A Cathartic Event In California
Bloomberg reports on California. “Almost $1.3 trillion of homeowner equity was lost in California since home prices peaked in December 2005, said Mark Zandi, chief economist at Moody’s Economy.com. ‘California is having a wrenching decline in wealth, but this is a cathartic event that will lay the foundation for a recovery,’ said Zandi in an interview. ‘This signals the beginning of the end.’”
“Foreclosure sales accounted for 75 percent of June’s total in Merced County, home to the Merced metro area with the country’s second-highest foreclosure rate; 72 percent in Stanislaus County, home to the Modesto metro area with the third-highest foreclosure rate; and 66 percent in San Joaquin County, home to Stockton, data from DataQuick and RealtyTrac show.”
“Sales of foreclosed properties equaled 63 percent of the total in Sacramento County, 62 percent in Riverside County, 58 percent in Solano County, 57 percent in San Bernardino County and 49 percent in Contra Costa County. Prices dropped as much 37 percent in those counties, DataQuick reported.”
“Bruce Norris, president of the Norris Group investment firm in Riverside, said he purchased foreclosed properties for one- third of the outstanding loan value during the past two months.”
“Norris bought a three-bedroom home in the Moreno Valley section of Riverside for $106,000, a 65 percent discount on the $300,000 loan held by Bear Stearns Cos., now part of JPMorgan Chase & Co. He got a 61 percent discount on a home with $258,750 in loans held by Deutsche Bank AG, and a 63 percent discount for a home with $324,000 in loans held by Morgan Stanley, he said.”
“‘The banks are stuck wholesaling to people like me,’ Norris said. ‘They are starting to move product faster than the market would normally allow.’”
“The housing bill signed by President George W. Bush yesterday is intended to stem foreclosures. Homeowners like David Imig and his wife, who live in the Stockton area and owe more than their house is worth, aren’t helped by the bill. They paid $462,000 for a three-bedroom at the market peak in 2005. Now, their neighbor’s foreclosed home is on sale for half its original price.”
“‘We’re a good $100,000 down,’ Imig said. ‘If we could move without taking a huge bath, we would.’”
“Peggy Thorpe outbid seven offers for a foreclosed house in Vallejo, east of San Francisco, and still got a 34 percent discount. It was the sixth time since May she made an offer for a home in foreclosure.”
“‘This time I jumped higher,’ said Thorpe, who works at a vineyard in Napa and paid $190,500 for the three-bedroom home with a loan balance of $289,000. ‘There’s an extreme bidding war right now.’”
The San Francisco Chronicle. “The new law aims to help 400,000 homeowners with new guaranteed mortgages. Yet it remains unclear how many lenders and borrowers will participate. Lenders must write down mortgages 15 percent below a home’s current market value.”
“‘Those are all wild estimates,’ said banking consultant Bert Ely of the numbers of homeowners who may be helped. ‘It may have some effect at the margin, but you’re still going to have lots of homes go into foreclosure.’”
“Some lenders may choose foreclosure, and many homeowners have what are now known as ‘liar loans,’ made with no income documentation, and may not be able to afford even reduced-rate loans, along with the taxes, insurance and maintenance costs that accompany home ownership. ‘A lot of people will find out they’re better off renting, no matter how good a deal they’re cut,’ Ely said.”
The Union Tribune. “San Diego cities and the county are expected to receive several million dollars from the housing bill to buy foreclosed homes and resell them to needy families. But with $4 billion to be allocated nationwide through the Department of Housing and Urban Development’s community development block grant program, local officials said the effort will not be nearly enough .”
“In the first half of the year, nearly 8,500 homes were foreclosed on in the county, according to DataQuick Information Systems. If area agencies received $2 million in the program, that would be enough to buy and rehabilitate eight homes at $250,000 each.”
“‘A few million dollars is not going to do much in this market,’ said San Diego City Councilman Tony Young.”
The Daily Breeze. “A UC Irvine study released today shifts blame for the housing collapse from sub-prime lending to the use of aggressive, private mortgage securities that followed the reduced role of traditional mortgage backers Fannie Mae and Freddie Mac.”
“The study by the UCI Paul Merage School of Business Center for Real Estate ties the start of what became a massive real estate bubble burst to the 2003 pullback of the government-sponsored financial service corporations from the credit market and the change in the prevalent source of mortgage capital.”
“‘We were quite surprised to find the intensity of sub-prime lending was insignificant after controlling for all the other factors influencing the market, but we were really blown away when Fannie’s and Freddie’s continuing presence in the market was shown to be so important,’ said Kerry Vandell, a UCI finance professor and director of the Center for Real Estate.”
“The researchers found that rising home prices up to 2003 could be explained by economic fundamentals, such as low unemployment rates, expanding household incomes and population growth. Those factors fueled housing demand and, in turn, increased U.S. home prices.”
“But in 2003, certain factors caused the two entities to significantly slow their lending volume, including accounting irregularities that led to the resignation of senior officers and the capping of their retained loan portfolios.”
“Private funding stepped in, in the form of asset-backed securities and residential mortgage-backed securities, while a new credit environment allowed looser underwriting standards and increased tolerance for riskier, high-yield loan products that included adjustable-rate mortgages with low initial ‘teaser’ rates, Vandell said.”
“The climate gave formerly marginal borrowers greater access to credit, leading to a record increase in total mortgage volume and pushing up home prices with momentum that is characteristic of a bubble, the UCI team said.”
“The researchers also found that interest rates did not significantly affect housing prices, also a divergence from conventional wisdom.”
“‘These finding help us understand that the government can have a major role in affecting the mortgage and housing markets,’ Vandell said. ‘It’s important policymakers consider this influence when they attempt to shape the markets in the future.’”
The Press Enterprise. “Saying that loans to borrowers with poor credit is the reason for the bubble bursting is like blaming the tail for wagging the dog, says a study led by the Center for Real Estate at the UC Irvine Paul Merage School of Business.”
“‘The real problem is that all the stops were pulled out, allowing the private issuers to run amuck,’ said Vandell.”
