Going Back Into The Mess
WMBF reports from South Carolina. “The Palmetto State saw a 32 percent increase in foreclosures from the last month, most of them happening in the upstate counties. Horry County is the fourth highest, but still better than the state’s average. Local real estate experts say these high numbers are expected in certain markets. ‘All the ones that are vacation areas or second homes. California, Nevada, Florida, South Carolina. So it’s not that alarming in that regard because it was already shadow of inventory that was really kind of accounted for anyways,’ said real estate expert Blake Sloan.”
The Sun News in South Carolina. “Condominium developer Ford Shelley will have to report to federal prison on Wednesday after a judge on Friday denied Shelley’s request to postpone his sentence while he appeals his case. Shelley was sentenced to 20 months in prison after pleading guilty last year to one felony charge of mail fraud related to sales at his Pineapple Bay condo project. Most of the buyers at the 12-unit Pineapple Bay project included Shelley’s family – including Shelley’s wife, his brother-in-law and sister-in-law – and friends or business associates.”
“The original sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000 in 2006, according to county property records. The most recent sales have been for between $135,000 and $157,500, according to statistics from the Coastal Carolinas Association of Realtors.”
“Scott Lemons, a real estate agent, and Simpsonville real estate investor Kevin Robinson were indicted Thursday on three felony charges apiece of mail fraud related to sales of Ashley Park condominium units in the Carolina Forest subdivision, according to court documents filed in federal court. According to the indictment, Lemons and Robinson used several of their companies to help Ashley Park buyers fraudulently obtain financing for their condo units in late 2007 and early 2008. Lemons falsely inflated the comparable values of units in the project by taking part in sham purchases from Ashley Park’s developer, who is not named in the indictment, according to court documents.”
“Lemons then obtained fraudulent appraisals that overstated the value of Ashley Park units, according to the indictment. Lemons and Robinson then provided banks with loan applications that included false information about buyers’ employment and incomes and falsely stated that buyers had provided down payments for their units, according to court documents.”
“Horry County property records show a $325,000 purchase for unit A-3; $329,500 for unit E-3 and $326,500 for unit E-10. None of the buyers has been named as defendants in any criminal investigation. All of the units referenced in the indictment went into foreclosure, according to county court records. Condos in the Ashley Park development have recently been selling for less than $60,000, according to statistics from the Coastal Carolinas Association of Realtors.”
The Star News in North Carolina. “BB&T Corp. has issued a foreclosure motion against developer Mark Saunders and companies owned by him charging he defaulted on loans of about $4.5 million, according to court documents. In the foreclosure, the bank is seeking 11 tracts containing multiple lots. The Coastal Companies attorney Elaine Jordan says in a motion for continuance that…The Coastal Companies had been making monthly loan payments, and BB&T said that it wanted to resolve the issue by the year’s end. ‘For 15 years we timely made every payment required by BB&T, including this month’s,’ Jordan said.”
“BB&T says, in the court documents, that Saunders had not been making the loan payment in full. The foreclosure adds to the list of legal actions taken against developer Saunders and his umbrella corporation since the real estate bust in 2008. Saunders had been the largest developer in Brunswick County, holding thousands of parcels at one time. But the bust left Saunders unable to finish basic infrastructure, including roads and sewer, leaving many buyers unable to build on or sell their lots.”
“Litigation includes a suit from homeowners at numerous developments, a separate lawsuit from Seascape at Holden Plantation residents, and a Bank of America suit that sought $78 million. Saunders recently settled the suit with Bank of America, and the company handed over 750 parcels to the bank.”
The FayObserver in North Carolina. “Foreclosures in Cumberland County jumped 53 percent in 2012. Consumer advocates blame the economy, job losses and the mortgage industry not doing enough to help distressed homeowners. But a significant factor in the 825 foreclosures last year may be a surge in cases that banks previously put on hold for a review of documents.”
“Cumberland County had 890 foreclosures in 2010; that number dropped to 538 in 2011, as banks had slowed or suspended their proceedings. Clerks at the Cumberland County Courthouse are now seeing lenders refile stacks of older cases. Chris Smoot, a clerk at the Cumberland County Courthouse, sees cases piling up. ‘We’ve got dates into April already for foreclosure hearings from certain firms,’ she said.”
“Smoot attributes the increase to banks and other lenders who had paused certain cases for review. ‘Now they’ve completed that,’ she said, ‘and that’s started the refiling of those foreclosures. Now we’re taking up old cases put on hold and filing all these new cases.’”
Southern Maryland News. “Combined residential and commercial cash values for properties in northern St. Mary’s dropped by 7.9 percent compared to when they were last assessed in 2009, the Maryland Department of Assessments and Taxation reported this week. Residential values in St. Mary’s dropped by 8.4 percent. This is the fourth year in a row in which assessment values decreased.”
“Prior to the recession, values were increasing from year to year, sometimes wildly. Each year one-third of the county is reassessed. In 2007 values for properties in northern St. Mary’s rose by 84.3 percent during the previous three years for all improved property.”
“At the conclusion of the three-year assessment period, assessment values for residential properties in Maryland decreased by 7 percent and in Charles County by 11 percent, according to data from the state Department of Assessments and Taxation. Elsewhere in the region, the full cash value of assessed residential properties in Calvert County dropped by 13 percent.”
“Charles County Commissioners President Candice Quinn Kelly (D) said the assessment for this group was an unexpected disappointment. ‘When the recession had first begun and that area was assessed, that year we saw a 29 percent decrease in values, and our taxes are based on those values,’ Kelly said. ‘We were hoping to see that remain steady in the next assessment period or maybe even increase a little bit, but now with this 11 percent decrease from the last period, we’re looking at a 40 percent decrease from when this first began. When we do the budget, we make our projections for the future years and what our revenue will be, and this was unexpected.’”
The Baltimore Sun in Maryland. “The Federal Housing Administration has waived through 2014 an anti-flipping regulation, which had prevented the agency from insuring mortgages on properties sold within 90 days of acquisition. The waiver, first implemented in 2010 to bolster the flagging housing market, is intended to enable investors to buy and quickly rehab properties as the market continues to struggle.”
“But in Baltimore, one of the cities most affected by fraudulent flipping, some housing experts are concerned that another extension of the waiver may usher in a repeat of predatory transactions that duped hundreds of buyers in the late 1990s and early 2000s, and left many Baltimore neighborhoods scarred with abandoned homes.”
“‘While we recognize FHA’s business decision to again institute its anti-flipping waiver as a way to encourage investment, stimulate the housing market, and reduce blight through home ownership, we continue to have concerns that the anti-flipping waiver will also invite fraud schemes to occur,’ the inspector general’s office said in a statement.”
“Flipping schemes proliferated throughout Baltimore and targeted first-time and lower-income buyers. In some areas, groups of homes were bought cheaply by speculators, revalued by conspiring appraisers and resold within days — or hours — for many times over the seller’s purchase price. In the 1500 block of N. Bethel St., for instance, one unscrupulous investor purchased six rowhouses in 1997 for less than $6,000 apiece. He resold them the same day for nearly $50,000 each to unsuspecting buyers, according to tax records and Sun reports. They were subsequently purchased by the city and demolished.”
