December 29, 2007

There Is A Glut Of Excess Inventory In California

The Sacramento Bee reports from California. “ResMAE Mortgage Corp.’s job posting, widely advertised just a year and a half ago, promised account executives with experience selling subprime home loans and a high school degree ‘7-FIGURE POTENTIAL.’ Those were the heady days of the real estate boom, and account executives at Orange County-based ResMAE and five other lenders identified by The Bee were getting paid big bucks to do something that seems a little crazy outside that context:”

“Issue subprime loans to almost everyone who wanted one, turning down fewer than 15 percent of Sacramento-region applicants.”

“Property owners who took out their loans were up to seven times as likely to face foreclosure during the past year as the rest of the region’s owners, according to a Bee comparison of property records and data from”

“Most of these six liberal lenders now are history, killed or severely maimed by the housing market plunge.”

“Those miserable with their loans typically had held on a little too long and gotten burned. Many felt they had been suckered into a bad deal. The out-of-the-blue personal letters, the unsolicited phone calls – all were full of breathless promises and muted caveats, they said.”

“‘They betrayed me,’ said Morris Abee, who refinanced with ResMAE in 2005.”

“A 79-year-old veteran, Abee’s most valuable financial holding was the house near Auburn he has owned for almost three decades. Lenders seemed to know that, too. ‘Every day, I got about 20 calls from different mortgage companies,’ he said.”

“One broker made a pitch and Abee bit. It took only about two weeks for the $566,000 refinancing at 6.25 percent with ResMAE to go through, Abee said. Most of the transaction, he recalls, happened through the mail.”

“After a few months, ResMAE sold the loan to another lender. Abee kept up his payments. Then, in October, his rate adjusted, boosting his payments from $3,500 to $4,100 a month. Though Abee knew the adjustment was coming, ‘it surprised me how much of a jump it was.’”

“The statistical fallout from ResMAE’s business practices speaks for itself. At least 14 percent of Sacramento-area properties financed with ResMAE loans during 2005 and 2006 fell into foreclosure during the past year, about seven times the region’s average, according to a Bee analysis.”

“Abee says there is a strong chance he will lose his home, too. ‘If they don’t reduce the payments, I’m going to,’ he said. ‘I’ve got no choices.’”

“In one Flexpoint Funding commercial still viewable on YouTube, cameras pan across snowy hills, sandy beaches and rugged trails while an enthusiastic narrator offers a three-day, two-night vacation simply for calling to discuss refinancing.”

“‘A $100,000 loan, only $253 per month,’ he urges. ‘A $200,000 loan, only $506 per month; a $400,000 loan, only $1,011 per month; a $500,000 loan, only $1,264 a month.’”

“And, Flexpoint’s ad assures, neither bad credit nor no credit rating at all would get in the way of loans issued after as little as ‘a 17-minute application process.’”

“Bill Brashear, 79, needed extra cash after a hospital stay, so he decided to refinance his Del Paso Heights home last year. He lives off $2,259 in monthly pension and Social Security; his house payment is now $2,037.”

The Merced Sun Star. “Not many new homes are being built in the Merced area these days, a trend also seen throughout the state, according to California Building Industry Association figures. The builders’ group said building permits were pulled for only 3,151 single-family homes statewide in November.”

“Total housing starts in California, as measured by building permits issued, dropped 45 percent in November compared to the same month a year ago to 5,498, according to the Construction Industry Research Board.”

“Last month in Merced County 35 building permits were issued for new homes, four more than October but 48 fewer than in November 2006.”

“Don Gray, president of the Merced chapter of the Building Industry Association, said homebuilders have recognized the lack of demand for new housing and won’t build new dwellings unless there is a demand for them.”

“‘Builders are pulling in their horns. There is a glut of excess inventory, mostly used homes. It will be some time until the market comes back,’ Gray said.”

“The standing inventory of new homes in the Merced area is around 70 units, some of which may be display models. Most of the glut in existing inventory includes used homes. Merced City Manager Jim Marshall said new building starts have been affected by vacancies in existing housing and available stock that hasn’t been sold. He estimated there are about 800 vacancies in existing houses.”

“The city of Merced issued 10 building permits for single-family homes last month; from January through November of this year 168 permits were issued for single-family homes. In the same period last year, 937 single-family home permits issued, Marshall said.”

“Gray, a land-acquisition specialist with Summerton Homes, said in a boom market, homes were sold as fast as they were built. Even with homes built on speculation, most were bought before they were even finished.”

The Recordnet. “Joseph Anfuso, president of Stockton-based Florsheim Homes, said he’s been seeing slow sales and increasingly scarce buyers all year. ‘With new home building, it’s tough in this market,’ he said.”

“Developers also don’t want to build homes to risk having the completed projects sit empty in a slow market. ‘You really have to watch your construction very closely to make sure you’re not over extending,’ he said.”

“New home sales were flat in San Joaquin County, too, with 82 transactions in October sales a tick up from September sales of 81. It was off nearly 55 percent from October 2006, when the county registered 182 sales.”

“Long gone are the days of the first half of this decade when builders quickly sold every home they built as well as many they hadn’t built yet. ‘To get somebody to sign a contract to wait out construction is very difficult in this market,’ Anfuso said.”

The North County Times. “New home sales nationally in November dropped to their lowest level in 12 years, a trend mirrored locally. Local new home sales numbers were not available, but the number of building permits for new homes issued through November in San Diego County has fallen by 25.9 percent from last year to 3,290, according to the Construction Industry Research Board.”

