when some of the trolls frightened me into silence–the good old days, now ya can’t shut me up!)
I’ve read many deja moo (thanks to the one who coined this-it’s priceless!)
Your synopsis above brought a tear to my eye.
Thanks for all your hard work, and outstanding research capabilities-you are adept, able to paint the American social psychology.
I believe (IMHO) this one is by far, the best. Humane, statistically forthright, and judiciously ballanced.
Best Always,
Leigh
Here here agreed =)
“So, the bottom line in today’s swift-moving credit markets: It isn’t so much what you make, but what you owe.”
Then this economy is on a heap of trouble.
That first article is Scary. Good grief.
It’s only scary if you’re a debt junky. Those of us who are debt free give the article a big whatever.
It has nothing to do with one’s status as a “debt junky.” It has everything to do with the tightening of credit standards in the jumbo residential mortgage market. If high income individuals with strong credit scores are unable to refinance, then there’s no hope for the vast majority of the population. And that’s scary, IMO.
Got cash, guns, and ammo?
Correction:
“If high income individuals with strong credit scores who OWE MORE THAN THEIR HOME IS WORTH are unable to refinance…”
…then the financial world is finally coming to its collective sense. Sorry, but if you want to borrow a couple hundred grand WITHOUT collatoral (e.g. when LTV is greater than 100%), then I’m going to ask for credit card rates.
RE: Got cash, guns, and ammo?
Seen the price of a 1000 rounds of Wolf 7.62×39 or .223 lately?
Better than buyin’ gold-if you can find a supplier!
You know emcee, I’m re-reading your post and i don’t think you get it. If high income individuals with good credit scores didn’t get a great loan program with a fantastic rate (no excuse ’cause rates have been low forever) the first time around, then they deserve a Joshua tree. If high income individuals with great credit scores didn’t have enough sense to live within their means and had to continue to go to the “equity well” with chronic cash-out refi’s, then they deserve the Joshua tree. If high income individuals with great credit scores didn’t have enough cash reserves to ride this thing out, then they deserve the Joshua tree. If high income individuals with great credit scores still managed to buy a house 8x their income, they deserve two Joshua trees!
Are you starting to get my point? The way I see it, we haven’t even got close to what I would call conservative underwriting standards. You want to qualify for 417+K loan amount?…..well then you better have 20% down that you can show me that you personally saved by being a prudent consumer, you better be able to show me 2 years tax returns or W-2’s that I can verify, and you better have at least 6 months in liquid cash reserves when the whole deal is said and done. Would you lend YOUR money for anything else?
I count 5 Joshua trees, that’s a lot of hurt…
If I could borrow money at 4.75%, then I might consider lending to an individual who never missed a payment with an income that leaves plenty left over after debt service at 7% or so. I don’t know about the LTV limit, although given the depreciating track of housing, I’d probably need a bit of an equity cushion, but not 20%, not for that sort of individual.
But that’s not the point. The point is that if an individual of that financial stock is not able to refinance, then all those of inferior financial stock cannot refinance either. And if that’s the case, then the foreclosure wave we’ve seen so far is just a drop in the bucket.
But he can’t refinance because he has too much debt, correct? He has ‘top flight credit’. Or am I misunderstanding?
Cash, guns and ammo…check.
Enough hands to lord them…check.
Giggles,
Leigh
Hi hd74man,
7.62×39 priceless!! Scored $110/case. Wohooo!!!
(too high, this dang war is killing the bullets of that calliber!)
Smiles,
Leigh
Heck - you priced 5.56 lately? Even the “cheap” stuff is getting pretty rich. My LWRC is starving (well maybe not starving, but definitely on a forced diet)
Equity is an opinion but debt is real.
Contracts call out debt not value.
Well, someone has to say it. California is going to be poor. America is going to be poor. No need to whitewash.
They’ve been poor and living rich on someone else’s money.
Exactly, here’s a prime example…
http://www.azcentral.com/arizonarepublic/business/articles/1003biz-powerline1003.html
I’m not even an AZ resident and that article ticked me off. Energy wars, water wars between states. No wonder some states are talking about secession. Interesting about that law that was passed that allows the FEDs to dictate to one state on behalf of another.
WATER! Above and below ground!
Water, and take care of it, ’cause bald monkeys can’t funtion for shite without it!
Fuck! How many times I gotta say it!
er…can you say Wisconsin? Cheeseheads are funny!
(but we have water!)
I would laugh if this were funny–but it is not.
Resources are not a laughing matter.
Water wars are NOT funny…energy wars are NOT funny.
Now, what the hey are we going to do about this? (genuine question, as I do not know the answer)
When I first read the article I thought “What the he ll? Build you’re own freakin’ power plants….”
Then I thought about it a bit. AZ doesn’t have any gasoline refineries. All our fuel is refined in CA and NM, and piped in.
And, if they are buying electricity from us, that is jobs here and money coming into the state. Money we’re going to need as our #1 industry (construction + real estate) tanks hard.
All our cheap Chinese crap comes in through CA. We get food from them. We ship out our copper through CA.
They need to buy some power from us? What’s the big freakin’ deal?
A wealthy person once told me: “It isn’t so much what you make, but what you keep.” - This is foreign to so many Americans.
Yes… there is a very important distinct definition between the words “Wealthy” and “Rich” that often gets lost in the street translation…
A poor person can be wealthy, and a rich person can be very unwealthy.
In short… wealth is an expression of time (the amount of time you can live off of your assets) where rich is an expression of income.
My friends from the Northeast used to give me a load of crap about living in FLA, especially about the income of most Floridians. But while they were stressing out and making more moola, they were also taking on more debt. I’ve got way more money in the bank than most of them and a positive net worth, something they mostly don’t have.
Wink
Quality of life has to count for something, too. Best advice I ever received has been that the key to financial freedom is to keep overhead low and don’t live beyond your means.
Fixed and Variable Costs:
FIXED MUST BE LOW. That is the key to happiness. If your variable costs are high, you just cut back and you are fine. The sheeple all have high FIXED costs and are screwed.