“‘We’re getting ready to go right back into the mess we just had,’ said Larry Chriscoe, who says he was the victim of a flipping scam in 1999. Chriscoe used an FHA-backed mortgage to buy a house in the Waltherson neighborhood of Northeast Baltimore. He said the seller had owned the home for a short time and used cosmetic improvements, such as paint and caulk, and a deceptive appraisal to charge him tens of thousands of dollars more than the home was worth.”
“‘I walked out on the property,’ said Chriscoe, who decided it wasn’t feasible — or logical — to pay off a mortgage that cost much more than the value of his home, which needed major roof repairs and an electrical overhaul. ‘There were so many things wrong in that house.’”
“Like Chriscoe, many buyers walked away from their homes and left behind vacant properties to be dealt with by banks, City Hall and the federal government. The transactions also destroyed buyers’ finances. Chriscoe filed for bankruptcy and said he is still trying to get his credit in order, eight years after leaving his flipped home.”
“Mark Sissman, president of Healthy Neighborhoods Inc., said he’s concerned about the anti-flipping waiver. His organization, which promotes homeownership and stabilizing Baltimore neighborhoods, still sees wide swings in appraised value of homes, he said. And loosening regulations could invite more mortgage fraud, he said. ‘Somehow, in Baltimore, creative entrepreneurs have found every way possible to make money at the cost of individual homeowners and the FHA,’ he said.”
“‘We’re getting ready to go right back into the mess we just had,’ said Larry Chriscoe, who says he was the victim of a flipping scam in 1999.
1999 prices are a long way down considering prices in MD are still at the grossly inflated levels of 2004. 2004 to 1999 price correction is >50%.
Maryland must be a recourse state. Non-recourse states clear faster….
In California, foreclosures are way down. In the areas I track, they are running 70% less than in 2009. And MLS sale inventory is at a 1-2 month supply.
Counting inventory held off market, inventory in CA is massive… and growing.
Held off market by whom?
My experience looking in my slice of SoCal is that not only has MLS inventory CRATERED (leading to bidding wars), but there’s also not all that much REO (according to Foreclosure Radar). If the banks were holding massive numbers of homes that they had bought back at trustee auction, would they not show up as REO on FR?
I watched an LA County trustee auction in Pomona a few weeks ago and there were about two dozen professional buyers pouncing on the rather slim pickings coming for bid.
Demand from both investors and end-users seems high.
Are you perhaps counting non-distressed owners electing not to sell at current prices in your “inventory”?
Your outlook strikes me as what SHOULD be happening at this point in history, and it aligns with what I would like to see happen, but I’m just not seeing the inventory from where I sit. Where are you seeing it?
What I’m seeing here in Tucson are houses where the owners attempted to sell, but no one would pay their lofty wishing prices. So, the houses are taken off the resale market.
What happens next? Three things. In some cases, all three things happen to the same house:
1. Owners continue to live in the house and dream of the day when buyers will pay their asking price. Dream on, I say.
2. Owners move elsewhere and rent the house “until the market improves.” Which is Tucson-speak for when buyers will pay their asking price. Have fun being an accidental landlord, I say.
3. Owners walk away and leave the house to sit there, rotting away in the desert sun. This happens quite frequently with houses that were bought as speculative investments. Either by the buy-live in it-flip crowd. Or the buy-rent it-flip crowd.
Maryland is recourse. The two counties referenced, St. Mary’s and Charles, are outer burbs in the direction away from all the jobs. St. Mary’s is a peninsula projecting into Chesapeake Bay and is probably a lot of waterfront second homes.
It is no surprise that those homes dropped in tax assessment. The article goes on to say that tax assessments tend to lag prices. But I’m a little surprised that the the average sold price of homes in the county was $239,666, almost a 5 percent increase from the overall 2011 value of $228,948. (from the article) I don’t think there’s the job base to support a price increase.
I don’t think there’s the job base to support a price increase.
If they’re second homes, do you need a local job base?
‘If they’re second homes, do you need a local job base?’
‘Local real estate experts say these high numbers are expected in certain markets. ‘All the ones that are vacation areas or second homes. California, Nevada, Florida, South Carolina.’
I suspect it depends on who they are second homes for. Are they second homes for people with no money, playing at being rich with their helocs? Or are they second homes for people that actually make a lot of money? If the latter, then the local jobs base means nothing. Except that the fewer the local jobs, the cheaper the help will be.
Wealthy don’t buy ‘homes’.
Larry Ellison collects them.
‘it depends on who they are second homes for’
This is old material at the HBB. The better question is, what is the real motivation to buy a second house? I happen to live in an area that some say is 40% empty at any given time. Why buy a house in Flagstaff when you can stay in a hotel or resort for much less? There isn’t any maintenance to worry about or property taxes. While getting at true motivation is difficult, it can be determined from behavior down the road. Many of the local foreclosures are ’second homes.’ And IMO the most expensive gated communities have as high a default rate as the town in general. These are people that sometimes could make the payments (or buy outright) and chose not to. Long story short, often these people are speculating.
A year ago I got a foreclosure ready for market in Williams. The guy across the street was retired from Phoenix and liked to chat. He told me how the FBs had refinanced and put in new cabinets, etc. Then they walked away, and I don’t remember exactly why. But they moved back to Montana. He then mentioned he still had his house in Phoenix and this house in Williams and that he was going to ‘have to make a decision’ about which one to keep. I didn’t think that much about it. This past weekend I was asked to secure and winterize a house in Williams, and when I got there it was this guys house! It’s in pre-foreclosure, busted up, frozen to the bone. I guess we now know what his ‘decision’ was.
Look at someone like McCain. He couldn’t remember how many ‘homes’ he owned, said he had to check with his staff. It was later determined he and his wife own ten houses, ranches, and condos. I suspect eight or nine of them are vacant every night, but they’re not really part of the shadow inventory, are they? What’s his motivation to buy so many homes? He’s got a ton of money, so why not?
In areas that attract people like him, houses (the rich peoples’ houses) are not dependent on local wages.
A year ago I got a foreclosure ready for market in Williams. The guy across the street was retired from Phoenix and liked to chat. He told me how the FBs had refinanced and put in new cabinets, etc. Then they walked away, and I don’t remember exactly why. But they moved back to Montana. He then mentioned he still had his house in Phoenix and this house in Williams and that he was going to ‘have to make a decision’ about which one to keep. I didn’t think that much about it. This past weekend I was asked to secure and winterize a house in Williams, and when I got there it was this guys house! It’s in pre-foreclosure, busted up, frozen to the bone. I guess we now know what his ‘decision’ was.
I can remember a time when we commoners went on vacation and (gasp!) stayed in hotels or motels. Or (eek!) pitched a tent in a campground.