“John Marcell, president of the California Association of Mortgage Brokers Education and Research Foundation, agreed that the housing crisis might not have occurred if Fannie Mae and Freddie Mac had been more active. That would have been possible, he said, if their loan limits had been lifted as they were Wednesday by the housing stimulus package signed into law by President Bush.”
“‘Had Congress listened to the real predicament that was forthcoming and had raised the loan limits back then and let Fannie and Freddie do their job properly, we would not have the problem we ultimately experienced,’ he said. ‘Because we opened up the flood gates of this loosey-goosey lending … we enticed people to become homeowners who were not in the position to do it.’”
“Vandell said Fannie Mae and Freddie Mac were ‘victims of circumstances’ and had no choice but to let private mortgage lenders take over the field.”
The Bakersfield Californian. “A local accountant’s signature was forged to help David Crisp’s wife get a loan in 2006, according to testimony Wednesday in the ongoing license hearings of former Crisp & Cole Real Estate principals Crisp, 28, and Carl Cole, 61.”
“Certified public accountant Timothy Hubbell of Bakersfield took the stand to answer questions about a letter dated September 2006 apparently bearing his signature. The letter was actually written by his former business partner, Kevin Sluga - Crisp’s father-in-law - Hubbell said after giving testimony.”
“The state’s attorney, Michael B. Rich, asked Hubbell if the signature was his. ‘No,’ Hubbell said. ‘Did you write that letter?’ asked Rich, who is representing the California Department of Real Estate in the administrative hearing. ‘No, I did not,’ Hubbell said.”
“The letter was in a 2006 loan file of Jennifer Crisp, David Crisp’s wife, submitted to Aegis Wholesale Corp. for what would be $475,000 worth of loans she received to buy 12706 Lanai Ave.”
“The letter was included in the file to clarify Jennifer Crisp’s supposed employment at California Business Solutions, a bookkeeping and accountancy firm co-owned by Sluga, her father.”
“Hubbell also testified the employment claim in the document, written on company letterhead, was false: Jennifer Crisp had not worked at the company for two years, as the letter claimed. She had never worked there, he said.”
“Later, Hubbell testified that Leslie Sluga worked a couple of days a week at California Business Solutions doing bookkeeping. She earned about $8 or $9 an hour, he said, bringing in about $400 a month.”
“In other loan files, the hearings have shown, Sluga claimed she had been a co-owner of the business for 15 years. Hubbell said after the hearing her income was stated as $40,000 a month in some loan applications.”
The Ventura County Star. “A Ventura-based builder appears to have fallen on hard times, and its state license is at stake. R.W. Hertel & Sons Inc. has disabled its Web site and put its building up for sale.”
“R.W. Hertel has a long history of accusations concerning defective building. In 2005, for example, residents complained of water leakage at the Rancho Obispo subdivision in San Luis Obispo County.”
“Presently in Stanislaus County, R.W. Hertel is facing a $250,000 fine for storm water damage violations in a subdivision that is home to several endangered species. In another sign of money woes, R.W. Hertel has ceased construction on a $25 million hotel and condominium resort project in Oregon.”
The Valley Voice. “Centex Corp. is relocating its Central Valley regional office from Visalia to Sacramento in a consolidation move that will mean many more lost jobs locally. After several rounds of layoffs in the past six months, a new round eliminated about 20 jobs in Visalia a few weeks ago, say sources familiar with the company.”
“The company eliminated chief planner for new projects, Cliff Ronk’s job, among others. Now, the company has put its big 50,000-square-foot regional headquarters on Akers up for sublease.”
“In addition to shutting down the regional office, sister company CTX Mortgage will be closing its retail office here at the end of August after a potential sale to another company didn’t happen.”
“Centex has been Tulare County’s largest builder for decades but its volume is less than a third of what it was just two years ago. Centex used Visalia as a regional office since it bought the operation of Andy Mangano in 1991 and expanded year after year in the number of subdivisions and towns it built in the Central Valley.”
“The big builder became a major employer here. For years, it was the busiest division for the Dallas-based builder in the state.”
“Centex moved to a vacant space in the big 150,000-square-foot Cigna Insurance building on Akers only a year ago, consolidating scattered offices into one location. Centex leased 50,000 square feet of the building that it now wants to sublease.”
“But a year later, the collapse of the new home market in California has apparently convinced Centex, like other builders, to pull up stakes here.”
The Sacramento Bee. “If you’re seeking ground zero of the real estate collapse, go no farther than Laguna Ridge. Four years ago, this 1,900-acre swath - characterized as Elk Grove’s ‘crown jewel’ - was master-planned for 7,767 homes. Roads, utilities, parks, and a new high school are all in place.”
“But the downturn hit so hard and so fast that only 310 houses have been sold so far. Thousands of phantom houses lend a surreal air to Laguna Ridge. Perfect residential streets with shiny nameplates wind through fields of waist-high grass. There are many speed bumps - but no cars. On Winkle Court, near a row of pristine model homes, the one sign of life is a jack rabbit streaking across the road.”
“No child plays at Constellation Park, despite tempting climbing structures, green grass and bright red picnic tables. The little park is encircled by a chain link rent-a-fence. Two blocks away, 15 occupied houses on Collie Way stand isolated on the lonely frontier of Laguna Ridge.”
“Among these pioneers are Chris and Jene Claude and their two kids. The Claudes say: If you’re seeking a sweet home and a great deal, go no farther than Laguna Ridge. ‘Right now, it is a little sparse around here,’ conceded Chris Claude. ‘But that makes the neighbors closer.’”
“Their house, 2,300 square feet with four bedrooms and two full baths, cost them $400,000 - probably about $125,000 less than they would have paid at the market’s peak. The Claudes aren’t worried about the paucity of neighbors in Laguna Ridge - they will come, they say. But they are irked by one facet of living in a 1,900-acre vacant lot.”
“‘The only thing that really bugs us is the fence around that park!’ the young mother said. ‘It wasn’t so bad when it was just an overgrown patch - but now it’s finished and the kids can’t get in.’”
