Everything Is Priced To Sell In California
The San Francisco Business Times reports from California. “So-called middle class millionaires, those with $1 million to $10 million, say they expect to lose real estate to foreclosure in the year ahead, according to a recent survey conducted by Lewis Schiff, a co-author of The Middle Class Millionaire.”
“Of those surveyed, 36 percent have a second residence for personal use and 5.6 percent of those expect to lose the property over the next year. Of those surveyed almost 45 percent own residential real estate as an investment, and 20 percent of those expect to lose their investment during the next 12 months.”
“‘One of five plan to walk away from residential investment property,’ Schiff told members of the Luxury Marketing Council of San Francisco attending a meeting in Tiburon on July 10. ‘They’re going to walk away like they had made a bad portfolio decision. Some are losing $100,000 to $200,000.’”
“‘We’ve heard of the subprime crash. Next we’ll see the residential real estate investors in trouble,’ he said.”
The Mercury News. “The stock market pitched and rolled Friday, mostly driven by investors’ fears about the financial stability of Fannie Mae and Freddie Mac.”
“Tom Davidoff, an assistant professor who teaches real estate economics and finance at the University of California-Berkeley, said Fannie’s and Freddie’s troubles eventually could lead to higher mortgage rates.”
“‘The federal government is not going to let the conforming mortgage market go away,’ Davidoff said. ‘Obviously, it’s a potentially giant bailout’ - $5 trillion worth of mortgage debt between the two companies - ‘at a time we really don’t have the money.’”
The Simi Valley Acorn. “After nine years of annual assessment rolls in Ventura County increasing by 6 percent to almost 12 percent, the rolls this year went up only 3 percent because the assessor’s office lowered the assessments on more than 34,000 homes by more than $3 billion.”
“In recent years, Ventura County taxpayers have provided local governments with everincreasing property tax revenue, as the countywide total assessed property values had gone up more than 100 percent over the past eight years.”
“Most of the affected properties that were reassessed downward were purchased between January 2004 and December 2007.”
The Sherman Oaks Sun. “According to the San Fernando Valley Economic Research Center, San Fernando Valley foreclosure filings totaled 673 in May - a 242% increase from a year ago.”
“The dramatic rise in defaults and foreclosures in the San Fernando Valley is hitting many families and communities especially hard as the cost of living increases. The Southland Regional Association of Realtors also reported the Valley median single-family home price fell 31% to $450,000 in May.”
“Congress is working to ensure that the problems that have placed so many homeowners at risk of foreclosure will not occur again.”
LA Downtown News. “The 12-story Union Bank building has been returned to its former glory, albeit with a residential twist. Developer Meruelo Maddux Properties is putting the finishing touches on a $40 million renovation that has replaced 10 floors of bank offices with 92 apartments.”
“The apartment-to-condo model has long been Meruelo Maddux’s plan. The idea was pitched to investors when the company went public in January 2007, Maddux said.”
“‘It was a reflection of our anticipation of what the market was going to do,’ he said. ‘At the same time we were planning for an environment with a strong inducement to sell. We expect many people who live here are going to want to own one.’”
“The project arrives as Meruelo Maddux, Downtown’s largest landlord, is facing significant financial challenges: With the stock down about 83% since its initial public offering, the company is reportedly looking to sell some of its properties.”
The San Diego Business Journal. “At the height of the real estate market a few years ago, downtown developers began building up. Young professionals looking to own a piece of property near the waterfront converged with savvy investors hoping to turn a quick profit. Many of the buyers got in over their heads. And lenders offered up more than they could handle.”
“‘There’s a glut of condominiums downtown,’ said Mark Goldman, a mortgage broker with the local office of Windsor Capital Group Inc. and lecturer at San Diego State University. ‘A lot of condos are going into rental supply and that’s creating some softness in the market.’”
“In the past three years or so, Goldman said he’s noticed condominium prices drop an average of $150,000 per unit as inventories inched higher.”
“He philosophizes on the topic, blaming much of the downturn in the residential real estate market on ‘greed at all levels.’”
“‘The thing is, the money screwed the demand,’ he said. ‘It created an artificial increase in demand and now that the aggressive financing is down, we return to affordability again and that’s what is going to drive the market.’”
“Agent Karen Wheeler has been trying to sell a bank-owned, one-bedroom condominium in Cortez Blu, a 67-unit, 20-story high-rise in Cortez Hill that has been listed since January. In February, the price was reduced from $384,900 to $349,000.”
“‘It’s probably dropped by 40 percent value over the last year and a half,’ Wheeler said.”
“About $400 billion in negative amortization loans are scheduled to reset in 2011, which could leave thousands of homeowners owing more than their homes are worth. According to state Attorney General Jerry Brown, Californians hold 60 percent of these loans.”
“‘For a household that could hardly afford the minimum initial payment, they’re fried,’ said mortgage broker Mark Goldman. ‘This will bring more properties to foreclosures.’”
“‘The reality is there are lots of factors we don’t know about that will affect prices upwards or downwards,’ said Paul Habibi, a lecturer at UCLA Anderson School of Management. ‘There are so many moving variables - jobs, interest rates, credit markets, supply and demand. When you take them in totality no one knows what will be.’”
“‘I’ve been starting to think the last couple of weeks about a double bottom,’ Goldman said. ‘We were getting close to a bottom, and I think that there’s some stuff that’s going to occur in the next six months that will cause downward pressure in pricing.’”
“Habibi said the economy will prove to be a big factor. ‘The most obvious is that if incomes rise and the unemployment picture gets a little better, then on the whole people will be better off,’ he said. ‘The other thing is if the credit markets loosen up again.’”
The Valley Voice. “Building activity in Visalia during June was the second weakest so far this year. For the month, total valuation was $19.2 million, down from $26.7 million in May and just $6 million better than the poorest month, February.”
“There were 59 permits issued for new homes and just seven for new commercial construction. The value for the homes was $13.3 million, while new commercial had a value of $3.5 million. For the year, the city has issued 321 permits for new homes, compared to 490 at this point last year.”
“How bad do people need jobs locally? Consider what happened at Visalia Community Bank recently which advertised for one open position as a clerk teller. The bank got 500 applications for the one teller job, says President Tom Beene.”