Second homes were for rich people. VERY rich people.
ALL empty houses are shadow inventory.
“These are people that sometimes could make the payments (or buy outright) and chose not to. Long story short, often these people are speculating.”
I personally have no problem with this, so long as the activity is not supported and sustained by government policies, such as ultra-low interest rates and federally sponsored and guaranteed lending designed to bolster speculator’s returns.
Second homes were for rich people. VERY rich people.
Regular people didn’t have lake houses or whatnot? They certainly did around here- but they weren’t mcmansions. Just simple little houses at or near the lake.
MANY occupied houses are shadow inventory.
ALL empty houses are shadow inventory.
Time to foreclose on McCain’s multiple, empty homes, eh?
‘McCain couldn’t remember how many ‘homes’ he owned, said he had to check with his staff. What’s his motivation to buy so many homes?’
One of the houses they bought is in Page Springs, just outside of Sedona. This area had probably the highest rate of foreclosure in N AZ, some of the lowest pay, along with the most expensive houses. So this is false:
‘In areas that attract people like him, houses (the rich peoples’ houses) are not dependent on local wages.’
Let’s take Sedona. I don’t know about now, but Madonna was building a house there. Al Pacino had a place, Oprah. Sedona got hammered on prices. Not so much because rich people couldn’t pay what they promised, but that a lot of people buying there (rich or not) were speculating. And when the gamble went south, they walked.
Here’s what matters today; how many current purchases are really speculations? Even if they pay cash, what I see is a lot of expectation that prices will rise. If they don’t, what are these people going to do? Is it really that attractive to be a break even (or worse) landlord in Phoenix or Tucson? And then we read about people borrowing money and putting almost nothing down, to outbid hedge funds. What’s going to happen to these people if prices fall further?
MANY occupied houses are shadow inventory.
Now that I agree with.
Time to foreclose on McCain’s multiple, empty homes, eh?
Why when they’ll be dumped on the market anyways? They’re empty.
I’m sure many areas like Sedona, Miami Beach, Maui, etc have or will fall in value. But their new values still won’t be determined by local wages. That will have to wait until we run out of rich people.
Sure they will. ALL items are subject to local wages and salaries.
‘That will have to wait until we run out of rich people’
Tell that to the FBs in Aspen.
Check out the price history on this movie star real estate investment special: It’s been on and off the market again since April 2007, on a range from $23m down to $9m, with (apparently) no offers just yet.
320-acre Malibu ranch hits the market
$9.995-Million Malibu Ranch property
Related Links
Related: 3200 Encinal Canyon Rd, Malibu, CA 90265
Posted: Monday, January 7, 2013 11:00 am |
Updated: 11:02 am, Mon Jan 7, 2013.
By Eric Thomas / The Malibu Times
A 320-acre ranch property on Encinal Canyon Rd. in Malibu has been put on the market with a nearly $10-million price tag. The ranch, formerly owned by actor Nicolas Cage, is currently owned by Apparel Limited CEO Masud Sarshar.
The 3200 Encinal Canyon Rd. ranch estate is one of the largest land-holdings available in Malibu, according to the property listing. It hosts numerous panoramic views and features miles of horse trails, oak trees, and proximity to four waterfalls in the Santa Monica Mountains. It’s listed at $9,995,000 and includes designs for home and horse facility additions by the famed architect, David Hertz.
…
Price History
Date Description Price Change $/sqft Source
11/16/2012 Listed for sale $9,995,000 -33.4% $9,254 Kathy Doyle Estates
07/01/2012 Listing removed $15,000,000 – $13,888 Westside Estate Agency
03/07/2012 Price change $15,000,000 50.1% $13,888 Westside Estate Agency
09/22/2011 Listed for sale $9,995,000 -33.4% $9,254 Westside Estate Agency
07/28/2011 Listing removed $15,000,000 – $13,888 Coldwell Banker - Malibu West
07/14/2011 Listed for sale $15,000,000 66.7% $13,888 Coldwell Banker - Malibu West
04/12/2011 Listing removed $9,000,000 – $8,333 Westside Estate Agency
03/26/2011 Listed for sale $9,000,000 – $8,333 Westside Estate Agency
03/22/2011 Listing removed $9,000,000 – $8,333 Coldwell Banker Residential Brokerage - Malibu West
01/28/2011 Listed for sale $9,000,000 -30.5% $8,333 NRT California
12/17/2010 Listing removed $12,950,000 – $11,990 Pritchett-Rapf Realtors
07/15/2010 Listed for sale $12,950,000 -34.9% $11,990 Pritchett-Rapf Realtors
06/10/2009 Listing removed $19,900,000 – $18,425 Luxury Real Estate
05/22/2009 Listed for sale $19,900,000 – $18,425 Luxury Real Estate
07/31/2008 Listing removed $19,900,000 – $18,425 Homes & Land
02/01/2008 Price change $19,900,000 -13.5% $18,425 Homes & Land
04/07/2007 Listed for sale $23,000,000 123% $21,296 Homes & Land
09/07/2000 Sold $10,300,000 – $9,537 Public Record
Sure they will. ALL items are subject to local wages and salaries.
Only if you have to sell to locals.
Only if you have to sell to locals.
With tens of millions of empty houses and growing, you won’t have a choice.
With tens of millions of empty houses and growing, you won’t have a choice.
Great! I look forward to snapping up a beach home in Maui for cheap.
‘a beach home in Maui for cheap’
Unless you’re going to live there, why would you? I’m sure there’s a resort or two on Maui, and you could go every year for less than the cost of annual taxes and maintenance.
Time to foreclose on McCain’s multiple, empty homes, eh?
Why when they’ll be dumped on the market anyways? They’re empty
Dumped? Who says his heirs won’t keep them? My Brit sis in law is still holding on to the obscenely overpriced London house she inherited from her parents (I would sell it if I was her, but she isn’t interested)
Unless you’re going to live there, why would you?
Uh … I think alpha was being rhetorical.
I would go live there.
“Only if you have to sell to locals.”
Once this is again the case, you will know the mania has finally ended.
Once this is again the case, you will know the mania has finally ended.
Was it ever the case?
Is it really that attractive to be a break even (or worse) landlord in Phoenix or Tucson?
I live in Tucson. And, although I’ve never been a landlord here, I know many people who have. If they were mom and pop SFR owners, they learned some very tough lessons.
If they own multiple apartment complexes like a couple of my friends do, they know how to make their businesses work. From what I see, leverage is one of their primary tools. So far, it has done good things for them. But the key words in the previous sentence are “so far.”
I would go live there.
Why when you can rent a house for a month for tiny percentage of the price of buying it?
Was it ever the case?
It was always the case. ALWAYS.
“Was it ever the case?”
You have to go back decades, but yes.
You have to go back decades, but yes.
When and where?
“When and where?”
You have to go back in time to before the doubling of the world population in recent decades.