“Real estate attorney John Hodgson represents developers who control about 90 percent of Laguna Ridge. ‘The bottom line is that this project got approved in 2004 when the market was at its pinnacle,’ Hodgson said. ‘With the delays of the city both before and after adoption of the plan, the fact is that this development missed the cycle.’”
“‘It breaks my heart,’ said Kathryn Boyce, a Northern California real estate analyst for Hanley Wood Market Intelligence. ‘Laguna Ridge would be perfect - a shining star. But the market crashed so quickly and deeply that it didn’t happen.’”
“Still, Boyce is a believer in real estate cycles. She sees pioneers like the Claude family as simply ahead of the curve.”
“‘If they just bought, they got a great deal and they’re in on the ground floor,’ she said. ‘The housing market will come back with a roar. At Laguna Ridge, all the infrastructure is in place and you’ll see a ton of houses all opening at once. It’s poised to come back like wildfire.’”
http://www.bloomberg.com/news/economy/
Ummm…. Why is the DOW not @ 8K yet?
PPT?
This is what Shizo’s link shows (12:53 pm PDT 31 July 2008):
“Economy
U.S. Economy Shrank at End of 2007, Misses Second-Quarter Growth Forecast
- The U.S. economy shrank at the end of 2007 and grew less than forecast in this year’s second quarter, signaling that the country is in worse shape than investors had anticipated.
Recession in U.S. May Have Started at the End of 2007, Revisions Indicate
- The U.S. economy may have slipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened, revised government figures indicated.
Harvard’s Feldstein Says U.S. Economy May Be in a `Very Long’ Recession
- The U.S. may now be in a “very long” recession that will drive the unemployment rate higher, with little that the Federal Reserve can do to help, said Harvard University Professor Martin Feldstein.
Paulson Says Fiscal Stimulus to Ensure Economic Growth in Second-Half ‘08
- Treasury Secretary Henry Paulson said he expects the government’s fiscal stimulus plan will boost economic growth in the second half of the year, offsetting a housing downturn and high energy prices.
Fed Loans to Failed Banks Made Easier By Fannie-Freddie Rescue Legislation
- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.
Spain’s Inflated Home Valuations May Infect $498 Billion of Mortgage Bonds
- Jose Maria Gonzalez is struggling to unload a four-bedroom apartment in Madrid so he can pay for the 480,000-euro ($750,000) house he now lives in. His problem may wind up hurting investors in Rome and Hong Kong he’s never met.
Chicago Purchasing Managers’ Index Unexpectedly Increased to 50.8 in July
- A measure of U.S. business activity unexpectedly rose in July, led by a gain in orders.
Australia Faces `Once-in-100-Year’ Housing Recession, Matching U.S., U.K.
- Australia may be headed for a housing recession similar to those roiling the U.S. and U.K.
German Unemployment Declined at Slower Pace in July as Economy Weakened
- German unemployment, enjoying its longest decline since reunification in 1990, fell at a slower pace in July as the economy cooled.
U.S. Economy Grew Less Than Forecast Last Quarter: Table of the Day
- Following is a summary of Gross Domestic Product from the Commerce Department.”
In Pacific Palisades Ca. you can buy a $1.8 million home and live next to a home infested with tens of thousands of rats. This article is amazing. Worth the read I promise but not for the squeamish…
http://www.laweekly.com/news/features/palisades-rathouse-unchallenged-by-health-officials-elderly-twins-fed-local-vermin-population/19342/
Wow. That’s creepy. I used to live in Rustic Canyon (part of the Palisades), and my three (very sweet) cats killed hundreds of rats in their lifetimes.
More on rats: I have a buddy who lives in an apartment on Barrington in Brentwood - pays 2600/month - and the place is crawling with vermin. The Indian restaurant next door (Clay Pot?) inadvertently feeds them. At night you can hear them clattering in the bamboo thickets between the restaurant and the apartment. It’s truly awful.
Creepy for sure. I lived in THAT house for 2 or 3 years in the 1980’s
1018 Fiske.
the best part of the story is that the government did nothing and the other homeowners don’t want anything done for fear that their home values will drop.
I also love how the family sued the previous owner, a movie star, and the real estate agent who did not disclose the rat problem. Real Estate agents are scumbags.
Wow, their house is like the Rat Temple of Rajasthan. Pacific Palisades is different!
“Real Estate agents are scumbags.”
Well, the house is infested with rats isn’t it? Maybe the agent felt at home and didn’t think there was a problem to report?
LOL!!!
No problem;
just drop a couple of “good” snakes in there and the rats would get the message
Greenspan says prices nowhere near bottom: http://www.bloomberg.com/apps/news?pid=20601087&sid=a4jioRRKzw5s&refer=worldwide
I’ll trust the DOW over Feldstein and Greenspan…
The Dow is a lot lower in relation to gold.
They have been printing so much money that it ends up in the Dow.
Some web sites have nice charts with inflation adjusted prices.
The tide is out and I don’t like what I see…..
http://www.bloomberg.com/news/economy/
Look @ the headlines. THEY ALL SCREAM DEPRESSION. You’d have to be a blind real-a-turd to deny it. Why is the DOW not @ 8K??? I think we may see mid 7’s in two years (maybe sooner)!
Depression?
Get a grip on yourself.
dutch,
If all the banks and investment firms and companies weren’t hiding so much crap from the books, we would be in a depression. In fact, it would be severe.
Heck, look at last week’s fed funding. They lent out truckloads of money to banks. Seems that these frauds don’t really have anything to pay out and when they finally have to capitulate, they are in trouble, and will bring the rest of us with them.
Heck, look at the new accounting rules that have been delayed, yet another year. Why do you think that is?
Could it be, that with the new rules, everything would go down the tubes?
My bet is yes.
Where is Smooth Hardley?
Where is the collapse of the farms?
Where is the 25 percent unemployment?
Where are the hoovervilles?
Where are the mass migrations of people?
The tent city in ontario has been there for years
Unemployment (even including underemployed) is still relatively low in historic terms.
Farm land is extremely EXPENSIVE and farmers are raking in massive profits.
