Unprecedented Circumstances In California
The California realtors have the June sales numbers. “Home sales decreased 24.7 percent in June in California compared with the same period a year ago, while the median price of an existing home increased 3.2 percent, CAR reported today. ‘The focus on foreclosures and subprime lending is ongoing and, coupled with higher inventories of homes for sale, is prompting many would-be buyers to play a ‘wait-and-see’ role,’ said C.A.R. President Colleen Badagliacco.”
“‘With just over a 10-month supply of homes for sale on the market, we expect further softness in prices in the coming months,’ said CAR Chief Economist Leslie Appleton-Young.”
The LA Times. “Southern California…saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
“‘In the beginning, we were thinking the foreclosures were going to be limited to low-income, high-minority neighborhoods targeted by predatory lenders,’ said Ester Cadavid of Los Angeles Neighborhood Housing Services. ‘Now we’re seeing a shift to the middle class.’”
“Among the hardest-hit areas are Riverside and San Bernardino counties. Their low prices drew first-time buyers who used adjustable loans. More than 1 out of 5 foreclosures in the state take place there.”
“‘These are unprecedented circumstances,’ said John Husing, an economist at Economics & Politics. ‘Anyone who says they’re not guessing is a liar.’”
The San Francisco Chronicle. “The number of Bay Area homes lost to foreclosure during the second quarter hit the highest level in almost two decades, and the region’s homeowners also received a record-high number of mortgage default notices, according to a report to be released today.”
“California also set a record in the April-to-June quarter for the number of foreclosures, according to DataQuick. ‘Folks borrowed beyond their means in larger numbers because of how common creative financing became,’ said Andrew LePage, an analyst with DataQuick.”
“Contra Costa County, with 2,316 such notices, and Solano County, with 1,065, both set records, LePage said. The Contra Costa cities of Pittsburg, Antioch and Richmond are cropping up as hot spots for foreclosures and defaults, he said.”
“One ominous change is that notices of default increasingly are leading to foreclosure. This year almost half - 45.4 percent - of notices of default resulted in homes being lost to foreclosure. A year ago, only 12 percent of notices of default resulted in foreclosure.”
The Orange County Register. “Orange County…recorded 2,984 notices of default in the second quarter, the highest since 3,116 filed in the first quarter of 1998. The record was 6,422 filed in the first quarter of 1996.”
“Marshall Prentice, DataQuick’s president, said many of the loans going bad were made at the housing market’s peak or soon after, between the summers of 2005 and 2006.”
“‘Appreciation rates for most of that period were in the double digits and lenders let many households stretch their finances to the max, and beyond,’ Prentice said in a statement. ‘It’s that pool of ‘beyond’ mortgages that the market is working its way through.’”
The Union Tribune. “Home foreclosures in San Diego County continued a troublesome climb into record territory in June. DataQuick reported that during the first half of 2007, San Diego County had 2,896 foreclosures compared with 445 during the first half of 2006, a 551 percent increase.”
“That sets a record dating to 1988, when DataQuick began tracking foreclosures, researcher John Karevoll said. ‘A steadily increasing portion of those who get notices of default now are being foreclosed on.’”
“From May to June, county foreclosures increased from 532 to 657, a 24 percent increase and a record for any month since 1988.”
“‘It still is not a major factor in the real estate market, but if there is a recession, it could become a huge factor,’ he said.”
“Ryan Grothe thought he was making the right decision when he moved his family into a two-bedroom condo he purchased in Rancho Peñasquitos in late 2005. Their one-bedroom apartment had become cramped, and he wanted a roomier place for their daughter.”
“A year and a half after moving into their new home, the Grothes are renting again, unable to make the nearly $3,000 monthly payment on their $370,000 loan and are facing foreclosure.”
“‘The lenders told us if we didn’t do something, our place would go into foreclosure,’ said Grothe, who is hoping to sell the condo, but for far less than the purchase price. ‘We had called both lenders trying to refinance and they said, ‘No, the property values are going down and you’d have to fork over money in advance to refinance.’”
“‘I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this, that we would need to refinance, we’re starting to fall behind, and it just amazes me that they help you get into these places and when you need help, they run the other way.’”
The Fresno Bee. “Fresno County saw foreclosures jump a whopping 134% in the second quarter, compared with the same period last year, as the once high-flying real estate market continued to plummet.”
“‘This is unquestionably the worst I’ve seen,’ said Bill Pfeif, a 30-year veteran agent in Fresno who sells lender-owned real estate. ‘Every week, the pace increases. You just wonder where it is going to end.’”
“Pfeif, who is trying to sell nearly 200 lender-owned homes and estimates one of every 10 houses on the market is a troubled property, thinks 2008 will be even worse.”
“The vast number of foreclosed properties contributes to a glut of properties on the market. Nearly 6,000 single-family homes are for sale in Fresno County, which Pfeif said is nearly a record. Add new homes offered by builders, and the likelihood of a recovery soon seems distant.”
“Real estate analyst Robin Kane of Fresno said home values skyrocketed beyond the ability of families to pay and are now falling back to earth.”
“‘The pendulum swung pretty far to one side, and now we are seeing balance being brought back to the market,’ he said. ‘There is a demand [for housing]. But it got out of reach and kept going because of the crazy debt [that] people were willing to take on.’”
The Appeal Democrat. “Foreclosure activity is picking up the pace with Yuba County leading the state in its percentage increase in default notices, according to a report issued Tuesday.”
“Second-quarter 2007 notices of default nearly quadrupled in Yuba County over the same quarter a year ago, according to DataQuick.”
“Yuba County’s median home price decreased by 10.4 percent in June 2007 compared with a year ago as the once-hot Sacramento housing market chilled, while Sutter County’s home prices were down 8.5 percent, said LePage.”
“‘Sacramento is the weakest large market in the state,’ said LePage.”
“Homeowners with two-year, adjustable subprime mortgages comprise some, but not all, of the three foreclosure-related calls per week that Bimal Mann, president of Trinity West Mortgage Inc, has been getting lately.”
“People whose incomes fell or who lost jobs can also face problems, as do homeowners whose ‘teaser rate’ mortgage allowed them to get into a bigger home then they could afford, as well as those who borrowed against the home’s value to get equity.”
“‘Some consumers just did it to themselves,’ said Mann.”
