It’s A Market-Driven Issue In California
The San Francisco Chronicle reports from California. “The coordinators of Sunday’s auction of 41 units at the new Eight Orchids condominium midrise in Oakland billed the event as a means of finding the actual market value for such homes. Among the dozen transactions recorded by The Chronicle, sales prices ranged between 25.3 and 34 percent off the original asking price.”
“‘The market has definitely humbled us,’ said Stuart Gruendl, CEO of project developer BayRock Residential of Oakland. ‘But at the same time, our heads are above water and the property is succeeding.’”
“BayRock has been taking reservations for Eight Orchids, a 157-unit complex at Seventh Street and Broadway on the edge of Chinatown, since February 2007. As of early last month, it had sold 20 units - fewer than two per month.”
“One of the early single-bedroom condos sold for $316,000, up from a starting bid of $245,000 but well below the original $435,888 asking price. The auction for a three-bedroom, three-bathroom town home started at $475,000, stalled around $528,000 and then quickly ran up to $534,000.”
“That was nearly 34 percent off the list price of $805,888. Nevertheless, a member of the bidding family, when asked how he felt, replied: ‘I’m kind of nauseous.’”
“On the other hand, one winning woman walked out of the auction room crying tears of obvious joy, with her family members smiling and offering congratulatory hugs. ‘Nobody offered me a consoling hug,’ Gruendl later joked.”
“All 41 of the homes put up for auction received bids above the minimum. Ken Stevens, CEO of the West Coast division of Accelerated Marketing, said the auction would be used to establish the price for remaining homes at Eight Orchids.”
“More difficult to evaluate is what the auction will mean for the broader Oakland or East Bay market, experts say. P’All those auctions will end up in some appraiser’s book,’ said Christopher Thornberg, an economist with Beacon Economics of Los Angeles.”
“‘That kind of discount could be attributed to their location, as much as to the overall market and credit situation,’ said Patrick Duffy, principal with MetroIntelligence Real Estate Advisors in Los Angeles.”
“The particular challenge for Oakland developers is that several large condo developments have opened or begun selling the past year. These builders are selling only a few units per month on average, according to San Francisco research firm Mark Co.”
“The Eight Orchids discounts could be unwanted news for those who have bought downtown Oakland condos during the past few months - especially if they settled on a unit in the Chinatown building itself. Gruendl acknowledged there is a gap between what early buyers paid and the amounts agreed to at the auction.”
“‘But not enough that existing homeowners should lose sleep,’ he said.”
The Press Democrat. “Lenders increasingly are unloading foreclosed homes as supplies continue to mount in Sonoma County — good news for buyers and bad news for homeowners trying to sell.”
“One in four homes sold in Sonoma County in February were foreclosed upon in the past 14 months. Every week in February, buyers purchased 16 houses or condos that had recently been in foreclosure, according to DataQuick.”
“Two days was all Richard and Liz Fedrick needed to find a newer house in Cloverdale they liked and could afford, something they didn’t think possible after leaving Sonoma County four years ago in search of cheaper housing in Southern California’s high desert.”
“Last month, the couple, with their toddler, moved into the three-bedroom home they bought for $295,000 after the lender cut the list price 18 percent.”
“‘We were expecting to have to settle for something older, something small. But there were tons of choices,’ Richard Fedrick said. ‘It’s a great market.’”
“Still, the rest of the housing sector has a way to go before hitting bottom, agents said.”
“‘In order for a market to level out, you have to get through the bank-owned homes. There’s going to be more and more inventory this year and next year,’ said Rendino, an agent in Rohnert Park.”
“Every week in Sonoma County, lenders seize almost 50 homes and condos from borrowers who have stopped paying their mortgages, according to the county recorder’s office.”
The Charlotte Observer. “Starting today, Wachovia Corp. has stopped making so-called Pick-A-Payment mortgage loans in 17 California counties that have been hard hit by falling home prices and rising foreclosures, according to a memo obtained by the Observer.”"In these counties, the Charlotte bank is no longer originating mortgages that it keeps in its own portfolio, a class of loans that includes the Pick-A-Payment product, bank spokesman Don Vecchiarello confirmed. The bank continues to make mortgages that it can sell off to investors, he said.”
“‘It’s a market-driven issue,’ Vecchiarello said. ‘It’s not a product-driven issue.’”
“The 17 counties are in regions known as the ‘Central Valley’ and the ‘Inland Empire,’ areas the bank has identified in earnings conference calls as particular trouble spots. The territory stretches from San Diego in the southern part of the state to Sacramento in the northern part of the state.”
“Wachovia acquired the product when it bought California-based Golden West Financial Corp. in 2006 to expand on the West Coast and in the mortgage business.”
“Investors have worried about the $24 billion deal because Wachovia bought Golden West at the peak of the housing boom. About 60 percent of the bank’s Pick-A-Payment portfolio is in California.”
From FOX 6 San Diego. “When Eddie Zepeda’s mortgage payments went up, he went through the roof. ‘I was desperate,’ explains Zepeda.”
“He had to decide whether to pay his skyrocketing mortgage, or to take care of his family. Even working two jobs, Zepeda says there wasn’t enough money for both. Zepeda says the money problems started to take its toll on his family.”
“‘I was getting divorced at a certain point cause the stress was just too big,’ he says. Zepeda says he tried everything. He set up meetings with five different lenders.”
“‘Two brokers and three banks and they all told me to ride it out, that there was nothing I could do at this point,’ Zepeda explains.”
“Zepeda says he didn’t have much of a choice so he decided to stop paying his mortgage and simply walk away from his home.”
The Daily Bulletin. “If neighborhood streets could talk, El Rancho Verde’s roads would tell the story of change. Nonetheless, the same huge front yards, towering palms trees and ivy-laden landscape flourish on this stretch of county land located adjacent to Rialto’s borderline.”