An Intimate History of a San Diego beach town, La Jolla
In 1886, Frank T. Botsford came to La Jolla and declared it “magnificent”. Two months later he bought the over 400 acres of pueblo lands already known as “La Jolla Park”. No one knows where the name originated - whether it means “the jewel” from the Spanish word La Joya or from “Woholle” the Indian term for “hole in the mountains”. See the Catalina History page on this site or watch the San Diego episode of the series to learn why most of California’s cities were founded in 1886. Botsford and his partners, George Heald and Charles Dearborn, subdivided and auctioned $62,000 worth of lots planned for homes on April 30, 1887.
California is well known for its land booms and busts, but La Jolla continued to grow from 350 residents in 1900 to over 30,000 today. From 1900 to 1920, tourism became the economic base of La Jolla. With the end of World War I, La Jolla was caught up in the heady 20’s and the population grew to 4000. During this era, the beach cottage look was replace by the elegant California Spanish style.
In 1927, a Spanish ranch-house style building, designed by Hollywood architect Robert Stacy-Judd, was erected. It was the first building in the United States to utilize the Maya/Aztec form of architecture.
The stock market crash of 1929 brought failure to the La Jolla Shores development and only a few houses were seen there until after World War II.
…
The stock market crash of 1929 brought failure to the La Jolla Shores development and only a few houses were seen there until after World War II.
Oh, I’m sure half-built subdivisions lost value in the last depression, but did areas where rich people lived revert back to reasonable multiples of local income?
Was a Beverly Hills mansion affordable to an average joe?
” He’s got a ton of money, so why not?”
That’s rich coming from you. My how attitudes change when you have skin in the market.
That’s rich coming from you
Doesn’t fit in with the stereotyped view you’ve been fed by your brain washers on am radio?
No, you commies were all over McCain and his money when it suited your political needs. Now, it’s okay as long as he and others like him keep their seven houses and do their fair share of bubble maintenance? Why? Is it personal to your situation or does it give President Statist cover to continue his fundamental transformation of America? Both?
Why? Is it personal to your situation
Yes. I want him to keep his yard mowed, so he doesn’t bring down the value of my Malibu beach house.
“04/07/2007 Listed for sale $23,000,000 123% $21,296 Homes & Land
09/07/2000 Sold $10,300,000 – $9,537 Public Record”
Interesting detail: The real estate pimps at Redfin dot com whitewashed the listing price history.
Thanks to Zillow dot com for showing the full glorious Dutch auction falling knife descent from $23,000,000 all the way down to the bottom. (And it still won’t currently sell at a lower price than it sold for in 2000!!!!)
If Nicolas Cage’s Malibu ranch wouldn’t sell for $9m throughout the red hot sales season of spring 2011, why does the idjot Realtor™ think they can get nearly $10m for it today?
Ben, you commented, “Unless you’re going to live there, why would you? I’m sure there’s a resort or two on Maui, and you could go every year for less than the cost of annual taxes and maintenance.”
I’m not on Maui, rather the east side of the island of Hawaii, about 30 miles from Hilo. My subdivision has about 60 houses that range from shacks to million dollar abodes. I would guess that about 25% of the owners are part-timers, visiting their homes a few times a year, looking forward to retiring here. In the meantime, they pick up a little vacation rental or regular rental income. Otherwise, you have to have a housesitter live in the house. Property taxes are low, about $100/month on a $300k home. Insurance (fire only) is another $100/month. This cost is really low compared to Houston where I came from. Maintenance is and will be high, but most of the houses are only about 10 years old. Food, electricity, gasoline and airfare are expensive. Few jobs here, but people are creative. Nearest town is 20 miles away. Bananas and avos are good and cheap. There have been a few short sales, 4 structures under construction now.
“A 320-acre ranch property…”
A plot that large is more work than many realize.
St Mary’s and Charles Counties in Maryland are pretty remote and rural, even though they are on the Eastern Shore (between the Chesapeake and the Atlantic). They are very agricultural counties (corn and chickens, in particular). Also, crabs, oysters, scallops, etc.
Because they’re out there on the E Shore like that and they only good way to get to Baltimore or DC job markets is via the Bay Bridge which is a traffic nightmare, jamming up for miles in each direction at rush hours. (This is probably why Annapolis is so overpriced, because it is on the “right” side of the Bay Bridge, off of I-95, near both DC and Balt Beltways, near all the jobs.)
Based on the traffic I’ve been in on that Bay Bridge plus observing the build-up of new strip malls and housing when you head out Route 50 towards the DE and MD beaches, I’m guessing that the vast majority of the people who bought out there to live year-round. Even in a good economy, it strikes me as a bad idea, just based on the logistics.
Googlemaps say that the counties are on the Western shore, between the Potomic River and the Chesapeake. No Bay Bridge.
It’s not too bad of a commute to Alexandria VA by crossing the Wilson Bridge (beltway).
‘In California, foreclosures are way down’
Yeah, but do you know why? I’ve posted it here several times. Have you been paying attention? Here’s a hint; it’s a state law (Jeebus Californians love those laws). OK, not enough? Your publicity hound AG got photo ops talking about it endlessly, so surely you saw it in the papers or on TV.
State’s stricter foreclosure law helps struggling homeowners
By Hudson Sangree
hsangree@sacbee.com
Published: Sunday, Jan. 6, 2013 - 12:00 am | Page 1D
Last Modified: Monday, Jan. 7, 2013 - 5:08 am
Five years after a tidal wave of foreclosures swept California, government is still tossing life preservers to struggling homeowners.
The “homeowner bill of rights,” which took effect Jan. 1, is the latest to arrive amid fanfare from the politicians and consumer advocates who championed it.
The state legislative package codifies some of the changes agreed to in last year’s $25 billion national mortgage settlement, negotiated between federal and state attorneys general and five major lenders, including Bank of America, Wells Fargo and Chase.
The bills’ changes apply to all lenders in California – not just the big banks – and extend the protections beyond the settlement’s 2015 end date.
“Too many Californians have lost their homes despite doing all they can to avoid foreclosure,” said Norma Garcia, an attorney with Consumers Union in San Francisco.
The group, which publishes Consumer Reports magazine, estimates more than 900,000 foreclosures occurred in California from 2007 to 2011 during the recession and housing collapse.
In Sacramento County, about 60,000 homes have been foreclosed on in the past five years. The peak came in 2008, with about 19,000 foreclosures, and tapered off last year to about 4,000, as lenders pursued alternative resolutions and the housing market began to improve.
The new law will help those still struggling, Garcia said.
The homeowner bill of rights enacts changes meant to correct misdeeds that came to light during the foreclosure crisis.
Among them are so-called robo-signing, where banks signed off on foreclosures without ensuring they were warranted, and dual tracking, in which lenders proceeded with foreclosures while at the same time processing borrowers’ applications for loan modifications. Many homeowners complained that they thought they were successfully modifying their loan only to discover they would still lose their home.
The bills that emerged from the Senate and Assembly also seek to curtail the maddening runaround that homeowners got as they were shuffled to lender call centers from India to Indianapolis.