“Falling home values also present a problem, particularly in pocket areas like Plumas Lake that have seen home values fall as much as $100,000 to $150,000, said Mann.”
“‘The value dropping as fast as it’s been has not helped the situation,’ she said.”
From KSBY 6. “Compared to last year, default notices are up by more than 195 percent in Santa Barbara County. In San Luis Obispo County, it is by more than 163 percent. Pages of local foreclosed homes can be easily found on the internet.”
“‘If the market price of the house falls, then you wake up one morning and you owe more than what it’s worth,’ said San Luis Obispo resident Jim Stahl.”
“Real estate broker Gretchen Ricker said she has not only seen clients, but friends fall victim to a lack of financial planning. ‘They go through the whole grief process, denial, and anger and ultimately acceptance,’ Ricker said. ‘But unfortunately, the acceptance part hits a little bit too closely to the end.’”
“Joyce Maloney, credit counselor with Consumer Credit Counseling Service, said high interest, risk loans, and creative financing are now catching up with homeowners as the housing market slows down. ‘It’s a sad situation, but it’s the sub prime lenders that created that situation, so they lowered the bar and let anybody buy a house,’ said San Luis Obispo resident Ron Hatch.”
“But Ricker has a different opinion. ‘If you wanted to put fault into the conversation, the fault might lie in not planning ahead,’ Ricker said.”
Here is the DQ/CAR table with more detail.
Anyone want to try the old, ‘but it’s coming from such a low base’ line? Oh wait, here’s one from the AD link:
‘DataQuick analyst Andrew LePage noted that the increase is from a small number a year ago. ‘Yes, there’s a big, spectacular increase from unspectacular levels a year ago,’ LePage said.’
Also, are you a frequent commenter on this blog and you have lost your job in real estate? Former realtor, mortgage broker, escrow officer, appraiser, etc? A reporter for a major regional newspaper in California is looking to talk to real people whose livelihoods have been affected by the market downturn. If so, send an email with a short description and contact info to:
thehousingbubble@gmail.com
(BTW, I’ll be happy to forward contact info from any appraisers out there who lost jobs/business because you wouldn’t play ball during the boom!)
From record lows to record highs all in about a year! Sacramento foreclosures are now TWICE as high as the 90s peak:
2007 Q2: 1,662
90s Record: 703 (1997 Q2)
Sacramento County Foreclosure Graphs
“It was a bad time to buy,” she said. Christine McCullough will lose her Natomas house to the bank in September.
Story in the Sacramento Bee on record foreclosures.
http://www.sacbee.com/103/story/290365.html
Ben -
We have a couple realtors out of a job … however this one hits home… I doubt many in Realtors be interested in talking to anyone considering the criminal nature of their actions.
Broker linked to fraud claim
EMPLOYEE’S ALLEGED PLOT COULD COST BOSS HIS LICENSE
State regulators are trying to revoke the license of a prominent San Jose real estate broker over $2 million in fraudulently obtained loans on four Central Valley properties.
A complaint by the California Department of Real Estate faults East San Jose broker Bic Pho for allegedly failing to properly supervise one of his agents and to monitor the actions of two companies he operated: Vision Quest 21, a real estate brokerage now in bankruptcy, and Mariposa Mortgage, which Pho headed until February.
Pho could not be reached for comment, and his lawyer declined comment until he has seen the complaint.
The state also alleges that Vision Quest failed to keep three years’ worth of records and failed to produce canceled checks and other trust records when investigators asked for them.
Until recently, Vision Quest operated several local real estate businesses, including Century 21 Su Casa, Century 21 Ruby, Aborn Prestige Homes and Estates, and Su Casa Realty. Vision Quest recently filed for bankruptcy, listing among its creditors 46 plaintiffs who have sued the company.
http://www.mercurynews.com/realestatenews/ci_6457729?nclick_check=1
“Real estate broker Gretchen Ricker said she has not only seen clients, but friends fall victim to a lack of financial planning.
Listen to this POS.
How many financial lives has this witch destroyed with her “better buy now or be priced out forever” sales huckstering.
And so when the roof caves in, it’s oh well, people should have been more aware.
These RE sales people are truly despicable.
“These RE sales people are truly despicable.”
This has been going on for years around my part of California. It will take considerable declines to get back to reality. We been having fake multiple bids, fake doc loans, and ton of POS from realtors for years around here. None of this has been legit IMHO for close to 10 years running!
Its offical. Realtors are despited/hated more than lawyers!
They have one very important common trait, which is the way you can tell if they (Realtor or attorney) are lying: Check whether their lips are moving!
What? You don’t think exploiting the stupid is an honest profession? Too bad. It’s about time that stupid people find where they truly belong. Oh, and may I add, these people combined greed with stupidity. They all knew full well they were banking on house prices continuing to go up so they could get some “free money” (as my about to be bankrupt bubble buyer friend calls it). I’ll bet virtually 100% of the applications for loans above 250k were fraudulent. During the early 90’s my household made 140k/year and the bank gave us a hard time for a 200k loan and our credit is perfect (they wanted 10% down but we, being first time purchasers didn’t want to give them more than 5% just in case something went wrong and we had to bail).
Stop feeling sorry for these people unless they prove they didn’t lie on their loan application.
I’ll say it. It’s coming off a low base. Actually its come from dirty use of statistics. Foreclosures have NO reason to be compared YoY for most purposes. You want to know the percentage of foreclosure vs other sales. And those numbers are just as bad — but they are the real numbers you should look at. I don’t want median house prices, I don’t want percentages foreclosures have increased. I want occupanies numbers, time on the market, percent of empty, REO vs occupied. These are real market making numbers. Median and foreclosure deltas are just headline sound bites.
Yeah, I know. You said it it yesterday too. I have laid out the numbers as plain as I can. You have to go to the links and read the details. These are record numbers of homes in default in California and we have barely gotten started.
I would like to see foreclosures reported by Zip codes so we can see the blighted areas. This will show us the pattern of RE movement within a city and/or movement out of or into the city proper.
The LA times has a foreclosure by zip coded graph. Google it or search in their web.
Hey, here you go. This is in a coworkers neighborhood. I think it’s around Temecuhell, California or Moron-o Valley. He knows this to be factual by sources other than zillow also.
http://www.zillow.com/HomeDetails.htm?zprop=17914224
That’s what, a 50% drop in house value? It was sold as a foreclosure.