“Building permits for new condominiums have tumbled even more, dropping 40.1 percent this year to 3,474, according to the group.”

“Builders said they have already lowered prices on new homes to the point where they lose money on the price of construction. Some said they would rather hold onto the properties than slash prices further.”

“‘If you’re in a position where you have to lose even more money just to get cash, you’re not going to do that,’ said Paul Tryon, president of San Diego’s chapter of the Building Industry Association.”

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Comment by Ben Jones
2007-12-29 12:41:05

‘‘If you’re in a position where you have to lose even more money just to get cash, you’re not going to do that,’ said Paul Tryon’

Well, Paul, you can say that but I have founds dozens of reports from California with builders doing just that. Maybe no one told him the big public builders have taken $16 billion in inventory writedowns; so far.

Comment by SoBay
2007-12-29 13:39:49

“Builders said they have already lowered prices on new homes to the point where they lose money on the price of construction. Some said they would rather hold onto the properties than slash prices further.”

Thats it Dude, don’t just ‘Give the House Away.’

Paul Tryon, president of San Diego’s chapter of the Building Industry Association will help to turn the tsunami into a small wave that Cali homebuilders can ride their boogie boards on.

Comment by Evil Capitalist
2007-12-29 14:19:16

B.S. No sales, no revenue. No revenue, no cashflow. No cashflow is a sure path into liquidation.

Comment by shakes
2007-12-29 16:59:24

They will continue to sell houses as long as they have overhead. Empoloyees cost more then what they will lose if they don’t sell. The builders are going to sell to stem the bleeding so that they will survive for the next cycle

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Comment by SVCAGUY
2007-12-30 03:28:25

HA! Totally a joke! As if this is the only industry which can afford not to lower prices. If we learned anything about the freemarket these guys are going to get crushed when competitors come into the market and sell below their prices. Construction costs, lumber and cement, have been coming down due to low demand. The permits may be down but the city goverments are all too pleased to hand them out increasing supply and beefing up employment in constructions. All this at the end is aragonence on the part of big builders.

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Comment by BuyerWillEPB
2007-12-29 15:00:58

‘If you’re in a position where you have to lose even more money just to get cash, you’re not going to do that,’ said Paul Tryon


If I’m in a position where I have to lose even more money just to pay for a home I still can’t afford even at your “drastically reduced” price, I’m just not going to do that.

So… who do you think wins?

Comment by JimAtLaw
2007-12-30 01:01:46

No one wins. You keep on renting (well, I guess you win, assuming you invest the savings), and the builder goes BK trying not to discount.

Of course, all of this assumes they really won’t lower prices further, which we all know is an absolute lie intended to try and goad people into buying now; they certainly will choose to lose money (or more money) selling what they’ve got so that they have cash flow to stay in business and make a profit tomorrow. Businesses do it all the time; not every transaction is a winner, and the idea that they would hold prices up in the face of plummeting sales over more than a very short period is laughable. Neither the stockholders, nor the sales force, nor anyone else involved will stand for it for long.

Comment by SVCAGUY
2007-12-30 03:30:41

The builders still have to pay property tax and other maintenance and upkeep costs every month. They are losing money any way you look at it. It wont suprise me CA cities
will start imposing penalties.

Comment by Professor Bear
2007-12-29 13:05:13

“New home sales nationally in November dropped to their lowest level in 12 years, a trend mirrored locally. Local new home sales numbers were not available, but the number of building permits for new homes issued through November in San Diego County has fallen by 25.9 percent from last year to 3,290, according to the Construction Industry Research Board.”

I guess it is different in San Diego, because today’s San Diego Union Tribune report said that sales were up in the West:

“In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.

Comment by Jingle
2007-12-30 07:24:01

Prof, that is a month over month comparison (Oct to Nov) in the same year. A 4% increase is probably an aberation. However, there are some houses selling today in the west.

The foreclosures are very enticing. I just bought one and have offers out on two more. Sacramento prices are approaching $100/sf on bank owned properties. That is at or below reproduction cost, assuming you get the land for free. They cash flow at 3% (6% interest rate, 80% financing) and after tax, I will see a 6% ROI. After 5 years, with modest rent increases in year 3,4 & 5, free cash flow is up to 6%. I can hold those forever. The big question in my mind, is if employment will hold. If we have no jobs, the tenants stop paying rent.

Comment by Bloz
2007-12-30 09:00:03

Woo-hoo! I just saw a listing for a house in Folsom, CA that is the same size as one I sold in 2003. The “listing” price is less than I sold for and it is “bank owned”. Pictures look like it has never been occupied.

2001 here we come.

Comment by Professor Bear
2007-12-29 13:06:23

“‘Builders are pulling in their horns. There is a glut of excess inventory, mostly used homes. It will be some time until the market comes back,’ Gray said.”

I think I can see the elephant’s hind end sticking out from under the living room rug.

Comment by Ben Jones
2007-12-29 13:14:20

IMO, these numbers are unreal. 3,000 starts? Weren’t they doing something like 200k a year, pre-boom?

Comment by crispy&cole
2007-12-29 13:24:58

Our local starts are down 75% from the peak - IMO, still way too many homes for real demand.

Comment by SVCAGUY
2007-12-30 03:36:47

Me thinks there wasnt all that much demand we were led to believe during the boom years. Far too many people acting as investors, still wrongly believing RE was their only road to wealth. The whole notion of flipping property several times over by nonresidents, while stacking ever increasing prices created far too much demage to the market.

Comment by Professor Bear
2007-12-29 13:11:30

“Builders said they have already lowered prices on new homes to the point where they lose money on the price of construction. Some said they would rather hold onto the properties than slash prices further.