“Things have changed for the worse, some residents say, but others say the best is yet to come.”
“John Brown moved here because the houses were cheap. That was in 2000. He paid $140,000 for his five-bedroom, three-bathroom home. ‘I have three kids and didn’t want to bring them up in the L.A. area,’ Brown said.”
“He’s optimistic about a proposed housing development by Lytle Development in the neighborhood’s northeast end that hasn’t materialized because of the busted housing market.”
“‘I’d like to see it happen,’ Brown said. ‘We’d like to see our property values go up.’”
The Modesto Bee. “Assessed home values — and property taxes — will be lowered this year on about 38,000 houses and condos, 4,000 mobile homes and 1,000 multifamily housing units in Stanislaus County.”
“County Assessor Doug Harms said that’s because property values have dropped dramatically in the past two years. He said some homes are worth less than half of what buyers paid for them during the 2005-06 housing boom.”
“The biggest drop will be for 2,500- to 3,500-square-foot Patterson homes purchased during December 2005, which Harms calculated are worth about 52 percent less than their original prices.”
“To break it down, homes purchased from October 2005 to July 2006 will see the biggest declines, which will average 40 percent to 44 percent countywide. The lowered assessments will reduce property tax collections.”
“‘It’s in the billions,’ Harms said of the loss. Last month he had estimated that property tax revenues would fall $1.4 billion, but now he estimates the loss will be significantly larger.”
“Five vacant Modesto homes that police say are havens for illegal camping, drug use and dangerous fires are set to come under the wrecking ball tomorrow. Police say officers and city building inspectors have since October worked with owners of the homes.”
“The owners agreed to allow city workers to demolish the buildings Wednesday morning, according to a Modesto Police Department press release.”
“‘There are a number of these properties throughout the city that we are monitoring,’ said city Building Inspector Bert Lippert in a press release. ‘If a property is being used as a haven for drug use or is becoming a safety hazard for the surrounding neighborhood, then we begin looking to the property owners to take reasonable steps to clean it up. If that doesn’t happen, then we have to look at other means to protect our community. And demolishing the dwellings is something that is very effective.’”
I was looking at a spreadsheet put out by the Federal Reserve of NY regarding Alt-A loans as of December 31, 2007.
All of this data is only for Alt-A loans in Calfornia as of 12/31/07.
A few things stood out:
- There were a total of 593,617 Alt-A loans in CA outstanding at 12/31/07 (about a third of the 1.7 million total for the U.S.)
- The percentage of loans in CA with full documentation was 16.8% (only Hawaii was lower)
- The percentage of loans in CA used for cash-out refi’s was 45.0% (only a few states were higher)
- The percentage of loans in CA used for purchases was only 36.0% (only a few states were lower)
- The percentage of loans in CA with pre-payment penalties at origination was 55.9% (only a few states were higher)
- The percentage of loans in CA with neg-am was 38.1% (the next highest state was FL @ 28.6%)
- The percentage of loans in CA with variable rates was 72.1% (the next highest state was NV @ 66.5%)
About half of the ARM’s had already reset in CA at 12/31/07 and deliquencies seem to be in line with the rest of the country.
I’m not sure what to make of all this.
The link for this spreadsheet (and a subprime one) is at:
http://www.newyorkfed.org/regional/subprime.html
“- The percentage of loans in CA with neg-am was 38.1% (the next highest state was FL @ 28.6%)”
Thank you for that statistic. I was aware that 75% of loans originated in 2006 in the Bay Area were neg-am, but I have been trying to find the total percentage of outstanding neg-am loans. I’ll bet the percentage is even higher for the Bay Area than it is for CA as a state.
Those are some ugly stats. I’ve never been interested in the plight of the FB’s, but those numbers just reek predatory lending.
“Big man, pig man, haha, charade you are”.
Hey you, town house,
Ha ha charade you are.
You house proud clown louse,
Ha ha charade you are
You’re trying to keep your clothing off the street.
You’re really a dead beat,
Upside down in the hot seat
And do you feel abused?
You had to run the evil tide,
And let it fly to the outside.
FB you’re nearly a treat,
FB you’re nearly a treat
But you’re really a cry.
Larry you’re nearly a treat, but you’re really a lie
“I’ve never been interested in the plight of the FB’s, but those numbers just reek predatory lending.”
No way around it. This was a massive predatory lending scam. A lot of people are being ruined by it.
“The percentage of loans in CA used for cash-out refi’s was 45.0%”
I hope Congress gets their butt into gear and helps out these poor, innocent people. Imagine, increasing the size of your loan to buy consumer goods, and then having the Congress take it’s time with a “helping hand”. What is this world coming to?
–
It is a very dynamic market and any stat that is 2 months old is out-of-date.
Jas
‘ put out by the Federal Reserve of NY ‘
- Hey! it’s none of the Federal Reserve of *NY*’s business what the heck we are up to in CA!
- The ‘Sub-prime’ loan was invented in Orange County and we basically took down the whole freekin world! Again!
Rant aside - we are toast. Talk to Ben if there is a problem.
OT–
Next door to Montecito (just south of Santa Barbara) is the hilly, beachside enclave of Summerland, a.k.a. Flipper Central. One 800-sq-ft Summerland shack has turned over each and every year since 2002 — seven times altogether. The randiest of her johns borrowed almost a million bucks to buy her in 2006 — and of course it’s John Q. Taxpayer who shall pay for that particular cupidity.
This week at the Santa Barbara Housing Bubble Blog: Saint Barbara recounts the entire sordid story of the hillside whore on Hardinge Avenue — and Raymond Chandler rolls over in his grave. Enjoy.
