One Unintended Benefit In California
The San Francisco Chronicle reports from California. “The recession that has already devastated the Central Valley has started to hurt the Bay Area, causing job losses that will continue through 2009 when the economy should begin a slow and weak recovery, according to a bleak forecast issued today. It was with some humility that UCLA economists issued this report, predicting high unemployment through 2010 as the state gradually recovers from the housing bubble.”
“In recent quarterly forecasts they had suggested the state might dodge the recession. But forecast Director Edward Leamer said the financial crisis that erupted in September and October had ‘unleashed a tidal wave of fear’ that caused spending and investment to collapse, confounding all the forecast’s expectations.”
“‘When you do forecasting you look at historical trends and try to project how they might play out,’ Leamer said. ‘But nothing such as this has ever happened. Everybody is relying on hunches.’”
The Bay Area Newsgroup. “To describe the economic outlook for the Bay Area and California, forget about slump or sluggish. Recession and nose-dive are what’s on tap for the moribund regions, according to a bleak pair of new forecasts, although recovery could begin by late 2009. The recession nationwide and in the state will savage the East Bay and Central Valley locally and parts of Southern California to a much greater degree than the Golden State overall, the UCLA Anderson Forecast predicted in a report released today.”
“‘The East Bay will be much weaker than places such as Silicon Valley and San Francisco,’ said Jerry Nickelsburg, an economist with the Anderson Forecast. ‘We see that 2009 will be a year of contraction in employment and income for California.’”
“California has probably lost about 150,000 construction jobs in the downturn, Nickelsburg estimated. But those totals could swell to 200,000 before the slump is over, he warned. Another major problem area is retail. Because of the housing bubble, retail developments became overbuilt. Spooked by weak jobs and rising foreclosures, consumers have curbed spending. This means that retail layoffs, which have already begun, could intensify.”
“However, one unintended benefit could materialize because of the devastation that has wrecked the housing markets. The foreclosures and collapsing prices could make homes more affordable. ‘As painful as the adjustment is and as regrettable as it is, there are benefits from the decline in home values,’ said Jeffrey Michael, director of UOP’s Business Forecasting Center. ‘The housing downturn has created some opportunities for buyers and the seeds of recovery.’”
The Burbank Leader. “Burbank winter shelter officials are requesting further resources to meet the needs of an explosion of families needing assistance. ‘Our numbers are much higher this early in the season. We’ve had more families show up in three days than we had in the entire 3 1/2 months last year,’ said Andy Bales, chief executive of the Los Angeles Union Rescue Mission.”
“‘It’s the economic situation — foreclosure, unemployment,’ Bales said. ‘I think it’s just the start.’”
The Sacramento News Review. “According to the Employment Development Department, there were 1.4 million unemployed Californians in this year’s third quarter, an increase of 406,800 people—40 percent—compared to the same period last year. In October, unemployment climbed to 8.2 percent, a 14-year high.”
“EDD spokeswoman Loree Levy says California’s unemployment insurance system is funded by an ‘antiquated revenue system’that will not be able to meet the needs of the state’s growing number of unemployed workers…Combined with the recent wave of job losses from the collapsing housing bubble, this structural gap led to a 55 percent decrease in the fund during the past year.”
“Rancho Cordova resident Chris Wallace, 28, worked full time in a local warehouse for two years until he was laid off in September. Unemployment only provides ‘about 50 percent’ of his former salary. ‘I don’t plan on being out of work [long],’ he said. To that end, he plans to move to South Carolina, where ‘more help and support’ may land him a new job.”
The Modesto Bee. “Foreclosure filings fell nationwide in November, but they spiked dramatically in the Northern San Joaquin Valley, statistics released by RealtyTrac show. Lenders repossessed 1,641 homes last month in Stanislaus, San Joaquin and Merced counties, and they warned 2,727 additional homeowners that foreclosure was imminent if they didn’t pay up.”
“The three counties placed among the five worst in the nation on RealtyTrac’s foreclosure rankings. That’s been true for nearly every month for the past two years. Last month in Stanislaus, lenders that foreclosed got stuck with more than $197 million worth of unpaid mortgages, according to figures released by ForeclosureRadar.”
“Lenders that renegotiated mortgages rather than foreclose aren’t doing so well either.
“More than half of the homeowners (nationwide) who received loan modifications to reduce monthly mortgage payments in the first half of 2008 are already delinquent on their loans again, according to the U.S. Office of Thrift Supervision,’ RealtyTrac’s James Saccacio said. ‘Many of these delinquencies could turn into foreclosures next year.’”
The Voice of San Diego. “It takes banks months to repossess and sell homes after owners stop making mortgage payments. In that time, some homes fall into natural disrepair. But a number of the foreclosures on the market deteriorate faster. Thieves snatch the copper piping or wiring to sell. And sometimes former owners strip the place of fixtures, hoping to sell them or to send a message to the bank.”
“‘They’re taking everything,’ said Sara Schwarzentraub, real estate appraiser and owner of Inter-State Appraisal Service. ‘Everything that’s not nailed down and some stuff that is nailed down.’”
“Just because the house-gutting occurrence is common doesn’t mean it’s legal. A house is collateral on a mortgage, and a kitchen sink is intrinsic in that value, as is a working toilet and a stove. And taking a hammer to the house before you leave just to spite the bank? ‘If there’s willful destruction of property, that’s deliberate harm to the collateral,’ said local real estate attorney William Markham. Banks can go after owners for breach of contract.”
“‘The question is, if it’s a few thousand dollars, is it worth prosecuting people who probably have no money anyway?’ Schwarzentraub said.”
“Another real estate broker listing homes on behalf of banks, Jim Klinge, said between 20 and 25 percent of the bank-owned houses he sees or lists have had stuff taken out of them. ‘Some of them just need the money, and they think they can rip off the appliances and get some money for it,’ he said.”