The Desert Sun. “After three years of planning and ‘dismal’ sales in the Vista San Jacinto housing development, Jim Bartlett is pairing with a competitor to bring new vitality to the project. The new plans include scaling down the homes - they’ll now start in the mid-$300,000 range.”
“‘The homes will be totally redesigned,’ project manager Jim Bartlett said of future plans. ‘We kind of missed the market with (the initial design). People aren’t looking for as large of homes as they were.’”
“Experts say it’s a sign of the times. New construction is one of the heaviest-hit segments of the Coachella Valley’s real estate market: In May, sales were down 45.1 percent from May 2007.”
“‘A lot of people were building bigger and more expensive homes … but that’s not going to happen for a while,’ said Dennis Cunningham of Palm Springs Modern Homes. ‘We’ve got to be more realistic.’”
The Pasadena Star News. “Federal regulators assumed control of IndyMac Bancorp. Inc. on Friday, putting the bank under control of the Federal Deposit Insurance Corp. On Friday, People gathered outside IndyMac’s east Walnut Street headquarters in Pasadena. Some were emotional.”
“One woman, who declined to give her name, banged on the door and yelled desperately at employees inside, asking them to let her make a withdrawal.”
Steve Knieriem of La Canada Flintridge, came by to try to close out his CD account. He had heard the bank was in trouble and had already moved money from one CD account to a checking account, but still needed to close down the second one. He was too late.”
“‘When I came back last week, I was told this place is not closing down,’ he said. ‘But today I decided I better come here and get my money out.’”
“Others maintained a good sense of humor about the situation. ‘I thought I was in a third-world country,’ said Jagdish Belagum, a technology officer at a Glendale firm. ‘I didn’t expect this to happen in the U.S.’”
The Merced Sun Star. “Oh readers, was it just a year ago that Loose Lips was chronicling local developer Ranchwood Homes’ fire sale? Yes, it was. Back then, Ranchwood president Greg Hostetler was selling one of his two Lake McClure houseboats.”
“The fleet reduction was in response to a ‘contracting’ housing market, Hos told us. His plan was to get rid of anything that was nonessential to growing almonds or building houses.”
“That was in June of ‘07. Lips described the local real estate market then as softer than Dom DeLuise’s belly. How innocent and naive we were! The situation has gone from soft to scary.”
“Home prices have plummeted by double-digit percentage points. If we’re sticking with this Dom DeLuise analogy, nowadays it looks like he’s had gastric bypass surgery. And possibly developed anorexia. Someone get the man a sandwich.”
“Even Ranchwood’s streamlining has taken on a more bare-bones tone. Instead of unloading houseboats and helicopters, the company is now selling slightly used office furniture.”
“In April, Ranchwood moved out of its two buildings on M Street in downtown Merced. This Saturday, the homebuilder is opening its doors to the public to sell desks, chairs (including cushy ‘executive’ models), monitors, keyboards, phones and other office fixtures. Everything is priced to sell, according to a classified ad in the Sun-Star.”
“Loose Lips would like to view this news in a positive light. Now that Ranchwood has gone from selling houseboats to desks, it could mean that our tender toes are about to scrape the rocky bottom of this housing bust. We’ve got nowhere to go but up!”
“Also, we’re glad to see a real estate-related company advertising in the Sun-Star again — even if it’s in the Misc. For Sale section.”
“Tom Davidoff, an assistant professor who teaches real estate economics and finance at the University of California-Berkeley, said Fannie’s and Freddie’s troubles eventually could lead to higher mortgage rates.”
Wouldn’t lots of the problems facing the GSEs be solved if interest rates moved higher? Right now, the return on GSE bonds is too low to cover the risk of default. A risk premium in line with the risk of mortgage default could go a long way to getting investors interested in buying GSE debt once again.
What am I missing here?
Higher interest rates price more people out of the market and/or drive price down lower, sparking another round of both people walking away from underwater homes because they were a “bad” investment or people not able to afford the ARM resets.
Just playing devil’s advocate.
And just like the deleveraging that has to occur on Wall Street the deleveraging that has to occur on Main street (the decrease of housing prices to norm), you’d hope to accomplish it in the most orderly and least painful fashion possible. Call it a Goldilocks deleveraging.
Given that markets really don’t like to be managed in an orderly fashion the possiblity of mortgage rates spiking too high is quite possible.
The other side of the equation is investors willing to take the risk of providing money to the mortgage market in crisis. Higher interest rates would serve the threefold purpose of driving home purchase prices down to affordable levels (in line with local incomes), reducing default risk (homes with prices in line with owner’s incomes are less likely to turn into tomorrow’s foreclosures or walkaways) and attracting investor funds back into the lending market (higher interest rates compensate investors in GSE debt for the risk).
Where is the downside to Mr Market’s affordable housing plan? And what holds the GSE debt at such conundrumishly low yields, given the solvency crisis?
Somebody said “too high” mortgage rates?
I really, really, like the sound of that.
Oh… You don’t know how much “too high” mortage rates makes me smile.
Why… that would almost be like the 1970’s… (Note: I think we’re repeating the deep recession.)
Got Popcorn?
Neil
A mortgage priced appropriately for risk wouldn’t be competitive in today’s market. Banks still aren’t factoring in the true cost of money into their rates because of Bernanke’s TAF window and knight-in-shining armor mentality.
When short term bank-to-bank lending rates become more competitive than the Fed’s, then we’ll see the return of realistic risk premiums. These financial basket cases will suck the taxpayer dry as long as there are commissions and greater fools floating around.
What we are seeing is the grim, ugly reality of moral hazard.
Why do people think banks use real money to lend for mortgages? Are you forgetting the most productive profit-maker for banks: the fractional reserve ratio?
Say I deposit $100,000 into a bank at an extremely high interest rate of 3%. The bank pays me $3000 annually (rounded down) for use of my money.
The bank then reserves $10,000 (10% reserve ratio) of my deposit in case I want my money back. That’s safe, sure. They then loan out $90,000 to a borrower at 6% annually. They’re making $6000 (rounded down) annually, and paying me $3000, with a profit of $3000 minus the maintenance costs of the loan.