Helooooo! McFly! The first ones to lower their prices to sell get the most money!
I would like to see foreclosures reported as owner-occupied or other.
Don’t you know they’re all owner occupied?
“Southern California…saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
Ben, setting records in the second inning of this game is what makes one wonder, “where will this end”. 1996 was when the market “activity” finally started to pick up in O.C. after 5 slow years. So peak REO’s took place at the END of the 5 year down market. Sooooooooooooo “where are we 2-4 years from now????????
‘1996 was when the market ‘activity’ finally started to pick up in O.C. after 5 slow years. So peak REO’s took place at the END of the 5 year down market.’
Bill, thanks for the insiders recall. IMO, these Dataquick numbers are huge and show the slope is much steeper than anyone imagined. That’s why the industry is so freaked out in CA.
I don’t understand why everyone is so surprised. This was predicted months ago here. had big debates about it. I actually called summer, It’s going according to schedule. Why the surprise here?
“Why the surprise here?”
Not sure it is surprise that is being expressed… more like shock and awe.
we haven’t even hit the big 2008 reset party, this is nothing. Foreclosures will set a record high next year… right after the Superbowl of course LOL
Good catch by Broker Bill. In my area of coastal Los Angeles, prices peaked in 1990 and hit bottom end of 1995, beggining 1996. So the last peak in foreclosures was after close to 6 years of prices dropping. We are only about 1.25 to 1.5 years from peak in prices so far this time…..
Most events follow a sort of sine wave, bell curve kind of deal, like a roller coaster. We’ve just barely gone over the top! We’ve got months, maybe a year until we’re at the midpoint where the ride is downhill at full speed. Save your pennies to buy up some properties cheap. Oh boy oh boy oh boy I can’t wait.
The numbers are wonderful. A 725% increase in anything sounds like a like to the numerically illiterate and this info will only help to educate the uninformed.
As usual Ben thanks for giving those us of allergic to the chemical additives in kool-aid a place to call home!
Does anyone know why the Alameda County statistics are missing?
Leslie saying prices will further soften? Say it ain’t so B!tchdog. Real Estate never goes down. You even told us that!
Oh… they didn’t go down!
They just got “softer”.
They just got “softer”.
Just like Leslie’s husband
Prices will get as soft as a pillow or a bowl of jello…
So how do you soften a 60%+ correction like the one we face here.
St. George Utah
Population: 90,354
Market forecast (June 2006-2007) -7.5%
5-year historical change (2001–2005): +71.6%
5-year historical change, average annual: +11.4%
Change last year: +35.3%
FORECAST FROM FISERV CSW AND MOODY’S ECONOMY.COM
5-year Historical rise of +11.4%, yet prices at +60% above that number.
“‘It’s a sad situation, but it’s the sub prime lenders that created that situation, so they lowered the bar and let anybody buy a house,’ said San Luis Obispo resident Ron Hatch.”
And here I thought it was the irresponsible borrowers who created the situation. Damn this personal responsibility character trait of mine, always confusing these issues for me!
“so they lowered the bar and let anybody buy a house,”
so this was the demand the CAR was talking about. I hardly call this real honest demand. Reminds me of the rolling black outs we had in NorCal. After they busted Enron the black outs stopped. It turned out that Enron was cutting the power and overcharging California to the tune of $9B… same idea but different players.
“I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this,’”
Back in 1986 I walked into a car dealership and said I can’t afford more than X. I think it was $4000, but I’m not sure now. Maybe $5000.
They ran the numbers and said I could qualify for way more. I said I was not going to pay more than X!!!! So, he showed me several cars that were very nice. Of course, no sticker in the window but now way were they X or less. “you can’t sell me that car for X”, I say. “Oh, you’d be surprised what we can do”. Two hours later when I refuse to budge on X he says “I can’t sell you that car for X.” That is what I said 2 hours ago… and I walked out the door.
4 years ago my (now) wife said she was not paying more than $120K for a house. Oh, but you can qualify for much more, and they pushed her hard to buy for more. She did eventually buy for $130K…. but not the $160K house the realtor and lender were pushing her towards. $370K for a condo???? No sympathy!
“I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this,’”
I love how they say this, as though the realtor, lender, etc. held a gun to their head and made them sign the papers. The fact that they apparently knew they couldn’t afford it, yet signed anyway, leaves me with no sympathy for their current situation.
they may not be making any more land; however, ignorant greedy dumbsh*ts are in ample supply.
I’m all for the personal responsibility angle, but i think it is insufficient. People being what they are, there will always be someone who can be led astray by greed and irresponsibility… which is just to say that blaming the borrower doesn’t really get you anything. The market volatility that they have created still adversely affects me and schadenfreude won’t help me buy a house in an inflated market.
on the other hand, the lenders can be regulated. real estate deserves (at least) the same regulation and transparency that securities markets have.
I try and I try and I try to sympathize with these folks.
At the end of the day, though, you gotta realize what you can afford and stand your ground. Also realize that as nice as these brokers are to you, the minute you sign and leave the office, the relationship and all the warm fuzzies are gone on the broker’s side. Unless, of course, you bring them more business in the future….
Please tell me I’m not the only one who wanted to talk to this guy and discuss the options available with a Joshua tree. Please tell me I’m not the only one curious to see how he would “get back” if said Joshua tree was left on his porch with a set or armored gloves?
Got popcorn?
Neil
Long time lurker. The last few days there have been tons of comments about Joshua Trees - what is that all about? Some sort of poison tree and a$$ reaming or am I off base? We don’t get these up here in Canada so am a little confused.
Kelowna,
Joshua trees are a kind of cactus. Very large and very prickly.
See post below……, but yeah, you got it.
If you’re from Kelowna BC I’m wondering if you can give an update on the Real Estate market up there. I have family in RE up to their gills in Kelowna and I’ve warned them but to no avail. What is powering Kelowna’s RE market at this point?
I’m from Edmonton and I think what is driving real estate in Kelowna is the Alberta Wealth that is pouring into the recreational areas of BC. The okanagan has always been a vacation spot for lots of Albertans and with all the oil money being generated it is finding a home in kelowna and BC realestate. I have a rental property in Edmonton, a condo, that has skyrocketed in value from 140K to 360K in two years. I plan on selling to someone who has moved into our city to find work and then buying some rec property in kelowna for rtirmenet 10 years down the road.