“It’s a bone of contention for Klinge, who often must quarrel with asset managers at the bank to let him fix up the house before he puts it on the market. Sometimes they refuse, even though most financing available — including the first-time homebuyer programs under the Federal Housing Administration and Veterans Affairs — require specific livability standards before they’ll lend money to a homebuyer.”
“One of Klinge’s listings, a foreclosure, has no stove and no dishwasher, and has mold in the downstairs. Klinge asked the asset manager for $3,900 to remediate the mold. The request was denied, in favor of waiting for a cash buyer who won’t mind paying for its removal. Three buyers have come and gone, and Klinge has held the listing for six months. It’s not the only one.”
“‘It’s a real hot button — the banks are crazy to just be throwing these in the market,’ he said. ‘How are you going to finance these? It’s not rocket science; this is basic real estate 101. You can’t get a loan without a kitchen.’”
The Bakersfield Californian. “As the clock ticks down on former Bakersfield real estate broker Carl Cole’s deadline to legally challenge his license revocation, Cole continues to work at a real estate agency in Thousand Oaks under the name of one of his defunct companies, Points West Group. But Points West, which has one active listing for a house in Oxnard, is not properly registered with the state Department of Real Estate, said spokesman Tom Pool.”
“As of Wednesday, Cole, 61, is described as an ‘administrative assistant’ on his Web site. The supervising broker is a former employee of Crisp & Cole Real Estate, the flamed-out partnership of Cole and former sales agent David Crisp, 29.”
“An ongoing Californian tally shows at least 139 Crisp & Cole-related properties with loans totaling more than $82 million have foreclosed, defaulted or been sold ’short.’ Most are single-family homes in the Bakersfield area. In September 2007, federal agents raided 13 local business and homes tied to Crisp & Cole operations. No charges have been filed in the federal investigation.”
The Associated Press. “Investigations into the collapse of financial titans such as Lehman Brothers, Bear Stearns and Washington Mutual have attracted most of the attention in the ongoing unraveling of the nation’s mortgage-backed security mess.”
“Lost in the headlines are prosecutions proceeding quietly on the local level against smaller players. In dozens of jurisdictions around the country, federal prosecutors are charging hundreds of people with originating the bad loans that helped derail the world’s financial markets.”
“Prosecutors are finding buyers who created fake identities to take out home loans, brokers who paid kickbacks to ensure fraudulent mortgages were approved and lenders who took bribes and forged documents. They are the ones who fraudulently overstated property values and borrowers’ incomes, who used illegal means to secure loans that homeowners ultimately couldn’t afford, though they had plenty of encouragement from Wall Street. That fraud helped artificially inflate home values that have since come crashing to earth.”
“‘Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,’ said U.S. Attorney McGregor Scott, whose district spans California’s vast Central Valley and is among those most affected by the housing bust. ‘It’s a profound ripple effect that affects everyone. We have a duty to put these people in prison.’”
“The FBI says about 80 percent of mortgage fraud losses under investigation involve industry insiders who inflated property values or made loans based on fictional information.
The remaining 20 percent is by individual borrowers who lied about their income or job history to qualify for loans. The larger group is where law enforcement is focused. ‘We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district,’ said William Edwards, the acting U.S. attorney for northern Ohio.”
“U.S. Attorney Gregory Brower has had to shuffle attorneys to handle cases like the one Nevada prosecutors say involved 432 fake buyers for 227 properties worth more than $107 million. At least 143 of the homes are now in default, costing lenders more than $17 million. Five Las Vegas brokers, mortgage agents and loan officers have pleaded guilty and six are awaiting trial.”
“Michael Cardoza, a San Francisco-area attorney representing one of those charged in central California, said prosecutors should be setting their sights higher. ‘It’s amazing to me that the people on Wall Street walk away with millions and millions if not billions of dollars,’ said Cardoza. ‘Now they’re just picking off little people . . . They’re doing scapegoats is what they’re doing.’”
The LA Times. “In the midst of a downturn in the real estate market, some developers are finding that they no longer can sell condos in buildings that even a year ago would have been quickly snapped up. Flummoxed by a precipitous drop in qualified buyers, they are choosing to rent out their buildings instead. It’s happening in downtown Los Angeles, and to a lesser degree in Hollywood and the San Fernando Valley — areas where high-density housing has sprung up in recent years.”
“And the shift raises questions about some of the fundamental assumptions surrounding urban development. Instead of buyers who can afford the hefty down payments and mortgages, some of these developments are now attracting renters who need only put down rents of $1,500 to $4,500 a month.”
“Mike Farzan, one of the Chapman’s co-developers, said that the decision for his building to go rental was something that was precipitated when some buyers had lost their jobs, and others watched loan commitments slip away as mortgage lenders changed guidelines. ‘Faced with the uncertainty,’ he said, ‘we decided to go rental, at least for a few years, until things settle down.’”
“Downtown condo owners in L.A. and elsewhere often see the property as an investment rather than as a place to live and build a community. ‘I saw it in New York; you can see it in London,’ said developer Tom Gilmore. ‘You can have a completely filled condo building and not have anyone living there on a daily basis.’”
“Daria Benedict had been in escrow for nearly a year on a 725-square-foot loft in the Chapman building in downtown Los Angeles when she got the first indication that the rehabilitation of the historic office building into high-end condos might have hit a snag. The developer of the building asked for a larger deposit on Benedict’s purchase of a 13th-floor unit that promised an open floor plan and oversized windows. Benedict had to scramble to find the extra cash.”
“But it hardly mattered. In May, the developers took the Chapman building off the market altogether, returned buyers’ deposits and instead opted to rent out the 168 units.”