But wait! The borrower buys something with that $90,000. $90,000 goes back to the bank (some bank, but let’s keep it simple and assume that the money goes to just the one bank). That person deposits $90,000 at 3%, so the bank pays out $2700 in interest (rounded down) but loans out $81,000 since $9,000 is held for reserves. The $81,000 loan pays $4860 annually (rounded down), minus the $2700 interest paid, for a profit of $2160 for the bank.
So in just two interations of the money multiplier effect, the bank has effectively made a profit of $5160, or 5.1% of the money originally invested. The third round becomes smaller as does each round after, but the money multiplier effect is allowing the banks to make a MUCH higher return on the initial “real” money than intended. Even worse, who knows where MY $100,000 came from. Maybe there was a loan above me where that money came from, so the bank was making money there, too.
Fractional reserve banking is fraud. The banks love it.
When I was a college student, I remember borrowing from Peter to pay Paul, working extra hours, eating Top Ramen for a week at a time, and mooching off of friends until my student aid check would come in.
The banks are doing the same thing, but with vastly larger sums of money and with only a dimming hope of a helicopter bailout as this meltdown goes on far longer than they had initially expected.
Looking at your website…fractional reserve banking would seem to be a similar swindle that allows banks to inflate their margins far more than real assets. However, if it was enough to keep the banks solvent, then the Fed lending through the discount window wouldn’t be necessary.
The banks are so egregiously overextended that they need to borrow money just to make new (and presumably much better underwritten) loans. That’s because they can’t even sell assets at 50% face value that were acquired from FBs or straw-buyer crooks for little or no money down.
They actually make out better. The mortgage is compounded interest but they pay you simple interest.
Not really. Fractional Reserve Banking is fine. The money supply gets expanded up to a point, and then it stabilises. Even banks have to make money at some point if only to pay for all that expensive computer equipment they use to store your money with.
The real problem is fractional reserve banking in combination with loan securitization. Run through the example again, and say to yourself “and what happens if the Bank sells the loan outside of the banking system”.
That’s the real cause of the current mess.
Hey all Bay area bloggers… I was wondering if everyone would like to meet up for an evening get together the last weekend of July? There are so many “positive” events happening now in the housing arena that I thought it might be fun to get together again! I was thinking Saturday, July 26th would be good. Who knows what will have happened by then?? Please email me if you are interested and suggest time/location. The email address is bayareabubble@gmail.com.
“About $400 billion in negative amortization loans are scheduled to reset in 2011, which could leave thousands of homeowners owing more than their homes are worth. According to state Attorney General Jerry Brown, Californians hold 60 percent of these loans.”
“‘For a household that could hardly afford the minimum initial payment, they’re fried,’ said mortgage broker Mark Goldman. ‘This will bring more properties to foreclosures.’”
Is there any chance that many of these scheduled 2011 resets will turn into walkaways once it occurs to the owners that they are up the creek without a paddle? If not, I may have to figure out how to let my wife know that we will be renting for another three years…
These neg am notes are scheduled to reset in 2011 but many of them have a balloon payment if the note exceeds %115 or %120 of value. These notes will be called years earlier.
If this grand state does hold 60% of the $400 billion, then you are talking about $240 billion that is going doen the tube.
Considering a rough conservative tax base of 1%, that is going to cost local and state goobermints almost $2.5 billion.
With local counties and the state already facing massive deficits, this could be the “big” one we Clownifornians always talk about.
You talk about bringing down the entire state’s RE, well here it comes!
TIMBER!
They won’t lose that much since the homes will eventually sell for SOME value and SOMEONE will have to pay for the taxes. In fact, it is better for the governments if the banks foreclose and pay the taxes and never sell the properties rather than have some deadbeat living in them and not paying the taxes.
They still lose a cool billion, I’d say.
TC,
I printed the reset (Ivy) chart and have it hanging in our office area.
Why?
To reming hubby iz tooo beeeg! (any arguement gets time out in locked closet)!
You make an exellent point. The second wave resets, many are jingle mailing today.
Hence, second wave may be bunny hill in ‘08/9?
Best,
Leigh
Dang -reming!
Remind.
Love it when kitten helps me type!
Leigh
So-called middle class millionaires, those with $1 million to $10 million, say they expect to lose real estate to foreclosure in the year ahead, according to a recent survey conducted by Lewis Schiff, a co-author of The Middle Class Millionaire.”
You are correct when it comes to the neg am loans. Those that will be accelerating sooner are the ones who are making the lowest tier payment .They will see their payments go up by as much as 77%…
Ann, ain’t that they truth…I was having a casual conversation with an IT guy here on the coast who does small office maintenance, about a rental near his home. He mentioned that the owner, a real estate agent, had about 12 homes and was really starting to sweat the Option ARM resets. 12 homes and he has no problem putting renters in them and potentially having them foreclosed out of the houses…….
Today’s Baron’s article points out that foreclosures may decelerate because many of the loans due to reset will have already gone into foreclosure. I don’t agree with point of the article that prices are near a bottom, at least in the bubble areas, but it makes sense that foreclosures will have been ballooned in the near term as people have and will with increasing frequency, walk away, especially all those paper millionaires with second/third investment homes, with no neg ramifications other than a ding on their credit. If they still have cash, they will be fine.
“‘The reality is there are lots of factors we don’t know about that will affect prices upwards or downwards,’ said Paul Habibi, a lecturer at UCLA Anderson School of Management. ‘There are so many moving variables - jobs, interest rates, credit markets, supply and demand. When you take them in totality no one knows what will be.’”
What’s the opposite of upwards?
If you’re in the real estate business? Sideways.
How about “upside down?”
‘The most obvious is that if incomes rise and the unemployment picture gets a little better, then on the whole people will be better off,’ he said. ‘The other thing is if the credit markets loosen up again.’”
….oh, and monkeys need to fly out of my a$$!
I can only hope this UCLA professor meant to say, “When you take them in totality, its not hard to see where things are headed, however for me to explain it all would just depress you guys.” Because if he really thinks jobs, etc… are too hard to figure out, he probably needs to give up his day job.
Majestic (UCLA grad, hanging his head in shame)
“‘One of five plan to walk away from residential investment property,’ Schiff told members of the Luxury Marketing Council of San Francisco attending a meeting in Tiburon on July 10. ‘They’re going to walk away like they had made a bad portfolio decision. Some are losing $100,000 to $200,000.’”