The only mass migrations there are are illegals going home to mexico.
I agree that things are rough but I doubt that we are headed to a depression.
Also our national debt as a percent of GDP is not historically awful.
I am a bear but I get a little tired of people hyperventalating on the bubble blogs that I read about the next great depression and being dismissive about other peoples opinions that our contrary.
Like when they say
THEY ALL SCREAM DEPRESSION. You’d have to be a blind real-a-turd to deny it.
I see tax data all freaking day and while revenues are down things have NOT even close to GRINDING TO A HALT.
“Farm land is extremely EXPENSIVE and farmers are raking in massive profits.”
You no not of that which you write. Land is expensive, profits are not massive for the majority of farmers.
Grains may be up 100% but so is everything a farmer uses. The prices the local co-ops pay for corn, beans etc. is about $1 below Chicago prices CBOT. The cost of fertilizer is up 300%, Rotenone has gone from $200 to $1500/ton. Fuel has gone from $3.29 to $4.65/ gal (why are airline fuels subsidized? It is just Diesel.) In California Dairy farms are closing rapidly. California dairy farmers buy feed. Dairy farmers cannot buy feed at current prices and survive.
Last year was very profitable, this year may be profitable. It is to early to tell.
Again I ask, dutch…
Why won’t the goobermint and the banks disclose EVERYTHING AND IN A HONEST FASHION?
Because they know that it would collapse they whole mess.
AS for the 8K Dow…we would have had that months ago except the Fed injected 200Bil of liquidity. The current 800Bil blank check didn’t hurt either.
It is all smoke and mirrors at this point. The only reason the charade goes on is because what other choice is there, but this Matrix?
Who can go out and buy a farm and then live off it?
Yeah, like people have 200-300K saved to buy that comfy farm in Indiana and live off the land.
Right!
Honestly, you need to open your eyes. Skewed economic numbers based on removal of very important components yeild false results. Period. Like was stated by OCDan- if the truth was made known, we’d already have run to the banks to yank it all out. Over the time I’ve spent here I’ve seen the “chicken little” episode played out on this blog- and many people have denied the massive decline we are just starting to see becuase it hasn’t hit the MSM. But slowly the items that were mentioned are coming true…
Rationing food
Bank failures
Propped up economy
Failing dollar
Inflation (REAL, not reported ~ 11%)
Foreclosures
Healthcare costs
Insurance costs
Energy costs (not just gas)
Unemployment jump
Gold @ $900-$1000
FED lending like never before
Reduction in entering illegals by 11%
Cities going bankrupt
…and that’s just the list I thought of in 30 seconds! I’m sure there is WAY more.
& the rest of world is starting to follow suit….
Rationing food?
(where?)
Bank failures
(do you want me to show you a chart from the early 90’s?)
Propped up economy
(on what 500 dollar stimuleous checks?)
Falling Dollar
(the dollar is off of its all time lows)
Inflation
(Depressions generally are deflationary with asset prices going down this is deflation not inflation)
Health care costs are no basis for saying this is a depression, in fact they couldn’t charge what they do IF NO ONE COULD AFFORD IT,
Energy costs
Got me there
Gold is not at its inflation adjusted highs of the 80’s
Fed lending like never before?
Maxed out Momma has a good article on zombie banks if you would like to check it out on her blog.
Cities going bankrupt?
Do to ridiculous public service pensions
We have more transparency in our markets than any other market in the world. Otherwise you would not have an ability to see there are still problems.
You could be right but I believe that I have a firm argument that you could be wrong. So dont go making statements to the effect that we are blind just because I dont want to shoot myself in the head panicking.
DOW at 8K .. that would be so sweet.. i doubt it’ll get anywhere near there, but who knows.
Regardless of the major indices, there will be super bargains in just about every sector.
The time is coming when “got cash?” will be a revelant question.
Dutchtrader,
The next depression may not be like the last one. We may not get the wave of farm failures or perhaps a populist president will push through tarifs that collapse the economy.
I think we are at the point where there is massive systemic risk and a depression could happen quickly.
I doubt it will be anything like the last one. Perhaps it will be 15% unemployment and a vast majority working for minimal wages.
What a lot of us are seeing is so many banks are over leveraged and by such huge amounts that a global credit event may happen. It will trigger cascading defaults. IF that happens then massive numbers of business will fail over night or shut down as short term loans are gone. The credit collapse will mean that most of us wage earners will get laid off as prices reset. Almost everybody.
When banks failed in the great depression along with the stock market crash; at first everything was fine. Then more and more businesses failed. The value of cash went up very much… anyone with debt got whipped out. Most of us with normal stuff these days like car loans, student loans, credit card debts… would be crushed.
Many banks are insolvent right now. Its waiting for acknowledgment by the FDIC… the off balance sheet transactions. Its kind of telling that it was put off for a year.
” It’s poised to come back like wildfire.”
Wildfire is in SoCal, moron.
Maybe she meant the weeds are poised to come back? Oops, too late.
After a major, once-in-a-century, burn it takes a couple of decades to build up enough fuel for a serious wildfire. Go ahead and buy that lot in Laguna Ridge, I’m sure you will have a neighbor in 20 years or so.
Maybe she was thinking about a song called “Wildfire.”
She comes down from Yellow Mountain
On a dark, flat land she rides
On a pony she named Wildfire
With a whirlwind by her side
On a cold Nebraska night
Oh, they say she died one winter
When there came a killing frost
And the pony she named Wildfire
Busted down its stall
In a blizzard he was lost
We’ll be riding Wildfire
We’ll be riding Wildfire
We’ll be riding Wildfire
By the dark of the moon I planted
But there came an early snow
There’s been a hoot-owl howling by my window now
For six nights in a row
She’s coming for me, I know
And on Wildfire we’re both gonna go
We’ll be riding Wildfire
We’ll be riding Wildfire
We’ll be riding Wildfire
On Wildfire we’re gonna ride
Gonna leave sodbustin’ behind
Get these hard times right on out of our minds
Riding Wildfire
Gee I can almost hear Michael Martin Murphy right now….sorry was out collecting seaglass for too long this evening
foreclosures sales spiking in the county south of me near dc. investors are buying.