“Benedict she continues to live at the Douglas building, a few blocks north of the Roosevelt. She said she has adopted a pragmatic take on her real estate fortune — one tied in part to downtown’s changing fortunes as a residential neighborhood.”
“‘In the long run, I think it saved me,’ she said. ‘I would have purchased that home for over market value. Even though I thought it was a great deal, downtown is a long-term investment thing. You have to invest and hope that it’s like Manhattan.’”
‘Rancho Cordova resident Chris Wallace worked full time in a local warehouse for two years until he was laid off in September. Unemployment only provides ‘about 50 percent’ of his former salary. ‘I don’t plan on being out of work [long],’ he said. To that end, he plans to move to South Carolina, where ‘more help and support’ may land him a new job.’
As tough as it is for politicians and the media to understand, what is happening is very simple, IMO. The economy is shifting and people are being forced to adapt. When the oil biz got crunched in Texas, lots of us thought it might come back. But once economic reality set in, folks had to do things like move to where the jobs are. It is really just a reallocation of resources. And this country is currently over-invested in housing.
If we only get about 10 million Californians to leave the state, it might be liveable again. At least we’d be able to drive the freeways!
All we’d have to do is deport all the illegas. The savings in education, medical, and other infrastructure fraud would also be over 20 billion. Eureka - the budget is balanced as well as wages would go up.
He may be disappointed when he gets to South Carolina. I read a report last night that is projecting unemployment in our State to be north of 10% or perhaps higher in 2009. We already have one poor county(Allendale)with over 18% out of work. Our state is going to have to bum a stack of millions from the FED to pay unemployment, our coffers run dry in Feb.
I think that’s the story for most of the states. Everything was built upon dollar velocity and the system can ill afford a slowing of that velocity. The problem, and the reason the hey days aren’t coming back, is that the pumping machine itself is broken - aka the credit game. Credit will come back at some point in time, but when it does it won’t resemble anything like what was going on over the last decade. In the meantime, there are all kinds of events occurring which many thought would never happen. Some of us did see it rather easily, but it’s amazing how our entire economy was built on system that was destined to break.
The thing is dollar velocity is just a pricing problem. Prices can adjust quickly and correct.
The larger problem is the time delay waiting for new industries to form and the effects of lower productivity as business collapse due to bad debt.
The banks fail due to the bad debt as well meaning it takes longer to allocate capital.
Finally, the government will resist, potentially making further malinvestment. So, you keep a clunker like GM around rather than form new businesses.
Hopefully, things don’t get too bad in the period of adjustment.
If we make enough bad moves, you can have a currency collapse. That will make contracts impossible. So, the key to this crisis is to stand back and let the bad debt fail and just do things to soften the blow. Take our resources and refocus on forming new business/infastructure that would make business more practical.
Saving bad companies, be they GM or banks or insurance companies just increases further bad behavior and stresses the remaining stronger hands. Stifles innovation with taxes or high inflation. We are headed down that path but we still have plenty of off ramps.
Quite so. An astoundingly accurate comment, albeit in hindsight.
I hear ya. I read the one story a couple of days ago about the SoCal couple moving to Reno ’cause they were out of work. Talk about fryin’ pan to the fire.
Yes. I always figured the street folk in Santa Barbara (under the giant tree, visible from the Amtrak train) were the smart ones: The climate is great! Why move to Reno and freeze? I don’t think the casinos are hiring these days.
No no no! We have enough street folk. Not only that, crappy dilapidated RVs have flooded our city recently because of some high-profile programs that were in the news recently. All of which mean well, and I know it’s a nice thing to do, but the more SB does for the homeless, the more homeless we have.
Here are some November 2008 Stats from the South SB County “CORT Report.” This is for South Santa Barbara County, which includes Santa Barbara, Montecito, Hope Ranch, Summerland, Carpinteria, and Goleta. As far as everyone is concerned “its different here” but the numbers are FINALLY starting to tell a different story. What is great is that both median and average price are both falling. The Used House Salepeople Association can’t use either number now (and they shamelessly switch as appropriate).
North SB County (Santa Maria, Lompoc, Guadalupe, etc.) is getting crushed, IE style.
Month # of Sales Avg Median # of Sales
over $1MM
Nov-08 78 $1,154,385 $738,500 30
Nov-07 100 $1,667,238 $992,500 48
Nov-06 122 $1,856,692 $905,000 53
Nov-05 135 $2,324,633 $995,000 66
Nov-04 170 $1,842,851 $947,500 75
Nov-03 154 $1,158,234 $737,500 47
Barbara Boxer put me on her mailing list. She says her top priority is to prevent house prices from falling. I think she is old and rigid in her thinking. Once people get past a certain age, they tend to lose their ability to adjust. They resist it at every turn. Too bad, ’cause adjust they will.
So she did survive when that Kansas house fell on her?
+1
Among my representatives, she had the weakest response in why she supported the $700B + $150B bailout. Something to the effect that California’s borrowing cost is going to up without it. Didn’t matter since our nearly insolvent state government’s credit rating was cut recently and borrowing costs are higher.
“…Cole continues to work at a real estate agency in Thousand Oaks under the name of one of his defunct companies, Points West Group.”
Points East
Points South
Points North
Cole: “Somewhere, somehow, someway I’ll find the right direction in life, although,… the people I’ve help along the way… may not be there to thank me.”
Bakersfried city council:
“I wonder what kind of “welcome basket” Mr. Cole got in Thousand Oaks?
he can hook up with M. Glickman and that ZZZZ best carpet guy other area locals
“‘When you do forecasting you look at historical trends and try to project how they might play out,’ Leamer said. ‘But nothing such as this has ever happened. Everybody is relying on hunches.’”
Wait….this is Ben’s blog, right? Because I could swear I ended up on Comedy Central.
“Everybody is relying on hunches.”