So far as I am concerned, they can hold on to their falling knives until they plunge into the ground right along side myriad buried statues of St. Joseph.

Comment by crush
2007-12-29 14:15:40

my brother was a sub for a big home builder in california…20 + years…the company’s take was easily 37% PROFIT per house…or else they weren’t happy…these guys can suck it…suck it big time…greedy crappy bastards…sorry…just had to get that off my chest


Comment by crush
2007-12-29 14:18:36

although, i must say, they gave him a job…so how should i really feel???????


Comment by auger-inn
2007-12-29 15:15:54

The best prices will come from the REO sales after the bank takes the homes back from these builders in BK. I’m inclined to wait for those sales.

Comment by Professor Bear
2007-12-29 17:28:38

I’m inclined to wait until the bailout talk coming out of top Wasington policymakers gives way to reality. Wishing prices will drop quickly once it sinks in that no taxpayer-funded bailout will materialize to help sellers unload their devalued McMansions.

Comment by Eggman
2007-12-29 22:38:02

The best prices will come from the taxing authority that will become the ultimate possessor of many of these properties.

Comment by are they crazy
2007-12-29 13:13:44

What’s the deal with these old folks that refi, get over $500K and then can’t make payments? What did they do with the money? Why would they refi instead of at least doing a reverse mortgage where there’s no payments? 20 calls a day he received? We never received a single call trying to get us to refi - and even if we had, we wouldn’t have done it. It can’t just be age - you got Murdoch, Buffett and plenty of other old codgers that seem to be able to handle their finances just fine. There’s so much I just don’t understand about what people did and why they did it. Is ignorance the prominent trait in society now or is it greed overcoming common sense - I just don’t get it.

Comment by reuven
2007-12-29 13:28:21

You have to be skeptical when people say there were duped. I think they thought there were going to make a “killing in real estate”

Comment by Home_a_Loan
2007-12-29 13:47:27

You can’t cheat an honest man.

Comment by edgewaterjohn
2007-12-29 14:52:59

’nuff said.

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Comment by wmbz
2007-12-29 15:27:48

“You can’t break a man that don’t borrow”… Will Rogers

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Comment by mikey
2007-12-29 14:07:55

Yeah..there’s been so much entertaining equity stripping going on in America that we should drop the cover charge and fire the real pole dancers :)

Comment by Jas Jain
2007-12-29 14:24:50

“You have to be skeptical when people say there were duped.”

Sorry, but people are duped all the time. You underestimate the power of propaganda. It is an all-encompassing process that creates and sustains bubbles. Mantras are created that sound right without in-depth examination, i.e., “They aren’t making anymore land.”

A must watch video – Happiness Machines (posted here two day ago):


Comment by david cee
2007-12-29 18:11:39

Sorry, but people are duped all the time

Like, the compassionate conservative.

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Comment by Professor Bear
2007-12-29 20:34:49

“the compassionate conservative”

Must be talking about HC?

Comment by AnnScott
2007-12-29 13:40:40

Medical is the ususal reason.

Medicare does NOT cover everything.

Hospitalization (Part A) has this nasty $1100 deductible on day 1, and during the year if they are in and out of the hospital, the daily copays go higher and higer and higher.

Office and out-patient (Part B) has a 20-50% copay depending upon the service.

Medigap policies to cover those deductibles/copays are not cheap. In CA figure $300-500 a month per person.

Spouse in a nursing home? Medicare pays for very very very few days and only if the person will improve as a result of the stay in the nursing home. If they are there longer than 2-3 weeks or their condition will not improve, they are on their own for the nursing home bill - figure $25,000 -40,000 a MONTH.

Medicare very very very rarely pays for home nursing care. Spouse has Alzhiemers or is incapacitated and needs a nurse’s aide? Tough. They are on their own.

If, as it sounds, the first older borrower in the article, did the loan before 2006, it was probably prescription drugs. Unless you have had to pay the retail price for a prescription, you do not have a clue. A lot of drugs are not generic and easily hit $200 a month. The newer cancer drugs are $20,000 -50,000 PER treatment or dose.

Medicare D helps but not much. In 2008, it covers $2400 worth of medication and then the person has to pay the next $3100. (For a couple, that means $6200 plus premiums plus copays of usually $10 generic and up to $70 for brand.) After the total gets to $5500, most drugs then have a 5% copay but some (cancer, insulin etc) have a 25% copay.

Comment by AnnScott
2007-12-29 13:43:22

I forgot to add that people in that generation are probably landrich (given the bubble) and cash poor because pensions and Social Security have not kept up with increases in the cost of fuel, food and medical care (including premiums.)

Easy to manage if one is a Buffet. Not so easy to manage if they have a max income of $4000 -5000 a month between 2 people with a pension and Soc. Sec.

Comment by Evil Capitalist
2007-12-29 14:22:59


If they could re-fi they could have SOLD. They wanted to have their cake and eat it too.

Comment by edgewaterjohn
2007-12-29 14:58:53

Yeah, and aren’t there a crapload of condos being built for these “land rich” folks to retire into just so they can indeed have it both ways?

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Comment by FED Up
2007-12-29 18:49:31

You are not required to borrow money to cover nursing home costs. Medicaid will kick in at a certain point and the surviving spouse will not be required to become destitute in order to pay for the care.

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Comment by AnnScott
2007-12-29 19:48:01

No Medicaid WILL NOT kick in automatically.

If the couple has income over 150% of Federal Poverty Level (that is about $19,500 a year for 2 people or $15,300 for 1) they DO NOT QUALIFY FOR MEDICAD.