I’ve been watching the Kelowna market for the last 2 years since moving here and Alberta wealth is only 1 of the reasons John suggests are whats driving this market. There are a ton of Europeans and Aussies buying condos just in the last year or so which is also adding to the mix. Skking this past winter at Big White I would say pretty much every third or fourth person was from overseas and quite a few of those were seriously interested in second homes due to Canada being so cheap. John, I would suggest to hold on a bit as we’re starting to get rumblings of slowdowns because of bumping up against affordability. The local paper here last week reported average June MLS stats for SFH are $504,912 (compared to $262,085 in 2003) so the bubble is still on full boil but with an average wage in Kelowna of under $40K affordability is a massive issue. My gut feel is the tipping point is getting close because in my area the houses from this spring are almost all still sitting and sales volumes are starting to drop. Where Florida is now I think Kelowna will be in maybe 1-2 years.
OK Neil I’ll bite
What do you mean with this Joshua Tree business?
It’s not Neil’s fault, actually. I’ve long been on a quest for the perfect ass-missle since this whole debacle began. One day while thumbing through some old desert pics I came across the sturdy Joshua and said “Ah yes, that’ll do.” Stay tuned, though. I was watching the Discovery channel the other night when it dawned on me that kicking a Stonefish up someone’s stinker might do the trick too.
I should have credited you ex-nnvmtgbrkr with the Joshua tree.
For those questioning, it is a huge cactus-like tree. The Joshua tree national park saw me hiking there every summer for just under a decade as a kid. If someone is in need of an a$$ pounding, it seems to be the best tool.
I miss a poster called Auger-Inn. His humor towards the REIC was mono-focused.
As to the stone fish… I had to Wikipedia it. Nasty. “It is the most venomous fish in the world.”
I prefer vegetable matter for such a duty though.
Neil
Kind of tough on the poor fish
No credit needed my friend. Your popcorn has kept the munchies at bay.
Vegetable matter does carry a wide variety of ass worthy projectiles, and now that I think about it, James does have a point - leave the animals out of it. Lord knows what the gerbils have been through.
Don’t forget Txchick’s trout of doom.
“I’ve long been on a quest for the perfect ass-missle since this whole debacle began.”
Have you considered barrel cacti?
http://upload.wikimedia.org/wikipedia/commons/thumb/a/ab/Echinocactus_grusonii_-_golden_barrel_cactus_-_status-endangered.jpg/657px-Echinocactus_grusonii_-_golden_barrel_cactus_-_status-endangered.jpg
In deference to the states at the heart of the housing bubble I think a combination is in order.
Sable Palm,Joshua Tree and Saguaro. I believe the combination offers both the best effect and keeps the situation in the individual states in perspective.
is that the fish in the amazon that swims up your…
ROTFL
To think I normally have a pretty intellectual career…
And then I start this thread…
Got A$$ projectiles?
Neil
What about that fish in shark tale that puffs up whenever he gets nervous? Imagine that happening inside a FB’s rectum..
‘We had called both lenders trying to refinance and they said, ‘No, the property values are going down and you’d have to fork over money in advance to refinance.’”
(snip)
“….we would need to refinance, we’re starting to fall behind, and it just amazes me that they help you get into these places and when you need help, they run the other way.’”
What amazes ME is that these people never considered that most people “back in the day” only had one mortgage and ONLY refinanced if the rates went down appreciably. We knew what our payment would be and were comfortable with it FOR LIFE - no need to scurry back to Predators Anonymous to re-fi every few months.
When you’re pointing the finger of blame at the lender (or anyone else you hold responsible for your own stupidity and lack of foresight) you have three other fingers pointing right back at yourself!
When you’re pointing the finger of blame at the lender (or anyone else you hold responsible for your own stupidity and lack of foresight) you have three other fingers pointing right back at yourself!
I have always wondered who the thumb is pointing to??
Must be God. God did this to me!!!
Does that mean the middle finger is up and the other 3 are curled back? That would be appropriate.
they X or less. “you can’t sell me that car for X”,
At least you didn’t call your (now) wife back then your X wife.
“I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this,’”
Wow, we’ve seen some truly dumbass quotes on this board, but this one takes the cake (so far?).
Yes, apparently when you won’t sign the mortgage papers, Vito comes out with a circular saw and says, “Your hand, or your signature”.
There’s a woman in my office who has stopped making payments on her house due to an exploding arm. (I know, I know, we tried to talk her out of it, but she went ahead anyway.) She called her lender, Wells Fargo, to find out how much time she has to try to sell the place or how long the foreclosure process will take. The guy she talked to said normally 3-4 months, but they’re so backed up right now with foreclosures, she probably has more like 6-7 months, and maybe even more if things keep going “like this.”
Exploding arm? That must have made a terrible mess whenever it exploded.
Don’t you have to be on financial steroids to have bulging and eventually exploding arms.
…stopped making payments on her house due to an exploding arm.
It was her check-writing arm?
I’ve heard similar stories about a backlog of foreclosures in the system. Looks like we’ve got plenty of time…..
They’re stealing future forclosures.
ROTFL
But seriously… scary thought. Would the 2nd quarter foreclosures have been higher if the banks were staffed to process the foreclosures? Will we see increasing foreclosures just due to the need to process old paper?
This thought train has me concerned…
Oh well. That’s why we switch emotional states to schadenfreude.
Got popcorn?
Neil
I believe that back in May, Michigan’s foreclose numbers improved M/M vs. April….but the reason was because there was a huge backlog of foreclosures the delayed newer foreclosures from being processed.
I missed that…
Does a house stay in NOD category until its formally foreclosed by the sheriff? Or can it be statistically in “foreclosure”, even though the squatter still lives in it?
Advice to FBs. If you know you’re going to be unable to keep making the payments, STOP MAKING THEM NOW! Save the money for the rental security deposit, first and last month’s payment, and the moving company’s charge.
At least that’s what I’d do.
“Advice to FBs. If you know you’re going to be unable to keep making the payments”
Oh Bill, you are SO evil.
This is exactly what my neighbor did for 5 months!! Now he is gone and I get to look at his dead lawn, all appliances removed and landscaping he ’sold’ to another neighbor. He knew he paid too much and was a FB so he lived rent free for 5 months and would brag about it every time I would talk to him.