That’s great news! And investors in housing have had such great financial insight lately.
That’s a knee-jerk reaction to the housing bill. Watching these knife catchers is almost depressing. Did you guys see the story about the guy who stabbed and then decapitated the guy next to him on a bus? There were 35 other people just watching, and no one did anything to stop him. I feel like that’s what’s going on with our PTB right now. Everyone knows that what they’re doing is wrong, but no one will stop them.
“Did you guys see the story about the guy who stabbed and then decapitated the guy next to him on a bus?”
If the guy that got decapitated was mindlessly yapping on a cell phone then he got what he deserves. I hope that was the case. Please, tell me that was the case.
He was sleeping with his head against the window.
Maybe it was Yun telling the other passengers that this is the bottom and the guy behind him couldn’t take anymore….so nobody stopped him.
“Everyone knows that what they’re doing is wrong, but no one will stop them.”
Well, they were heading to Winnipeg. Maybe the others thought the poor bastard was lucky.
No one will stop them? This is the way bubbles end. If you think this is bad then you will hate it when RTC 2 or whatever serves that role starts collecting junk assets so that they can be given back to the wealthiest people in the room.
The idea that the housing bill has anything to do with this seems silly to me. Can you show even one example of people going forward because of that? More likely the first round of big price cuts is causing a dead cat bounce on the way down. There will probably be at least one more of those.
Yeah, I didn’t mean that the housing bill will save house prices, I just meant that it gives a BLANK CHECK to fund 2 NEWLY CREATED GOVERNMENT MONOPOLIES, which is unconstitutional and borders on taxation without representation.
The victim had no chance. Was sleeping. The remaining passengers got off the bus and barricaded the door so the murderer could not escape.
Too bad you weren’t there to fight the guy with the Rambo knife in the bus corridor. You would have been a hero.
“‘The banks are stuck wholesaling to people like me,’ Norris said. ‘They are starting to move product faster than the market would normally allow.’”
“The housing bill signed by President George W. Bush yesterday is intended to stem foreclosures. Homeowners like David Imig and his wife, who live in the Stockton area and owe more than their house is worth, aren’t helped by the bill. They paid $462,000 for a three-bedroom at the market peak in 2005. Now, their neighbor’s foreclosed home is on sale for half its original price.”
I think the number of FB’s who leave the keys on the granite counter is going to be huge (and completely unexpected, of course). Neil is right….20% to 30% down payments will again be the norm as banks realize this is the only way to really keep people in their homes…skin in the game will be a requirement.
Even 20% is small when you consider that CA is dropping by 30% per year. Just one year, and you’re already well under water.
Update to Bruce Norris “The Trend is Your Friend”! I don’t care what kind of “deal” you got from the banks, $4.00 gas and no jobs will kill Moreno Valley. Where will you find the next sucker to buy your remodeled house? especially when the same bank you just bought it from, has 6 more to sell at the same price they sold to you. Are you going to corener the market bu buying every foreclosure the bank has to offer.
Sorry, Bruce, only a cub reporter from the local throw away would hype your real estate expertise. I’ll be waiting for the sideline for another 2 years, and enjoying some popcorn
He should have gotten into martial arts like his brother.
Well, I understand Norris has bought maybe a thousand houses. And I doubt he’s renting them out. He’ll fix-up and sell those $100k houses and undercut the area. But this is bulk. He’s probably buying 50-100 at a swipe.
“But this is bulk. He’s probably buying 50-100 at a swipe.”
I know nothing about Norris and his deals, but these types of investors, flush with cash, are the ones who make a killing off the banks and FB’s. Their ability to buy in bulk, with no messy financing getting in the way, allows them to secure properties at rock bottom pricing. The truly wealthy are the ones who will pad their positions nicely when all is said and done. I’m not one of them!
Not really all one has to do is learn two words hypothecation and leverage and you too can play with the big boys…
http://en.wikipedia.org/wiki/Hypothecation
I doubt he’s buying in bulk…if so some R.E.O. Manger just got a huge raise….
I would love to see the address of these properties he’s purchased but here’s a non R.E.O. 4 and 3 listed for 225k
http://www.prudentialcal.com/Listing/ListingDetail.aspx?Listing=29281307
Moreno Valley is currently moving around 40 to 50% off peak unless he turns that 3 & 2 around quick he’ll probably lose a few bucks especially if it’s south of the freeway (60)…
If he was buying in bulk and actually knew what he was doing he’d be buying at 10 to 25 cents on the dollar…his purchase price indicates he has no clue or he’s not buying in bulk
Ben, don’t care how much cash Bruce Norris has/had, Case-Schiller tells me from their May report
“The plunge in the price of homes gets worse”
and he is going into the foreclosure epicenter, Moreno Valley. How many more blow out foreclosure houses will the bank have in the next 90 days.
I actually think the opposite…..(bearing in mind I’m looking at my area - expensive Silicon Valley).
I predict that there will be a return to low down payments because many people CAN afford a monthly house payment, what they can’t come up with is that 20% down.
I suspect the market will tank so much, they have to come up with something creative. However, all documentation will be scrutinized, there will be two appraisals for properties over $500K and there may be a request for at least the beginnings of a 401k or IRA.
But who will loan the money without the buyer having real skin in the game?
Banks are having a devil of a time coming up with capital. Bond buyers are running scared. People who put down large down payments will ride out being underwater to ‘preserve their savings.’ It takes forever to save up 20% down (we bears would know…).
There will be no return to low down payments until the bond market recovers. Or haven’t you been reading about the continuing shut down of the MBS market?
25%+ down will be the norm in the darkest days of this downturn. Those dark days could be 2010!
I admit I was amused to being referenced.
Got Popcorn?
Neil
Nonsense. If they can afford the monthly payment they can afford to save up the down. Get back into the real world here, nobody is going to be giving away houses again.
‘California is having a wrenching decline in wealth, but this is a cathartic event that will lay the foundation for a recovery,’ said Zandi in an interview. ‘This signals the beginning of the end.’”