Average Soc Sec is $1100 or $13,200 for 1 person. It is, however, $26,400 in income for 2 and they DO NOT QUALIFY.

Wanna bet you don’t have to borrow the money for a nursing home? If they are over the Medicaid income limits they sure as hell have to come up with it one way or another. They may borrow it, they may use up any 401K or IRAs they have or they have to sell something but they WILL have to pay the bill or the patient will be discharged from the facility.

And, for the person above, why shouldn’t they be able to stay in their home if they could refi an amount they could pay? You prefer that they move into subsidized housing for the elderly and your taxes help pay for it?

Any refi not paid off during their lifetimes would come out of the proceeds for the sale of the property by the estate.

Comment by MaryLee
2007-12-29 20:07:48

Where does this wonderful state exist? I watched an elderly neighbor of my mother’s lose his house after spending his investment savings on long-term care for his wife. Ended up 80 yrs old, living in a studio apartment, on SS alone. This was in Washington state in 1994

Comment by JimAtLaw
2007-12-30 01:18:10

I think a lot of people these days are advised to make sure to get those assets out of their hands so as to be eligible for benefits before the nursing home and hospital come to rob them blind charging 5x or more what they charge insurers for the same services.

Comment by wolfgirl
2007-12-30 05:03:15

Get the assets gone five years before you need the money.

Comment by ronin
2007-12-30 07:39:27

You can’t make blanket statements about where medicaid will kick in and where it will not. To some extent it depends on the state. But in this state I can think of any number of families in 3500 sq ft houses with nice jobs and nice cars that are getting charge-free in-home nursing assistance for the chronically ill.

Most states are realizing that in-home care is a lot cheaper than nursing home care.

Comment by AnnScott
2007-12-29 19:49:37

So they sell, pay the medical bills and DO WHAT?? Live in a tent because they can not afford to buy somewhere to live since the money went for medical bills?

Try to be less obtuse.

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Comment by Evil Capitalist
2007-12-30 07:56:44

I always thought attroneys were at least kind of smart. Now I’m starting to think that most of attorneys have issue with logic. Ok, let me spell it out for you - SELL the house, pocket $600,000, rent a smaller place for $10k per year and have $500,000 for expenses, with NO CARRYING COST.

If the dumb-ass could not live the rest of his life pretty happy with $500k, then there is NOTHING that anyone could do.

Comment by Professor Bear
2007-12-29 14:43:19

“people in that generation are were probably landrich (given the bubble)”

Comment by Groundhogday
2007-12-29 13:55:35

Want to bet this guy refinanced more than once? That is how you get on the call list. And I’m guessing that he pulled the money out to “invest” and lost it. Probably pissed some of it away on luxuries, then invested badly with the rest. I sure wish these “reporters” would learn to ask a few questions.

Comment by ex-nnvmtgbrkr
2007-12-29 14:01:44

You are correct sir. Serial refinancers are targeted.

Comment by Potential Buyer
2007-12-29 15:27:27

You are probably on the ‘do not call’ registry. I didn’t receive any cold calls for mortgages at all during this past frenzy. Not that I think they have compunction about calling, but maybe I’m no longer on the lists that get sold to marketers.

Comment by Zhang Fei
2007-12-29 13:19:58

“Builders said they have already lowered prices on new homes to the point where they lose money on the price of construction. Some said they would rather hold onto the properties than slash prices further.”

I think the problem is that they bought the raw land with borrowed money, and the loans are coming due. I suspect it is easier to sell a house to home buyers today than it is to sell raw land to other developers. They’re losing money on the construction costs, but getting the land - and the associated holding costs (property taxes, etc) - off their hands at a higher price than raw land.

Comment by Jas Jain
2007-12-29 13:42:53

Right you are, Zhang. They are in a pickle! A pickle with cayenne peppers. During 2005-06 they were in a honey jar (like fruit preserve).


Comment by Jas Jain
2007-12-29 13:56:07

Sorry, I meant 2004-05.

Comment by MD_renter
2007-12-29 14:06:09

Mmm… pickles….honey… *wanders off to get snack*

Comment by Duane Lapinski
2007-12-29 14:31:51

How are these builders going to hold onto the properties, and still make payments on their loans, or pay their subs? It sounds really brave to say things like that, but do they have the cash flow to be able to do it. I doubt it.

Comment by tuxedo_junction
2007-12-29 15:22:14

Lenders will keep rolling the construction and land notes, plus accrued interest, into new notes. This game will continue until the regulators or independent auditors call a stop to it through the requirement of adequate loss reserves.

Comment by JimAtLaw
2007-12-30 01:27:43

Well, that or the banks could eventually decide they can’t continue playing the game and racking up more and more potential losses on collateral that is depreciating, and instead bite the bullet and eat the losses to date, stop lending the builders more money, and foreclose…

One would think some lenders might be thinking about doing this on some projects already, given IBank projections of continuing price depreciation until 2012 in CA and some other places… if it turns out the bank was lending more and more to builders that were effectively insolvent, heads could roll, and I imagine some may go along for the ride with the builders, but others may bail out early even if it means they get bruised in the process…

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Comment by Jas Jain
2007-12-29 13:27:19

One area suffering from inventory glut is Santa Clara Co. Inventory of SFH up 110%, YoY, and sales down 40%, YoY. There is easily 12 months of supply. Also, inventory declines, seasonally, during Nov-Dec and bottoms around the New Year, but this year the % inventory decline is lot less than 2005 and 2006.