Yup, that’s how I like my economists — the kind that rely on hunches, gut feelings, rabbit’s feet, Magic 8 Balls, tarot cards and the Pyschic Hot Line.
All along, people have been telling Leamer he’s all wet. Now because of the credit crisis “that developed in September and October,” his expectations have been confounded.
This clown is an “economist” just like Lawrence Yun and David Lereah are “economists.” Send in your $5 to the state with a signed application and YOU TOO can be an “economist.”
Is that how an eCONomist cries uncle?
It’s like they lost their french curve and have only a ruler. Excel has 6 kids of curves to select, only one is linear.
I have a hunch Leamer is working hard to prevent a severe tarring and feathering from occuring on his person.
Daria got the clue with a Year Long escrow on her 725′ condo in downtown LA that Something was wrong?
wonder what # of revlon dye she uses?
Year long escrow. Whew.
Hey dweller. I’m going to be PS this Xmas for three days. Whats the typical day time Temp?
“‘Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,’ said U.S. Attorney McGregor Scott, … ‘It’s a profound ripple effect that affects everyone. We have a duty to put these people in prison.’”
Note to myself: Send Mr. Scott a Season’s Greeting card & a tin of See’s caramel pops.
Hwy50,
Yes, this is a banner day. I hope all the MB’s out there that fluffed paperwork and padded income to get their “prospect” to qualify is sweatin’ bullets.
And you know WHAT!? I don’t -care- if you “quit the business”! It has no bearing on your criminal conduct. I don’t care if you’re currently asking if we want fries with that?
I’m thinking they should just put the big wigs in prison. Like director-level and above.
You know what they do in communist China to those guys…
“I’m thinking they should just put the big wigs in prison. Like director-level and above.”
and outfit them all in flowery summer dresses, high heels and lipstick for the prison rough boys and lifers
Time to end the war on drugs. Prisons will need the space.
In New York we already have it, however. Upstate New York’s economy can be saved WITHOUT another street crime wave in NYC!
WT Economist,
LOL! Hey, whatever works. Wouldn’t that be funny? Oh, gee, sorry Mr. Loanfraudster, we’re full up right now so you won’t be able to begin serving your sentence just yet. Mind you, you’ll already be labeled as a FELON and have to check in if your address or employment status changes.
We should be able to squeeze you in… sometime in, 2013? Meantime, have a nice life, CON!
I agree, this guy is doing the right thing. This is still only in the earliest innings. The depth and breadth of this train wreck is stunning. I get a chuckle every time I hear someone talk about how the recession should be over soon. Dream on.
We’ve been talking about the fraud for years here and now we see some serious efforts to prosecute. Does anyone recall paladin? He/She posted here for a while with a surprising amount of insight on mortgage fraud. I wonder if this is the same paladin who used to post here,
http://www.paladinpi.com/Mortgage_fraud.html
Oh, yes I recall Paladin quite well. And I think heads should roll. I would never dream of committing fraud on a mortgage document, yet millions have done it, gotten away with it, and now threaten my family’s fundamental well being. Where is the justice? All my bills are paid. Where is my bailout?
Good find, oc-ed!
I’ll bet that’s our Paladin…who else would it be?
So good to see he/she is still working on this, and it looks like he’s seeing some success.
On further review, it might not be, as that Paladin is in Arizona, and I think our Paladin lived in California. Still not sure…
“The FBI says about 80% of mortgage fraud losses under investigation involve industry insiders”
( Duh )
“They’re doing scapegoats is what they’re doing”
Well what would -expect- a defense attorney to say?
I don’t know about the rest of you but the AG’s going after these “smaller players” is a major, major victory for bubble bloggers everywhere. It’s a great day and everyone should be glad and proud to see this.
If his client has information on other crimes up the food chain, then he should cut a deal for testimony. If he doesn’t, then shut the F up and take your medicine.
Marcus,
Spot on! I mean isn’t that how it works any time law enforcement breaks up any -other- form of organized crime?
DinOr ,,Your right , it was a form of organized crime . Fake comps raised the price of a general area and therefore the crime
extends beyond a few houses that were inflated and affects all the houses in the area ,as you know . The appraisers looking at the comps included the bogus sales and honest borrowers thought a
area was rising by true demand and true qualifying when it wasn’t .
I would like to also see them recoup the cash that was taken back
by cash back fraud . Also ,if law enforcement really looks at all the double-escrows that were taking place ,they will see a patten of a Ponzi scheme and fraud in which the real estate industry was extremely involved with raising the prices . The law ought to investigate those Seminar Groups that were looking for dummy investors to con also .
If you are a investor you are suppose to pay a higher rate and fees and put a higher down payment on a loan . People let their investment properties go first if they get into trouble . When people lie about their intent to occupy a property and the lenders don’t underwrite for that ,it raises the levels of risk in a project and it encourages faulty speculation . Its cheating to lie so the lender cannot determine the true risk . The speculation buying would of been curtailed had the lenders
not breached their duty to underwrite loans ,or worst ,have agents who helped the borrower commit this sort of fraud .
RE: the AG’s going after these “smaller players” is a major, major victory for bubble bloggers everywhere. It’s a great day and everyone should be glad and proud to see this.
Absolutely, Din/OR
The rot started at the very bottom with the L/O ensuring that
their appraisals were completed by hacks who would hit a pre-determined valuation number and include no negative report commentary regarding neighborhood quality or condition of the improvements which would raise a red flag with an underwriter.