7 months free for my buddy. Just helped him move to an apt. last month.
We know someone (former lender, to boot) who lived free for six months.
Gotta love these jackasses…
We all need to pitch in and buy ads in all our local papers advising FBs to walk, now — save your money and run. Different ads for single-action states like Calif. You should definitely walk away now, the lender can foreclosure or go after you. Not both.
‘fraid many of my fellow Californians have HELOCed their way out of the single form of action rule, if I understand it correctly…
“We all need to pitch in and buy ads in all our local papers advising FBs to walk, now — save your money and run. ”
Tageline:
Your Mortgage… There’s never been a better time to stop paying…
Your mortgage. Don’t leave home without it.
I’m just sayin’ is all.
I don’t know why landlords do a credit check? They should make inquiries about average bank balance for last few months.
LLs want people, rich, poor or inbetween, with a proven record of paying their debts in full and on time..
I have seen many cases where groups move into a place on one of their clean credit reports, then cycle until the 7 years has expired and so forth. Credit reporting is pretty weak. Identity theft to rent is huge also and apparently very hard to detect for the average landlord.
With so many landlords running credit checks, at what point do you make the move? If you sit in the home for months not making payments prior to the foreclosure, you’ll save a lot of money. However, you’ll have a history of late payments when you go to rent. However, if you rent before the late payments start showing up, you won’t save much money before making the move. With a history of late payments (if you sit in the foreclosing house “rent free”), will it be harder to rent a decent apartment?
Smart lady.
She should save up her money and sign a lease for a nice apartment, just before her credit tanks. At this point live free, it’s on the house. Just try to keep other credit in good order (i.e., cards, utilities, etc.) - but let the house lapse.
If Wells is dumb enough to write her loan under those terms, they deserve whatever they get.
There’s a woman in my office who has stopped making payments on her house due to an exploding arm.
I heard that “woman” at the bank when she was getting her loan, she said she would give her “right arm” to get into that house.
I too saw her at the bank - after they approved her loan. She looked armed and dangerous.
may of been serious hostage situation I heard about…
Lady forced her ARM up her mortgage broker’s a$$….
the click was ticking… ARM had already reset and was ready to explode…
The right to “bear arms” is actually in our constitution
The guy she talked to said normally 3-4 months, but they’re so backed up right now with foreclosures, she probably has more like 6-7 months, and maybe even more if things keep going “like this.”
BS…
Wells Fargo is so screwed up it will take 2 years for them to take the house.
Free rent.
Maybe she did it on purpose. 6+ months of free rent! Her credit sucked to begin with and she probably figured her ARM was cheaper than rent. She will go back to renting with a smile knowing she saved $ during those few years she “owned” the house. Makes me sick really. It’s the lenders who will lose and many are going out of business. When they all die up and only 700+ credit, 20% down and high income can get financing is when we will see the bottom of house prices.
I’m with you about all of it except high income. If only 150% MHI can get in, we have another issue to worry about - permament landed gentry - ouch
High income as in the 3x rule and also 25% of gross income towards house payment rule. If someone makes only $30k a year, he may be out of luck in California or south Florida even when house prices bottom out.
On a more serious note - if this is a backlog where the pure paperwork and administrative issues are actually slowing the placing of foreclsoures on the balance sheets of lenders, is it safe to say that balance sheets and P/L’s are understated at this time (I know we all have opinions on the ‘real’ value of assets in their balance sheets and their ability/willingess to mark to market is another issue - but this would be more defined, right)?
Anybody in retail banking have an ability to quantify this and/or the ramifications it would have on stock prices (short term just related to that backlog - assume x per month, average value/loss per unit, backlog of x)?
Good question. (sorry I don’t have an answer)
ABX-HE-BBB 07-1 broke below 40 today. “Investment grade” subprime bonds have now lost over 60% of their value since January.
Not “contained” either. Junk bond spreads widened again today. Bloomberg Index up 7 basis points (costs 0.07% more to borrow) while Treasury borrowing cost fell by 4 bp.
BIg deals can’t get done at acceptable prices. Chrysler ($12 bil) and Alliance Boots ($18 bil) couldn’t sell their junk bonds. Banks are stuck with the debt. This was the second rejection for Chrysler.
Good Times.
Do you have a link which explains how to interpret this stuff?
Sorry, I don’t have a link but will try to explain. The ABX-HE-BBB 07-1 is an index of subprime loans written in late 2006 and securitized by January. The BBB portion is the second-lowest piece on the totem pole. The BBBs are protected by an unrated piece (typically 5-7%) that will take all losses until it is gone. If you assume 50% losses upon foreclosure, this would mean 10-14% of the loans would have to be foreclosed before the BBB slice takes a penny of actual losses.
The fact that the BBBs are being valued at less than 40 cents on the dollar tells you that the market is anticipating foreclosures of 20-25% if you assume losses of 50% again. Given that Countrywide just said that 23.7% of all subprime loans are late by 30 days or more, that might be too conservative. If foreclosures go to 30%, the BBB slice will be rendered worthless (other than any interest payments already received).
Junk spreads are the extra interest junk bond issuers have to pay for being risky borrowers. If the spread is 265 basis points (as it was in May), they have to pay the treasury rate + 2.65%. The spread has now blown out to over 400 bp and seems to go up every day. Even if treasury rates didn’t budge, risky borrowers interest rates have gone up by 1.5% or more. That’s why a lot of private equity LBO deals are in trouble.
This reflects lenders fear of losses. Subprime and alt-A spreads over the prime 30-year fixed rates have also gotten a lot wider. Also, many of the previously available risky structures, like the 2/28 hybrid ARM have been discontinued for the same reason. Fear.
Does this have anything to do with corporate bonds falling too, bonds that are unrelated to subprime mortgages? Vanguard High Yield Corporate, for example.
LA Girl:
Corp debt sinking (= bond prices go down, yields go up) not directly tied to subprime meltdown. Indirectly, though, the massive losses in the subprime sector are forcing everyone in the credit space (like me) to reevaluate their risk assumptions. The “unit price of risk”, whether it is in subprime or investment grade debt, has gone UP, so investors are demanding more spread (= return) and when spreads go UP, bond prices go DOWN.