This guy is a joke. He’s probably a Realtor (side job) as well thinking that we have hit bottom in California. Folks, there is no end in sight. A meaningful recovery is not coming anytime soon.
I’m still trying to wrap my head around $1.3T just in California. And this thing isn’t even half over yet. I’ve been studying the housing bubble for several years now, but it’s still almost unbelievable.
Of course, a good chunk of those losses will fall on those outside the state by whoever holds the MBS. Still, millions have households that will not become a foreclosure statistic figure to see a paper loss of their net worth for a few hundred thousand dollars. It will have a significant impact on consumer confidence possibly outlasting the remainder of the correction.
And along with the vanishing of this $1.3 trillion will be the comment by many on this blog that the remaining cash - as scarce and thus more precious this vanishing act will cause cash to be - will become worth less.
Go figure.
Maybe they should calculate the house price using bags of potatoes as the currency? (or goats?)
2005 My house was worth 4,000 goats.
2008 My house has dropped value to 2,000 goats and next year you can buy my house for only 1,000 goats.
The average goat sells at the fair for $300.
4000×300=$1200000
2000×300=$600000
1000×300=$300000
It still is to much for a BBQ.
Cash will be much nicer to have in our pockets, especially when
compared to phantom equity.
1.3T - ….. note that in Thousand Oaks, 1.2 million dollar houses at the peak are still 1.1 mil….
Wishing prices mean nothing.
Actually, Zandi is an economist. I don’t remember meeting him as a child, but an older sister was a grade school classmate. I remember her as being quiet and very serious.
My mother taught school in the high school that I attended. Several years after I graduated, one of the Zandi boys (Steve) got into a car accident. He was driving drunk and ended up with brain damage. He was no longer able to drive.
Mom used to see him riding his bicycle on West Chester Pike, which worried her. That’s PA Route 3, and it is one busy highway.
OTOH, Steve was still able to communicate, and he’d periodically come over to the high school to warn the students about the dangers of drunk driving. Mom recalls that his presentations were quite moving.
Mark is a girl?
Nevermind. I reread your post. I see what you meant now.
I think he doesn’t want girls to drink and drive….or something like that.
Well the guy should lose a testicle for every wrong “bottom has been reached” pronouncement he makes. Somehow I suspect that if his family jewels were on the line, he would be a tad more realistic.
After the first two he’d probably never shut up.
Kinda like a chick.
Flame away.
The real question is why would anyone listen to Mark Zandi any longer?
Ask NPR, NYT, AP … he’s their go to guy. His MO is a touch of reality with a strong light at the end of the tunnel finish.
Sickening, I would love to put together an audio retrospective of NPR Zandi interviews and Chris Arnold reports. Perhaps I will.
Greenspan says houses are nowhere near finished declining:
http://tinyurl.com/6enb7t
The U.S. faces “a very substantial change in the balance between growth and inflation,” Greenspan said.
Well. We’ve had huge growth with little inflation, so now it’s gonna be the opposite of that…
I just don’t think this is the change Obama is referring to.
Greenspan, GREEDSpan, the one who keeps saying he couldn’t predict the bubble and now is saying we are nowhere near finished declining? So is this CYA time for the old fart?
Just like Billary, the folks and jumolks will only remember that AG presided over, “the good times”.
“Their house, 2,300 square feet with four bedrooms and two full baths, cost them $400,000 - probably about $125,000 less than they would have paid at the market’s peak.”
Congratulations Chris and Jean Claude. You will still pay more than a half million dollars over the life of that loan. Owning a home really is the American (banking industry’s) dream!
http://www.yurts.com
Slim used to rent from a lady who…
1. Paid cash for her land.
2. Built her house on it.
She paid for all of the building materials and hired help from her savings, which were derived from working in the computer industry.
Needless to say, she was more than a little proud of the fact that she had no mortgage.
That is where I am heading AS. Pay cash no mortgage.
Stick to your guns - paying interest for a moment longer than is absolutely necessary to achieve a goal is for suckers!
Not to mention amortization - heck the typical family stays how long? 5 years. How much equity can one buildin five years? Easy, just enough to pay the agent’s commission at sale!
Of course that’s assuming they have a “normal” loan, which is hardly a given.
Why do people buy houses while counting on the job security and stability more typical of 1958 when it’s the year 2008?
Sacramento (Placer County):
Just overheard co-worker telling her friend that she’s going to be turning one of her homes over to the bank instead of trying to sell it. Owns two homes, one small, one mcmansion, dumping the mcmansion. She has two year left on interest only loan before payments jump, said that she doesn’t see the market coming back by then so what’s the point. This person originally bought the house for over 1 million. Don’t know how long ago, during boom for sure, 3 - 4 years maybe.
Also, a few weeks ago, my wife handed me a flyer that someone had placed on our apartment door (Roseville, CA - 700 units in complex). Read something like: “Owning a home is closer than you think. Call me to find out about new FHA loans for first time buyers.” etc etc. Never had that happen before, they’re going door to door now I guess. Just like Uncle Rico.
…she doesn’t want you here when she gets back because you’ve been ruining everybody’s lives and eating all our steak!
Hey, she made $8 or $9 an hour…. but made $40,000 per month…talk about “over-time”…when did she sleep?
Bakersfried, at least they got oil.
Later, Hubbell testified that Leslie Sluga worked a couple of days a week at California Business Solutions doing bookkeeping. She earned about $8 or $9 an hour, he said, bringing in about $400 a month.”
“In other loan files, the hearings have shown, Sluga claimed she had been a co-owner of the business for 15 years. Hubbell said after the hearing her income was stated as $40,000 a month in some loan applications.”
$40000.00, $400.00?
It’s just a decimal error. I’m sure she wasn’t trying to defraud or anything.
\snark off
I got additional word on that house we were looking to offer 425K on…
The foolish buyer that offered just short of asking (749K) has now found the lender squeamish because the property is a fixer upper. They apparently have designated it, “uninhabitable”.