Saint Barbara
Hey SB, this would have only been off-topic in the morning Florida thread. I love hearing about how F***’d my neighbors are to the north!
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I named the area Fanta Barbie in 2005. I lived there for 3 years and have few friends whom I told to sell their homes during 2005-06. One did but then bought a more expensive place (marriage thing).
Jas
This is an interesting story told in a very entertaining way, but the assertion that the taxpayer will pick up the tab is not supportable and has no evidence. All of the Fed money is paying off fractional values with major strings attached. If you want to claim the taxpayer is picking up the bill for this then you need to prove that by exposing the money trail.
Didn’t the Fed exchange the collateral for Treasuries? If so, then if they don’t get paid back, we just sold Treasuries at a discount, and that would be taxpayer $$. I could have sworn I read that the Fed was buying MBS at face value with Treasuries.
I believe it was all over the news that tax payers were on the hook for BSC losses.
“CNBC’s Steve Liesman reports on a letter from Treasury Secretary Paulson to New York Fed President Tim Geithner. In the letter, Treasury agrees that the Fed can bill Treasury for any losses from the Bear Stearns deal.”
You tax dollars potentially at work.
No bail-out here.
Very good. I visit your site just for the interesting stories. I went into a Sin City tone while reading it.
This summer should get real interesting. As the supply of naive knife catchers dwindles and inventories grow.
I wonder what actual demand is (so-called “pent-up” demand)? The real estate agents seem to think it is sky-high.
What I mean is the number of people who actually want to buy a home but feel this is bad timing, and not the number who are actively looking for one today (so-called “knife-catchers”).
I certainly would like to buy a home, but not until prices return to earth. I suspect the majority who visit this blog feel the same way.
Paying cash when it pencils out. Until then, we’ll continue to rent.
My criteria: Something I like, that I can afford (
Something I like, that I can afford ( less than 25% of my income for a 15 year mortgage after 20% down), and doesn’t lose more than 10% of its value (i.e. near the bottom).
That last part is what makes buying hard right now…
We are geezers in training, who sold our prior residence. To retire down the road, we need a paid off home.
I want the 50% haircut to hit fast. If this plays out like Japan (15 yrs of downhill slide), it will screw all of us up.
I’m proud of you for being a saver. What ever you do,don’t buy into an HOA development. We did twice, and learned all about totalitarianism. Go for a nice one story with a private yard, in an older neighborhood. Tha’s our plan. McMansions are a fish bowl lifestyle,with a dictatorship.
My advice - Don’t buy into an HOA. Don’t buy a McMansion, its fishbowl living under a dictatorship.
We are buying an older one-story ranch ,with a private yard. I am sick of yuppies, and I want privacy.
We owned a home before, sold it, and rented to wait out this market. This will be our 3rd and final home, smaller than our previous one. We’re geezers in
training. You’re a young whipper-snapper. (Who saves, is smart and is disiplined!)
Cash baaaaaaaaaaaaaaaaaaaaaaaaby!
–
Folks, things are looking worse and worse for CA and most Western metros:
Radar Logic Latest Annual Rate Trends
AREA_____ 6M AR 3M AR 1M AR
Sacramento, CA -40% -60% -39%
Las Vegas, NV -39% -46% -47%
San Fran, CA -34% -52% -53%
Los Angeles, CA -31% -39% -19%
Tampa, FL -30% -35% -41%
Boston, MA -29% -46% -15%
San Diego, CA -28% -37% -12%
Denver, CO -27% -33% -41%
Atlanta, GA -24% -31% -10%
Detroit, MI -23% -33% -52%
Phoenix, AZ -23% -20% -18%
Miami, FL -21% -22% 21%
Seattle, WA -21% -22% -28%
Minneapolis, MN -21% -30% -28%
San Jose, CA -20% -32% -47%
25 MSA Comp -22% -25% -14%
Jas
Jas, what are these numbers? Are they annualized sales volume change? Or something else?
–
These are PPSF (price per sq ft) for transactions over a 28-day period. There are delays due to time between transactions and when they are completed and recorded. Radar Logic data has slightly higher volatility than Case-Shiller, but they are slightly more current.
Jas
Am I reading correctly, all metro areas, excluding Miami(?) have prices, per square foot, dropping at double digit rates?
Is Miami a dead cat bounce? Missing the minus sign? Only the sale of ocean front property?
Its falling apart!
Got Popcorn?
Neil
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Neil,
One-month change is more volatile and not necessarily a reflection of change in 3M and 6M trend.
Yes, the trend price change is 20-40% annual rate for the metros listed, including for the composite for all 25 metros. Please note that not all 25 metros were listed. The remaining metros have declines lower than 20% AR.
Jas
We got a thing - radar love.
http://www.youtube.com/watch?v=JeRa3RtBiIU&NR=1
Radar love ~
Leigh
“The 17 counties are in regions known as the ‘Central Valley’ and the ‘Inland Empire,’ areas the bank has identified in earnings conference calls as particular trouble spots. The territory stretches from San Diego in the southern part of the state to Sacramento in the northern part of the state.”
___________________________________________________________
i.e.: The Greater Inland Empire
I always thought of the area east of San Diego as “the desert”. I never thought of it as the Inland Empire.
IE is north of SD, east of LA and OC. It sits in the wedge formed by San Bernadino and San Jacinto Mts, which also give it its reputation of the biggest smog-trap in the known universe.
The Central Valley is surely hanky enough to be included in the Empire, one would assume.
The Central Valley is an entirely different economic zone (ranging hundreds of miles away from the Inland Empire), but also hosed on housing.