The best house deals are going to come from specuvestors. People who have lived in a property are too emotionally attached to their homes to “give them away”. The only irrational seller is the seller who thinks that their memories and personal touches are valuable to the buyer.
Please take care of my squirrels. hehehehehehehe
Here in the country, I saw six half grown ground squirrels and one adult on my little patch of lawn. My wife lamented that when we move out of this rental someone will poison them all.
Middle-Class-Paper-Millionaires, oops~ Make that Thousandaires
“So-called middle class millionaires, those with $1 million to $10 million, say they expect to lose real estate to foreclosure in the year ahead, according to a recent survey conducted by Lewis Schiff, a co-author of The Middle Class Millionaire.”
“Of those surveyed, 36 percent have a second residence for personal use and 5.6 percent of those expect to lose the property over the next year. Of those surveyed almost 45 percent own residential real estate as an investment, and 20 percent of those expect to lose their investment during the next 12 months.”
I think thousandaire is what TXChick always means by the $30K millionaires.
HOw in the world is someone, if they are at the top of this group at $10 mil, in this kind of trouble? What did they buy? An $80 mil Picasso for the Heast Castle they just bought?
I am by no means the most conservative guy and have been known to blow some cash in the past. With that said, I think I could hold onto most of $10 mil. Buy a nice modest home, continue working mu cushy job.
I guess these dingdongs couldn’t resist the urge to buy the biggest, baddest 2nd and 3rd rental/vacay properties, as well the usual list of culprits…
-Queen Mary II cruise in the luxuty suite
-More toys than Santa Claus on Christmas Eve
-Ring up the CC’s again
-Let spouse open the candlemaking/Christian clothing/pirate shop
-Live a bazillion miles from anywhere, so everything costs more to ship or get by car
-Botox
-Boob jobs
-Anything else?
Bueller? Bueller? Bueller?
Both Hearst Castle and Scotty’s Castle(in Death Valley) pretty much stopped being built, once the Great Depression took away everybody’s money, including a bunch of William Randolph Hearst’s.
Imagine how the little people of that time fared?
“Imagine how the little people of that time fared?”
You don’t have to imagine, just look around you and you’ll see with your own eyes how people, little and not so little, fare once their money is taken away.
Hearst had a million-acre ranch in the Sierra Madre expropriated during the Mexican Revolution of (1912?). That had to hurt, even with Mexican land being dirt-cheap at the time.
Wonder how many of those American ex-pats who’ve been buying and renovating those former Spanish silver baron’s 18th Century mansions in Alamos are going to end up fleeing with just the clothes on their backs during the next Mexican revolution.
The middle class millionaires playing “jingle mail” with investment properties really aggravates me. As one who would like to see society maintain a similarity to current society, though fiscally and environmentally saner than current society, versus plunging into the survivalist abyss some seem to root for, well, I think some of these folks need to suck it up and take one for the greater good.
There are no half-measures left to keep alive a bed-ridden corp’se of an economy, and the quicker somebody sticks a shiv into it’s belly, the sooner we can pick up the pieces.
From the SF Business Times article:
“‘One of five plan to walk away from residential investment property,’ Schiff told members of the Luxury Marketing Council of San Francisco attending a meeting in Tiburon on July 10. ‘They’re going to walk away like they had made a bad portfolio decision. Some are losing $100,000 to $200,000.’
‘We’ve heard of the subprime crash. Next we’ll see the residential real estate investors in trouble,’ he said.
Many of these investors turned to so-called Alt-A mortgages, which fall between prime and subprime credit quality. During the housing bubble, such loans were popular because they typically required no or little documentation for a borrower’s mortgage application — an attractive feature for people with complex finances.”
*****
Since real estate, including primary residences, is thought of strictly as an “investment” around here, this statement gives some depth as why I call it:
“The Alt-A Bay Area”
There won’t be a survivalist abyss. All the money the Fed created tends to exist in some form in someone’s account, minus whatever profit was made from selling homes that was reinvested into accounts that invested in selling homes.
So basically, of the trillions that the Democratic and Republican Congress let the Fed create, much of it exists, and is out there. The money is looking for a home. As banks crash, assets will be available CHEAP. If a bank has $100 billion in mortgages on the books, and the bank fails and is bought out for $20 billion, even if housing prices fall 50% to $50 billion, the buyer is getting an amazing deal.
I know many people with a LOT of cash sitting around waiting to be used for just this purpose. Buy assets below market value, true market value, and reap big profits. The big boys have been doing it for years. See: Bushes, Clintons, Obamas, McCains, Naders, etc.
“I know many people with a LOT of cash sitting around waiting to be used for just this purpose. Buy assets below market value, true market value, and reap big profits.”
A proven, winning formula. Buy when everyone else is forced to sell. Become the buyer of last resort.
I’ll need cash?
I hope the RE and financial markets don’t bottom too quickly. In order to take advantage of the great deals, it might require bailing out of gold when it’s only $950/oz or so.. and I’d much prefer to wait till it’s $5,000 an ounce.
hmm.. Will all of us gold bugs want to dump gold at around the same time? nah.. that can’t happen.
Not to worry. When these folks walk away, to the extent they turned their loans into recourse loans by HELOCing, lying on loan documents, etc., the banks will likely eventually figure out that there is money to be recovered here. And then, they’ll turn loose the collection lawyers, and the real fun will begin.
“‘One of five plan to walk away from residential investment property.”
This article shows why the problems in the Bay Area are only getting started. The outlying areas have been hit with subprime resets and people walking away as prices drop; the core areas are going to get hit by option-ARM recasts and resets and people walking away as prices drop.
It is way too early to even consider buying in most parts of core areas of the Bay Area like Marin and San Mateo. I can report that the number of condos on the market in Marin has never been higher than now. As the depression deepens, the housing market in these areas is going to collapse like a house of cards, and the declines from the peak so far will look tame. There is no way prices in these areas can be sustained with real wages declining, job losses accelerating, home equity and credit card standards tightening, and creative mortgages vanished. Too many families in the Bay Area are basically slaves to their houses, and these houses are going to be cruel masters.