It looks like more and more the system is actually serving to keep people from making terrible mistakes instead of facilitating same.
They apparently have designated it, “uninhabitable”.
It looks like more and more the system is actually serving to keep people from making terrible mistakes instead of facilitating same.
Now once realistic down payments are required… it will also downselect to buyers who *think* before they spend. As you allude to, the return to historical lending standards is going to pull the ladder out from under this…
No salesman wants skeptical informed buyers. It hurts the velocity of money.
Coming soon to a neighborhood near you!
Got Popcorn?
Neil
“The housing market will come back with a roar.”
There’s that word “market” again.
Greenspan Says Housing Prices Not Yet Near Bottom (Update3)
By Steve Matthews
July 31 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are “nowhere near the bottom” and the resulting market turmoil isn’t showing signs of abating.
While the odds of a recession are 50-50, achieving stable markets will “take a while,” Greenspan said today in a CNBC interview.
After his comments, benchmark stock indexes declined further. The Standard & Poor’s 500 Index slid today by 16.88 points, or 1.3 percent, to 1,267.38. The Dow Jones Industrial Average lost 205.67, or 1.8 percent, to 11,378.02.
The economy grew at a 1.9 percent annualized rate in the second quarter after expanding 0.9 percent in the first quarter, the Commerce Department said in Washington. Gross domestic product was revised to show a contraction in the final three months of 2007.
More Americans filed claims for unemployment insurance last week than at any time in more than five years, the Labor Department said. Fed policy makers have cut the benchmark rate to 2 percent from 5.25 percent since September, halting the reductions in June amid rising concern about inflation.
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, are a “major accident waiting to happen,” Greenspan said. “The solution” is the “nationalization” of the companies, he said.
`Major Accident’
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, are a “major accident waiting to happen,” Greenspan said.
“The solution” is the “nationalization” of the companies, a restructuring involving an infusion of taxpayer money and eventual sale back to the market as “five or 10 separate entities,” he said.
Washington-based Fannie Mae dropped 71 cents, or 5.8 percent, to $11.50 in New York Stock Exchange composite trading. Freddie Mac, based in McLean, Virginia, fell 56 cents, or 6.4 percent, to $8.17.
“It’s important that we focus on stabilizing the financial system,” Greenspan said.
Policy makers also need to reconcile slowing economic growth with rising prices, he said. The U.S. faces “a very substantial change in the balance between growth and inflation.”
The Fed had to open up lending to securities firms to curb turmoil in financial markets, he said. “You have to do the backstop because once you get to that point your particular choices are very limited.”
Still, Greenspan said he was “uncomfortable” with aspects of the Bear Stearns Cos. rescue. “That is a fiscal policy operation, essentially something which should be set up in the Treasury Department.”
Consumer prices increased 5 percent in the 12 months to June, the most since May 1991. The core rate, excluding food and energy, increased 2.4 percent from June 2007.
To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net
Last Updated: July 31, 2008 17:26 EDT
AG must have some puts he needs to unload.
Yeah but there is no such thing as a national housing market. They’re all local.
I learned that from Alan Greenspan.
Just some are a bit more “frothy” than others.
‘This signals the beginning of the end.’
What, exactly, does Zandi think the “signals” are? They aren’t listed in the article. And, no, we are not near the end. Just because we’ve lost $1.3T does not mean that we’re near the end. We’ll be near the end once the foreclosures peak and start declining on a consistent basis. Right now, NODs and foreclosures in California are at record highs and still increasing.
The economy grew at a 1.9 percent annualized rate in the second quarter…
I have seen this figure before. First, as long as the govt continues to hand out stimulous checks and everything will be fine. Second, they use something like 1.1% to estimate inflation in the figure. Umm, I think that is just a bit low.
And mean ole Slim just got that stimulus check. Banked every penny of it. So there.
OK, Slim, I have to admit I don’t really follow this. More or less everybody deposits the check, right ? - I mean, except for the few that actually take the check to Walmart and have them cash it to pay for what they buy. . .
So, once I file my taxes and realize that I am due to receive $600 (or $300 or $1200, or whatever), I simply enter this in my Excel file as Accounts Receivable, no different than a business A/R. I dont’ concern myself with it, and when it comes I deposit it, remove the A/R and book it into checking account balance.
In other words, I have no idea whether I “spent” the stimulus check or not, any more than whether I “spent” a similar check from account XYZ.
I banked it. And I’m not gonna spend it. So there.
The more I think about it, aren’t government stimulus checks like printing money?
Can’t they write us more stimulus checks?
That’d be ok by me, I guess…
My neighbor just got her stimulus check two weeks ago.
She go laid off last week.
Good thing she has her stimulus check to live off of for the next week.
More re Centex, from Austin Business Journal.
Centex Corp. posted a net loss of $150 million, or $1.21 per share, on revenue of $1.13 billion for its first quarter of 2009. That’s up 17 percent from the same quarter last year, when the company recorded a loss of $128 million, or $1.05 cents per share, on revenues of $1.9 billion.
The Dallas-based company’s home building division also experienced a 42 percent drop in revenue, driven largely by a decline in home closings.
Centex is among the top five home builders in the Austin region.
Centex (NYSE: CTX) released its first-quarter report after the market’s close on Tuesday. The company’s stock price fell more than 4 percent Wednesday to $13.29 a share.
CTX up $1.16 (8.58%) today on all the upbeat GDP and employment news.
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Ditto. ??????????????????????????????????????????
This was reported on local TV news station yesterday:
Here’s the link: http://abclocal.go.com/kgo/story?section=news/business&id=6296712
“Financial Title Company abruptly shut its 57 California offices Wednesday after its parent company lost its line of credit, triggering job losses and uncertainty in an already shaky real estate market.
No one saw it coming. An estimated 500 California employees are affected by the sudden closure of Financial Title. In Texas, 190 people lost their jobs, plus others in Arizona and Nevada.
Buyers and sellers with escrows at Financial Title Company are being transferred to another company.
Escrow officers and their clients showed up to work Wednesday morning to a notice posted on the door. Their office, and 56 other across the state were no longer in business.