I’d pit Modesto against the worst the Empire has to offer up…
I took the Amtrak from Fresno to L.A. (well, Bakersfield) this weekend and oh my lord, if you all have not done that before, you all need to see what kind of poverty we’ve cooked up in the Central Valley. I’ve lived my whole life in Fresno or L.A. and I had no idea how bad it was in rural Central Valley. We’re talking Navajo Nation bad here. LOTS of open-pit dumps on fire! At least I know where to set the next Snake Plisken movie.
I’ve done quite a few drive-bys around the Central Valley, and it’s the same or worse in every city…
Rampant overbuilding in areas full of ag smells and Dante’s Inferno in the summer.
And no real way to make money in most locales, a dead end where a $8 hour job is as good as it gets.
“the Central Valley is an entirely different economic zone (ranging hundreds of miles away from the Inland Empire), but also hosed on housing.”‘
Bith CV and IE have some similarities. Both were regions which saw explosive rampant uncontrolled growth of cheaply built mass -produced tract housing over former farmland(CV) or pasture/scrubbrush(IE). The rise of this rampant urban growth in the hot miserable inland CA valleys was due to the need for coastal dwellers for cheap housing away from the overpriced coast . HB’ers put up those originally cheap tracts to meet that need but then speculation and Bubble hysteria took the cheap Inland CA home to rediculous prices.
Now the prices are coming down and we see massive foreclosures/price drops in the Inland areas , which will in turn bring out another round of stupid bidding.
Another similarity is that all those homes were built like crap.
‘Rampant overbuilding in areas full of ag smells and Dante’s Inferno in the summer.’
Ag smell is a GOOD smell. And let’s get specific–what part of Dante’s Inferno? Seventh circle? Eighth circle, Bolgia 3? All sorts of different smells to be found in the Boring Dead Italian Poet’s Afterlife Plan.
“IE is north of SD, east of LA and OC. It sits in the wedge formed by San Bernadino and San Jacinto Mts, which also give it its reputation of the biggest smog-trap in the known universe.”
There is the IE and then there is the real nasty part of the IE, the inner older ragged core region bounded by the 15, 10, 215, and 91 fwys, This inner older densely settled part of the IE includes San berdoo metro, rialto, colton, riverside inner metro, fontana, roubidoux, part of redlands, and is generally populated by recent immigrants/ illegals ,white crackers, assorted welfare folks, begrimed truckers, tough guy homeys in 8-cylinder behemoths , redneck wackos, gangsta expatriates from LA, you got it.
This is the area which has the severe industrial pollution ptoblems especially in south fontana, Colton, Inner San Berdoo & Rialto which are four really nightmarish largely ghettoized burgs
soon to become know as “The Forbidden Zone”
–
Bad Lands (I believe a movie title, was it about Antelope Valley?) or Gang Land?
Jas
“I always thought of the area east of San Diego as “the desert”. I never thought of it as the Inland Empire.”
Same here where I live. Ever since I was a kid, I’ve always thought of it as “the mountains.” Now the tourist industry has renamed it “the High Country.”
as in crystal meth country?
You made me laugh. And you are probably correct.
“IE..areas the bank has identified in earnings conference calls as particular trouble spots”
To call the IE a trouble spot is the understatement of the century.
Anyone who has traveled extensively over the IE has to be aware of all that massive overbuilding of tract homes, simply plunked down on bulldozed graded lots. Very cheap home , though amople in size but squeezed like sardines onto small lots. And lots of former good pasture, groves, farmland plowed over, asphalted, and turned into ugly sprawling malls and tracts.
The process of rural degredation and razing of the IE into malls & homes is quite laizze faire & uncontrolled, something which was done throughout the western US & CA last century(call it despoilation).
Lots of pollution problems and industrial dumping in the IE, which will never see the light of day as the overall IQ level of the IE, especially the San Berdoo section, is quite low.
Yes. And empty malls as bussinesses fold and empty houses.
“Nevertheless, a member of the bidding family, when asked how he felt, replied: ‘I’m kind of nauseous.’”
Ah, the joy of catching a falling knife.
In the head.
I too, when someone has just taken the reeming of a lifetime, am impelled to ask the “how does it feel” question. Morbid curiosity I guess.
LOL - That reminds of the scene in the movie the Princess Bridge where Wesley has just had 1 year of his life sucked away.
……and be honest, for posterity’s sake.
[Wesley cries and moans in pain]
… Interesting.
Except in my version the count has a large bowl of popcorn.
to blave
Avert eyes!!
The “machine” ain’t got nothin’ on the Joshua Tree. I’d like to see how Wesley would hold up under the JT treatment. Miracle Max would have his hands full, that’s for dang sure. Ain’t no pill I know can reel in a colon.
Count Rugen: Your princess is quite a winning creature. A trifle simple, perhaps. Her appeal is undeniable.
Prince Humperdinck: I know, the people are quite taken with her. It’s odd, but when I hired Vizzini to have her murdered on our engagement day, I thought that was clever. But it’s going to be so much more moving when I impale her on our wedding night with a Joshua tree. Once Guilder is blamed, the nation will truly be outraged - they’ll demand we go to war.
Happier with the movie now ex-nnv?
Got Popcorn?
Neil
does this mean i have to switch to Fargo? or The full monty?
“Wachovia acquired the product when it bought California-based Golden West Financial Corp. in 2006 to expand on the West Coast and in the mortgage business.”
Just to keep the foreclosures at bay, Wachovia is hoping that they can keep the pick a payments reset to a 50 year mortgage with all interest tacked on to the rear . Nice buy Wachovia and Merrill did real well with First Franklin, I suspect that Bank of America will do equally well with Countrywide.
Do you think that people are dumb enough to go for the 50-year “product”? It doesn’t seem like very many people are interested in them so far. Maybe they would have been before the crash started, but I think people are actually starting to pencil out the costs these days.