Keep the popcorn popping,
Red Baron
Do the following to get through the depression: 1. Get and keep a job 2. Rent a place or live in an RV so you can be mobile for your job 3. Save at least 25% of your after-tax income 4. Eliminate debt unless you could pay it off if you lost your job
Red,
I couldn’t agree more about the list of 4 you always seem to mention in your posts.
Look at how 500 people applied for a bank position that pays $10/hour, even in Visalia.
Renting or RV. Mobility is good, unless you have tenure with a goobermint job (as I raise my hand).
Saving money. Cash is king. Despite the gold/silver bugs, my gas station still takes greenbacks.
Get out of debt. I have been in that valley of death before, for 20 years. I will not go back, except for a mortgage that is less than 3X my gross income. If that means a condo w/HOAs, I will try to live with it.
But none of these morons telling me to buy in Rancho Santa Margarita where homes are still at best/lowest listing, going for 390K, gets it. I make decent money, but not $130K. Maybe the wifey should get a job. Nah. Don’t want to rely on 2 jobs at 50-60% of income to pay the banksters. Why should they get the trip to Aruba every year and live in the Hamptons at my expense?
Heck, the median gross family income in this town is 88K, according to Wikipedia. Gross median income for single person is $77k. How does that translate into 400K+ homes? Is everyone in this town making more than that. Am I part of a poor group that drags the median down?
Oh well.
Just looked at Realtor.com today and saw some 3/2 condos in Aliso Viejo that were built in the 80s, going for 188K. That would be very comfortable on my salary, even with tax and HOAs.
“About $400 billion in negative amortization loans are scheduled to reset in 2011″
Is there any mortgage product better than a negative amortization loan to summarize the idiocy of the bubble?
Couldn’t agree more!
I always thought the idea was to pay back your debts, ESPECIALLY A MORTGAGE!
Oh well, have I been wrong all these years!
Davidoff said. ‘Obviously, it’s a potentially giant bailout’ - $5 trillion worth of mortgage debt between the two companies - ‘at a time we really don’t have the money.’”
One funny after another, as if ‘we’ ever had a spare 5 trillion handy.
Let me check behind the couch, i may have a few billion to throw in.
“How bad do people need jobs locally? Consider what happened at Visalia Community Bank recently which advertised for one open position as a clerk teller. The bank got 500 applications for the one teller job, says President Tom Beene.”
Visalia is town of around 120,000 people, and to outward appearances it seems more prosperous than it is(not to single it out, all of the Central Valley is the same, varying only in degree of disaster) and it’s main drag (Mooney blvd) is interchangeable with any other corporate drag strip in the land, the same stores offering the same junk, as nauseum.
It also has more failed housing projects than you can shake a stick at~
______________________________________________________________
About the job fair:
499 people didn’t get the $10 an hour? clerk teller position.
What are they going to do for money?
and to outward appearances it seems more prosperous than it is
This could be said about a lot of places. Especially those that make those “best places to live, etc.” lists.
“What are they going to do for money?”
Ah, now you are finally getting it.
Yes, so would somebody please go tell the UCLA professor what’s going to happen, cause he thinks its all just too hard to figure out.
Majestic (still pissed that the UCLA prof. is caught like a deer in the headlights).
While they were there, four or five of them could put bandanas over their faces and make a forced withdrawal. hehehehehehe
“Success in any endeavor requires single-minded attention to detail and total concentration.”
Willie Sutton
“Everything is priced to sell…”
Not in our ‘hood (92127 Rancho Bernardo). The median used SFR list price on the MLS is stuck at $1.25m, despite a recent (April 2008) median sale price of $690,000 — a bid-offer price gap of $560,000.
Not sure why the most recent Sandicor.com data is for way back in April. Perhaps the more recent results are too ugly to post?
http://sandicor.com/statistics/stats2008/04-2008/sfd-04-06-stats.pdf
Listing prices have come to mean nothing. More and more folks just laugh when they see them.
Unfortunately for the underwater FBs, they can only hope for a miracle and hold on for another month.
‘The most obvious is that if incomes rise and the unemployment picture gets a little better, then on the whole people will be better off,’ he said.
Why do I get this mental pictue of pigs flying after I read this?
Ha Ha good one . This guy forgot to mention gas going down to $1.50 a gallon.
Pigs with small dainty wings come to mind. My grandmother and grandfather used to go to the Del Mar races every year. The phrase that they heard the most…
If Ida
Id Ida only bet on horse …
Way OT… I see that Tony Snow passed away. He was a good guy, seemed to be able to bring some humor into his business.
http://www.foxnews.com/story/0,2933,381250,00.html
I really felt sorry for him…
Taking the job of Press Secretary for ’ssshrubery, was like parachuting onto the deck of a fully engulfed aircraft carrier, trying to fan the flames away from the Mission Accomplished sign.
He did as best he could, and was a funny guy, and that’s worth a little something in my book.
“The Titanic pitched and rolled Friday, mostly driven by investors’ fears about the financial stability of Fannie Mae and Freddie Mac.”
Iceberg lettuce price increases have been sighted off the port bow!
“‘The federal government is not going to let the conforming mortgage market go away,’ Davidoff said. ‘Obviously, it’s a potentially giant bailout’ - $5 trillion worth of mortgage debt between the two companies - ‘at a time we really don’t have the money.’”
_______________________________________________________________
Pressure is playing for ten dollars when you don’t have a dime in your pocket.
Lee Trevino
“Pressure is playing for ten dollars when you don’t have a dime in your pocket.”
You’re making progress.
I completely disagree with the “Everything priced to sell in California”
Prices here while less outrageous than a couple of yearsa back remain sky high. Depending on the area still need to come down 30 to 50%. Parts of Riverside county and most inland areas went up 4X or thereabouts since 1999 and have only come down some 40% so far, leaving them still over 200% higher than just a few years ago. Worse, the high price of gas is making these areas even less affordable. Keep in mind if you drive a car which gets 20mpg and you do 65 mph on the freeway you are burning through 3 gallons an hour of gas, so at $4.5 a gallon that is between $12 and $15 an hour to drive your car, not including depreciation and maintenance, which takes the cost to around $20 an hour to drive an average car.
Yeah, at best prices are at 2004/2005 levels, and at that point it was already deep into the mania.