“For too long, struggling homeowners in California have been denied fairness and transparency when dealing with their lending institutions,” state Attorney General Kamala Harris said in a statement on the laws’ implementation.
“These laws give homeowners new rights as they work through the foreclosure process and will give Californians a fair opportunity to stay in their homes.”
…
“The state legislative package codifies some of the changes agreed to in last year’s $25 billion national mortgage settlement, negotiated between federal and state attorneys general and five major lenders, including Bank of America, Wells Fargo and Chase.
The bills’ changes apply to all lenders in California – not just the big banks – and extend the protections beyond the settlement’s 2015 end date.”
Does this mean that the terms of the settlement became effective prior to January 1 for the big banks?
Doesn’t this mean that any significant reduction in foreclosures by the big banks should have already occurred?
Is that reduction in foreclosures by the big banks (if it occurred) a reason why more homes have gone the short sale route?
Is that lack of reduction by the big banks (if there was no reduction) evidence that the result of the new law will be a big yawn?
IMHO, it’s too early to tell if this law will have a meaningful impact on the pace of foreclosures…HOWEVER, I think we can all agree that this law will do nothing to speed up foreclosures, unlike the potential “Rocket Docket” law in Florida, and the vacant/abandoned home foreclosures laws in NJ/IL, which would/will almost definitely increase the number of foreclosures.
http://realestate.aol.com/blog/2013/01/08/20-cities-where-foreclosure-home-sales-should-rise-in-2013/
Lots of Florida markets.
Ben, the new law has been in effect for about 8 days, so I doubt the effect of the law has shown up in the data. The reduction in foreclosures started before year-end.
Important for me is not the number of foreclosures, but whether distressed housing is clearing the market (which includes short sales as well as foreclosures).
Per LPS, the number of non-current loans continues to shrink in CA (and we’ll get more data in the next couple of days for the month of November). If a law slowed down foreclosures, we would see the same thing happen in CA as what happened in NV, the non-current loan rate STOP its decline. We won’t know if that happened (other than anecdotes) until the data comes out.
Through the end of the year, I think most of the decline in foreclosures was more homes going the short-sale route. The new law, while I expect it to further decrease the number of foreclosures, I’m not sure it will significantly slow the number of short sales.
We’ll find out in early March, when LPS comes out with their data as of the end of January…we’ll see if the number of non-current loans stopped decreasing, or just decreases at a slower rate.
“The reduction in foreclosures started before year-end.”
D’ja ever hear of rational expectations?
I thought not…
‘the new law has been in effect for about 8 days, so I doubt the effect of the law has shown up in the data’
I’ve probably posted 10 articles, all the end of last year, clearly stating that the foreclosure cancellations were due to this law. Maybe you think a sudden 70% cancellation rate just happens?
Yup, but I’ve also heard of rushing to the exit.
I’m talking about actual foreclosure sales (ie. the conclusion of the foreclosure). What is more logical, stopping foreclosures that you would prefer to process well before the end of the year (and thus getting snarled up in the new law by waiting)? Or rushing to get them done before the law takes effect?
Since the law was signed in July, there was plenty of time for lenders to plan for the end of the year…and since California’s foreclosure timeline is well defined, lenders could schedule foreclosure sales up to the last week of the year.
In any event, as I’ve noted, if disposing of distressed inventory in fact slowed down because of the anticipation of the new foreclosure law (as you suggest), it should show up in non-current loan rates slowing their fall (or even rising).
However, the most recent data available (October) showed a faster decrease in non-current loan rates (the largest monthly decrease in non-current loan rates in over 2.5 years), we should get the November data in a few days to see if the reduction in non-current loan rates continued.
Ben, yes, however, a “cancellation” (most quote Foreclosure Radar) is a cancellation of the Foreclosure Sale after the notice of sale has been posted, not a cancellation of the foreclosure action itself. Most have surmised that this has to do with a prohibition on “dual tracking”.
However, while there is a spike in cancellations, Foreclosure Radar also shows no appreciable slowdown in the number of homes actually going back to the bank or sold to a third party.
So, if the bank could get the foreclosure sale completed before year end, the data is showing that at least through November, they are appearing to attempt to get that done. The result of this (continued conclusion of foreclosures), combined with more short sales occurring, resulted in non-current loan rates falling faster in California.
We have yet to see if foreclosure sales (back to bank as REO or sold to 3rd parties) have slowed since year-end, or just a slowdown in the practice of having a Foreclosure Sale date actually scheduled while negotiating a modification or short sale (ie. dual tracking).
‘we should get the November data in a few days’
Why don’t you just do a web search?
LPS releases the state-by-state non-current loan data monthly (all loans either delinquent, or in the foreclosure process). This is a key piece of data I track. They give a “first look” toward the end of the month (last “first look” in late December). In that release, they give the big picture national data as of the end of the prior month (end of November), and the date of the next release of their monthly presentation, where, among other things, they present the state-by-state data (also as of the end of November).
The date in their “first look” release notes that the full presentation should be available by January 9th. More often than not, they are late. So, my guess is that the state-by-state non-current data from LPS should be available in the next couple of days.
As of tonight, they only have the presentation for the data as of the end of October available on their website. If you have the time, it is worth it to look through the presentation, and if you have extra time, to listen to the commentary along with reading the presentation (usually 20-30 minutes).
‘LPS releases the state-by-state non-current loan data monthly’
I’ve done work directly for LPS. They have their head up their a**.
Speaking of Sedona, Ben, would you know who owns that house below the Chapel of the Holy Cross? I am always amazed when I go to the chapel, how impressed some people are with it. I think it is a monument to excess.
No, I’ve never been there.
“I think it is a monument to excess.”
+1 That perimeter wall/wrought iron fence probably cost more than my entire house. Oh well, economic stimulus.
‘The original sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000 in 2006, according to county property records. The most recent sales have been for between $135,000 and $157,500…Horry County property records show a $325,000 purchase for unit A-3; $329,500 for unit E-3 and $326,500 for unit E-10…Condos in the Ashley Park development have recently been selling for less than $60,000′
Enough time has passed that most people have forgotten how much fraud there was in the peak prices. And I see comments in the media all the time about ‘when’ we’ll return to those peaks. Although the government is doing what it can to help:
‘His organization…still sees wide swings in appraised value of homes, he said. And loosening regulations could invite more mortgage fraud, he said’
Most of the buyers at the 12-unit Pineapple Bay project included Shelley’s family – including Shelley’s wife, his brother-in-law and sister-in-law – and friends or business associates.”
No cause for concern here: You can always trust your brother-in-law….that’s why your sister married him.
A little pillow talk in 2007: Oh Baby, if you get your sister and brother to pay $500,000 above market value for my condos, it will really get me off! Bwahhahahaha!
Which party were you?
Neither. I am the guy who bought for $130,000 after the $500,000 loss. All twelve, if I could!