“Don’t live beyond your means”. This is an Islamic teaching. We Muslims are not allowed to take or receive interest. That saved me from falling in this housing bobble cliff. I have credit line of more than 30k I awe absolutely 0$. I pay me statement every month.
Wealth…love of family, friends and respect of foes.
Rich…nothing but money matters, crass, souless, unweathly.
Original thought…dang!
My favorite Aunt quoted this often in my youth.
Another one she said “Don’t be too proud to pick up that penny!” (I still do to this day, I kid you not!)
Remebering fondly. Ah.
Leigh
Well, Kahn ought to be OK if he just eats instant Raman noodles instead of Ajisen ($12 for a large bowl of noodles), spends most of his disposable income on his mortgage, and doesn’t get laid off.
OT: who is going to write the next best seller:
SUBPRIME:
How California screwed the world
(OK, I know CA Jumbo Prime and Alt-A mortgages are also going to screw over a lot of investors, but that’s not as catchy).
Nah, he’s not okay. It’s my bet he’s still screwed if he doesn’t eat at all, get’s a raise at work, and spends all of his disposable income on his mortgage.
Kahn says, “I have no choice but to sit around and keep making these mortgage payments.”
Sure he may do that for a while. His $672,000 house may cost him $6,000/month or $72,000/year. He makes $150,000. So that is only 48% of his income. Of course, when his rate resets to 9% next year, his payment will go up another $20,000/year. He then may look at the comps and realize his house is now worth $400,000. Then he will see he can rent a similar house for $30,000/year (41% of his payment). He will wonder why he is dumping $42,000 a year down a rat hole to protect $275,000 in negative value.
This is why the bubble correction takes so long. No one takes any action until the pain is so great, the imbalance so obvious, that they finally see the answer: Jingle Mail. Kahn will mail the keys to the lender within 24 months. The only question will be what took so long?
A 48% of pre-tax income toward the mortgage, living in California, is great pain the way I see it.
Pinch!
Ready to play do the numbers? Come on…you know PITI better than most!! I promise-it will be fun!
160K a year x 10% down = $16,000.00.
OKaaaaaaaaaay…I’ll stop. We both know that he does not have $16K and closing cost.
I did not mean to pull your toes (no more numbers tonight!)
Weeeee!
Leigh
“Kahn will mail the keys to the lender within 24 months.”
A subprime idiot has nothing to lose, but the hard working Mr. Kahn probably has assets that will be tapped if he decides to mail in the keys; hope he enjoys living there because he’s going to be there for some time, upside down, and going deeper by the month. Wasn’t it Janis Joplin who said: freedom is when ‘ya got nothing left to lose?
It sounds like Mr. Kahn still has his original loan, and hasn’t refinanced. He can walk away and the purchase-money lender can’t touch his other assets. California is a non-recourse state.
Nearly a quarter of Bakersfield homes listed for sale in September ‘were ‘distressed,’ meaning they were offered by sellers acting under duress”
- If the press is reporting that 25% of the homes are in distress, then there is probably another 25% hanging on by their fingernails before forclosure.
duress…not one of the funnier California States of mind.
dude, duress aint fun, doesnt matter if its in Cali or not.
Recent graduates of How To Make a Million in Foreclosures classes rush to catch a falling knife
http://www.mercurynews.com/ci_7069484
And I’m serious about those full page ads running in the Mercury News from the latest get rich charlatans coming through town. If I knew how to make a mint in foreclosures (and I do) why would I tell anyone about it ?
“If I knew how to make a mint in foreclosures (and I do) why would I tell anyone about it ?”
Exactly.
The 20+ years I have spent kicking around in r.e. was mostly the school of hard knocks and little pay, working for many a-holes. Why in the world would I create more competition for myself?
The numerous people I tried to talk out of cutting their own throats, along with their families, never listened to me. But alas, even if my net worth is nothing more than two pennies to rub together, I still have greater net worth than probably 90% of the U.S. That’s scary.
“‘People are barely making mortgages; there’s not enough money for furniture,’ Chavez said. ‘I don’t blame the customers. Even myself, I wouldn’t go shopping for big-ticket things.’”
So closing three stores and laying off help. Not much of a surprise. Sad.
The side effect, “Even myself, I wouldn’t go shopping for big-ticket things.” creates a new ripple. I doubt if Mr. Chavez is hurting, just cutting losses. A long slide down.
“‘People are barely making mortgages; there’s not enough money for furniture,’ Chavez said. ‘I don’t blame the customers. Even myself, I wouldn’t go shopping for big-ticket things.’”
For how long can the casualty count in the War on Savers be successfully kept secret?
For how long can the casualty count in the War on Savers be successfully kept secret?
uh oh–my butt is grass! HELP! There’s not enough aspirin or V!
Shoot!
Leigh
“In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”
Ouch! Ouch! Bet Khan wishes he was a bitter renter.
Sounds to me like he got Khaned. (Not sure if this rhymes with “conned” or “caned”, though…)
Sorry,
Couldn’t resist the temptation.
Khan, Khan, you’ve got Genesis…
KIRK’S VOICE
but you don’t have me! you were going to kill me, Khan!
You’re going to have to come down here! You’re going to have to
come down here!
KKKKKAAAAHHHHNNNN!!!!!
Sorta relevant since so many Clownifornians thought they could come here and get rich on all that “undervalued” RE in Texas! Ha!
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/100407dnbustxhomeinventory.1351d5bff.html
Anyone who thinks Texas is undervalued couldn’t have spent much time there. It’s hot, sticky, economically depressed, there’s endless land to build on and new housing everywhere.
RE: Anyone who thinks Texas is undervalued couldn’t have spent much time there. It’s hot, sticky, economically depressed…
And that’s not to mention 2 million wild, feral pigs runnin’ around!
Now, now……I’m sure there’s some good looking women around there somewhere.
Do you like them big?
Are you comin’ on to me Wickedheart?
Or, do you like them skinny and mean?
EVERYthing is bigger in Texas…er…wink.
Squeal like a pig, boy!
Texas: Fire ants, funnel clouds and F’d borrowers who are wishing for the first two…
“Or, do you like them skinny and mean?”
My wife weighs 115lbs and at times she scares the hell out me. (I wouldn’t call her mean, though. I usually give her just cause.)