Comment by Blacque Jacques Shellacque
2007-12-29 14:34:00

One area suffering from inventory glut is Santa Clara Co.

Anyone who would buy a home around here for the current asking prices is facked in the head.

Comment by Mo Money
2007-12-29 15:18:36

Well there certainly a few facked in the heads still running around, the house on the corner from me finally went sale pending after five months on the market.

Comment by SiO2
2007-12-29 20:13:57

In east San Jose, inventory’s going up, sure. In west santa clara county (saratoga etc) the inventory is the lowest that it has been since april, I’ve been tracking. I”m waiting for saratoga prices to fall. Not happening yet.

Comment by Eggman
2007-12-29 22:47:00

Well, Saratoga &tc are actually one of those places where “they’re not making any more land.” The town is built out, the area is built out, except for random infill, and that’s that. If you want to live out there you’ll have to pay.

Real Estate *is* local in the respect that while everyplace will sufffer price drops, most likely serious ones, some places will be able to shoulder it (except for random FBs) and other places will utterly crater. Saratoga? Cupertino? Prices will slump and people will deal. Manteca? Los Banos? They will have to tear those places down, especially when gas hits $5 a gallon.

Comment by Bluzer
2007-12-30 09:58:08

I remember during the bust - most tech stocks took a 40-50% hit in the first few months. Some however - and Ciena comes to mind - hung in there with significantly smaller declines. However, in the fullness of time, they too caught up with their brethren.

Remember the real-estate decline has only just started (~ 1 yr). The Cupertinos, Saratogas and Palo Altos will also take significant hits. One tipping point will arrive when the tech economy goes into a recession and the high paying jobs are cut. But even without that Silicon valley will catch up - on a relative basis - with central valley.

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Comment by exit56
2007-12-29 13:51:47

“A glut of excess inventory”

Is that from the Department of Redundancy Department?

Comment by Neil
2007-12-30 00:34:05

Oh, you want arguments. This is abuse. Arguments is two doors down the hall.

Comment by sohonyc
2007-12-29 13:54:06

“‘They betrayed me,’ said Morris Abee, who refinanced with ResMAE in 2005.”

“… in October, his rate adjusted, boosting his payments from $3,500 to $4,100 a month. Though Abee knew the adjustment was coming, ‘it surprised me how much of a jump it was.’”

I don’t know about you, but I’m having a hard time spotting the “betrayal”.

Comment by Stars End
2007-12-29 14:08:42

I think people don’t get the idea that the money they will owe is REAL. So much of the bubble had a unreal feel about it, maybe this is more of the same. Just a guess on my part. To me, owing ANY money is VERY real and I don’t like it! :)
Stars End

Comment by mikey
2007-12-29 14:10:31

He’s the one with the target on his back with the “Shoot Me” sign under it .

Comment by Blacque Jacques Shellacque
2007-12-29 14:25:47

What I want to know is, WHAT was his reasons for refinancing? His home was apparently under his control for close to thirty years.

Was it necessary to refinance? If not, why do it then?

Comment by JamesRaven
2007-12-29 13:59:23

I drove through a residential area in San Diego today (From Balboa Park to South Park via Upas fyi). A month or so ago my wife and I laughed at how many FOR SALE signs lined the sidewalks on this route.

Today? A single FSBO sign in the same drive. Weird.

Comment by Ouro Verde
2007-12-29 14:09:15

So James, did they pull up the anchors for the holiday season?

Comment by JamesRaven
2007-12-29 14:11:31

I would say that roughly 100 signs disappeared in 60 days. My guess is that only a few were sales. But, but, but, anytime is a GOOD time to buy!!

Comment by Ouro Verde
2007-12-29 14:19:18

Maybe the inlaws are visiting and nobody wants to show the truth of the new fear. Dead homes. Nobody wants to advertise for a sinking alligator.

“No Mom, everything is fine.”

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Comment by edgewaterjohn
2007-12-29 15:14:50

That’s much more plausible then those all selling. Now is a natural time to want to hit the reset button on sales…and wait for that Souper Bowl kickoff…rah, rah.

Comment by Stars End
2007-12-29 14:10:20

Maybe they are waiting for the spring rush!
Stars End :)

Comment by travanx
2007-12-29 14:16:56

They started taking Foreclosed signs off the for sale signs in Glendale, CA. Thats probably a bigger negative than positive at this point. I cant believe I am still seeing people buying houses around here. Unless they are just getting rented out now while someone puts SOLD on the sign.

Comment by SaladSD
2007-12-29 14:46:43

About 3 weeks ago my sis and I drove by our childhood home in Kensington, a 1920s era suburb in SD. It broke our hearts to see that someone had replaced the cool medieval-looking, solid wood arched entry door with an ugly plain door. (Salvaged for $$ ??) The interior had a couple pieces of furniture, but was otherwise empty and forlorn. What a sad, sad ending to what was once a beautiful home. I can only guess that the house was flipped to death after my folks sold it in the 70s for, gulp, $30K.

Comment by Professor Bear
2007-12-29 15:11:57

‘Tisn’t the season to post For Sale signs in the yard.

Comment by El Pato
2007-12-29 16:25:31

Lots of houses being pulled off the market. Daily MLS changes for this area:

Comment by stanleyjohnson
2007-12-29 14:08:42

not one new listing since early December
is fast approaching under a million three.

Comment by housing hanky panky
2007-12-29 16:17:52

Hi stanley,

some time ago you posted a couple of funny pic’s. (dope heads)

Could you please give me the sites again. My email is…………

Thank you

Comment by Neil
2007-12-30 00:38:49

But last year national inventory on zip never broke one million. So to be wondering if it will drip below 1.3 million prior to 2008 isn’t that big of a deal.