Yes. The Bloomberg index is tied to corporate junk bonds. As you probably know, the price of the bonds falls when yields go up. Junk yield = treasury yield + spread — when the spreads increase 150 bp, the value of the bond should fall by about 6% (for 7-10 year junk bonds). The Alliance Boots deal seems to show the same thing is happening in Europe.
Good thing no one wrote derivatives on those indexes using leverage and carry a full reserve to cover losses.
Yeah, thank heaven even these Wall Street Wonks have some limits to their greed. No one is that foolish.
I’m just glad the hedge funds look out for their customers first.
Here’s a link to the ABX.
http://www.markit.com/information/affiliations/abx.html
My understanding of the ABX indices is that they don’t represent the market price of the security tranche but the price of a 5-year credit default swap compared to the cost of such swap at the time of issuance. For example, an index of 50 means that credit insurance is twice as expensive as it was originally, while an index of 33 means that credit insurance is three times expensive as it was originally. The index is set up so that the higher the perceived credit risk the lower the index value.
TJ you are correct.
What’s important is you can plug the numbers into magic formulas and set your billion dollar algorithmic robot trader loose on the markets.
tj
Yes, that’s right. But because it is a par value of 100 and a payoff equal to the losses of the tranche, it can be used as a proxy for the implied percentage losses over the 5-year period. Just as long as you keep in mind that the reference period is January or July and not the date the loan was written. It is the change in expected losses from the first day of trading until now.
“My understanding of the ABX indices is that they don’t represent the market price of the security tranche but the price of a 5-year credit default swap compared to the cost of such swap at the time of issuance.”
Could you go into this a bit more, as I am confused about this point. The prospectus for ABX.HE seems to indicate that it is based on a (resistant) mean of the spreads of the collection of bonds in the index, which would equate to an extimated yield over LIBOR, IIRC.
An interesting thing to note is that the ABX is (1) only based on a fairly restricted set of secutitizers, 20 or so (2) appears to have to be based on adjustable mortgages, mainly [I infer this as the prospectus restricts the index to bonds with variable interest I would guess that a REMIC based mainly on fixed mortgages would have one or more fixed-interest tranches] and (3) the ABX is based only on mortgage pools that are not 3rd party insured. The index also does not seem to use weighting by issue size. I wonder what biases this all induces, as opposed to considering the population of all tranches based on subprime 1st lien mortgages…
Oh, a copy of the prospectus is here:
http://www.markit.com/news/ABX%20Index%20Rules%201-17-06.pdf
YIKES! pdf warning! ^^^^^^^
Hey, maybe you geniuses can figure out why all the “new, revolutionary mortgage derivatives” are headed the way of the Titanic. What kind of idiots are Harvard and Yale turning out these days?
It’s not us… securitization products were never designed to eliminate all risk, and especially couldn’t possibly eliminate the risk of broad market revaluation of the underlying collateral.
The trick is, why were the people who were buying the MBS not diligent about checking the value of the loans and collateral underlying the securities? Because they trusted the ratings agencies? This goes to the root of the bubble - why didn’t people, from Joe Sixpack to the hedge funds to the investors at the biggest banks in Japan and elsewhere, see this for what it was/is? Mass hysteria combined with a lot of power to generate spin from people with a vested interest in keeping it going, methinks.
[for junk bonds] “The spread has now blown out to over 400 bp and Just curious…What level of junk bonds have a 4% spead? ‘Good’ junk (BB+), or the real trash (CCC+ or lower)?
In addition to the general collapse of the housing market, could some of the increase in spread be due to either (1) a revision to more conservative levels of risk aversion- the risk penalty has been historically low recently or (2) pricing in the possibility of inflation?
This page sums it up pretty clearly.
It’s pretty fun to date articles by the shock-and-awe of the quoted ABX index… “OMG, BBB- 06-2 all the way down to 73!” hahahah!
Oh chit……………that page contains that waterfall Pic.
Wheeeee……………..
Great find, thanks for posting, though other parts of that site seem pretty, er, out there, even for us tin foil hatters…
“Not “contained” either.”
Old news…Countrywide tells us it is now hitting PRIME. Get your “I told you so”s ready for the coming months…
Yep, it’s moving both vertically up the credit scale to prime mortgages and horizontally into other credit markets. After all if the ratings agencies screwed the pooch that badly on subprime, shouldn’t an “investment grade” rating be just as worthless in every other area too?
Bernanke’s “smooth flow of credit” seems to be running a bit rough these days.
http://money.cnn.com/2007/07/25/real_estate/prime_catching_subprime_ills/index.htm?cnn=yes
“But there also has been a big increase in foreclosures in economically vibrant regions, ones with growing populations and steady job growth, such as California, Arizona, Nevada and Florida. That’s new.”
New, yet predicted by us over six months ago…
six months ago…sh!t, 2 years ago!
This makes me nuts when ever I see it.
“in economically vibrant regions, ones with growing populations and steady job growth, such as California”
Make that _barely_ growing populations. I still believe we’re going to get some interesting returns from the USC estimates coming out in a few months.
It runs of the top of his Bernanke’s head smoothly then it gets caught in the cotton candy on his cheeks where it becomes kind of mushy when you try to get a handle on it, it just disintegrates leaving a sticky feeling and no explanation as to what and how this happened.
“Yep, it’s moving both vertically up the credit scale to prime mortgages and horizontally into other credit markets. After all if the ratings agencies screwed the pooch that badly on subprime, shouldn’t an “investment grade” rating be just as worthless in every other area too?”
the credit ratings people are idiots. they rate things by looking in the rearview mirror. mortgages are “safe” because there were relatively few loses in the last five years. this was because property values were rising and credit was easy, so people could just refinance. similar non-logic was occuring on the corporate side. easy money allowed non-profitable firms to pay back debt by issueing new bigger debt.
This stuff is reading like War of the Worlds or something now. All we need is Tim Robbins to start losing it and tell us we can live underground.
Do you mean a person with good credit working as a WalMart clerk can’t afford an $800,000 house?
Ha he wouldnt be able to afford a $50k house!
*I had a bus driver who didn’t make enough money for a house(and this wasnt in a bubble either) so he slept in the woods.
“BIg deals can’t get done at acceptable prices. Chrysler ($12 bil) and Alliance Boots ($18 bil) couldn’t sell their junk bonds. Banks are stuck with the debt. This was the second rejection for Chrysler.”