“I usually give her just cause”…….like when I use our walk-in closet for Joshua tree storage. Looking back, I can see being upset.
Go kiss her on the face…a big wet one!
You Joshua tree storage hogger!
Curtsey to Mrs. Exmort’b~
Leigh
Oh, and the nice areas in Texas, places I’d actually consider living in, are expensive! The Hill Country is not cheap by any means and property taxes in Texas are a killer.
I hate Texas new housing developments. One of the things I really like about San Antonio is all the trees. The first thing they do in these developments is chop down all the trees and stick in a crappy cookie cutter landscape. Ugly as all hell.
“The first thing they do in these developments is chop down all the trees and stick in a crappy cookie cutter landscape. Ugly as all hell”
Testify! Florida has a pretty good infestation of that cookie cutter crap. They cut down the trees, and then put these pathetic little saplings in the yard. Like those will ever grow to be something one day.
“Farid Khan, a Tracy resident, pulls down $160,000 a year. He has tried to refinance his home in a quest to lower his mortgage payments. Even with a top-flight credit report, he apparently can forget about getting a new loan.”
How can this be? Something must be terribly wrong in the world.
What bugs me with these stories, Ben, is that the reporters NEVER EVER EVER ask the literal and proverbial million dollar question…
“How the freak can you make what the top 15% of the world makes annually and NOT be able to get a loan, esp. IF you have perfect credit? Could it be YOU are in DEBT UP TO YOUR EYEBALLS?
Just once, please someone, anyone ask these clowns the questions.
Bueller, Bueller. Bueller! Hello.
Agreed. Also, he can’t actually afford a $670K home on only $160K which would equate to $480 loan amount under normal Freddie Fannie guidelines. As usual, he overspent.
Dude - $150K is way more than what the top 15 percent in the world makes - commercial culture has given us a very skewed view of wealth. I’m sure someone who makes $150K is in the top 0.5% of global income. Shoot - that’s near top 3-5% in the USA.
Got a 35% reduction in pay 4 yrs ago …after 30+yrs with same firm, the majority of middle america is making 30-50k.
I make 50k IF I work another full schedule.
So, the news is WRONG, the people who make 160k in CA or anywhere else are relatively few- that minority of 2% and those above.
The economy is based on the media telling us that we must live like the “jones”, credit card co’s/banks swindling the working american and then castigating the middle american because “we” bought into the “American Dream”, the rest of the nuts were Fix/Flippers that overbought/overdreamt.
The value of the loan apparently exceeds the value of the house by $174,000. Would you lend him even $498,000 (100% LTV) today, or would you be inclined to lend him $398,400 (80%)? If you go the latter route, Kahn needs to do a cash in refi of $275,600. Nearly 2 years of his salary….to accomplish what? Protect an overvalued asset that continues to drop in value? He will get a clue soon.
To the gawds, I wish you were right. So few can even spell
C-L-U-E. Bless us all.
maybe Farid doesn’t have any equity in his property. if he originally bought it with no or low down payment, he’s toast, especially since his value has probably decreased alot.
and btw, anyone who chooses Farid Kahn as a fake name imo deserves to be toast/
How can this be? Something must be terribly wrong in the world.
Yes, the capitalist pigs now want to calculate something they call LTV. This is nothing but a war on the proletariat! We must keep the party vigilant on such matters. Next they might limit DTI. Long live the revolution! REAL ESTATE ONLY GOES UP!
Comrade Neil
The real problem here is that they guy ‘making $160,000′ thinks he’s doing well. Why? ‘Cause he remembers when his dad hit $100,000 back in ‘79. Oops, it takes $300,000 to have the same buying power today, and, don’t forget, housing is included in the CPI through rents, not mortgage values.
‘I have tried about 15 times to get a new loan,’ said Tassano, who asked that his full name be kept private. ‘No one wants to talk to you now.’”
LOL, anyone notice his “full name” was just above this? Nice job!
I saw that also….
Would that be Christopher Tassano? Good thing that is a common name, otherwise we might know exactly who he is.
Reminder to myself: txchick57 is really fast. Must post comments faster to beat her to the punch.
Chief:
Get me the Cone of $ilence
86, out.
Nice editing.
Hey Mr. Homedebtor, tell us your story. We will keep your name confidential…
OK, yes. Maybe Mr. Tassano, and/or the article writer, are prime candidates for The Short Bus. Or, maybe, just maybe, Christopher Tassano is not his real name. Or Tassano is his middle name.
I get concerned that some in this blog community will injure themselves leaping to conclusions. Perhaps they’ll have to HELOC to pay their medical bills. Oops! They’re all ecstatic renters!
“…Oops! They’re all ecstatic renters!”
Bugs: “eh, Wine Country Dude, I don’t think so! …have you been drinking Daffy’s moldy Cabernet?”
Thanks for your concern, Duuude but given the track record of the journalists and FB’s here the odds that these two aren’t candidates for the short bus are probably less than 1 percent.
“For the once-sizzling housing market, the proverbial seven fat years have ended. ‘The era of unlimited funds at very affordable prices for consumers is most certainly over,’ said Christopher George, president of San Ramon-based mortgage firm CMG Financial. ‘That period of time has closed.’”
CMG financial offered the checking account mortgage and was one of the prime pushers of Alt A, Option ARMS mortgages as well. LOL
from April 22, 2005 Inman
“…Whether a borrower benefits from this program or not depends on whether the gain from using the mortgage as a checking account exceeds the cost of the above-market margin. There is no easy way to determine this. CMG does not allow users to calculate interest savings uncontaminated by extra payments, nor does it indicate how far above the market their margin is.
The CMG plan may discipline borrowers to save more than they would otherwise, which could be a valuable feature for some consumers. Forthright merchandising would stress this feature, rather than implying that the early payoff and mortgage interest savings that arise from the borrower’s own additional savings are due to the program.
Note also that CMG offers only one type of mortgage under this program. It is one of the riskier ARMs around because the rate is adjusted every month based on movements in Libor, a highly volatile index. This is not a mortgage for borrowers who would have trouble dealing with rising payments….”
http://tinyurl.com/2jhvn5
Mr. George, do you realize that most of your borrowers are just as screwed as Mssrs Khan and Tossano?