I am just kidding MS Big V - an Aprils fool, I’m sorry!
The bank is in so much doodoo that they are hoping for a miracle. 50 year mortgages have been discussed, they were common in Japan in 1989.
A person is smart, people are stupid. A person might pencil out a budget; people pencil out ‘wants’.
Hoz,
we have a 50-yearer up north. wish it was an april fool’s…
http://www.labuick.com/index.asp?PageID=60&sMenuID=4
“Starting today, Wachovia Corp. has stopped making so-called Pick-A-Payment mortgage loans in 17 California counties that have been hard hit by falling home prices and rising foreclosures, according to a memo obtained by the Observer.”
Do you guys remember the article yesterday where the guy said that they were heading at mach 1 into a wall, and once they hit then they would have to make some decisions? Do you see any parallelism between that guy’s MO and Wachovia’s?
Does everyone remember
“To know Pick-A-Payment is to love Pick-A-Payment” over on the broker blogs?
Mach 1 impaling into a Joshua Tree forest.
Got Popcorn?
Neil
“‘There are a number of these properties throughout the city that we are monitoring,’ said city Building Inspector Bert Lippert in a press release. ‘If a property is being used as a haven for drug use or is becoming a safety hazard for the surrounding neighborhood, then we begin looking to the property owners to take reasonable steps to clean it up. If that doesn’t happen, then we have to look at other means to protect our community. And demolishing the dwellings is something that is very effective.’”
Modesto is creating “safety breaks” and battling drug use.
http://www.urbandictionary.com/define.php?term=safety+break
Who cares about a few pot smokers? It’s when the meth hits the area that the *real* trouble starts…
Not to sound like a fuddy duddy or anything, but if you let the kids get away with smoking pot right in front of your face, then you’re just asking for them to push the boundaries a little bit more. The drug dealers that used to live next to me in El Sobrante started doing meth and ecstasy after they found out that pot just wasn’t enough to piss off the sherrif.
Why, that’s like claiming opening a savings account can lead you down the path to buying 3 houses, with nothing down and no interest loans…
I see where you’re coming from. I don’t mean the cops shouldn’t hassle them or at least root ‘em out. I’m just saying it’s not time to call in the DEA…
oh, jeebus….
oh, jeebus….
No kidding, as I *inhaaaaaaaaaaaaaale*…(cough, cough…)
There have been a lot of studies on this topic and the overwhelming conclusion is that pot smoking doesn’t lead to worse drugs. It does, however, lead to more pot smoking. lol
I see nothing wrong with pot. Better than alcohol, which has ruined a lot of people. I feel sorry for the millions that were arrested for having weed. Of course, the alcohol companies don’t like the competition, so it is no surprise that our laws are what they are.
Amsterdam was so much fun. Europe makes us look so immature.
Modesto is overrun with tweakers its been that way for at least five years .
“‘In order for a market to level out, you have to get through the bank-owned homes. There’s going to be more and more inventory this year and next year,’ said Rendino, an agent in Rohnert Park.”
I think this statement marks the official end of the 3rd inning. What do you all think?
1st game of the season, still batting around-in the top of the 1st inning.
Bringing in Paulson to pitch…
3rd inning .. hmm.. I’d like to think so but i’m not sure how long the banks can hold out. They’d rather sell their daughters into slavery than take a $$ loss, and it’d be a mistake to underestimate their resolve, imo.
joey: They’d rather sell their daughters into slavery
reminds me of the opening scene in Memoirs of a Geisha
You’ll notice that the were selling 16 foreclosed houses per week, but gaining 50 foreclosures per week. I don’t think they’re going to work through the bank-owned inventory very quickly at that rate.
“‘I’d like to see it happen,’ Brown said. ‘We’d like to see our property values go up.’”
-Typical value-obsessed California homeowners. ugh.Hey- I’ve got a great idea: How about work and come up with innovative ideas; Maybe your salary would “go up”.
No kidding.
Mr. Brown, your children have all moved away due to extreme housing unaffordability, crappy schools, deteriorating infrastructure, low wages and a generally awful standard of living. What say you?
Brown: ‘We’d like to see our property values go up.’”
Mr. Brown, your state is slowly going bankrupt, as all the bubble MEW/refi tax revenue from the last 8 years has evaporated. Teachers and police are already being laid off and this is only the beginning. What say you?
Brown: ‘We’d like to see our property values go up.’”
Mr. Brown, your state and local politicians have all sold out to the corporatist, REIC, pro-illegal and anti-gun lobbies. You and your descendants are being forced to pay the socialized costs of a government bubble bailout as we speak, even while your rights are being taken away. What say you?
Brown: ‘We’d like to see our property values go up.’”
Excellent, HARM.
“The owners agreed to allow city workers to demolish the buildings Wednesday morning, according to a Modesto Police Department press release.”
Do we see now how some home values (not land) come become 0? There is sooo much inventory out there that at one point it could become more common to see this occur, especially in the marginal areas.
Just like the dot.com bubble. NASDAQ dropped 75%. Some stocks did not go down that much, and other became toilet paper.
Here’s a handy little tool
http://bigpicture.typepad.com/comments/2008/04/ny-fed-map-tool.html
Interestingly, this tool shows higher % of low FICO/High LTV in Texas than Florida
but there’s no bubble in TX remember.
Since I’m colorblind - we are all subprime!
See my post at the top for CA stats and a link to the underlying data. I downloaded the spreadsheets to look at because the “interactive” map sucked….
“Zepeda … decided to stop paying his mortgage and simply walk away from his home.”
Kudlow yesterday made the very good point that so long as people can rent a house cheaper than they can “own” one, they have no incentive to go along with government plans to “help them stay in their homes.”