This was the top story on American Public Media’s Marketplace radio show this evening… “Flash in the pan” (snigger)
TEXT OF INTERVIEW
Kai Ryssdal:
The deal of most concern to Wall Street at the moment is the one taking Daimler Chrysler private. JP Morgan Chase and Goldman Sachs are the lead bankers on the deal. We learned today they and their counterparts aren’t going to be able to syndicate, or sell off, the loans it’s arranged for that deal — $10 billion worth. Which, no matter who you are, is a big chunk of money.
It’s also symptomatic of what some are calling a credit squeeze. Since debt is what makes the business world go ’round, we figured it might be time to find out whether that’s true or not. So we got Mike Hatley into the studio. He’s the president of Westgate Horizons Advisors. That’s a company that buys some of those loans from the big Wall Street banks. Mike, good to have you with us.
Mike Hatley: Thank you.
Ryssdal: Let’s take the news of the day that I was just talking about — the Chrysler thing. And then we roll in subprimes. We roll in private equity borrowing a whole bunch of money. And I’m going to ball it all up into one question, which is, Is there a problem in the credit market today?
Hatley: Yes, there definitely is a problem in the credit market today. There’s a definite supply overhang.
Ryssdal: What does that mean — supply overhang? It’s just money, right?
Hatley: It’s definitely money. But there are all of these loans that banks have underwritten, meaning that they’re on the hook to make these loans. They want to sell these loans because they don’t want to hold as much risk as they agreed to underwrite. And they have about $200-plus billion of loans to sell. And buyers like us are saying, “Well, we’re kinda full right now. We don’t really want to have a lot more exposure.”
Ryssdal: Well, when that happens, what do these banks do? Do they just sit there and just carry this debt and carry this debt?
Hatley: That’s exactly what’s happening right now. Case in point is the Chrysler deal at this point. There’s two separate loans for Chrysler. There’s one for the car company, Chrysler. And there’s one for the finance company, Chysler Financial. They were attempting to sell to investors $10 billion-worth of loans to Chrysler, the car company, and another $8 billion-worth of loans to the finance company. They came to the market today and said, “You know what? We’re not going to try and sell those loans anymore. The $10 billion to the car company, we’re just gonna hold them on our books and we will come back some point in the future and try to sell those loans.
Ryssdal: Reconcile these two things for me, though. We are hearing from you and from other people that there are problems in the credit market. And yet, default rates are low, deals are still getting done. Clearly, people believe there is money to be made lending money. So, which is it? What’s going on?
Hatley: Well, defaults are definitely at all-time historic lows right now. But there’s still a large supply of loans that the banks have underwritten and have agreed to make that they need to find buyers for. The buyers in the market are holding back right now and it’s going to take a while before those loans make it through the market.
Ryssdal: Your group, your company, is one of those buyers of loans, right?
Hatley: That’s right.
Ryssdal: So, what is your thought process now as you look at these banks holding onto huge amounts of debt when you decide whether take it off their hands, or not?
Hatley: Well, that’s a very good question and we’ve been very, very cautious lately in terms of agreeing to buy new loans. And that’s largely because the loans that we bought three weeks ago, there’s a secondary market where these loans trade . . .
Ryssdal: You then sell them off, right? That’s the secondary market.
Hatley: Well, well, we may sell them off or other people may sell them off. Or we can buy more in the secondary market. And the loans that we paid 100 cents on the dollar for three weeks ago are trading at 97 cents on the dollar today. And, when you see that kind of a movement, it makes you think, “Well, why should I buy another new loan right now when it’s just going to trade off in the secondary market.
Ryssdal: And 3 cents on the dollar when you’re talking about a $100 million loan is a whole lot of money.
Hatley: $3 million. It’s real money.
Ryssdal: Six months from now, if we call you up and we say, “Hey, Mike, what’s going on in the credit market?” Will we either point to this summer as the beginning of something bad, or will it just be a flash in the pan and six months from now you guys’ll back to normal?
Hatley: You know, that’s a good question and I’m not sure that we’ll be back to normal in six months, honestly. I think it could take longer to play out. The one positive fact is the economy overall is still doing pretty well. I mean, you certainly read about the housing sector as being soft. But this is a technical, supply-demand imbalance and it will work itself out. But it may not be six months. It may take a year to work itself out.
Ryssdal: Mike Hatley’s the president of Westgate Horizons Advisors here in Los Angeles. Mike, thanks for coming in.
Hatley: Thank you for having me.
http://marketplace.publicradio.org/shows/2007/07/25/PM200707251.html
“The one positive fact is the economy overall is still doing pretty well.”
Man, talk about getting cause and effect all bass ackwards. The economy looks good because they’re handing out credit like crack to consumer-addicts. Credit is driving effectively all growth now. The tail of debt finance is wagging the economic dog. Jeeeeezzzzz.
Exactly, Deron!
Debt problems may signal end of buy-out boom
By Paul J Davies and Saskia Scholtes
Published: July 25 2007 17:58 | Last updated: July 26 2007 00:16
Financing for the Chrysler and Alliance Boots buy-outs – two of the biggest private equity deals in the global markets – ran into serious difficulties on Wednesday, intensifying fears about the possibility of a credit crunch.
Banks failed in their attempts to sell loans financing the deals to investors – even after offering higher interest rates. That means the banks will have to hold the loans on their balance sheets, limiting their ability to underwrite new leveraged buy-outs.
The banks had been trying to arrange $20bn in financing for Cerberus’s purchase of Chrysler, the US carmaker, from Daimler. But they postponed the sale of $12bn of debt attached to the company’s carmaking operations. The banks will instead hold $10bn of the loans – hoping to sell the debt to investors later – with Cerberus and Daimler taking on $1bn each.
The deal’s underwriters also improved terms on $6bn of debt for the carmaker’s financing arm, after cancelling an additional $2bn of loans last week.
http://www.ft.com/cms/s/ca48c19e-3ace-11dc-8f9e-0000779fd2ac.html
Credit gloom intensifies after failed loan deals
By Michael Mackenzie and Paul J Davies
Published: July 25 2007 20:54 | Last updated: July 25 2007 20:54
The gloom in the credit markets intensified on Wednesday as Chrysler postponed a $12bn loan deal and banks failed to sell £5bn ($10.2bn) of senior loans to fund the leveraged buy-out of Alliance Boots.