“The East Bay is unique, it can be its own economic micro-climate,” said Christopher George, president of CMG Financial Services, a San Ramon-based firm that provides mortgages and other services.
“You have what are essentially new towns that have sprouted in the East Bay, like Brentwood,” George said. “You’ve got Mountain House. The East Bay will not see nearly as severe a downturn in housing.” — Christopher George, Dec ‘05.
I saved this quote because I knew it would come in useful at some point
Cass Elliot had Fat Talent…
All the loans are Jumbo
And no one can pay
I’ve been on a walk
Call it a blog-free foray
I’d be forewarned
If I was in el lay
California Dreamin’
On such an October day
Saint Joesph’s upside down perch
I passed along the way
Well, people are real estate diseased
In the casino they play
You know i’ll preach here, even if it gets old
I’ll have my say
California Dreamin’
Game over, no one can play
http://www.youtube.com/watch?v=fYWCvLVLM08
The contagion will come from the East. That is East Bay.
Expect it to engulf the whol Bay Area before it’s done. It will be over when the politicans roll by shouting “Bring out your dead and no one comes out”
“In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”
LENDER: Okay Mr. Khan we need 20 % down and we will finance you for 80 % of 498,000. How does that sound?
KHAN: But the appraiser said my house is worth…
LENDER: Sorry to interrupt but If Lennar is selling a similar house for 498,000 we don’t need to bother with a out of work and out of town appraiser
KHAN: Damn you bankers
KHAN: Damn you bankers
Khan: Now I have no choice but to leave the room leaving only you and this gorgeous woman dyed green. (Khan leaves room)
Kirk: I won’t fall for that TRICK, again KHAN! Now that I sell HOTEL ROOMS on PRICELINE (taaa-da), thwarting your evil plans is CHILDs play. Bones, get in here. (Kirk is talking to his cell phone, but its not on.)
Gorgeous Green woman: Shall we get a hotel room?
Kirk: Dang it bones, they wouldn’t accept my bid for $65 for the night! (Trying to priceline on Iphone)
Khan: (sticks head in room): I’ll lend you this room for $40, just sign here.
Kirk: (Signs paper in pompous manner, hands over two ATM bills)
Khan: (Snickers as he now has approval on his appraisal.) Now I’m saved. (Stops as he see’s the penciled in monthly payment with mandatory tax and insurance with-holding acount.) Noooo! (Runs into door now locked from the other side.)
Moral: Don’t go begging to the bank.
Neil,
Khan name also called to my mind Star Trek II; The Wrath of Khan. See my post above. Couldn’t resist.
wink.
I wouldn’t want to bear the Wrath of Khan…
“In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”
How can people who pull in almost $200K a year be so well..stupid…You refi the heck out of the home(guess you want to see what it is like to live on $400K) or you purchase at the height of the market like the rest of the zombies..I MUST BUY !! MUST BUY!!..I mean I can’t feel sorry for someone who is smart enough to make the money but not smart enough when spending it…ohh I forgot.. PEOPLE ARE SMART…
Why do you assume any correlation between income and intelligence? In my experience, some of the dumbest people that I have known (in terms of raw intellect) have been very financially successful–usually with some sort of variant of corporate sales.
Ignorance — and the confidence that comes with not recognizing the downside — gets you a long way in sales. The applicable maxim is “Often wrong, never in doubt.”
He is obviously overpaid. Either you have a brain or you don’t. There is no excuse like “I am no good at math, but good at this other thing” b.s.
God I hate that commercial.
The market is finally creeping over the Altamont Pass, where Mountain House is, to here in the Tri-Valley. All of the greedy idiots who took equity out of their homes to buy “investment” properties in the valley are starting to get distressed. Housing is a crappy investment….too much overhead.
I read the article about the idiot Khan…he doesn’t want his real name used because nothing like being outed as an idiot in the paper to make your day. I sat there and read the article and wondered why they don’t do articles on people like myself who realized the loans being offered to me were going to blow up in my face and choose not to participate. Now I’m renting in a neighborhood where it would cost at least 2.5 times more a month to own in and living well within my means. I figured out why…it doesn’t make good press to point out there are people who didn’t drink the kool-aid and get in over their heads. How can we lobby for a bail-out if it was pointed out not everybody took out suicide loans which were destined to go bad.
I have absolutely no sympathy for the idiots with the bad loans, I do feel for the folks who are losing their jobs in the retail sector which ballooned during the bubble….but those retail sectors need to deflate along with the housing bubble also.
We are at the edge of an abyss not seen before…how deep is it is the question now.
“With foreclosures at record levels in Bakersfield, home prices falling, and inventories on the rise, the consensus among our panelists was ‘it’s a buyer’s market.’”
Surrrre. That’s what they said on the way up too. It’s a buyer’s market. Interest rates are at historical lows. Buy now or be priced out forever.
Look at the horror on the faces of the people who bought that line.
Mr. Busby was on TV in summer 2005 real estate summit show on this same channel where he claimed “prices would go up 10-15% for the forseeable future”!
Your right. According to your local RE agent it is “always” a good time to buy because _____. I had an argument with a good friend (local RE agent). She insisted it was a good time to buy. “RE is a long term investment. Buy and hold on for five years and make money.” Five years is considered “long term”. 30 yrs is long term for me. She also insisted that RE will rebound in two years. What is up with RE people. The sh*t has hit the fan people. Wipe the stuff from your eyes and read the writing on the wall. RE is going into the crapper with the economy. PS - Never never never move to Bakersfield because it is the biggest sh*t hole in CA even without a recession. IT’s equal to the Inland Impire and Fresno.
to be fair we are a step below fresno, and IE is well at least it southern ca
That “real estate is a long term investment” line must be on the latest NAR talking points. You sure see it a lot.
Historically, real; estate just about keeps up with inflation. That makes it a poor investment. And that ‘long term’ stuff. Stocks are a long term positive investment, too. But if you bought a handfull in 1929 you had to wait until about 1944 to break even - and that’s only on those companies which didn’t go belly up during the depression.