Kudlow is either a master of stating the obvious or ignoring the obvious depending on what neocon slant he can get out of it.
Cocaine Larry. What else is there to say?
I actually think the smartest owners will continue to make timely payments on their underwater houses til the bottom is clearly in (e.g. prices stop going down for a year or so), at which point credit-markets will improve somewhat. Then with their still-good credit, quickly buy a 2nd house at substantially lower basis, and jingle-mail their initial house.
The reasoning is that if you jingle-mail early and rent, your credit is shot and you’ll be unable to capitalize on the market at the bottom.
Just letting you know that the auction for the house in Pacific Beach (of which I posted on Sunday) was a sham. They had a secret reserve. Oh well, looks like we’ll have to wait for at least one lesser fool to lose its shirt before we can jump in.
Does anyone know about this company:
http://www.ushomeauction.com/
Out of Irvine, CA, which gives me pause. Rather sleazy infomercials running locally right now, promoting their auction. Smiling guys in tuxedos running around the audience. But, some interesting starting prices. I just don’t like the idea of turning over an “earnest money” check to them.
Also on TV in the Bay Area. Pound to a penny their shills work wonders.
“Out of Irvine, CA, which gives me pause. Rather sleazy infomercials running locally right now, promoting their auction”.
Irvine /south OC was and still is a hub magnet for all sorts of shady, slick RE lenders/ RE corps/. Most well known is new century & Ameriquest, but tons of smaller fry still out there .
Too bad as the areas these shady dealers operate out of are in modern gleaming hi-tech corp parks such as area of the El Toro Y where 5 meets the 405 in So Irvine /lake forest. Gives these parks a bad name.
Which one? I’m sorry, I didn’t see your post. Are you talking about the one on the corner on Mount Soledad road that’s bank owned..?
No, it was 2718 Hornblend Street.
there is no such thing as a real auction unless you are bidding on the courthouse steps.
Speaking of which, my landlord’s 1bd 1ba La Costa condo goes to auction tomorrow morning on the El Cajon Courthouse Steps. $201,000 opening bid if anyone wants it, view of the ocean, 1 car garage and 800 sq ft. It will blow away anything in PB (I moved here from CrownPoint) or you can just wait a year and pay less
‘We’d like to see our property values go up.’
—————-
And I’d like to win the lottery.
I want 32 cent a gallon gas, wetter water, and — a pony!
I want a pony….no….two ponies, so the first one will have a friend….
And I want detachable genitalia, World Peace, and $25 million in a numbered Swiss bank account….
And I want detachable genitalia
LOL - Who wouldn’t?
Not me. Mine already get me in enough trouble. Who knows how bad it’d get once they called me up from Nebraska and wanted a ticket home.
“Not me. Mine already get me in enough trouble. Who knows how bad it’d get once they called me up from Nebraska and wanted a ticket home”
THAT is THE funniest thing read in a long time. thank you !!
This is simply not said enough here. OMG WTF Ponies!!!~~~!!~
Pssst…
Big underground Demolition Derby in Modesto, tomorrow~
“The owners agreed to allow city workers to demolish the buildings Wednesday morning, according to a Modesto Police Department press release.”
Looks like Ben’s prediction is coming true. Once they start tearing the buildings down, you might as well hop on your neighbor’s Harley, grab yourself a bottle of whiskey and a pistol, and start riding around in circles shooting your pistol and taking swigs. I know I’ve mentioned this scenario a few times, but I feel that it’s worth repeating.
Just had a mental image of a dozen whiskey-swigging bikers, riding in a circle around… poor, confused Suzanne, screaming into her cell phone, “This can’t be happening! I *researched* it!” Good times.
LMAO!
Goin’ be a lot of Harley’s for sale with all those ‘hard core’ loan officers selling their toys, we should form a biker gang ‘Ben’s Angels’
I’m going to step out on a limb and say the bottom is next summer (2009). It looks to me as though foreclosures are starting to move. Looking at the Countrywide REO blog, they’ve peaked and are starting down. I am guessing that 15 months from now, prices will mostly have reverted to the mean. The banks, individual homeowers, and the taxpayers will all feel some of the pain, and some of the early buyers of foreclosures (perhaps those who buy before June of this year) will lose their recent purchases. But I don’t think it will be the end of the world - it will just feel like it.
There will be plenty of “silent screaming”.
But what about Ivy Zelman’s reset chart? The second peak of resets doesn’t happen until the third quarter of 2010.
You might be right, but the bottom, once reached, will be with us for a long, long time. If affordabilty is what it takes to qualify for a home, and wages continue their pattern of stagnation, then it’s the only conclusion you can come to.
“wages continue their pattern of stagnation”
I think this is optimistic. Yesterday, the NYTimes posted the rise in food stamps amid vanishing jobs. 1in 8 in Michigan on food stamps, 1 in 10 in Ohio on food stamps…Dell yesterday announced they would close their desktop assembly in Austin and terminate 900.
The auto sales numbers today were dismal…even Toyota down 10%. Retail stinks. Wall Street is doing rolling layoffs.We know construction, mortgage brokers, architects, banking are way down. Rippling job losses are just getting started.
…which is why everybody was out buying the dip today.
The bottom is in!!!
It’s not the end of the world, but it is the end of the housing market as it’s been known since WWII. Two-thirds (or more) of everything built since 2003 was built not for long-term livability, but for quick-flipping, just like the late-stage Nasdaq IPOs. It has almost no intrinsic value - bad location, bad (too large) size, bad construction, bad (too small) lot size, bad everything. It’s garbage.
The best model is Nasdaq going from 5000 down to 1200 or Dow from 12000 down to 7000. Figure out what kind of house it is and figure the bottom accordingly. Many houses are drkoop.com.
