The Housing Bubble

The Fresno Bee reports from California. “The Fresno Association of Realtors examined the sales and mortgage history of 1,305 notices of trustee sales from the last three years to find out what caused foreclosures in Fresno and where the foreclosure market stands today. More than half of the homeowners who lost their houses to foreclosure in the past three years refinanced their loans or borrowed cash against their equity. On average, properties lost to foreclosure were refinanced at least twice. Many homes purchased between 2002 and 2003 went up in value, said Justus Martin, the association’s MLS operations manager. Then homeowners decided to borrow money against their rising equity to make other purchases, such as a car or boat.”

“When home values fell, homeowners realized they owed more than their homes were worth and had taken out more than they could afford. ‘It’s always greed in this industry,’ said Doug Lanier, client relations manager at a Fresno mortgage company. ‘Greed from the investors all the way down to the homebuyer.’”

The Santa Cruz Sentinel. “The housing market sprang to life in May, with 160 single-family homes changing hands, the most in that month since 2006. Still, it’s nothing like the boom years when sales in May topped 200. The median price, the midpoint for what sold, was $535,000, down from $553,000 in April. Last year it was $425,000; two years ago, it was $610,000.”

“Distressed property remains significant in Watsonville, which has borne the brunt of foreclosures. Of 23 active listings in South County, 12 are short sales and six are bank-owned, said Stephen Pearson of Century 21 Classic, noting ’some improvement’ in the time it takes to close a short sale by some banks. ‘Short sales will be a part of the market for the foreseeable future,’ predicted Robert Bailey of Bailey Properties, noting they allow homeowners in trouble to sell, albeit without equity, salvaging their credit and their pride.”

“He said part of the short sale delay is the time it takes the homeowner to ‘come to emotional reality’ and get counsel from an attorney and tax advisor.”

The North County Times. “After six weeks, a California tax credit for some homebuyers has almost run dry, the Franchise Tax Board said Thursday. Real estate agents contacted Thursday offered a mixed message on whether the tax credit mattered to their buyers —- some complained that it had been badly publicized. But all seemed to be prepared for its imminent demise, after Robert Kleinhenz, an economist for the California Association of Realtors, predicted the fund wouldn’t even survive until the end of May.”

“Murrieta real estate agent Marjo Wood said the tax credit has definitely goosed her sales, but she added that there are limits to the amount of help the government can provide. ‘I do believe it’s affected people’s decision over whether they were going to buy or not,’ she said. ‘It’s unfortunate that it’s ending, but I understand why it’s happening, because there is no funding for it.’”

The Union Tribune. “Foreclosure filings and notices of default fell dramatically last month in San Diego County, but analysts did not see this as evidence of less distress in the housing market. Sean O’Toole, CEO of ForeclosureRadar, said lenders seem to be timing their actions to coincide with changing economic conditions. Earlier this year, he noted, foreclosures and defaults increased as the stock market improved and home sales and prices stabilized. But in recent weeks, as those markets have faltered, distress actions have fallen back. ‘I don’t believe in conspiracies, but at some point it becomes a sensible strategy to manage the books,’ O’Toole said.”

“He and other economists doubt that short sales and loan modifications will solve most homeowners’ problems, which are exacerbated by the sluggish economy and lower home values that make refinancing all but impossible. ‘We’ve got an awful lot in the pipeline and at this pace, it’s going to take years to work through this,’ he said. ‘It’s a question of do you rip off the Band-Aid fast and have a sharp sting or rip it off really, really slowly.’”

“The Mortgage Bankers Association put California’s first-quarter delinquencies at 10.9 percent of all homes with mortgages last month, down from 11.3 percent in the fourth quarter. But that still leaves some 1 million homeowners in California who are not making their payments, O’Toole said. ‘If you were to foreclose on those folks en masse, it would certainly create panic and fear,’ he said.”

The Orange County Register. “Veteran Orange County apartment owner and manager Ray Maggi says this the current rental market ‘is the worst I’ve ever seen’ for landlords. Maggi, a past president of the Apartment Association of Orange County, says in his three decades in the rental game hasn’t seen as harsh a mix of falling rents, empty apartments and rising costs. ‘Contrary to popular belief, we don’t make money with 90% occupancy,’ he says of current historically high counts of empty units across the county that run roughly at 10 percent vacancy.”