“The original sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000 in 2006, according to county property records. The most recent sales have been for between $135,000 and $157,500…”
Stupid is as stupid massively overpays.
How does this happen?
Buyers with $50,000 just give it away without any concerns or research?
In the 1500 block of N. Bethel St., for instance, one unscrupulous investor purchased six rowhouses in 1997 for less than $6,000 apiece. He resold them the same day for nearly $50,000 each to unsuspecting buyers, according to tax records and Sun reports. They were subsequently purchased by the city and demolished.”
They clearly were using OPM.
“unsuspecting buyers” - “low information voters”…same people?
I know the developer of these condos (rented from him for years). I think I was there when this whole idea was born- I went to an open house at an older apartment bldg downtown that had been converted into condos (by another developer). This was early in the bubble and the units sold quickly.
The developer of this project was also there, excitedly asking the other developer questions about who he’d used for this or that, etc. About two years later, he initiated this project. Alas, too late! It didn’t get finished until the boom had gone bust (plus, it was a poor-quality renovation job. They kept the historic fronts, but added totally generic modern crap onto the back, making it feel like you were in a characterless apt community.
Some Kimball House Square condos to be sold at foreclosure auction
More than half the condominiums in the Kimball House Square development on South Limestone will be sold in a foreclosure auction to attempt to raise $4 million owed by developer JTM Holdings to Bank of the Bluegrass.
The $12.5 million makeover, announced in 2005, took five old attached Victorian houses on South Limestone that made up the Kimball House, which over the years was used as residences, a boardinghouse, a sorority house and a hotel.
The 19 condos to be sold are all rented, Frazier said. The other 17 condos were previously sold and are not part of the foreclosure auction.
The burn:
Three of those owners have contacted Frazier saying they thought they had also bought the garages they have been parking in, but which are listed to be auctioned.
“Their contracts each list a garage, that’s true. But there was no legal description or legal document to give them ownership,” Frazier said, adding he had no choice but to sell the garages.
This part sounds strange to me. How can the bids establish the best price if they’re not going to actually sell them at that price?
First, each will be sold individually. “That is to establish the highest and best price,” Frazier said. “We will then sell all the units as a whole, and the highest cumulative bid will be the winning bid.”
Read more here: http://www.kentucky.com/2013/01/03/2463771/much-of-kimball-house-square-condo.html#storylink=cpy
“‘All the ones that are vacation areas or second homes. California, Nevada, Florida, South Carolina. So it’s not that alarming in that regard because it was already shadow of inventory that was really kind of accounted for anyways,’ said real estate expert Blake Sloan.”
What qualifications does this guy have to be deemed an expert?
One of my deceased friends was a search engine optimization specialist. And a good one.
But he was the kind of guy who wore his expertise lightly. He preferred to call himself an “egg-spurt.”
RIP, Will. It’s been seven years. And your many friends still miss you.
I thought the FHA was a provider of financing to help low-income households buy homes?
How did they morph into a flipper-support service and provider of loans north of $700K?
How many low-income households can afford a $729,750 mortgage?
Jumbo Loan Limits for FHA Reinstalled Through 2013
By: Rosemary Rugnetta | December 21st, 2012
Loan limits for conforming loans and FHA loans have been announced. All loan limits have remained the same including those for FHA which means that jumbo loan limits for FHA have been reinstalled through 2013.
The FHA high balance limit is good news for counties across the country that are considered high cost areas. These FHA loan limits impact certain areas, such as California, New York and Virgina, that have counties where the average home cost is higher and larger financing is needed when making a purchase. Borrowers in these areas can continue to use FHA mortgages which have a high balance limit of $729,750.
Although document requirements are similar to conforming and regular jumbo mortgages, the FHA jumbo loan may have additional requirements that are placed by the lender. In addition, borrows must realize that FHA also has an upfront mortgage insurance premium that adds to the total cost of the loan and an annual mortgage insurance premium that adds to the monthly mortgage payment. To help with closing costs, FHA allows borrowers to use seller concessions up to 6% or, in some cases, closing costs can be added to the mortgage. The FHA down payment requirement is only 3.5% which is one of the main reasons that borrowers opt for FHA financing. Credit score requirements for FHA loans are also much lower than for regular jumbo and conforming mortgages.
…
It’s just more fuel for the fire:
‘(Reuters) - More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.’
http://www.reuters.com/article/2012/04/26/us-usa-housing-negative-idUSBRE83P12E20120426
‘Homebuyers in North Carolina have tapped USDA resources for loans when buying property in rural areas. The agency offers 100 percent financing on home loans, sometimes subsidizing the interest rate to as low as 1 percent for low-income borrowers.’
‘Connie Vital, acting housing director for the USDA office in Raleigh, said the subsidy enables borrowers to show repayment ability, making it possible for buyers on a tight budget to qualify for a loan. “As long as borrowers’ income reflects that they need assistance, the government will subsidize that payment,” Vital said. “That’s how we can make affordable housing loans to people who make less than what a conventional bank would accept for a loan.”
‘Lots of renters don’t buy a house because they don’t have the down payment,” Mason said. “With USDA loans, as long as borrowers are creditworthy and don’t exceed the income limits, they could become homeowners.” Even for her clients who have enough for a down payment, Mason recommends financing 100 percent of the home purchase, if they qualify for a USDA loan. Mason has had many clients, including single mothers, who would not have been able to buy a home had it not been for the USDA loan programs.”
http://www.newsobserver.com/2012/06/25/2158688/usda-home-loan-program-helps-buyers.html#storylink=cpy
And check this out:
http://ficoforums.myfico.com/t5/Mortgage-Loans/Getting-a-USDA-loan-while-in-default-on-a-mortgage-IIB/td-p/812434
And this:
‘While slashing funds for disability, elderly, homelessness and Native American housing programs, Congress has doubled the funding for a USDA housing program that may cost the government $4 billion in defaulting loans because over a third of the government-guaranteed rural home loans in its portfolio may be ineligible for the program. On April 15, President signed into law the continuing resolution to fund the government that, despite concern over the deficit, included increased funding for the USDA’s Rural Development Service’s Section 502 single family guaranteed loan program from $12 to $24 billion annually for the current year as well as the next Federal fiscal year.’
‘In January, an inspector general’s report discovered that the government may have given out more than $4 billion in stimulus housing loans to ineligible borrowers. ‘In a couple years, when these loans are going bad, everybody’s going to say, ‘Oh me, oh my, how did this happen?’ ” Christopher Whalen, managing director of Institutional Risk Analytics, a bank rating and consulting firm, told the New York Times. “There’s no surprises here.’
http://www.realestateeconomywatch.com/2011/04/congress-doubles-funding-for-troubled-usda-housing-loans/
If it wasn’t so important, it would be humorous to listen to posters here quibble about who was to blame for the bubble. We have a giant problem forming right now, out in the open, and there isn’t any question who to blame. It’s the federal government making these ’subprime’ loans. Twisting even the tax code to keep the shell game going. And the Fed is buying MBS to grease the entire thing. “How did this happen”, indeed.