I think you are right 15 months to the bottom, then interest rates start to rise rapidly and we get a long slow decline to the real bottom.
I beg to differ. Interest rates rise, even by a point or two and we see the bottom (real one) in “record” time. Expect the bottom (minus small bumps up and down- not worth worrying about like 10% swings!) to last at least 2-3 YEARS. But you can bet your bottom dollar (it is getting there quick, too) some tard-sucking disposable cowboy hat wearing politico will ensure a bottom that will last for at least a decade.
–
“The 17 counties are in regions known as the ‘Central Valley’ and the ‘Inland Empire,’ areas the bank has identified in earnings conference calls as particular trouble spots. The territory stretches from San Diego in the southern part of the state to Sacramento in the northern part of the state.”
These guys are ALWAYS behind the curve. What happened to CV and IE is now happening to SF and SJ metros that were holding up (down only single digit from the peak) as of four months ago.
The areas of highest demand that I know of — Cupertino, Los Altos and Palo Alto — suddenly are building inventory after very hot 12-18 months.
One reason is that when prices are collapsing ½ - 2 hour drive from these metros suddenly more people are willing to sell in SF and SJ and move 1/2, 1, 2 hours away and save lot of money without having to move out of state and be far away from friends-and-family.
Jas
BTW Jas, I averted the need to make an offer on that home because wifey came to the realization that it was just a pig with bright red lipstick.
This craigslist ad is hilarious. The owners didn’t get their reserve price at auction, so now they’re giving a deadline before which they will accept any offer ABOVE THE HIGHEST BID received at the aucion. Numbnuts.
http://sandiego.craigslist.org/csd/rfs/624706011.html
What a bunch of tools.
“Comes complete with 3 months of private concierge service…..”
Does this mean the seller isn’t leaving?
Damn, it’s after 5pm. Why oh why didn’t I read the HBB earlier in the day.
That place was a steal.
Heeheeeheeehe.
Wow, that is Pebble beach. And I thought it was different there.
In truth, I do love that area. Just not at $2M.
$1,995,000 was the starting bid, which is still $400,000 above Zestimate. This guy is really funny.
http://www.findrealestateagents.org/California/Pebble_Beach_93953_homes_for_sale.php
http://www.zillow.com/HomeDetails.htm?zprop=19328110
This is part of the ad: …”Own this home and take the scenic and famous 17-Mile Drive anytime without having to pay the $9.00 daily gate entrance fee.”
Yes, buy my home for $2 million and save the $9 fee for the local drive!!
“Own this home and take the scenic and famous 17-Mile Drive anytime without having to pay the $9.00 daily gate entrance fee.”
Saving 9.00 a day…in 300 years, this house will have totally paid for itself!
er, 600. 600 years…it’s for the long term investor.
Don’t miss our rants on affordability in:
“Ah…the joys of owning…”
http://www.viewfromsiliconvalley.com/id402.html
–and–
“The joys of owning…Follow-up”
http://www.viewfromsiliconvalley.com/id403.html
Thanks!
The banks in the Bay Area are still delusional. Here’s an REO in Crockett. The town of Crockett was built around the C&H sugar factory. They have people there working 24/7, and they have to take a break every 2 hours. They know it’s break time when a giant whistle goes off that is loud enough to be heard across the entire town. The whistle also doubles as the local fire alarm, so if you hear the whistle at an odd hour, there’s a fire.
http://sfbay.craigslist.org/search/rfs?query=reo&minAsk=min&maxAsk=max
Sorry, here’s the correct link:
http://sfbay.craigslist.org/eby/rfs/626927556.html
Agreed, the Crockett listing is nuts. But the next one down, in Richmond, is even worse. (I live about 25 miles away). Now, this is not downtown Richmond (aka “The Iron Triangle”), where life is cheap, but it’s Richmond nonetheless. And the back yard, based on the fence squarely in the kitchen window, is so expansive. Just right for gracious entertaining.
The new northbound span of I80 there also throws off intensely loud road noise because of the texturing of the road surface used to increase drainage and traction in the rain. That is one loud town.
Timing, Timing, Timing…
“Wachovia acquired the product when it bought California-based Golden West Financial Corp. in 2006 to expand on the West Coast and in the mortgage business.”
“Investors have worried about the $24 billion deal because Wachovia bought Golden West at the peak of the housing boom. About 60 percent of the bank’s Pick-A-Payment portfolio is in California.”
Great timing on the sale side!
The funny craigslist ad from big v. If I could afford a home above $2M, then I could probably pay $9 for a drive around 17 mile drive periodically. Of course, I will pass on the $2M house, and pay the $9 on the once in a while I might visit Monterey.
Hmm…leseee….50 cents a mile for beautiful scenery or 2 mill for a large millstone so I can sink to the bottom of the Pacific?
He had to decide whether to pay his skyrocketing mortgage, or to take care of his family. Even working two jobs, Zepeda says there wasn’t enough money for both. Zepeda says the money problems started to take its toll on his family.”
“‘I was getting divorced at a certain point cause the stress was just too big,’ he says. Zepeda says he tried everything. He set up meetings with five different lenders.”
“‘Two brokers and three banks and they all told me to ride it out, that there was nothing I could do at this point,’ Zepeda explains.”
REO Speedwagon’s ‘Ridin’ the Storm Out’. Eddie, give up the house and take care of your family. Getting divorced sucks, so hopefully giving up the house and going somewhere else and you can salvage your marriage. That should not be a choice for people. If it is, F&C* the house and keep the family.
Ridin’ the storm out, waitin’ for the fall out
On a dead black night in the bank’s and broker’s winter.