Agreed. After viewing condo in my gated zone, the price listed is as high as they were in 05 not lower.
Wazzupwiththat?
And then in Deepwell area, prices are still 4x what they were in 97 or more, still way way way too high. around 700/1.4k
House seriously considered in 96 was 240k and way to high for me then, all things lumped in…
IF Ida.. hehehe
Ignore wishing price. Comps are what matter. If there are no good comps then YOU set the comp.
“Don’t listen to your friends. They’re losers!”
Tom Vu (the original middle-class-millllinaire)
http://www.youtube.com/watch?v=hnda41lj6go
Oh man, that funny. Tears to my eyes. Anyone who can watch that and not LOL must be dead inside.
No matters how much lipstick the so-called experts try to put on the pig’s lips; the truth is the mess is getting out of control. And it’s not just housing problem nor oil problem. The experts are scared stiff, and up until now, none has proposed a cohesive corrective policy to try to remedy the proble. All we, the regular folks have heard up to now is nothing …
Oil: US has a Department of Energy - where is the DOE Secretary? what is the policy?
Finance: What is the policy? or it’s just bandaging… bank has started to fail (1st is IndyMac, more to come…)
US is facing with multitude of problem deficits - US trade, war spending, oil, social spending plus lax and/or non-regulated financial rules… have created the greatest quagmire the country is in now.
WE SHOULD BE SCARED…………..
Okay, I am nost the expert on naming all the members of the cabinet.
HOWEVER,
mhd, I have to agree. In this pressure-cooker energy moment, where the fook is the DOE person?
Bueller? Bueller? You’d think, if ever there was a time to know the name of this person, it would be now.
Oh well, what do expect from this goobermint, and that includes all parties, not just the elephants’!
yeah, and to think, Phil Gramm is being considered the new
Economic advisor to possible new administration.
IF we were in high school classes with half the morons on both sides running gov, our teachers would have had them suspended or failed them for bad or missing reports, lying, stealing, and being clowns.
Whiner!
Update on Indymac CD: as posted I have a $50K CD opened back in Feb with 5.20% rate, which was/is a great rate considering it is only for 7 months. Now that FDIC has taken over Indymac, the rate I locked-in will be honored and continue to accrued as per FDIC:
“11. Will I continue to earn interest at the same rate?
Yes, interest will continue to accrue at the contract rate on all non-broker deposits. If you deposited funds through a broker, the interest will accrue and be paid through Friday, July 11, 2008.”
Since I am non-broker account, I continue to enjoy my 5.20% rate. In fact if they would let me renew this CD at 5.20% for another 7 months I would do so in a heartbeat.
i’m pretty sure you’ll have to renew at your new bank’s rate.. i wonder when the FDIC will tell you who that new bank is.
Yes the US is going to crap. But hey at least they are making sure the US doesn’t polute the air or kill off all the little Mud Slough. No matter how much wa have to pay just to eat or transit to work. If you have work to transit too.
Hey theres a thought, if we don’t have jobs then we can all go stand outside military recruting stations or live in trees.
OK Sarcasm off
“Others maintained a good sense of humor about the situation. ‘I thought I was in a third-world country,’ said Jagdish Belagum, a technology officer at a Glendale firm.
You soon will be–courtesy of Alan Greenspan and Ben Bernanke.
Keep the popcorn popping,
Red Baron
Do the following to get through the depression: 1. Get and keep a job 2. Rent a place or live in an RV so you can be mobile for your job 3. Save at least 25% of your after-tax income 4. Eliminate debt unless you could pay it off if you lost your job
The invisible bank runs have been going on for some time now, vis a vis the internet, but there’s nothing like the urgency of a bonafide run on the banks, in living color.
_____________________________________________________________
“One woman, who declined to give her name, banged on the door and yelled desperately at employees inside, asking them to let her make a withdrawal.”
Steve Knieriem of La Canada Flintridge, came by to try to close out his CD account. He had heard the bank was in trouble and had already moved money from one CD account to a checking account, but still needed to close down the second one. He was too late.”
“‘When I came back last week, I was told this place is not closing down,’ he said. ‘But today I decided I better come here and get my money out.’”
“Others maintained a good sense of humor about the situation. ‘I thought I was in a third-world country,’ said Jagdish Belagum, a technology officer at a Glendale firm. ‘I didn’t expect this to happen in the U.S.’”
It can’t happen here
It can’t happen here
I’m telling you, my dear
That it can’t happen here
Because I been checkin’ it out, baby
I checked it out a couple a times, hmmmmmmmm
And I’m telling you
It can’t happen here
Oh darling, it’s important that you believe me
(Bop bop bop bop)
That it can’t happen here
Who could imagine that they would freak out somewhere in Kansas…
Kansas Kansas tototototodo
Kansas Kansas tototototodo
Kansas Kansas
Who could imagine that they would freak out in Minnesota…
Mimimimimimimi Minnesota, Minnesota, Minnesota
Who could imagine…
Who could imagine
That they would freak out in Washington, D.C.
D.C. D.C. D.C. D.C. D.C.
It can’t happen here
Ba ba ba ba ba ba ba ba
It can’t happen here
It can’t happen here
Everybody’s safe and it can’t happen here
No freaks for us
It can’t happen here
Everybody’s clean and it can’t happen here
No, no, it won’t happen here
I’m telling you it can’t
It won’t happen here
(Bop bop didi bop didi bop bop bop)
Plastic folks, you know
It won’t happen here
You’re safe, mama
You’re safe, baby
You just cook a TV dinner
And you make it
(Bop bop bop)
No no no no
Oh, we’re gonna get a TV dinner and cook it up
Go get a TV dinner and cook it up
Cook it up
Oh, and it won’t happen here
(No no no no no no no no no no no
Man you guys are really safe
Everything’s cool).
Who could imagine
Who could imagine
That they would freak out in the suburbs
I remember (tu-tu)
I remember (tu-tu)
I remember (tu-tu)
They had a swimming pool
I remember (tu-tu)
I remember (tu-tu)
They had a swimming pool
I remember (tu-tu)
I remember (tu-tu)
They had a swimming pool.