Report from San Jose area…(was just there)…
Aside from the usual 10 zillion for sale signs on homes,
Santana Row…San Jose…upscale shopping area…was there on Friday, very dead, all stores nearly empty, whizzed right in for a lunch, all employees say business is way down.
Santa Cruz…I quizzed waitresses, sales clerks, etc…business all down, even in this supposedly good season…
San Carlos, Belmont, etc….not much is selling in the home arena…heard a couple of scary stories about re-fi disasters in the $1million plus range…
that’s my non-scientific observations from an area that’s “different”
but the weather was very nice!
“I quizzed waitresses, sales clerks”……..and all I ended up with was a purse full of cards for realtors and loan officers.
At least the meal for the waiter is free
Tell me who eats all those cup-cakes when no-one shows up for the open house?
Host/hostess AKA waiter/ess
Desperately searching for GoDough?
“‘Buyers are looking for desperate sellers,’ said said Raju Jassar, the broker and owner of Real Estate Professionals of Bakersfield. ‘And they know that some builders, and a lot of banks, have inventory they need to liquidate immediately.’”
“Desperately searching for GoDough?”
Great play on words. For those who are not familiar…
http://en.wikipedia.org/wiki/Waiting_for_Godot
BayQT~
We all know who fookin’ Godot is! This is the high-IQ blog, after all!
I’m sorry. Rough day.
I appreciate that you would explain your reference. Thank you.
Tooooooooooo funny!
Welcome to MY Empire…
“The Inland Empire, Riverside, San Bernardino and Sacramento also are being hit hard by foreclosures, she said. ‘The areas that went up fastest (in price appreciation) are going down hardest,’ Appleton-Young said.”
Sort of sincerely…
Emperor Norton II, Emperor of the Inland Empire
The inland empire is different…..
http://housing-kaboom.blogspot.com/
In my neck of the woods in the East Bay, we’re seeing the same signs of total disaster. One home on my block is foreclosed upon. Several of the homes that sold in the last year or so seem to be inhabited by people who are never home. I just get this feeling that most are just barely hanging on. This brings me to my next point which is that:
“Despite incomes of $150,000 and more, many homeowners in the East Bay are surprised to discover they are unable to refinance their homes.”
-Indeed. 100k is fairly easy to come by in the Bay Area, as obnoxious as that might sound. The problem is that what seems like a lot of money ( which it is) pales in comparison to what that translates into if you were to buy a home here. That 150-200k suddenly becomes more like 35k elsewhere. The differences between renting and owning are severe. I must be saving well over 65-70% of my income renting. If I were to buy, the opposite would be true: 65-70% of my income would be going towards a mortgage assuming I did a 30 year fixed.
In my opinion, the illusion in the Bay Area is that surely everyone must be rich. True- there are quite a few wealthy people here. But most are simply unaware of the fact that they are entry level lower middle class residents who ignore the fact that those tiny little bungalows they paid 650k for are 75k homes most anywhere else.
Put in that light, the economy of the Bay Area is actually quite poor, given the fact that the overwhelmingly generous sum of 150k gets you jack. If people looked at value and costs versus the dollar amount, perhaps they would realize just what the term “quality of life” means.
JB, you bring up two excellent points that I think will be learned, albeit very hard for this country: cost vs. value AND quality of life.
It seems that people assume that because something costs a gadzillion dollars it must be worth it. Nothing could be further from the truth. However, during this runup many overlooked this little fact. Second, quality of life, despite the contrary, IS NOT 2 hour commutes EACH WAY to and fro work! Bedroom community mentality does not compute to quality of life.
However, I realize the argument is that my 750K home will be my retirement nest egg in 30 years, provided you live that long and can get more than 750K for it.
At this point, I would argue you are better off saving or taking the money you made on the previous sale and buying cash in hand something decent and find a job there. Even if you can’t find work in your field, if you made 300K on the sale, but somewhere for 100K and bank the rest. The money you make in interest can cover you health insurance. Then, if need be, get a job at Wal-Mart until something better comes. Geez, this ain’t rocket science. If that doesn’t float your boat, move closer to current job, rent, and take that 10-12K interest on the 200K and use it for rent costs. Geez, again, that would cover anywhere from 6-12 months rent, dep. on certain factors.
Oh well, I know I am preaching to the choir here. I just don’t see how these shlubs don’t see it.
I guess the math that says debt=wealth and debt=the new black also means that having a monster mortgage=wealth. Too me, it just doesn’t add up.
Life is too short!
“If I were to buy, the opposite would be true: 65-70% of my income would be going towards a mortgage assuming I did a 30 year fixed.’
Considering the first 10 years of a mortgage are mostly just paying interest, flat or falling home prices will mean that all those hefty mortgage payments will make these homeowners glorified renters from the bank.
not to burst anybody’s housing bubble, but Bakersfield is the biggest joke of a bigger city, in the Golden State…
About 20 years ago they used to sell anti-Johnny Carson t-shirts @ gas stations in town, as he used them as an easy foil on the tonight show.
esteem lower than the lowest limbo stick…
‘They don’t have a loan for me. I have no choice but to sit around and keep making these mortgage payments.’
Sounds like a plan. What was your alternate plan? Sit around and keep refinancing so you could upgrade your Benz?
They don’t have a loan for me. I have no choice but to sit around and keep making these mortgage payments.’
Well, at least you’re not throwing your money away on rent.
Unless you sell, payoff the loan, or get foreclosed, I think that is what banks expect you to do.
Surely you don’t think he has to pay back the loan?
This is California!!!!
/snark
Despite incomes of $150,000 and more, many homeowners in the East Bay are surprised to discover they are unable to refinance their homes. Increasingly, lenders are shunning homeowners who have burdened their houses with too much debt.
Describes a whole bunch of people I know there (dual income) who are now probably up $HIT CREEK without the paddle. The same people that were pushing me to buy and making fun of me for not. Who has the last laugh now?
“Sacramento County officials say, the downturn in the housing market is resulting in scores of vacant uncared-for homes blighting local neighborhoods.
Supervisor Roger Dickinson said not just poor neighborhoods are affected. ‘We are seeing foreclosures in neighborhoods that are considered middle class or upper middle class,’ Dickinson said.”