From that point, it was lies, lies, and more lies until some Norway teacher’s pension fund got stuck holding the mortgage bag on a worn out POS tri-decker in some urban ghetto.
a friend of my moms is looking to buy a condo in newbury park california for 350k or so and the deal fell through because they could not get morgage insurance. i think she is lucky because no condo is worth 350k, you buy the condo and the neighbors! I rent in an apartment in phoenix and have thought of buying a condo, my apartment building has been mostly empty until the last couple months. one guy has been cranking his music at 3am the last couple days, not too long but still it happens. another guy down below cranked his a couple nights ago so i left to go to the book store for some peace! anyhow, i’m thinking of throwing firecrackers on their balcony and join in the noise fest! renting is nice, becasue i am month to month and will move if noise becomes persistant! anyhow, i will not be buying a condo!
You are far from the only one who feels that way. Condos should have stayed a niche product. During this boom a whole lot of people spent a whole lot of money to live like Ralph Cramden.
Our small business is located in Newbury Park (Ca) and she lucked out. I once lived in Newbury Park, btw. I know the area well.
I hate living in apartments SOOOooo much. It’s fine if you have considerate neighbors, but it’s UNBELIEVABLE how many people are raised to be completely selfish and short-sighted. I once had some Russian neighbors who would crank their TV so loud that you could hear them a block away (seriously). Being me, I knocked on their door and asked them if they needed help or something. They acted like I was the one who was crazy. This was after 10 PM on a weeknight, after tolerating them for like 2 weeks prior. I think they eventually got evicted, but if you live in a condo, then who can evict them? I think condos are even worse than apartments for that reason.
RE: I hate living in apartments SOOOooo much. It’s fine if you have considerate neighbors, but it’s UNBELIEVABLE how many people are raised to be completely selfish and short-sighted.
I had a short-lived shack up with a gal who had the misfortune of living under tenants who would start moving furniture around at 3AM in the morning. It was like WTF? Are these people mentally ill?
The idiots would drive her right to tears.
They too, were from some former eastern block dunghole.
Sure screwed up my amourous adventuring.
my neighbors do this! It’s like, what are you doing up there!? And yet if I say anything, I’m the bad guy. I’m an active person, but I don’t get how anyone can move around so much at home. And why can’t people put carpets down? I”m on a rampage now - complaining once a week until we force our upstairs neighbors to comply with that rule …
“I hate living in apartments SOOOooo much.”
+1. With a house you can have a shop in the garage; a man has to have a shop. I service (or destroy) almost everything we own. I would never rely on a shop for routine maintenance.
I had a neighbor like that. I found that for some reason he didn’t like me playing my music loud every morning at 9am and moved. It helps if you have a good sub-woofer.
i love it that someone got even with these a_holes. yes, i have had many problems with neighbors over the years, and actually moved out of a place breaking the lease because this family lived above me and had 6-7 kids, plus 3 adults. the kids would run non-stop from 7am-9pm. I told the complex and notified them of the unhabital living conditions and moved out after their inaction. they tried to send it to collection, but i would not pay, i decided that even if it got on my credit report i would not pay. they just wanted the rent no matter and would not even move me in the complex!! another guy used to pace 11pm or so talking on the phone, luckily it was not often so i lived with his antics once in a while. but, i was like have a drink dude and sit down and relax on the phone. years ago, it seemed to me i never had noise problems renting all through college in the 1990’s. so i always wonder is it me or is it the loser masses!
“It was with some humility that UCLA economists issued this report, predicting high unemployment through 2010 as the state gradually recovers from the housing bubble.”
Enjoy that baked crow Christmas dinner, Anderson School forecasters!
If one goes back and looks at their forecasts for the past six or seven years, one comes to the conclusion that they should be made to enjoy that menu for many Christmas dinners to come!
“However, one unintended benefit could materialize because of the devastation that has wrecked the housing markets. The foreclosures and collapsing prices could make homes more affordable. ‘As painful as the adjustment is and as regrettable as it is, there are benefits from the decline in home values,’ said Jeffrey Michael, director of UOP’s Business Forecasting Center. ‘The housing downturn has created some opportunities for buyers and the seeds of recovery.’”
For how long did we have to say this here before a ‘reputable’ economist picked up on the idea?
PB,
Longer than I can remember. Looking back we’ll -also- conclude that had the efforts in the early hours *not been focused on propping up home prices, untold billions ‘could’ have been saved.
By letting the chips fall where they may the damage would have been largely confined to those that most deserve it. Builders and their lenders.
But NO!!!
…regrettable as it is… …the decline in home values, said Jeffrey Michael
Hey Jeffrey, don’tcha think it was artifically high prices that was/is
the problem to begin with?
Sometimes me thinks when someone holds the
title is “Director” or higher, reality and common sense
take on a whole different meaning.
“…reality and common sense take on a whole different meaning.”
The meaning is heavily influenced by funding sources.
Or, as Upton Sinclair said around a hundred years ago…
“It is difficult to get a man to understand something when his salary depends on him not understanding it.”
Truer words have rarely been spoken.
–Shannon
I watched Niall Fergeson an economist from Harvard last evening on Tevis Smiley and he was brillant.
Sorry about the late notice - it’s been on of those weeks. Bruce Norris will be speaking at SDCIA tonight at the Scottish Rite Center. The meeting starts at 6pm but they don’t get to the meat of the program until about 7 so don’t worry about coming late.
I wish I could go. Please give us a summary or web links if possible.
Is he going to wear a skirt? I might go if he’ll wear a skirt.
No, he promised to do this presentation nude. Sorry.
The ground is moving…behind and beneath…the “O.range C.urtain”:
“…Executive Director Ingrid Harita, who stands to lose $7,500 of her $197,000 salary.”
Seems like Ms. Harita can afford one of those $975,000 North Irvine “rancheros” but for the rest of those $650,000-$850,000 modest ranchettes… I’m not sure there are enough qualifying “lima bean” pickers
How O.C. Gov’t deals with the “little people”:
“…County officials met in closed session with county supervisors Tuesday — receiving the go-ahead to make the cuts — before breaking the news to workers.”