And they thought it couldn’t happen here
(duh duh duh duh duh)
They knew it couldn’t happen here
They were so sure it couldn’t happen here
But…
Suzie…
Yes yes yes–I’ve always felt that
Yes I agree man, it really makes it…yeah…
It’s a real THING, man
And it really makes it
(Makes it)
Suzie, you just got to town,
And we’ve been, we’ve been very interested
In your development,
Since you first took the shots.
Forget it!
Hmmmmmmmmm
(It can’t happen here)
(Can’t happen here)
(Can’t happen here)
Mr. Frank Zappa
Ah cash. There’s nothing quite like it.
Scruples ain’t bad, either.
Where’s the money??
http://tinyurl.com/2dnj53
“Habibi said the economy will prove to be a big factor. ‘The most obvious is that if incomes rise and the unemployment picture gets a little better, then on the whole people will be better off,’ he said. ‘The other thing is if the credit markets loosen up again.’”
A couple of big IFs in his statement.
Brings to mind:
Words and music by L. Hays and P. Seeger
If I had a hammer
I’d hammer in the morning
I’d hammer in the evening … all over this land,
I’d hammer out danger
I’d hammer out a warning
I’d hammer out love between all of my brothers and my sisters
All over this land.
If I had a bell
I’d ring it in the morning
I’d ring it in the evening … all over this land,
I’d ring out danger
I’d ring out a warning
I’d ring out love between all of my brothers and my sisters
All over this land.
If I had a song
I’d sing it in the morning
I’d sing it in the evening … all over this world,
I’d sing out danger
I’d sing out a warning
I’d sing out love between all of my brothers and my sisters
All over this land.
If I’ve got a hammer
And I’ve got a bell
And I’ve got a song to sing … all over this land,
It’s a hammer of justice
It’s a bell of freedom
It’s a song about love between all of my brothers and my sisters
All over this land.
If I had a hammer, I’d beat all my brothers and sisters with it, forcing them to sing a song I like to listen to. And when it’s time for them to eat from the trough outside, I’d ring the bell to let them know there’d be no beatings with the hammer for quite awhile.
I’ll be looking for that hammer and bell on eBay shortly. The song? I already have quite a few.
The Offspring’s version of that drippy @ss Feelings song.
Feelings
Nothing more than feelings
Trying to forget my
Feelings of hate
Imagine
Beating on your face
Trying to forget my
Feelings of hate
Feelings
For all my life i’ll feel it
I wish I’d never met you
You’ll make me sick again
Feelings, oh oh feelings
Of hate on my mind
Feelings
Feelings like I never liked you
Feelings like I want to kill you
Live in my heart
Feelings
Feelings like I wanna deck you
Feelings like I’ve gotta get you
Out of my life
Feelings, oh oh feelings
The hate’s in my eyes
Feelings, oh oh feelings
You’re not very nice
If I had a hammer, there’d be no more folk singers.
Molly,
Ever see the movie “A Mighty Wind”?
“To someone whose only tool is a hammer, every problem looks like a nail.” — Unknown.
he San Francisco Business Times reports from California. “So-called middle class millionaires, those with $1 million to $10 million, say they expect to lose real estate to foreclosure in the year ahead, according to a recent survey conducted by Lewis Schiff, a co-author of The Middle Class Millionaire.”
I suspicious of these surveys. The people who have < $10Mil and are really into being “millionaires”, so much so that they read books called “The Middle Class Millionaire” may be over-counting their wealth. I don’t think it’s appropriate to ever count one’s primary residence in any “net worth” figure, so that eliminates a lot of would be millionaires right off the bat.
Let me give you an example. I own a piece of swampland in Florida. It’s not worth much. The lot adjacent to mine (now owned by the bank) is an even wetter lot of the same size (20 acres)
For two years, the owner of the property (and I use that term loosely–he had a 3 year I/O loan with a 100% balloon payment at the end) had it listed in MLS, for 8 Million Dollars! (At best, this land is worth $50K)
The listing featured a house! There was no house on the property, but if you read the fine print in the listing, he’s build a house for anyone who paid $8Million for it.
And now for my point: Needless to say, there was no interest in this land, even in the peak of the bubble. But the owner, when I talked to him, believed he was worth $8 Million Dollars because he had a property in MLS listed for $8M! He’d say things like “I never thought I’d be managing $10 Million dollars worth of property” when I’d swing by his office to chat with him. These are exactly the type of people who like to attend “Millionaires seminars” and read books about being a Millionaire….
BTW: I had my attorney offer the bank that now owns the lot $12K for it. Haven’t heard back yet.
I just searched for any similar listings in this zip code. There were a few others who had “phantom houses”–empty lots listed as houses in MLS. I did find this half-completed house up for sale: for $12M!
http://www.realtor.com/realestate/windermere-fl-34786-1076980164/#Photo
Notice the construction date is listed as 2009, and the photos of the home are unfinished! It’s, by far, the most expensive listing in that area. Nobody in his right mind would by someone else’s abandoned project for $12,000 let alone $12 Million!
So, I can add my own flair to this property?
So long as you have 37 pieces of flair…
“Others maintained a good sense of humor about the situation. ‘I thought I was in a third-world country,’ said Jagdish Belagum, a technology officer at a Glendale firm. ‘I didn’t expect this to happen in the U.S.’”
I think we are not far for this country to turn in fourth-world country. GM value is around $6 billion and Toyota is $147 billion, with this valuations we are very close to fourt-world country level … . House prices should be valued accordingly, like it is in Zimbabwe. I think housies here at least in California inflated like everything in Zimbabwe…
The only thing that separates a first world country from a third world country is not capital, assets, resources or labor. It’s government-intrusion into the freedoms we’re born with.
At this time, America is holding on to its first world status. As the sheep elect more stringent tyrants, that will fall by the wayside, as it becomes harder and harder for anyone to really work to gaining wealth.
Today I find it easier to open a business in Mumbai than in the States. Sure, there is more “poverty” (State-created) and “regulation”, but it is fairly easy to avoid both.
In these united States, it is a bit harder to avoid regulation, with the accountant-lobbying group that uses the title CPA after their name being paid very nice snitch fees for giving up those who abuse the loopholes. (One reason I will never use a CPA, and I recently disparaged a high paying customer for letting his CPA dog into a meeting with me. Of course, I save the customer much more than that waste of flesh does, so he’s asked him to refrain from putting his foul stench within 15 feet of me.)