Isn’t it cheaper for the owners to just bite the bullet and drop the price tags on these vacant homes to a level where buyers will happily purchase them and move in, rather than keep them vacant until they crumble into dust? After all, an owner-occupant will typically not let a home fall into a state of dilapidation or let five-foot-tall weeds spring up in the yard, and homes in disrepair with weeds growing in the yard are pretty hard to sell and require expensive renovation before selling them.
Who wins from this interminable standoff between would-be buyers and owners of vacant homes?
Anyone who calls himself “Upper Middle Class” is most likely not. Is there really any such thing?
What’s amazing is most Americans thing they’re better off than they really are! A close friend, who does a lot of good work for non-profit agencies, finally crossed the 100K mark for household income. He remarked to me that that probably puts him in the “top 5%”
Not even close. That’s, at best, the top 15%
http://en.wikipedia.org/wiki/Affluence_in_the_United_States
The question is, WHY would you want to think you’re better off than you are. Isn’t it more useful to know how you’re actually doing?
And that’s part of the problem with the whole bubble. People wanted to look and feel richer than they were! And the Government encouraged it because it kept the voting public happy.
Simply put, it’s called…
Posing. The new ‘mErikUn pastime.
The old American pastime…
“Puttin’ on the Ritz” is a popular song written and published in 1929 by Irving Berlin and introduced by Harry Richman in the musical film Puttin’ on the Ritz (1930). The title derives from the slang expression “putting on the Ritz”, meaning to dress very fashionably. The expression was inspired by the swanky Ritz Hotel.
http://en.wikipedia.org/wiki/Puttin‘_on_the_Ritz
“Anyone who calls himself “Upper Middle Class” is most likely not. Is there really any such thing?”
Actually, if you scroll down to the bottom of the Wiki page that you linked to, there’s a chart comparing three academic definitions of social class. Two of them define “Upper Middle Class” (also called the Professional Class) as the top 15%. According to the data appearing earlier on the page, that puts the national average household income for the Upper Middle Class at around $100k.
FWIW, my own definitions based on observations over the past few years in terms of current income distribution…
Super Rich: 99th percentile
Rich: 95th percentile
Upper Middle: 85th percentile
Middle Class: 75th percentile
Working Class Class: 25th percentile
Poor:
In other words, only 25% of the population are truly what one would consider Middle Class or better. About 50% are barely able to stay afloat financially, essentially living paycheck-to-paycheck. And the bottom 25% are simply unable to afford housing, health care, food, etc.
That practical definition is a good one. And if your net worth is negative, then you’re POOR, no matter what you think you are.
Well, with student debt, I’m “poor.” How come my kids don’t qualify for free health insurance, college financial aid, etc.? Why am I taxed at a 40% combined federal and state marginal rate?
Because if someone tried cutting my taxes, there’d be a major political party to screech that he was giving a tax cut to the “rich.”
The people being screwed the most are high-income salaried professionals. You get no tax deductions (because of AMT, and the mortgage-interest deduction phases out after $150K) and you can’t play funny (but legal) tax games that self-employed people can.
Execectuve level employees can also play games by taking deferred income, $1/year salaries (like Steve Jobs, who pays no social security tax), and back-dating their stock options.
But a professional couple who may be pulling in $500K together simply have to pay 40-50% in combined fed, state, and local taxes and there’s nothing they can do about it.
Remember, our national budget divided by our population comes to about $7500/person (after corporate taxes have been factored in.) So if a family of 4 isn’t paying 30K in taxes they’re getting a “free ride”. Yet I hear people like this COMPLAINING about taxes. Makes me want to strangle them.
Yee Haa I’m rich then. Caviar dreams - first class travel, yacht 6 bedroom home by the bay oh yeah… Let me tell you I am NOT rich! OK, I am able to comfortably make my bills and we have some left over to save, but Rich for gods sake? 10 years ago 100K was doing pretty darn well, but today - not a chance. And yes as an individual 100K = top 5% in US.
Hi Waltz!
We were poor monetarily, but rich in spirit.
IMHO, class has nothing to do with social or economical status…but rather how one extends his or her essence to another.
Some call it the golden rule. Others call it honesty. The words do not matter, but intent is transparent and sincere.
Best,
Leigh
Actually that link shows that about 100,000 for *one* person *would* be about the top 5%.
Weeds of denial, that’s what people are smoking.
That’s what is growing 5 ft. tall in front of those foreclosures!
Weeds of denial.
“Realty insiders hope the Federal Reserve’s cut in interest rates could thaw the frozen mortgage market. ‘It’s not a magic bullet,’ said Jerry Stadtler, a realty agent and CEO of San Ramon-based Bay Area Funding. ‘But it gives us something positive to talk about.’”
I just laughed when I saw this. Yeah, the bubble is starting right back up. Bernake is saving the banks and inflating a stock bubble.
What fun… wheeeeeee!!!!!
I just gotta say it, James: How Now, Down Dow? I don’t know if it was Neil or Professor Bear, but whoever it was on this blog who said “14,000, We Hardly Knew Ye” should say it again, LOL!
Alas, must have been the Professor. I’m purely confused by such a irrational market.
I’ve got to come clean…
Been using Arabic Numerals for a long time now~
Don’t turn me in
I posted this earlier in the bits bucket, but it belong in the rarefied California thread. I just got the info on the properties sold within 2 miles of my area in LA. Plenty of knifecatchers still around in the 90024 zip code. When will this end…
04/11/2007, $436,000, 740 sf (condo)
06/22/2007, $639,000,1,108sf (condo)
07/31/2007 $749,000 1,530sf (condo)
07/25/2007 $1,435M, 1,705sf (SFH)
05/31/2007 $720,000, 1,394sf (condo)
07/13/2007 $1,292,000, 2,446sf (SFH)
04/12/2007 $850,000, 1,769 sf (condo)
08/02/2007 $730,000, 1,959sf (condo)
04/02/2007 $872,000, 1,769sf (condo)
04/10/2007 $899,000, 1,769sf (condo)
Neighborhood High: $1,435,000 Neighborhood Low: $436,000
Neighborhood Avg: $862,200
Oh cripes sake, that’s my ZIP. *sigh*
So many fools snapping up so much inventory . . .