“Enraged union officials suggested that the county look elsewhere to save money, suggesting it cut perks for executives and managers — including car allowances and enhanced retirement benefits — before forcing layoffs and unpaid days off.”
I wonder if Crissy Cox has helped the O.C. sales tax revenue and begun shopping at Fascist Island?
Sorry, forgot the link:
ORANGE COUNTY TO CUT 210 JOBS
4,000 other workers will be told to take 2 unpaid weeks off in worst fiscal crisis since the 1994 bankruptcy:
http://www.latimes.com/news/printedition/front/la-meoc-oclayoffs11-2008dec11,0,7606952.story
Nope. Ms. Harita can afford to pay about $600k for a residence, not $1MM.
I think it is appalling public officials in California are allowed to use a “personnel issue” exemption to talk about the public’s business out of the sunshine. Oh, right, we are a “progressive” state. Wink, wink.
Some states have open meeting laws built into their state constitutions.
And the secret meetings in Washington really blister me.
Change.
Let’s see some.
I’m coming the growing conclusion that the people, as in “we the people” will need to cause the change.
I am extraordinarily rattled today because my household pays, how shall I say it, a MONSTER federal tax bill, both as a percentage basis and in dollars. A final 2008 payment is due soon.
Household is on IRS audit “target list” and we have to explain ourselves in some detail every year. Not in person, yet.
But where in the hell is that kind of scrutiny in Washington today? These people are supposed to work for us for the common good!
rant off/
RE: “…Executive Director Ingrid Harita, who stands to lose $7,500 of her $197,000 salary.”
Wait’ll the Terminaor goes hat in hand beggin’ for $28 billion of Fed money to pay for these parasites.
If DeMint thinks there will rioting with a Detroit bail-out, the SWRHTF when the state’s come cryin’ for the dough to prop up
the slavish salaries, benefits, and pensions of the public union leeches.
OK, sure. The East Bay will be decimated, but San Jose and San Francisco are like golden eggs that cannot be touched. I am here today to tell you all (as I do) that people living in the East Bay generally work in Silicon Valley or San Francisco. They are drawing on the same employment base as their peers living in the “epicenters”. Any economic forces affecting the down-trodded East Bayese will also affect the more pristine San Franciscers and San Josites.
My company is based in San Jose we have had layoffs last spring and again this fall. Most of the layoffs this fall were in the Bay Area. In addition health benefit copays went up, we’re getting a bunch of mandatory days off and bonus payouts are pretty weak, add in our stock options are underwater by almost a dozen dollars per share and I can safely say that this spring people won’t feel quite as wealthy as they used to.
Even without the mortgage terms getting tighter, people will just have less money available to spend. It’s looking like my income is going to go down about 20%. We’ll see what summer brings.
we’re shedding 64 people on Friday. Two weeks unpaid shutdown coming up. The train has derailed.
Ouch. Hope your car stays on the tracks, or you have another conveyance to greet you at the horizon.
They’ll all be devastated, of course, but I do think there would be some difference.
In the “nicer” areas, houses may sell at some price. It could be 50% or more below today’s price, but at some price people will live in Palo Alto, etc.
In the East Bay, there may be houses that will never sell at any price. And once you get a few boarded up houses on the block, selling any others will be difficult.
Now I’m not naive enough to think that a once-nice neighborhood can’t become a slum. I’ve driven through enough boarded-up neighborhoods in the Northeast not to know better. But I think there is some merit to the belief that housing in places that have nothing going for them (1 hour commute to anything, bad infrastructure, gangs, etc) will decline to $0 while houses in more established areas, like the nicer Peninsula communities will merely reset to 1980 prices….
You’re right, Reuven. I think the difference is in our definitions of “East Bay”. I think Newark is East Bay. I don’t think of Los Banos, etc as East Bay. That’s the central valley if you ask me.
I think of Pleasanton/Danville/San Ramon as East Bay. All I remember is lots of financial-services places and car dealers out there. But then BART now goes to SF from Livermore, yes? It’s been a dozen years or so.
And yeah, anything the other side of Altamont Pass or Antioch is the Central Valley.
Los Banos is not East Bay
I prefer a strict definition. If a town borders on the SF Bay, it’s the “bay area”. If it doesn’t, it’s not.
Los Banos is lightyears away from anything that can remotely be considered East Easy Bay. Why not say Modesto is part of the East Bay for that matter?
I mostly agree with reuven, the east bay must be “on the bay,” but by “on the bay” I mean you can see the bay. If you’re on the other side of the hills, you’re not in the east bay. My definition still leaves quite a lot of variation there. You got Richmond, “Point Richmond” (hah!), El Cerrito, Kensington, Albany, Berkeley, Oakland, San Leandro, and Fremont. Those communities are all a bit lower on average than comparable communities on the peninsula, but are all (except for Richmond) pretty pricey. All (except Richmond) should follow the same trends as San Francisco and the peninsula.
East of these–Orinda, Lafayette, Moraga, Walnut Creek, Concord, Danville, and so forth–I have no idea, nor no need of one. I would not want to live there because I could have an equivalent community, for 1/3 the price, by completely leaving the bay area. They are paying the bay area premium but losing any of the bay area advantage (e.g., its too hot and too cold, too suburban and too rural, too long a commute, and so forth).
As always, YMMV.
IAT
Lost Banos is definitely not East Bay.
The remaining 20 percent is by individual borrowers who lied about their income or job history to qualify for loans. The larger group is where law enforcement is focused
And why not go after this 20% (though I think it’s probably higher!). It would be very simple:
1. Compare stated income to what they reported on their tax return
2. Tell them to pay taxes on that stated income, or go to jail
How hard/expensive would that be to enforce? They can have clerks in India match up the paperwork!
reuven,
I never meant to imply the balance of 20% was ‘un’ important. They are. ( Now that the numbers are coming out though, “I” think “we” have spent entirely too much time chasing after it ) But remember, there are (2) types of mortgage fraud, fraud for housing, and fraud for profit.