2008 is the start of the decline.
2009 will sting.

Got popcorn?

Comment by ex-nnvmtgbrkr
2007-12-29 14:18:59

Here’s something to ponder.

Just got back from So Cal. My bro-in-law’s bro-in-law has just decided to walk from the house he can no longer afford or sell (even short-sale). Now here’s the thing. Over the last several years massive appreciation has allowed him to MEW himself into toy heaven (my bro-in-law and I were guessing somewhere in the neighborhood of 200K to 250K in MEW). The dude has two water bikes, two dirt bikes, a massive toy trailer, a custom rock-crawling type 4×4, customized 4×4 truck, customized sedan for the wife, all of which he brags he owns free and clear, but we know how he got there. Now, does this dude walk with thousands of dollars in assets, raise his middle finger to the lender, and get a free pass by Bush with the whole debt forgiveness thing?

Pretty F-ed up, eh?

Hey lenders, can you say repo man?

Comment by Professor Bear
2007-12-29 15:09:28

I wonder if the Bushies had this sort of fellow in mind when they decided to forgive taxes on short sale income?

Comment by JimAtLaw
2007-12-30 01:37:51

Yes, they did.

Comment by Mo Money
2007-12-29 15:21:40

Yeah, so where is he going to put all that stuff now that he’ll be renting for the rest of his life ?

Comment by tuxedo_junction
2007-12-29 15:29:39

The bank will foreclose. Since a purchase money mortgage is not involved, the borrower-mortgagor will be responsible for the deficiency. The bank may write-off the loss, or may try to collect, or may sell the debt to a collection firm. If the debt is reduced to a judgment (court procedure) the judgment holder can send the sheriff after non-exempt property. This seized property will be auctioned off and the proceeds, after the sheriff’s expenses, will be applied to the judgment.

In my experience bankers are not aggresive about collecting unsecured debt. The spend-thrift will most likely get to keep his toys.

Comment by Ken Best
2007-12-29 18:50:24

The bank will sell it to a collection agency, getting some cash. The Agency will go after him and his toys :-)
Note to unemployed loan brokers: time to start a collection business.

Comment by SubKommander Dred
2007-12-29 20:20:09

I would think that after all is said and done, this guy ends up having to sell all of his ‘toy’s at a loss. Folks who spent like that usually don’t have much in savings. More likely than not, I’ll bet he’s advertising all that stuff on Craigslist just to keep the electric from getting shut off and food on the table.

SubKommander Dred

Comment by are they crazy
2007-12-30 00:38:19

I’m betting that the lender would be more likely to go after the toy collector if they knew about all the toys.

Comment by sm_landlord
2007-12-29 15:35:20

There probably aren’t enough qualified repo men on Earth to go after all of the FBs who did that. You BIL’s BIL will likely get to observe rapid depreciation in action on all the toys. If he has a few brain cells, he’ll transfer the toys out of his personal ownership for pennies on the dollar, and it will be clean, because the toys themselves are “free and clear”, not collateral. Besides, even if the banks got it together to do repos like that (unlikely), how would they monetize the stuff? I’ll bet that 4×4s and Jet Skis will be a drug on the market for some time to come. Yes, pretty F’d up.

BTW, are prices coming down in Reno yet? I’m looking to buy in that area in a year or two, maybe up Mt. Rose toward the lake?

Comment by David
2007-12-29 21:45:35

All these toys consume lots of gas. I wonder how much use he will get with fuel at $4 a gallon?

Comment by Blacque Jacques Shellacque
2007-12-29 14:28:20

Bill Brashear, 79, needed extra cash after a hospital stay, so…

Why, why, why?

Good God in Heaven, why not just sit things out until the next check arrives in the mail?????

Comment by AnnScott
2007-12-29 19:52:09

Duh…because hospitals come after patients relentlessly and Medicare does NOT pay the entire bill. Those 20% copays and the deductibles on hospitalization are killers. And don’t forget the $3000 gap in prescription coverage…..

Comment by cactus
2007-12-29 20:43:03

I would not risk my house to pay a medical bill in full. Work out a payment plan with the hospital or if the hospital has sold your bill tell the collection agency to take you to court. They will always try and shake you down for the money but I have never seen a repossesion. long term care ? yes you will have to pay maybe going broke.

Comment by Blacque Jacques Shellacque
2007-12-30 02:57:50

Duh…because hospitals come…

According to the article, the amount he got when he refinanced was $270K. If his hospital stint was indeed under Medicare and the gaps in his coverage in his case actually totaled $270K, he’d have been better off selling.

Comment by WT Economist
2007-12-29 14:39:51

“Want to bet this guy refinanced more than once? That is how you get on the call list.”

My grandfather serially refied his house to “invest.” The mortgage brokers and stock brokers had him on speed dial, and made him feel like a big wheel. My grandmother kept him under control while alive, but there was no stopping him once she was gone.

The choices were go to court and fight to take his independence away, and maybe lose, or let the sharks eat the carcass. My cousin tried to go after the brokers, because you aren’t supposed to buying stocks with borrowed money, but they said that if they didn’t do it, someone else would. Churned away every dime in the end.

But this was in a rising market, so eventually he was able to sell and leave with a little money. He was thus able to live in an apartment on his own until physically unable. Others might still be able to move to a cheap apartment and live off social security, post foreclosure. Perhaps the government can sponsor the conversion of McMansion developments into a set of small apartment buildings for seniors.