“Maggi notes a 96-unit complex he’s owned in Buena Park since 1978 as a good market gauge. Before this slump, he never started a month at this complex with more than 10 vacancies — and now he’s got 14. ‘Lots of hard times,’ he says explaining why it’s so hard to fill up apartments.”

“The U.S. Attorney’s office announced a series of mortgage fraud cases in Southern California as part of an ongoing nationwide crackdown against ‘corrupt real estate professionals, bank employees who help facilitate fraud and those who prey upon distressed homeowners,’ as well as borrowers and so-called ’straw” borrowers.”

“From United States Attorney André Birotte Jr.: ‘Over time, we have seen repeated spikes of fraud targeting financial institutions. Over the last decade, we saw one of those spikes as mortgage fraud blossomed with the housing bubble. When the bubble burst, in part because of fraud permeating the system, the effects were felt around the world. We are now sorting the through the wreckage to identify and prosecute the most egregious offenders.”’

The LA Daily News. “Father John Lasseigne says he’s on a holy mission to save not only the souls of his parishioners in Pacoima, but their homes as well. That mission is a $1 million city pilot program aimed at helping troubled homeowners in the Northeast San Fernando Valley where one out of every nine homes is in foreclosure.”

“The money will be used to coax lenders to write down loan balances and answer the prayers of homeowners who owe far more on their houses than they’re worth. ‘It’s the Holy Grail of our foreclosure prevention loan modification program,’ says Lasseigne, of Mary Immaculate Church in Pacoima.”

“Thirty Northeast Valley homeowners will get no-interest loans from the city Community Redevelopment Agency that will be paid directly to lenders who have agreed to reduce the mortgage principal to current market value. But it has not been a slam-dunk achievement. ‘The biggest impediment was that banks don’t want to do principal reduction,’ said Yvonne Mariajimenez, deputy director of Neighborhood Legal Services, which was involved in negotiating the deal with lenders.”

“Lasseigne arrived in Pacoima two years ago to discover his parishioners in the jaws of a foreclosure crisis. ‘We began calling upon our parishioners (to see) if they were at risk of losing their homes,’ recalled Lasseigne. ‘Hundreds of them came forward. We began interviewing them. We learned how they had been taken advantage of by the banks: Given false information, information in language they couldn’t understand, not qualified for the loans that they badly wanted but they really weren’t qualified for.’”

The Bakersfield Californian. “Bakersfield real estate broker associate Michelle Overstreet had a rude awakening after launching her real estate career 16 years ago. A field she thought would be immediately lucrative and give her more free time turned out to be more time consuming than she anticipated, and it was six months before she earned her first commission. We talked to her about her new book, and about the real estate market in general.”

“Q: About half of mortgaged homes in Bakersfield are upside down on their loans. That means a sizeable number of homeowners can’t get out of their houses unless they do a short sale. What effect is that having on agents? A: There are not enough experienced Realtors with knowledge of short sales, and that can leave the selling Realtor and his or her buyer with a bad taste in their mouth. Especially the seller when his home is foreclosed because of the Realtor’s lack of knowledge.”

“Q: What’s your take on the possibility of a massive second wave of foreclosures? It’s been predicted for more than a year now but hasn’t materialized. A: Many homeowners were put into adjustable rate mortgages, or ARMs, and they may not be able to afford their homes when the rate goes up. There also are thousands of bank-owned homes in the Bakersfield area that are sitting vacant.”

“Q: So what will be the outcome of that? Will there be another big wave or will they continue to trickle out slowly? A: I think the banks have learned from the massive drop in values not to just let everything out at once. However, this can be seen as both good and bad. The good thing is that the lender has more control over values by keeping inventory low. The bad thing is that your typical buyer would like to live in a nice area where people are taking care of neighboring properties, and when the bank sits on a property before putting it on the market, the yard dies and the home just appears to be more run down, thus giving the appearance that the property will need more extensive work to bring it back to a manageable level.”