Additionally, once they’ve identified a crooked MB or realtor, they’re likely to get 20/50/1,000 related files that person was involved in.
Its got to be more than 20% that lied on loan applications , you would not have all the foreclosures if this wasn’t so. The amount of people that lied about intent to occupy so they could get a low down loan ,when they were really a short term investor or flipper was widespread .
Florida even announced in mid 2006 that they had 40%
investors buying property . Remember how flippers were shocked that they had to become landlords when the market turned .Why are there so many houses that haven’t even been occupied ?
The fact that the industry qualified people on teaser rates ,rather than the potential adjusted up rate ,was a underwriting mistake
that the industry can’t explain why they did that . But ,we all know that the people that were taking out loans ,especially between 2003-2007 ,did not have the income to support the loan amounts . How can you have that high of a percentage of people
that didn’t know what they were doing ? Its more likely that the loan agent said to the borrower that they could get them the loan
,just sign this ,and the people went along because they were in a frenzy to get in on the sure bet of real estate . The fact that people went on creepy loans also shows that the loan was not that important to them as the leverage was ,sure sign of short term investors . I grant you that the REIC were the professionals that breached their duty to stop this fraud and certainly not help the borrower commit fraud or encourage it .
Exactly, Wiz.
It’s only 20% if you expand the pool to all mortgage holders… including someone who bought in 1979 and is three months from paying it off.
If you look only at the bubble years, the statistics get pretty terrifying.
IIRC, in 2005-2007, 70% of all mortgages in San Diego were stated income. 90% of the borrowers overstated their income. 50% of those overstated by at least 50%
That means that .7 * .9 = 63% of all house buyers in San Diego during the peak boom years are actually felons.
The numbers on this whole thing are so staggering, I’m not at all surprised that the news doesn’t reflect reality. We really are at that point where, to tell everyone how deep is the sh!t we’re in, would make the sh!t much deeper.
This will not be pretty.
–Shannon
Tube … Your math makes sense to me . Over 50% are defaulting in spite of loan modifications . It was a mania in which loan fraud was widespread .
I would like to know why in cases where the loan agents forged documents , the borrower didn’t qualify anyway and just happened to buy a house that was way over their income affordability .
No doubt during the latter years of the boom ,straw buyers were
sought out to kick up the cash back fraud crime-wave . Maybe the cherry-pickers making 12 bucks a hour didn’t know that a 700 k house was beyond affordability and maybe the 50k cash back they thought was business as normal .
“The numbers on this whole thing are so staggering, I’m not at all surprised that the news doesn’t reflect reality.”
Just a few napkin calculations back in the summer of 2005 caused me to believe that a depression would result when the eventual collapse arrived. I posted my thoughts to this blog back then too.
DTLA is not San Fran, San Diego or Manhattan or even San Antonio for that matter. There is no wharf or river. And the homeless are much meaner than the Santa Monica trolls.
I don’t even like being there for anything - except catching a game at staples Center
Of course there is a river, it’s called the Los Angeles River, a concrete channel that is an architectural marvel which may have water in it 2 months out of the year. And the water is as clear and pristine as a stated income loan.
I used to live about a block from the LA river. Funny, I never thought to list my house as “riverfront adjacent”.
‘unleashed a tidal wave of fear’
I’m inclined to think that people are not buying for more reasons than just ‘fear.’ Maybe they actually don’t have the money. Has anyone seen anything about that in the MSM? No money, credit cards tapped out, no housing ATM. That’s enough to put a little fear into a good little consumer.
Maybe, but I have money in the bank and (at the moment) a good paying job. I’m pretty scared of buying right now for two good reasons.
I’m afraid prices have a long way to go on the down side.
I’m afraid my job will go away long before the mortgage is paid off.
Fear is important. I don’t do a lot of stupid things because I’m afraid of death, pain, etc.
“It’s not rocket science; this is basic real estate 101. You can’t get a loan without a kitchen.”
Can’t make a ham sandwich either. Considering most people don’t cook at home, will the kitchen go the way of the “Great Room” concept in homes? Probably not since whenever there is a party at a house, all of the guests congregate in the kitchen cause that’s where all the action happens.
–
Latest Annual Rate (Transaction originating During Aug-Oct):
Sacramento, CA -48.7%
Atlanta, GA -42.6%
San Fran, CA -42.4%
Minneapolis, MN -39.8%
Chicago, IL -38.1%
Tampa, FL -36.9%
Phoenix, AZ -36.1%
Denver, CO -34.5%
San Jose, CA -33.8%
Detroit, MI -30.1%
Boston, MA -30.0%
San Diego, CA -28.5%
Milwaukee, WI -27.6%
Jacksonville, FL -27.5%
25 MSA Composite -27.5%
Miami, FL -27.4%
Los Angeles, CA -26.5%
Las Vegas, NV -25.8%
Seattle, WA -24.4%
Washington, DC -24.3%
Cleveland, OH -24.2%
St. Louis, MO -24.1%
Charlotte, NC -21.2%
Philadelphia, PA -20.0%
Columbus, OH -17.2%
New York, NY -16.9%
This is the fastest rate of decline and also the broadest.
Jas
Oh, there you are.