Comment by jacko
2007-12-29 14:48:33

“Perhaps the government can sponsor the conversion of McMansion developments into a set of small apartment buildings for seniors.”

interesting. i’ve been thinking the same thing. there’s going to be a big shift in housing demand away from sfh to multi-family due to demographics.

Comment by Professor Bear
2007-12-29 14:59:58

Your grandfather’s situation provides a nice illustration of why it has become politically imperative to ensure the stock market always goes up.

Comment by JerryM
2007-12-29 15:05:48

It is just a “game” for the Wall St. boys and boy do they know the game. They know the rules and these professionals have no fear of anyone really ready to punish them. The large banks etc suck the shareholders in, insiders cash out, and the game goes on. Always greater “fools” ready for the next big run up.

Comment by Paul in Jax
2007-12-29 17:04:54

The guy was a home-owning grandfather, for Chrissake. Sorry to offend a blogger’s relative (again), but all his problems are of his own making. He had his fun, now he pays. I fail to grasp why anybody who sold him anything deserves punishment.

Comment by Mo Money
2007-12-29 15:27:23

They can call my house all they want, I never pick up the land line and there is no answering machine. Anyone I know that I want calling me has my Cell number and that’s it. Before I instituted this policy I would pick up the land line and hear nothing for a few seconds after I said hello while the salescreature woke up and grabbed for the phone, Anyone greeting me with “Mr Money ?” got hung up on so fast it made their heads spin.

Comment by Groundhogday
2007-12-29 17:09:19

Wow, my father-in-law did the same thing during the dot com bubble. Day-traded away his paid off home equity. But the rapidly appreciating SF housing market allowed him to sell the house in 2004 for a nice hunk of cash.

It took him a couple of years to get his hands on that cash as family members did their best to keep him from self destructing. But this year he finally won out, got control of the money and spends his days trading options. Some folks never learn.

Comment by Ken Best
2007-12-29 18:42:02

There was a house fire in San Jose yesterday. Fire fighters took a long time to put out the fire, uncommon for a house. Turned out it’s a
11,000 sqf house, with basement. A Mac Mansion. The house was
being remodeled, its owners were out of town. Kind of suspicious.

Comment by Earl 288
2007-12-29 21:26:22

Did the fire occour after midnight? If so, probably arson.

Comment by housing hanky panky
2007-12-29 15:50:38

Credit loss could hit $US1trillion.

Now this is scary……..YIKES!!!!!!

THE US economy could be heading into its blackest year since the Great Depression as estimates of losses from the housing slump and sub-prime mortgage implosion reach unprecedented levels.

The latest bank estimate of $US700 billion in losses made this week by Rob McAdie, the UK-based head of credit at Barclays Capital, is $US300 billion more than a headline-grabbing Golden Sachs estimate that jolted US markets just last month.,24897,22973589-643,00.html

Comment by housing hanky panky
2007-12-29 16:33:24

Liquidity and Deflation…………….

“Liquidity” is in fact debt. An example will suffice to show why “liquidity” is ultimately deflationary, not inflationary.

Let’s say that The Fed “injects” $100 billion in the form of a 1-day TOMO (Repo) operation. Banks pony up collateral of some sort (securities) and receive cash.


This is “more money”, right, and therefore inflationary.

Uh, no.

What happens tomorrow?

You have to pay the $100 billion back, WITH INTEREST.

In other words, one day later, the total amount of free cash in the system has actually gone DOWN, not up!

Now what IS “printing”?

The Treasury literally printing. That is, issuing dollars without offsetting them by selling Treasury bonds. In other words, instead of selling debt to raise cash, they simply print the cash.

But that has not been happening, nor can The Fed make that happen.

Treasury can, but won’t.

Why not?

Because if they do, the bond market will react by immediately cutting the value of all EXISTING treasury bonds.

Now when The Government goes to “roll over” its debt, it finds that the rate of interest it must pay has increased in an exactly equal amount to that which it printed!

But since The Government is only about 1/5th of the total economy (and the “dollars printed” went into the total economy), they in fact will bear five times more cost than they get in benefit, as they get ALL of the cost via higher treasury interest rates!

That is why the Treasury has not and will not do this.

The Fed CAN’T do this.

Comment by cactus
2007-12-29 20:30:51

I think the FED will just lower interest rates so the paying back part won’t cost the Banks much. Will the dollar fall as a result ?
Will inflation head higher ? Long interest rates go higher ?

Comment by ronin
2007-12-30 07:54:23

Liquidity does not always mean debt. It just means the free ability to spend, pretty much at will. In fact, if I have no debt, and plenty of savings, I am very liquid.

But when we talk about the fed ‘injecting liquidity,’ that actually does mean that it is creating money- i.e., creating debt.

Comment by Snug as a bug in a rug
2007-12-30 08:55:42

You wrote: “Now what IS ‘printing’ The Treasury literally printing.”

Help me understand this, ok? Let’s say that Treasure runs the printing presses and generates more dollar bills in January. I can’t see why it would change anything.

Unless Treasure gets on a Rose Bowl float and starts tossing out the newly-printed money to citizens, what’s the big deal? Now, if they write a check (faster and easier than lots of $1 bills) to a bank or an individual or a county or something, then that could have an economic effect. But if they print and hold the dollar bills, so what? Or am I misunderstanding you?

Comment by housing hanky panky
2007-12-29 16:55:04

I posted this earlier but it didn’t appear. Two very important things appear in this article, and one relates (IMHO) to how any bail-out might occur.

Credit loss could hit $US1trillion.