IBD Editorials
Perspective
Next Big Gov’t Housing Bailout: Federal Housing Administration
By Mark A. Calabria
Posted 01/07/2013 05:11 PM ET
The Federal Housing Administration (FHA)’s 2012 audit confirmed what has been obvious for some time: The FHA is deeply underwater, with a negative economic value of $34 billion.
With over $1 trillion in mortgages backed by the FHA, even minor changes in the housing market could add tens of billions to that total. A taxpayer bailout is inevitable.
What isn’t inevitable is the size of that bailout. The FHA has been sunk not by a housing bust, but by policy choices. Better choices can reduce the size of the hole.
At the height of the housing bubble, in 2005 and 2006, the FHA’s market share, by dollar volume, hovered around 2%.
Although its loan quality at the time was poor, characterized by the combination of low borrower equity and poor credit quality, the ultimate losses should have been relatively small.
FHA officials, however, chose to see the contraction of private lending as an opportunity. The decision was made to blow more hot air into the deflating housing bubble.
The outcome was all too predictable. Despite being almost nonexistent at the bubble’s peak, the FHA now serves about a third of all underwater borrowers. The number of homebuyer policies the FHA holds has increased almost 400% since the bursting of the bubble.
Taxpayers face a rescue likely in the tens of billions of dollars unless Congress and the FHA immediately reform the FHA’s practices.
The FHA has succeeded over the years in offering lenders something almost no one else will: a cheap way to pass on risk to the taxpayer.
Unlike private mortgage insurers who usually cover the first 20% to 30% of losses, the FHA protects the lender from 100% of loss.
Even in today’s real estate market, it should not be possible for a loan to go 100% bad unless there’s some fraud or negligence on the part of the lender.
…
1) So, the government is trying to debauch lending again.
2) The last time this happened, the government and central bank just took the bad debt off the private holder’s hands. And said, “We can do this indefinitely.”
3) The Fed just noted that there is now more general concern about further bond buying by the Fed due to unintended consequences.
Number 3 is a CRACK heard from a massive overloaded timber. And instead of trying to force better lending and reduce overall debt, the government and Fed are trying to push the impression that their bad debt uptake can last forever.
THAT’S the scenario people like me have been curious about
- what if the government support of the housing market, which is all that is supporting the prices now, cannot continue indefinitely?
And people like me were also curious about how the market could continue in the mid 2000s, when the recommendation was serial flipping when the mortgage became unaffordable. The simple question was then, ‘can house prices increases really continue indefinitely? What if they just level off? What then?’
The question is today, what if the Fed and government are forced to back off their support of the housing market?
“…- what if the government support of the housing market, which is all that is supporting the prices now, cannot continue indefinitely?”
That’s my question, too.
And a follow up: What could possibly stand in their way?
Instead of trying to increase “reserve capacity” - the bullets they have to fight future financial crises - the government and Fed seem hell bent on avoiding fixing the structural problems while expending all their ammo (which not so coincidentally enriches the crony sectors).
But Japan. 200% debt to GDP and growing. If they can do it, so can we, right? Well there are differences. Balance of trade differences, ZIRP in an inflationary versus deflationary environment, different savings rates. Will those differences be consequential? And will Japan ultimately be able to avoid any negative consequences from its debt?
Global GDP is 69 trillion dollars. The Fed’s balance sheet is 2.9 trillion. US government spending is around 4 trillion dollars.
The US is very much a non-insular economy. It is an extremely globalized economy. So its a 7 trillion dollar fish in a 69 trillion dollar pond.
So the Fed doing unsterilized government debt buys smacks of recklessness and desperation.
We’re going to grow our way out of this? Really? At the end of WWII, the rest of the world lay in ruins and the US reached the peak of empire. Today, the US is a mature economy like the EU (kind of hate to talk of them as monolithic, see Germany/Greece for the differences) and Japan. We got away with having a massive debt and not paying it off once and letting GDP growth get it down to a sustainable level of GDP.
So, when what happens happens, and we look back and say, “Ahh, those were the key factors to lead to this outcome,” what will those factors be?
Well.. kicking the can down the road with more and more debt and hoping the structural factors somehow fix themselves, while encouraging the bad behaviors which cause those problems seems like a recipe for, at best, stagnation and decline.
To me, it points to a market still on life support. Can’t touch FHA jumbo limits. Can’t let interest rates rise. Can’t require bigger down payments. Can’t allow the income tax forgiveness on short sales to lapse. It goes on and on.
“To me, it points to a market still on life support.”
And the patient is dying anyway.
The PTB are “all-in,” suggesting that extraneous factors which force them to reduce housing market price supports could have effects which “nobody could have seen coming.”
“To me, it points to a market still on life support. Can’t touch FHA jumbo limits. Can’t let interest rates rise. Can’t require bigger down payments. Can’t allow the income tax forgiveness on short sales to lapse. It goes on and on.”
Exactly… it goes on, until it can’t.. wish I could foresee how long that will be in the future.. I do think Japan is a good predictor for for what we’ll see, which is a slow decline and decay of housing for a long while after we get through this current period of bubble amnesia..
I also get a chuckle out of main stream media talking about the end of QE.. yes, Bernanke and company may stop buying treasuries or houses for a while sometime in the future, but that pause will only last as long as the economy holds up.. they’ll be right back to easing and QE en’ infinity when the economy turns again.. so, bottom line, at the end of all this madness, the Fed owns all the mortgages.. what then ?
“the Fed owns all the mortgages…what then?”
REO-to-rental (brings to mind toilet-to-tap water purification systems…)
General Information
REO and Vacant Property Strategies for Neighborhood Stabilization, a summit examining the community impacts of foreclosed and vacant properties, will be held September 1 and 2, 2010 at the Federal Reserve Board’s Martin Building in Washington, D.C.
The aftermath of the foreclosure crisis has left many communities struggling with large swaths of empty homes. The event, co-sponsored by the Federal Reserve Board of Governors and the Federal Reserve Banks of Boston and Cleveland, will help communities and practitioners better understand current barriers, promising practices, and regional differences related to neighborhood stabilization and the disposition of real estate owned (REO) property.
In conjunction with the event, the Federal Reserve will publish a new volume of papers that explores such regional differences and presents perspectives from the various participants involved in REO disposition–sellers, buyers, nonprofits, and municipalities. Finally, the summit will release key findings from a Federal Reserve research project on local uses of Neighborhood Stabilization Program funds.
After the event, PDF, text, and audio podcast versions of the panelists’ presentations will be available for download.
REO and Vacant Property Strategies for Neighborhood Stabilization is a Federal Reserve System initiative under the Mortgage Outreach and Research Efforts (MORE) group.
Apparently, a commonly understood goal of Fed housing policy is to reduce housing affordability.