My bank balance’s low, waitin’ for the blow
I’ve been thinking lately of what I’m missing in the city…
And I’m not missing a thing
Watchin’ the banksters blowin’ their thing
Ridin’ the storm out
Ridin’ the storm out.
My trailer’s outside me, it’s there to hide me.
It says that alone we’ve finally found home.
The wind outside is frightening,
But its kinder than the lightning life in the city.
Its a hard life to live but it gives back what you give.
Nice. Great tune — long time since I’ve heard that one.
I’m starting to see for the first time tons of foreclosures coming on to the market here in the OC. I’ve been working with a RE agent who has been very active in the REO / Foreclosure market and he indicated that the “light switch just recently went on” with the banks and they are starting to realize that they need to move inventory. Up until recently, he indicated that most of the banks were not willing to work with distressed borrowers hence the rapid run up in foreclosures.
On many of the bank owned properties there is something called a “Brokers Pricing Opinion” or BPO which is basically the average price that three individual mortgage lenders would value a particular property. What’s interesting here in the OC is that the BPO’s are typically averaging about a $ 100 k below the MLS price.
Anyway, fun times in the OC - we still see lots of overpriced stuff on the market but am also seeing some dramatic price reductions on homes all over OC.
i have been seeing some big reductions in OC for awhile now… another 30% or so and Bob’s your uncle. The sad part is people trying to sell cheesy little condoes for way more than SFRs. Every man for himself.
This is the town where I graduated from high school. Sounds like a good deal to me. Do you guys think this overpriced? Am I thinking like an equity locust?
http://stlouis.craigslist.org/rfs/626632904.html
And here’s the neighborhood I lived in. Is this cheap?
http://stlouis.craigslist.org/rfs/601046482.html
Big V, that is just depressing to look at homes like that on lots that large for those prices, while here in the OC you couldn’t get a decent condo in a decent neighborhood for that.
Remain calm. Put down the checkbook and back away from the computer.
Ya need a little R+R… a week or so should do it.
I like that house. I’d be interested in it if it were in Amarillo TX, and my budget said I could trade up above 135K :).
The thing that blows me away about this one is that if you built a house in Silicon Valley for $375k on land you already owned, it would probably be about 1800 sq ft give or take. It’s not uncommon to spend $200k on a remodel/expansion! So how can you get a 3000 sq ft house with land for this money, even if land is free? I guess the cost of labor is higher here, and possibly there’s more stringent regulations regarding earthquake and energy efficiency. but still, it’s very strange to me.
Big V,
I was in St. Louis a few years ago, stayed about a couple of blocks away from the Arch. I was there on a business trip. I had only a couple of days.
Never been to St. Louis. I was so excited because I had just finished reading Undaunted Courage by Stephen Ambrose. I was able to stand along the river banks of the Mississippi River, go up in the Arch and at night see the fireflies. I thoroughly enjoyed by two days there. I will never forget seeing the fireflies and the Mississippi River.
–
Q: Who are buying into areas where prices are now falling at 20-40% annual rate?
I can understand the auctions (news and resales) and foreclosures, but what about the “normal” sales? Are these people aware of the rate of decline?
Ja
There’s a house in fresno that peaked at $600, is on the market for $500, and I would buy for ~$430. Non-bubble 2002 pricing was $350ish; the carrying cost difference between $350K and $430K is under $400 per mo.
“Who is buying now?”
I have a co worker who was just outbid on a house in Sunnyvale. Why would she buy? She would like to own and settle down, if she finds a place she likes. If prices fall further, but she can afford what she paid, in the long run she believes it will pay off.
Yes, she could continue to rent and save money. But she has the money and would prefer to own. Can remodel as you see fit, no fear of an FB landlord getting foreclosed and causing eviction. For people who don’t care about the fixtures in the house, and like the variety of moving frequently, these are not advantages. But other people prefer the stability of owning. (stability is assuming they can afford it of course) As a bonus, in the long run it could pay off since property taxes only go up 2% per year, and inflation will ultimately drive up rents.
I personally own but would like to buy a better house/neighborhood. I’m already exposed to RE, so either way I would lose some perceived value if prices fall. I want to buy a place and live there for many years, so a short term blip is less meaningful. I agree that it would be cheaper to rent an apartment, but, I would prefer to own a house so am willing to pay a premium for that.
Finally, I am not seeing a 20-40% drop in my target areas. I would welcome it of course, but I’m not seeing SFH in Los Altos for sub $1.3m like there was in 2001. However I may be missing something.
If I knew for sure that there would be a 40% fall in the next year, of course I would wait. I do not know that, and I certainly have not seen it now. It’s certainly possible.
That’s why people are buying now.
‘I have three kids and didn’t want to bring them up in the L.A. area,’ Brown said.
So he moved to San Berdoo-adjacent instead??
” have three kids and didn’t want to bring them up in the L.A. area,’ Brown said…So he moved to San Berdoo-adjacent instead?? ”
He moved adjacent to rialto, which is one gigantic ghetto pocket ,which is adjacent to San berdoo, the great IE breeding ground for gangstas and drive- bys.
Rialto and San Bernardino are freaking dangerous. I don’t think that’s been said enough. My Mom used to live out there managing an apartment complex, dead bodies are a regular occurrence in that area. Gangs are rampant. I think I read about it being ranked as one of the most dangerous areas to live in the US. I think it took first place. Second was Compton / South Central area if I’m remembering it correctly. It’s really scary out there.
If we had any sanity as a nation we’d identify the ganglands, bring back the troops from Iraq and send them in there to clean house. But oops, we can’t do that - it’d be racist and oppressive!
Salon: The Great Depression: The Sequel
http://tinyurl.com/2dfyfh
Nightmare generator tool- courtsey the feds.
Use liberally to torture FBs
http://www.newyorkfed.org/mortgagemaps/