THE US economy could be heading into its blackest year since the Great Depression as estimates of losses from the housing slump and sub-prime mortgage implosion reach unprecedented levels.

The latest bank estimate of $US700 billion in losses made this week by Rob McAdie, the UK-based head of credit at Barclays Capital, is $US300 billion more than a headline-grabbing Golden Sachs estimate that jolted US markets just last month.

And it is light years from the $US50-100 billion in losses predicted by US Federal Reserve chairman Ben Bernanke to Congress in July. Expressed another way, the International Monetary Fund and World Bank say only 15 countries have a GDP higher than $US700 billion. Australia was 15th on both lists.

But even estimates of a $US700 billion sub-prime bloodbath may be conservative, with respected finance and economic blog sites like Calculated Risk predicting losses as high as $US1 trillion. The implications for global credit markets of losses of this magnitude would be horrendous, forcing banks and other institutions to slash lending by several trillion dollars.


Writing in American Banker last week, Alfred DelliBovi, president and chief executive of the Federal Home Loan Bank of New York and a former deputy secretary of the US Department of Housing and Urban Development, said the lessons of the Great Depression could help avert disaster.

He said the Bush administration should look at the 1933 federal legislation that provided $US200 million to set up the Home Owners Loan Corp (HOLC) and gave it authority to issue $US2 billion of tax-exempt bonds. The funds were used by HOLC to buy delinquent home loans from lenders and refinance them directly with consumers on flexible terms.

HOLC offered to finance up to 80 per cent of a home’s assessed value to a maximum of $US14,000, about $US225,000 in today’s dollars.

By June 1935, HOLC had refinanced 20 per cent of all qualifying mortgages, saving about 800,000 home owners from foreclosure and stabilising the balance sheets of many lenders. HOLC liquidated itself in 1951 at a slight profit to the government.

“The HOLC success story should give policy makers cause to thoroughly consider reviving the model to deal with the current crisis in home finance,” Mr DelliBovi wrote.

“Franklin D. Roosevelt said the broad interests of the nation require that special safeguards be thrown around home ownership as a guarantee of social and economic stability.

“Wouldn’t it be a nice change if we could hear President Bush echo those words.”

But the powers to intervene like this may not require the setting up of a new government instrument. As the credit crisis worsens, increasing attention is being focused on a 2004 paper by Fed legal division staffers David Small and Jim Clouse about the extent to which the central bank can lend money to individuals, partnerships and corporations (IPCs).

It concludes that the Fed’s traditional constraints of conducting domestic open-market transactions only in US-backed or issued securities and making loans only to depository institutions can be relaxed in cases where banks become unwilling to provide credit.

When this occurs, the Fed is free to lend money to anybody it likes, so long as the circumstances are “exigent” and there is a vote in favour by five governors. “In making loans to IPCs, the Fed would be able to accept a wide variety of private sector credit instruments as collateral,” the paper says.

Full article…………..,24897,22973589-643,00.html

Comment by Vermontergal
2007-12-29 19:35:16

Yippee!! Let’s have the Fed bail out hedge funds directly!! Woo-hoo!

The question is how real a possibility is this? We’re talking about a report penned by a couple of lawyers working for the Fed. Would direct lending actually hold up in court? How long would the “emergency” be? What criteria would they use to lend? And if it’s okay to lend to individuals, do I get a spot on the discount window? ;)

Comment by sleepless_near_seattle
2007-12-29 16:56:50

“After a few months, ResMAE sold the loan to another lender. Abee kept up his payments. Then, in October, his rate adjusted, boosting his payments from $3,500 to $4,100 a month. Though Abee knew the adjustment was coming, ‘it surprised me how much of a jump it was.’”

I’m throwin’ the bullsh!t card. Granted, another $600 per month isn’t small potatoes (at least not for me), but I would think that someone who can afford a $3500 payment wouldn’t be as put out so as to lose their home by such an increase.

My guess is he couldn’t really afford the $3500 and was quickly bleeding whatever savings he once had. And what happened to the (most likely) $400K+ in HELOC money.

Comment by pizzaiolo
Comment by pizzaiolo
2007-12-29 19:13:01

Oops, I screwed up the title of the URL. It should have read: the worst realtor pics in America

Comment by cactus
2007-12-29 19:27:04

#6 Pollack the millionare Realtor who owns the dollar theater in Chandler with all the movie stuff in the lobby. I think he owns all the mini malls as well.

Comment by Professor Bear
2007-12-29 19:51:28

Year in review 2007
Slideshow: the year in review
Published: December 27 2007 13:01 | Last updated: December 28 2007 12:27

“The subprime mortgage crisis and the resulting credit squeeze was the defining financial story of the year.”

Comment by Dan (from SoFla)
2007-12-30 01:05:48

Yun spins like crazy but his presumptions aren’t entirely wrong.

However, the volume of transactions was at its highest at the last stages of the boom, in 2004-05 and even 2006. Those people are almost certainly upside down.

Furthermore, the inventory levels indicate a rapid decline, so even those who bought at the early stages of this boom in 2002-03, will be finding themselves at best at breakeven ratehr shortly.

With regard to Miami in particular, the soon-to-be-finished constructions were started in 2005-06 and will go on sale in 08-09, further glutting the market.

As probably close to 80% of the late bubble sales were to investors, these high end properties encounter additional problems - they’re upside down, unrentable, unsellable and unmortgageable.

So, a note to Mr. Yun - the early bubble buyers will soon be upside down as well. Unless they’re living in their units and have a reasonable debt load, the 2002-03 purchases will be in danger, more if they were HELOC’ed.

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