“Q: How good are banks and investors who fund mortgages about working with borrowers to either modify a loan or permit a short sale? Are they loosening up at all? A: The loan modification process is not what many homeowners think it is. It is a temporary reduction in payment with the balance of the loan being put on the back end. If the homeowner can make his mortgage payment, it is best to ride it out. Only if the homeowner has a ‘true hardship’ will the bank allow a homeowner to do a short sale. The Realtor listing a property must determine if the homeowner has a true hardship or if they are wasting everyone’s time.”

The Santa Maria Times. “In a milestone of sorts, the unemployment rate in Santa Barbara and San Luis Obispo counties fell back below 10 percent in May, according to data from the state. For San Luis Obispo County, unemployment is at 9.5 percent — more than 1 percent up from a revised 8.4 percent in May 2009. The revised rate was 10.1 percent in April. The Santa Barbara County rate is the highest May total on record, according to Mark Schniepp, director of the Goleta-based California Economic Forecast Project.”

“Statewide, the unadjusted unemployment rate is 12.4 percent. Among Santa Barbara County cities, Lompoc leads the pack with 14.6-percent unemployment — 3,000 people out of work from a work force of 20,700. Guadalupe is not far behind with 14.1 percent, albeit from a much smaller labor force of 2,800 with 400 unemployed. In southern San Luis Obispo County, Oceano led the county with a reported 17.6 percent unemployment rate, with Nipomo at 12.6 percent.”

The Ventura County Star. “The financial outlook has taken a turn for the worse for Santa Paula, which is already hobbling through a severe budget crisis. The city has no redevelopment money left. At a time when sales taxes and property taxes are way down, the city has little ammunition to stimulate the local economy or boost development. ‘The Redevelopment Agency is dead on arrival,’ said Santa Paula Finance Director John Quinn. ‘The Redevelopment Agency is where you want to engage in economic development. We are just not funded.’”

“Grappling with a $19.1 billion budget shortfall, the state of California took more than $2 billion from redevelopment agencies statewide to help balance its budget. The state earlier this year took $770,000 from Santa Paula, leaving the city of about 30,000 residents nothing in redevelopment funds. The money is typically used by cities to expand businesses, create jobs, redevelop downtowns and neighborhoods and build affordable housing.”

“At a recent Santa Paula City Council meeting, a dejected Quinn asked the council, ‘What works with no money?’”

The Conta Costa Times. “Marin saw a rise in both the number of single-family home sales and the median price in May compared with last year, a real estate tracking firm reported. The overall median price in the Bay Area last month was $410,000. That was up 20.1 percent from $341,500 in May 2009.”

“‘For now, at least, we’re seeing a more normal mix of sales across the region and across price categories, thanks in large part to the state and federal tax credits coupled with incredibly low mortgage rates,’ said John Walsh, MDA DataQuick president. ‘In the second half of the year, there’s obviously going to be less wind in the market’s sails, given the fading tax credits.’”

The Marin Independent Journal. “When Floyd Fulmer moved to Novato at the end of February, his purchase of a single-family home capped a long, hard journey in personal finance. He had finally saved enough money to buy a house in a nice neighborhood. He picked a house on Clemente Court in the San Marin neighborhood near a large patch of undeveloped land owned by the Novato Unified School District.”

“Fulmer was alarmed to learn recently that the spot could be designated by the city for low-income, high-density housing - and he wasn’t the only one. Hundreds of residents packed a recent meeting on possible rezoning of that and properties throughout the city as local officials seek ways to meet state-imposed affordable housing quotas. ‘The primary selling point for my home was this open field, which added to the character of this neighborhood,’ Fulmer said. ‘I finally earned my way into a neighborhood like this through a lot of hard work, like a lot of other people here. With this rezoning, I’m just upset at the notion that some construction could go on here and could be incompatible with the character of the area.’”

“‘My concern is that the state government is taking away more and more of our local land-use decisions,’ Mayor Jeanne MacLeamy said. ‘The fact is that the state is broke, yet they still have the gall to tell us what to do with our property.’”

“MacLeamy cited the recent Wall Street meltdown as evidence that people should live within their means. ‘I think people should be able to live in the housing they can afford,’ she said. ‘If they need to rent for a while, so be it. We found through this financial crisis that an awful lot of people should have never bought anything in the first place. They couldn’t handle a mortgage.’”