My ZIP too. Just telling the Mrs. this morning that we’ll buy within 5 years.
The only thing I can figure with this is there were some people that, even with the crazy lending earlier this year, were just (5%-10%) short of “affording” the home they wanted. Once the price dipped a little bit, or they got a raise or bonus, they jumped into the property - thinking it was a short-term dip rather than the beginning of a downturn.
The only problem with this theory is where did they get the loan from?
Duh…….those are all “old” transactions from earlier this year, and the later ones probably had long escrows, the latest closing date is August 2nd…prices now are probably a little different….sorry, I should actually READ the table before pontificating.
Even some of the July / August people that knew things were slipping probably were afraid to walk away from their earnest-money deposit - likely tens of thousands of dollars…..in the long run it might have been the right thing to do.
In my best William Shatner impersonation:
“KHAAAAAAAAAAAAAAAAAAAAAAAAAAN!!!!!!!!!!!!!!!”
If you run into him, DO NOT call him Captain Kirk…
Been there, done that
So, what happened when you called him Captain Kirk?”
Phasered him or used the Vulcan neck pinch!
With that comment…I think I hire a dwarf female prostitute to call out to him: Captain Kirk!… I have the cream cheese!…just to have a hit “you tube” clip
“Palace to Prison” on the adverts on here, nobody has ever clicked on…
Hits Home
alad, OT, but just wanted to keep you abreast of the water situation here on the ground in West Central Fla. It’s all over the news today that two of our regional rivers, the Manatee and Little Manatee, are at flood stage further inland. WTF? How does this happen when the “rainy season” in this part of FLA was pretty much a bust this summer. We’ve had some recent moderately heavy rain in the past couple of days, but not what you usually see here in these parts. Weird, I’m telling you. I think it has something to do with all the development. Ground just can’t absorb. Dang the HBs.
Palmy…
Old rules no longer apply and remember, Mother Nature always bat’s last~
And she or he who bats last, bats best.
Guys in Bay Area ( CA ) . Any updates on whats going on with the new homes/condos being build In the Rivermark area ..I forgot the name of the housing complex..Its right on Lafayette between Agnew and Hope street …Have they reduced prices ? is it all occupied?
Agnew and Hope street
Hmmm.
Between one of the old state asylums and Hope street.
Hmmm.
I see a lot of KBH & Toll in Milpitas & Northern San Jose near 680 & Hostetter.
They are looking to scrap bottom of FBarrel. And on weekends you see the KBH guy waving the 7 foot arrow towards the developments 10 miles from base.
If you are familiar with San Jose, around City College — I saw an amazing sight today. Not one, not two, but 4 huge apartment/condo complexes being built!!…………I’m guessing San Jo is getting serious about their high density housing and they are certainly high density - 4 stories by the looks………..
Vegas Bank owned 1 bed condo foreclosures that were listing at $135,000 at begining of Sept jsut got repriced at $111,900 and sold, another repriced at $119,000 and sold. With 25% down, and 6.5% interest, you can get Positive cash Flow. Except, the brutual months of Dec, Jan, Feb will bring these bank owned REO foreclosures down to $90,000. The capitualtion is right on target for Nov 15…
David,
to what neighborhood in Vegas are you referrring. Thanks.
“Vegas are you referrring” Northwest Vegas just outside Summerlin. I have been investing and tracking Vegas since 1994. Lots of out of state investors letting their “alligators” go back to the bank. *Alligators= Negative Cash Flow, that you keep feeding month after month.
Thanks for the info. I expected that to happen about 3 to 4 years ago, when I saw what people were paying for homes and condo’s in that area (actually in most of Vegas).
“Appleton-Young said.”
“said Raju Jassar,”
“Crabtree said.”
“Florez said”
“said Jon Busby”
Hey, all you “True Believers” repeat after me:
“Well, shut my mouth!”
“Whoever controls the media, controls the mind.”
Jim Morrison
Listen up, daytime vampires masquerading as Realtors…
That bullet that Cagey B shot at you a few weeks ago, wasn’t magic
It was Silver~
“Realty insiders hope the Federal Reserve’s cut in interest rates could thaw the frozen mortgage market. ‘It’s not a magic bullet,’ said Jerry Stadtler, a realty agent and CEO of San Ramon-based Bay Area Funding. ‘But it gives us something positive to talk about.’”
Count the flowers on the wall, Stadtler
In 2006, Khan paid $672,000 for the house he bought from Lennar Homes. But the median price for houses sold by Lennar in Mountain House in August 2007 was $498,000, according to a search of county files. That’s 26 percent below what Khan paid.”
Yeah Prices do not fall.
It’s getting really ugly. It’s nice to be a bitter renter.
lol!!!!!!!!!!!!!!!!!!!!!!!!!!!
“Bakersfield’s market difficulties stem mainly from rapid new home construction and a prevalence of subprime loans, which were especially popular in affordable parts of the state, said Leslie Appleton-Young, chief economist with the California Association of Realtors.”
Leslie you owe the dopes you talked in to buying the last few years a massive apology. lol!!!!!!!!!
I’ll be Mortgage Czar, as long as you let me be the Drug Czar as well…
http://news.yahoo.com/s/nm/20071003/bs_nm/economy_credit_dc
BITTER RENTER.
LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
We have entered the next phase of this monster downturn. That is, lenders wanting a REALLY BIG cushion of safety, thus protecting their investment(s).
So, let us take a number. Let us say the house someone bought in 2005 cost $600,000. Lenders know there is no clear bottom in sight so they “pick-a-safety-number” from the past. Prices in 2000 looked reasonably safe. Prices before that even safer. However, let us say the $600,000 house cost $300,000 in the year 2000. (a 100% markup in 7 years l.o.l) THAT $300,000 number is what they are going to base their lending criteria upon. ANY astute investor knows the number one priority in investing is, “Preservation Of Capital.”