The result of globalization will evaporate “the freedoms we’re born with.” Middle class of this country will slide to the poverty the same level as it is in Zimbabwe or in Russia.
Don’t you remeber how New Orlean looked like after Katrina?Now in Russia there are almost 100 billionaires and soon there will be as much as in U.S.
“Billionaires of the world united”.
That will be the time when everybody else in the world will be in the same level that is Zimbabwe today.
Manufacturing in U.S. disappears and with it middle class. There will be billionaires and slaves around the world…
That is what you see in the middle of America, where young people are recruited to go to die in Iraq…
http://www.itulip.com/forums/showthread.php?p=39709#post39709
The result of globalization will evaporate “the freedoms we’re born with.” Middle class of this country will slide to the poverty the same level as it is in Zimbabwe or in Russia. Now in Russia there are almost100 billionaires and soon there will be as much as in U.S.
“Billionaires of the world united”. That will be the time when everybody else in the world will be in the same level that is Zimbabwe today.
Manufacturing in U.S. disappears and with it middle class. There will be billionaires and slaves around the world…
That is what you see in the middle of America, where young people are recruited to go to die in Iraq…
The result of globalization will evaporate “the freedoms we’re born with.” Middle class of this country will slide to the poverty the same level as it is in Zimbabwe or in Russia. Now in Russia there are almost 100 billionaires and soon there will be as much as in U.S.
“Billionaires of the world united”.
That will be the time when everybody else in the world will be in the same level that is Zimbabwe today.
Manufacturing in U.S. disappears and with it middle class. There will be billionaires and slaves around the world…
That is what you see in the middle of America, where young people are recruited to go to die in Iraq…
“Tom Davidoff, an assistant professor who teaches real estate economics and finance at the University of California-Berkeley, said Fannie’s and Freddie’s troubles eventually could lead to higher mortgage rates.”
Mortgage rates should be a lot higher, it’s insane that you can get a mortgage at 6%. With all the risks out there, the only reason rates are so low is because our government is keeping so low. Without Fannie and Feddie banks could compete in the mortgage market, now they have no chance and are failing.
All interest rates are too low, and so it still pays to be a debtor in the U.S., whether government, student, or mortgager. Foreigners are addicted to selling us products (overseas wars are also the equivalent of us buying products from foreigners) and so they continue to repatriate much of the proceeds, keeping bond, credit, and equity markets, and the U.S. dollar, more buoyant than they otherwise would be.
We hear that it is the resiliency of the U.S. economy that will pull us through. I’m more inclined to say that the resiliency has helped pull us through so far, but may be wearing thin - not to mention the illiterate lard-asses who make up a growing percentage of the of the new order.
“The 12-story Union Bank building has been returned to its former glory, albeit with a residential twist. Developer Meruelo Maddux Properties is putting the finishing touches on a $40 million renovation that has replaced 10 floors of bank offices with 92 apartments.”
“The project arrives as Meruelo Maddux, Downtown’s largest landlord, is facing significant financial challenges: With the stock down about 83% since its initial public offering, the company is reportedly looking to sell some of its properties.”
The irony. Bank to apartments, back to bank?
“Loose Lips”?
http://www.youtube.com/watch?v=gUkbdjetlY8
“Agent Karen Wheeler has been trying to sell a bank-owned, one-bedroom condominium in Cortez Blu, a 67-unit, 20-story high-rise in Cortez Hill that has been listed since January. In February, the price was reduced from $384,900 to $349,000.”
“‘It’s probably dropped by 40 percent value over the last year and a half,’ Wheeler said.”
So if it’s dropped by 40 percent already, is she suggesting that at the peak, one bedroom units like this were fetching nearly $600k? Or is it just that the place is still absurdly overpriced?
I can’t imagine paying even $350k for a one bedroom, let alone $600k. Oy.
This is an incredibly historic moment.
I recently read an old book- the Panic or ‘89. It is an amazing primer on the PPT as heroes (?) and what is happening as we speak.
With the Fed opening the Discount Window to F&F and the predictable demise of Indymac, we have a wild time ahead.
FYI- Lehman will not last the month.
You can add this to the mix. An interesting week, indeed.
http://www.dailybreeze.com/ci_9858629
“About $400 billion in negative amortization loans are scheduled to reset in 2011, which could leave thousands of homeowners owing more than their homes are worth. According to state Attorney General Jerry Brown, Californians hold 60 percent of these loans.”
How exactly does a rate reset on a negam loan cause a homeowner to be underwater? Oh that’s right, it can’t. It’s just the low-rent sh#theads at newspapers and in the halls of government that can’t tell the difference.
Argghh, anyone else read the insufferable Jeff Opdyke columns in the WSJ? He writes navel-gazing garbage about himself and his family and if they’re typical, we’re fooked. I can’t link to today’s column, but basically the story is he left a real good job in NYC so she could follow her dream to move back home to Baton Rouge and be a hospital administrator. Surprise! She lasted a couple of months there, and now they realize they’re not happy where they are. So now they’re going to up and leave to follow their dream to live abroad, in Hong Kong.
Meanwhile they’ve been doing the usual over-the-top remodeling of the house they bought in La., including a quirky Asian-themed bathroom. He pondered if it would hurt eventual resale value, but decided it was more important to follow your dream of the moment then worry about that crass calculation. This is from an older column that ended up at a real estate site.
So recently he’s been writing about (1) how hard it is to sell their home in this market (2) how expensive rents are in HK. LOL! And now (3) that Asian bathroom remodel wasn’t such a great idea after all, especially since you never know when you might want to follow your dream somewhere else.
Gah.
ABC News Has Obtained Privately-Prepared Lists of Most Troubled Banks:
http://tinyurl.com/6njwbn
“At the top of the list was ANB Financial National Association of Bentonville, AR, with a 344 ratio. The bank failed earlier this year and was later taken over by a Louisiana bank.”
“The Colorado Federal Savings Bank of Greenwood Village, CO, was listed as having a bad loan to asset ratio of 244.82.”
“With a ratio just under 100, at 96, the $13-billion Downey Savings and Loan of Newport Beach, California is the biggest financial institution with a high ratio of bad loans. “