–
Latest Annual Rate (Transaction originating During Aug-Oct):
Sacramento, CA -48.7%
Atlanta, GA -42.6%
San Fran, CA -42.4%
Minneapolis, MN -39.8%
Chicago, IL -38.1%
Tampa, FL -36.9%
Phoenix, AZ -36.1%
Denver, CO -34.5%
San Jose, CA -33.8%
Detroit, MI -30.1%
Boston, MA -30.0%
San Diego, CA -28.5%
Milwaukee, WI -27.6%
Jacksonville, FL -27.5%
25 MSA Composite -27.5%
Miami, FL -27.4%
Los Angeles, CA -26.5%
Las Vegas, NV -25.8%
Seattle, WA -24.4%
Washington, DC -24.3%
Cleveland, OH -24.2%
St. Louis, MO -24.1%
Charlotte, NC -21.2%
Philadelphia, PA -20.0%
Columbus, OH -17.2%
New York, NY -16.9%
This is the fastest rate of decline and also the broadest.
Jas
Can anyone explain to me how a short sale in conjunction with a HELOC works? I know several people that have purchased a house out of state with HELOC money ( in No. Carolina for example) and then had their house here in CA foreclosed on or are trying for a short sale. Does the bank investigate what assets were purchased with the HELOC? Can the bank force a sale of the new house, cars, etc. to makeup for the outstanding balance? It can’t be that easy to get a free house, can it?
I’m pretty sure that the HELOC is a recourse loan. They have to pay it back no matter what.
‘Just because the house-gutting occurrence is common doesn’t mean it’s legal. A house is collateral on a mortgage,…’ said local real estate attorney William Markham.
Oh…ouch. I think I just soiled myself. Nope, I was mistaken. That was the secondary market inwestor who just soiled themself.
“And the shift raises questions about some of the fundamental assumptions surrounding urban development. Instead of buyers who can afford the hefty down payments and mortgages, some of these developments are now attracting renters who need only put down rents of $1,500 to $4,500 a month.”
These developers do know that renters can’t take out a low amortization loan to pay the rent each month, right? Rent comes out of net pay, not gross pay, but net pay, that amount left over after taxes, 401k contributions, and whatever else gets extracted from your check. I personally find it offensive to pay more than a $1/sq.ft for rent, so these would have to be some spacious rental properties.
Fraud carries a 10 year Statue of limitations .
Statue of limitations? Reminds me of a Seinfeld episode…
Kramer: Anyway, it’s been two years. I mean isn’t there like statue of limitations on that?
Jerry: Statute.
Kramer: What?
Jerry: Statute of limitations. It’s not a statue.
Kramer: No, statue.
Jerry: Fine, it’s a sculpture of limitations.
Kramer: Just wait a minute…Elaine, Elaine! Now you’re smart, is it statue or statute of limitations?
Elaine: Statute.
Kramer: Oh, I really think you’re wrong.
statutory limitations period
Maybe so, but I believe the SOL doesn’t start to run until the fraud is detected.
Um… buyers who could “afford” it? I don’t think so. It looks like the renters are the ones who are affording it.
“‘Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,’ said U.S. Attorney McGregor Scott
++++++++++++++++++++++++++++++++++++++++
No one here has lost sight of the fact. Glad to see the U.S. Attorneys are on board now. On a side note, McGregor Scott? Are you kidding me? Even more of a pet peeve than people with two first names are people whose first name is a last name and the last name is a first name. I never liked the music group Jefferson Starship for this very reason. Just think how Star Trek would have been if instead of “Beam me up Scottie”, it was “Beam me up McGregor”. Sounds like you are asking a brand of beer for something rather than a person.
How about dudes named “Guy” who have first names for last names?
–
“In recent quarterly forecasts they had suggested the state might dodge the recession. But forecast Director Edward Leamer said the financial crisis that erupted in September and October had ‘unleashed a tidal wave of fear’ that caused spending and investment to collapse, confounding all the forecast’s expectations.”
“‘When you do forecasting you look at historical trends and try to project how they might play out,’ Leamer said. ‘But nothing such as this has ever happened. Everybody is relying on hunches.’”
I have called him a rouge economist early this year. CA has been in a recession longer than the US, but this rogue economist totally ignored the Unemployment Rate.
Jas
Speaking of crime . Has anybody mentioned that they got a big fish .
Bernie Madoff ,a Wall Street market maker arrested in Ponzi scheme
to the tune of 50 billion .
yeah, makes you want to invest in stocks..who has the losses. i read he went to ski events in europe to coax more suckers into giving him the bucks to keep it going. boy, that will be an expensive ski trip for those who lose their money. just the kind of news our economy needs…more massive fraud…maybe they could pay it off with a new bailout! i’m beginning to think the system is filled with fraud…lol
Thanks for mentioning the current crisis at the Burbank Winter Shelter. I do some work for Union Rescue Mission and they are seeing an unprecedented increase in families in need of housing this season. Any help we can give them is greatly appreciated. If interested, here is the link: http:/urm.org
“Michael Cardoza, a San Francisco-area attorney representing one of those charged in central California, said prosecutors should be setting their sights higher. ‘It’s amazing to me that the people on Wall Street walk away with millions and millions if not billions of dollars,’ said Cardoza. ‘Now they’re just picking off little people . . . They’re doing scapegoats is what they’re doing.’”
Not in all cases…
WSJ
DECEMBER 12, 2008
Executive Accused of Mortgage-Securities Scheme Article
By EVAN PEREZ
WASHINGTON — A financial executive used little more than a pen to alter credit scores and reclassify mobile homes as single-family houses, inflating the value of thousands of mortgages that were repackaged and sold to investors, prosecutors allege.
Federal prosecutors in Miami on Thursday charged Steven Gordon, 49 years old, a former partner at Bayview Financial LP, with one count of wire fraud, in one of the first cases highlighting investigators’ efforts to move beyond low-level mortgage schemes and delve into suspected fraud in the mortgage-securities business involving bigger financial firms.
Mr. Gordon, a former director of residential acquisitions at Bayview, made more than $2.8 million in additional commissions by altering the value of 2,800 loans from 2001 to 2006, according to documents filed by prosecutors in U.S. District Court in Miami.