Here’s how it’s going to work for several years into the future. If a buyer has perfect credit, a great and stable income, the lender might cut him/her some slack but lousy/weak credit and a not so great work history - forget becoming a new property owner. If that property which cost $600,000 in 2005 is now for sale at a “bargain price” of $450,000, it makes no difference. The lender will be looking at many things including the “safe” 2000 price of $300,000. Why? Because it’s called “Support and Resistance”. ALL investments react to support and resistance. In this case, “resistance” arrived in 2005. Support was prior to Mr. Magoo’s free money leaving the station. Trace back to the point where the train left - and that’s support. Bear in mind that some dumb money overshoots resistance (which is why prices kept going up in 2006 but slower).
Again, don’t be fooled. This property mess has a loooooong way to go and when it reaches it’s destination it’s going to languish there for several years. We haven’t even seen big builders go bust yet. Only when that starts has the real decline started but it’s a sloooow landslide.
As for government rescues? B.S. These scumbag politicians who jumped on the, “I’m a caring politician who wants to help the average American so I’m going to try and bail you out,” are now backing off as they add up the numbers. One of thos numbers being that a LOT of people (more than F.B’s) are against a bail out. As usual, a politician would sell his own daughter on the streets if it meant getting elected and they need the numbers in their favor to get elected so they will dump the F.B’s.
So when did it start?
We were stationed in Dayton Ohio in 1997. My favorite cousin and her hubby are living in Columbus.
They were taking out loans on their house. At the time, I did not know what HELOC meant…borrowing on a house? (talk about clueless)
Anywho…they divorced, BK’d, he went into flipping. In 1997-8. She’s doing great, BTW.
So, when did this start…or when did we notice?
I just remembered they were appoved for HELOC in 97/8 a few months ago.
Is it possible people have been borrowing (or better stated, banks loosened credit) years ago?
Anecdotal? I don’t know.
“September’s distressed listings increased from August, when one in 5.6 homes for sale were distressed, the report states. Last year’s tally of distressed properties was not included in the report. They were likely negligible…Crabtree said.”
5 to 1, One in Five…
http://www.youtube.com/watch?v=9DfG1SNydnc
It was a Riches to rags story, this American Century…
Is Zillow becoming irrelevant in valuing RE?
They really have their heads up their A$$es when it comes time to change valuations.
I think Zillow was always irrelevant. They try to appeal to home *sellers* so it always made sense to give very optimistic estimates (to make the sellers happy!)
Zillow’s last home sales data is back from April. Yeah, I’d say they were some what irrelevant, if not so many realtors monkeys.
If elected so by CONgress, i’d like everybody to call me, “your Czarness”
“With foreclosures at record levels in Bakersfield, home prices falling, and inventories on the rise, the consensus among our panelists was ‘it’s a buyer’s market.’”
yES IT IS A BUYERS MARKET BUT IT IS NOT TIME TO BUY. wAIT FOR 50% OFF. LOL!!!!!!!!!!!!!!!
Rumors of the economy’s demise…
http://www.youtube.com/watch?v=zqiblXFlZuk&mode=related&search=
“A car tire, an empty bottle of Wild Irish Rose and a handful of Bud Light cans litter the yard. Shoots of dried weeds stand 5 feet tall. The doors and windows are covered with plywood.”
Mmmmm….. sexy…. Pop in some Barry White tunes and add a couple of votives… oh, wait, they did say dried weeds, didn’t they? Okay, pass on the votives. Maybe one of those battery-operated lanterns that looks like a candle. Yeah… now we’re talkin’. I don’t know about you all, but here’s what I’m thinkin’: sweet hobo love…
Comment by palmetto
2007-10-03 18:08:02
“The first thing they do in these developments is chop down all the trees and stick in a crappy cookie cutter landscape. Ugly as all hell”
Testify! Florida has a pretty good infestation of that cookie cutter crap. They cut down the trees, and then put these pathetic little saplings in the yard. Like those will ever grow to be something one day.
Never speak to me about these again, because I am going to jump right on the next DRHorton rep I see and chew the top of his head off.
Tooooo funny! What in the world would we do without you gal?!!
Psst…tip of his head(s)?
Make sure you jump in the right direction *as you surely will*
Grin,
Leigh
In the final analysis , it’s the value of the property that will determine if you get a loan or not .You can have a high credit score ,a high income ,but if the value is no longer in the property you don’t have anything . That is why is was stupid to give 100% LTV loans and it was stupid for lenders to condone inflated appraisals based on a demand from speculators and unqualified low-down buyers on creepy loans .
I have said it many times that the appraisal is the most important element of a loan . Right now the incentives and cash back deals are making the appraisals faulty as usual in this lending cycle . Lenders that were giving 125% LTV refinances during the boom are really stupid . I bet alot of the lenders that have loans on the books that allow 15 to 25% neg. amortization are wishing they didn’t go down that road now .Really ,it how solid the property value is that matters in the final analysis .Got 25% down ,unless of course you get a government backed FHA loan .
Here’s a question
Why is Europe concerned about inflation
http://bloomberg.com/apps/news?pid=20601087&sid=aDXXoxkdWNGU&refer=home
While our FED is not.
Given the record high Euro/dollar.
Interesting point on the ‘furniture store going out of business’ angle.
In the last six months, three large furniture stores near me have gone out of business, including Huffman Koos (high end), which had quite a few stores.
“Bakersfield’s market difficulties stem mainly from rapid new home construction and a prevalence of subprime loans, which were especially popular in affordable parts of the state, said Leslie Appleton-Young, chief economist with the California Association of Realtors.”
‘cuse me, but if these were “affordable parts of the state” then why the need for subprime loans?
:bored
:bored:
Apologies to Tom T. Hall : Deep Psychic
if i’d known what was coming, i’da bought a 6 pack and drank 4 before clicking on that.
I’ve gone to about 10 lenders in three months,’ said Khan, a Mountain House resident who asked that his real name not be used. ‘They don’t have a loan for me. I have no choice but to sit around and keep making these mortgage payments.’
Um, wasn’t that what you expected when you chose to assume a mortgage??
Also, why does a $160k choose to live in a craphole like “Mountain House”?
Who told him he has to keep making the mortgage payments? If he’s lost more than his equity in the house, and if he is unethical, he could stop paying and get a few months rent in his pocket before walking.