REO To Rental Fed Plan Would Do Little For Housing, Says Goldman Sachs
Goldman Calls Out Bernanke
Loren Berlin
First Posted: 01/06/12 02:36 PM ET Updated: 01/06/12 06:30 PM ET
The Federal Reserve’s foreclosure rental program would do little to lift the ailing housing market, Goldman Sachs analysts wrote in a research paper released on Friday morning.
The analysis, written in response to a Federal Reserve paper released earlier this week, calculates the nationwide effects of renting foreclosed properties as “positive but modest,” possibly fostering a 0.5 percent increase in home prices in the first year of program implementation, and a 1 percent increase in the second year. But those are Goldman’s maximum increases, and the researchers are quick to add that the “actual effect would likely be less.”
According to Goldman, three factors limit the program’s potential. First, there is the possibility that some of the foreclosed properties that would become available for rent could sit vacant as rental properties, meaning that while the homeowner vacancy rate would decline (because the home has never come up for sale), the vacancy rate on rental properties would not, merely pushing the problem of vacant structures from one part of the market to another.
Goldman researchers also argue that the program likely wouldn’t do much to decrease the overall availability of homes for sale, which is one of the biggest problems currently plaguing the American housing market: There is too much housing supply relative to the demand. As Goldman sees it, even if every single foreclosed home owned by Fannie Mae and Freddie Mac — the two government-owned mortgage giants that would sell the foreclosed homes to investors in any federal rental program — shifted to the rental market, banks and large investors that have held off on selling some of their foreclosed homes would likely bring them on the market, in effect perpetuating the problem of too many homes for too few buyers.
Finally, the Goldman analysts assert that some of the foreclosed properties aren’t suitable for rental, either because of the home’s condition or location, or because the economics of renting that specific home are unappealing to an investor. Though there’s no easy way to determine what percentage of homes would be inappropriate for renting, Goldman suggests that as many as half of Fannie Mae’s and Freddie Mac’s homes wouldn’t qualify, indicating that a rental program couldn’t scale up to the size necessary to change the dynamics of the housing market in a meaningful way.
That some homes are unsuitable to rent is acknowledged in the Fed paper released Wednesday. But exactly because it’s hard to get a sense for how big or small this issue would prove to be, the Fed’s analysis on the issue remained very limited.
Goldman is not alone in its skepticism. Jed Kolko, chief economist at real estate website Trulia.com, agrees that the program is likely to have limited impact. “The typical government-owned home tends to be in areas where rental vacancies are higher than average and where more people are likely to be homeowners,” he told HuffPost, “so there’s a mismatch between where the stronger rental demand is and where these vacant homes are. So, while renting out homes is definitely worth doing and it will help stabilize neighborhoods where those homes get occupied, it’s only a very small piece of a very big, messy housing picture.”
…
“Goldman Calls Out Bernanke”
More good banker, bad banker from the MSM?
Jan. 8, 2013, 7:01 a.m. EST
The year of the jumbo, jumbo mortgage
Surge in big loans last year fueled by falling interest rates
By AnnaMaria Andriotis
For home buyers, 2012 was a year when loans dwarfed the definition of jumbo.
Private jumbo loans start after $417,000 in most parts of the country—or exceed $625,500 in pricey metro areas like New York and San Francisco. But lenders say they’ve been doling out loans that far exceed these amounts.
“We see quite a bit of volume over $1 million…[which] did increase this year,” says Brad Blackwell, portfolio business manager for Wells Fargo’s home-mortgage unit.
Overall, lenders distributed $148 billion of private jumbos over the first nine months of the year, up 23.3% from the same period a year ago, according to data compiled by Inside Mortgage Finance, a trade publication. Originations for the year are on pace to be the highest since 2007.
The jumbo surge overlaps with a spike in luxury real-estate sales. For much of the year, sales of existing single-family homes priced at $1 million or more have been on the rise. In November, sales volume increased 52% from a year prior, according to the latest data by the National Association of Realtors.
Buyers’ appetites for pricier homes and bigger mortgages were fueled by interest rates that hit new lows this year. Fixed rates on 30-year private jumbos average 3.92% for the week ending Dec. 21, down from 4.61% a year prior, and 5.58% for the same week in December 2010, according to mortgage-info website HSH.com.
While many wealthy home buyers could pay for their home outright, the low rates provide an incentive to opt for financing instead. As rates drop, so do the monthly payments and overall interest charges. Also, borrowers can usually deduct mortgage-interest payments on a total of up to $1 million of mortgage debt.
The sleepy Caribbean island of Great Exuma has turquoise-clear blue waters, plenty of sunshine, and now, real estate bargains. Photo: Jennifer and Guy Miller.
Wealthy buyers, in particular, are being courted by large banks with special deals. Wells Fargo, currently the country’s largest private jumbo provider, is discounting mortgage rates for some clients who maintain at least $1 million in assets with the bank, including in its savings and brokerage accounts. Bank of America offers a 0.50-percentage-point discount on points—optional fees borrowers can pay up front in exchange for a lower rate—paid toward mortgages for customers who have more than $250,000 in assets with the bank.
Matt Vernon, home-loans sales executive at Bank of America, says existing customers accounted for nearly 9 out of 10 of the private jumbo mortgages it distributed this year.
To qualify for the lowest rate, buyers will need to meet several lending requirements, including high credit scores and proof of income.
Lenders, who in most cases keep private jumbos on their books, say they closely vet applicants to ensure that the risk of default is very low. They stand to benefit from high-caliber borrowers—especially those who sign up for adjustable-rate jumbos. When the Federal Reserve raises rates, banks will have to increase the rates they pay out on deposit accounts, but they’ll receive bigger interest payments from ARM borrowers whose rates will rise.
Here are some strategies to consider when shopping for the best deal on a jumbo.
…
Looking for a $1m+ home in San Diego County? You have plenty of choices, according to Redfin dot com:
Number of currently-listed homes = 4210
Number listed at prices north of $1m = 1006 (1 out of 4 current listings)
I’m pretty sure that a lot less than one out of four San Diego households can afford to buy a $1m home…
P.S. There is something like 1 million homes in the San Diego area, of which only 4,000 (4 out of 1000 or 1 out of 250) are currently listed. However, given the typical homeowner is age 55 or so and will me moving on to age-suitable housing over the next couple of decades, if I were a young family, I wouldn’t hurry up and buy now. There will be plenty of shadow inventory available over the next few years…
Redfin is getting really sucky. You can no longer look back over the past decade to see how far prices fell. These scam artists are working their hardest to hide recent history.
But I have advice for you greater fools: There has never been a better time to catch yourself a falling knife in the real estate market.
http://www.bloomberg.com/news/2013-01-09/blackstone-steps-up-home-buying-as-prices-jump-mortgages.html
The following line is consistent with my understanding of how others are making the acquisitions…cash up front, back-fill with relatively modest amounts of debt (60% leverage in this case, vs. 80%+ for typical individual buyers).
“Blackstone currently buys all of its homes with cash and then finances pools of houses with up to 60 percent debt. Conventional single-family home mortgages are financed with a 20-percent down payment.”