“It was a surprise to everybody, a surprise to me, especially a surprise to the employees,” Financial Title customer Peter Baldacci said. “They had no idea until they arrived this morning.”
Employees were joined by state insurance examiners to safeguard and move real estate transaction files Financial Title was in the middle of processing.
“If they had given us some warning, that would have been different, but absolutely no warning whatsoever,” special projects manager Donna Mahoney said.
Financial Title was a fast-growing company, not the biggest or the oldest, but one with a solid reputation.
“Financial Title had terrific escrow officers, terrific sales support staff,” Ilse Cordoni said. Cordoni manages the south of Market office of Zephyr Real Estate. Financial Title was handling about five closings for her agents.
“It’s not a happy message; I think it makes buyers very anxious,” she said.
Financial Title has not returned any phone calls. A company executive in Texas, however, has indicated the parent company lost its line of credit after failing to meet loan requirements.
Tightening credit may be impacting businesses.
“I think these lenders are going to start to pay,” Mahoney said. “They’re not just doing this to people - personal people - they’re taking their lines of credit away and doing it to companies too.”
Another title company, First American Title, is stepping in to ensure that transactions are successfully processed to completion. State insurance officials told ABC7 escrow transactions being handled by Financial Title might face slight delays, but that alone should not cause deals to fall through.
Despite that, Derrick Nesbitt was quick to show up to reclaim escrow papers for a client.
“When the title companies are struggling like this, Lord knows what’s going to happen to the rest of the industry,” he said. “
There’s that sentence again: “No one saw it coming.”
“There’s that sentence again: “No one saw it coming.”
I can’t wait to hear what they say when all the AltA and PayOption ARMS start to re-set in large numbers. But I’m sure “shocked” or “surprised” will be included for sure.
Many of these businesses must be taking things right up to the edge - borrowing and begging all along the way - in an effort to outlast the downturn. These sudden overnight shutdowns will be what finally puts a stake through the heart of the V shaped recovery theory.
There was an article in the Sac Bee today about an increase in commercial loan defaults:
http://www.sacbee.com/101/story/1124195.html
As more defaults occur and the economy worsens, banks are going to cut existing lines of credit. That loss of liquidity will kill a lot of small (and not-so-small) businesses. Once commercial lending for startups and small business hits the street, we’ll see heavy job losses.
Interesting that the defaults are still so low. Ah, but here we see the danger that sometimes lurks when folks depend a little too much on experience:
Competition was so fierce during the boom, and with recent recessions having been mild, these businesses must see this recent bust as no more than someone hitting a giant “reset” button on the housing market.
So, they are still way more concerned with getting a leg up for the recovery they are still certain will come soon - rather than hunkering down. That is what will make them burn through their cash and amass debt to the extent that total failure is the result.
Much of the online business advice I’m reading says to save as much of your income as possible. I also subscribe to a business podcast by a lady who gets really militant on the point of NOT borrowing against the home equity.
FWIW live across from a large Financial Title office and it already has a large “For Lease” sign on it today. It opened about a year ago after much expensive renovation and they had a big party complete w/ live music, etc
Okay, ‘fess up. Did you crash the party?
naah, the band was really lame, and did not want to hang out w/ a bunch of sleazy realtors…
“Still, Boyce is a believer in real estate cycles. She sees pioneers like the Claude family as simply ahead of the curve.”
Ahead of the curve, behind the curve, semantics really. Wasn’t it a few years back when real-estate workers were declaring housing the new California Gold Rush? Yes, they are modern day pioneers who drank too much kool-aid and fell off the wagon.
Consumption and production in China only go up
http://www.bloomberg.com/apps/news?pid=20601068&sid=a5WZayG1omPQ&refer=home
NOT
No decoupling
I have talked about the foreclosure right near me that I took care of for a long time until it sold . Well,that deal fell out of escrow . Than I finally said to the agent (who hardly ever came around ),”How do you expect to sell this place if you never put a sign up ?” Within 12 hours a sign was up and the house sold again within a week . The lady who bought the house came around looking and told me her agent saw the sign . Apparently she sold a house up North and she is going on one of those F&F fixed loans . Nice enough lady and I didn’t tell her that all her plants would be dead if I hadn’t water them for months using my own water . I just couldn’t stand the eyesore to see a nice landscaping die .
But my point is that I didn’t see a whole lot of marketing of the property
and I had to pull teeth after 7 months to get them to turn on the water ,but than they would never cut the grass (maybe twice in 4 months ). Than I finally told the RE agent that I was going to call the lender and tell the lender what bad foreclosure agents they were ,than I got action ,(I think its a out of State lender ).The defaulting prior owners didn’t trash the house when they left quickly . I don’t know how much this lady paid for the place ,but she seems happy about the whole situation .I was trying to find out if she was a investor or not ,and she said something about wanting to live there 20 years ,so I was relieved .
One story with a happy ending.
About dried up lawns, one can go on google maps and walk around with street views in California central valley locations and see how many abandoned houses there are because lawns are all brown. Those street views are pretty recent, like a year or so.
New Sac Bee article:
http://www.sacbee.com/103/story/1125316.html
Here’s my comment. Bet it gets flagged by sunup:
walt526 at 12:53 AM PST Friday, August 1, 2008 said:
Rebound in 2009? Try 2012
The regional economy is the weakest its been since the early 1990s, with the state unable to artificially prop up job growth, and the Alt-A’s starting to reset next year, Sacramento housing will not stabilize until well into the next presidential election cycle. Used house salespeople (they like to sound like they have the least iota of knowledge about housing, so they callthemselves realtors) and their paid shills have been predicting a strong comeback since late 2005. They have been wrong month after month, and they’ll continue to be wrong. Would you ask a gas station clerk about oil futures? Of course not, because he’s poorly trained, there’s no real barrier to entry to the job, and his job is to sell gas, not ensure that you make a sound purchasing decision. The same is true of used salespeople. Those who trusted them, got burned. Avoid real estate for the foreseeable future and pay attention to economic fundamentals, not the used salespeople spiel..
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