Bankers raising $20bn for the private equity buy-out of Chrysler Group from DaimleyChrysler were forced to postpone the sale of $12bn in loans for the car group.
Bankers still intend to raise a further $6bn in loans for Chrysler’s finance arm, albeit with higher interest rates but an additional $2bn loan for the financial company was cancelled last week.
http://www.ft.com/cms/s/f9df9bb6-3ad9-11dc-8f9e-0000779fd2ac.html
Since, IMHO, it’s been the buyouts which have propped up the stock market, will the potential credit pull-back finally affect the stock market?
Sold 50% of my long positions today. Though we’ve had so many head-fakes, perhaps the long-awaited credit crunch is finally here.
CA is different, yeah baby, bring it on.
The only difference between CA and rest of country is we are laid back and money comes to us, we don’t chase it.
Can someone explain personal responsiblity? After all if you are leveraged to the hilt at the bottom you will make a killing.
Have you not been reading the OC Register blog…I mean it is friggen awesome! It really give you an insight into the mentality over here.
Here is the comments on a RE investor interview.
http://blogs.ocregister.com/lansner/archives/2007/07/insider_qa_gets_a_1.html#more
Take a gander at that, real Kool Aiders there, let me tell ya that is the sentiment of the stick the head in the sand crowd of the OC for sure. I find it fairly hilarious myself, can’t wait to see these douche bags get clowned in this coming storm.
yes, I hear the same tired arguments all the time, “Median price going up, yup, that means house prices still climbing” Not that the slightly higher median is for say a 2400sqft home rather than a 2000sqft home before.
Prices in much of South OC are dropping below 400/sqft. This was unheard of a year or two ago and it will only go higher from here.
On some larger homes, the price per sqft is at $300 and dropping in many cities. Check redfin to see. Oh so many suprises in store.
Here is one at $250 per square foot for a home at 2700 Square feet. MLS493329. In RSM. Pretty sure it is an REO.
Damn that is a Sacramento suburb price.
“Southern California…saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
Not really…considering that we’re still on a downward trajectory, and the 1996 level was well after the bottoming out, I’d say they still don’t get it.
On a nice note to REIC and and the investor community - thanks so much for the misplaced optimism in actually believing NAR and their clan - you gave me a lot of time to get my shorts in. I will be forever indebted - and plan to help out Ben once I’m clear of this stock market.
Gotrocks,
I see the glass as half full; we definitely have room to improve. What is going to happen when credit gets *really* tight? Bwaaa haaa ha!
Got popcorn?
Neil
Foreclosures up 725% in a year.
If it goes up 21% more it’ll be a record.
Conclusion: everything is fine.
“A year and a half after moving into their new home, the Grothes are renting again, unable to make the nearly $3,000 monthly payment on their $370,000 loan and are facing foreclosure.”
This is interesting - it implies that their interest rate has reset to 9% (assuming that taxes and insurance are not folded in). Pretty big reset already - no wonder people are sinking.
It raises an iinteresting point. Much of the current lender losses are arising from lender greed. I always find it funny that the weakest citizens are forced to pay the highest prices, but thinking about it debt is not for everyone, and certainly neither desirable or a right.
Blasphemer!
“while the median price of an existing home increased 3.2 percent, CAR reported today.”
We should be seeing at least 5% or more per quarter deteriation on prices… but its just isnt crashing as it should be. What gives?
Higher median could easily mean less “cheap” houses are selling, which shifts the median upwards. The median is meaningless outside of more data about the sampling spread.
Cheap houses would mean 800 sq condo built in the 70s’ as an apartment which went from 75-85K now selling for 450k in 8 years… at best would be 175K. And best is really stretching it… what you have for $450K is really not a low end but really horrible overpriced POS.
We should be seeing across the board declines of 50%.
In some parts of San Diego county (mostly the starter/lower-end n’hoods), prices are already down 20-25% from peak.
They are still totally unaffordable to the types of people who buy these homes. I have no doubt many areas will see 50% declines, or more.
There was a good analysis in a San Diego blog, when the median started to rise last fall. Basically, the cheaper houses didn’t sell so that distorted the sample. When the median was size-adjusted (per sq ft) it was still falling. Considering that SD was one of the earlier markets to tank, I’d imagine the same distortion is now affecting the statewide numbers.
If one goes to http://www.bubbleinfo.com they can get these stats from none other then a Real estate agent who calls it like it is.
If you have a dozen eggs, eight chicken eggs and four Ostrich eggs, the median egg is a chicken egg. Lose 5 chicken eggs (due to declining sales) and the median egg is now an ostrich egg?
Eggxactly.
(sorry)
Good egg sample.
Add new homes offered by builders, and the likelihood of a recovery soon seems distant.”
“Falling home values also present a problem
“‘The value dropping as fast as it’s been has not helped the situation,’ she said.”
———————————————————————————-
NEWSFLASH!
Falling home values are NOT the problem. Home prices falling is the ONLY thing that will help this situation. Housing market RECOVERY IS PRESENTLY ONGOING as the prices fall to where regular people can afford to buy regular houses.
The REIC is still spinning the stories as if the ONLY solution, the ONLY recovery will happen when (again) house prices shoot up so high that 90% of regular folks can’t buy a house to live in without committing financial suicide. As if the thought of, “Normal people being able to buy normal homes?!!!!” would be unimaginable. (Gasp! The horror!)
Absolutely love how you put that!
After years of whining about an “affordable housing crisis” you’d think they’d jump for joy at the prospects of lower prices, no?
Ah, but then the Realtors™, who live on commissions, will have to live like the rest of us rather than on incomes that inflated with the bubble…
I want the real estate industry to explain :
(1) Why did real estate people put people in property they couldn’t afford and justify this by a myth that “Real Estate always goes up “?
(2) Why did loan brokers counsel borrowers on how to commit fraud to get a loan they didn’t deserve and pressure appraisers to inflate property ?
(3) I want to know why Wall Street rated junk loans at a lower risk than they were .
(4) I want to know who designed low down /low doc loans for sub-prime buyers or who allowed lenders in mass to put non qualified sub-prime buyers on low down/low doc. loans .
(5) I want to know why lenders didn’t tighten up when it was apparent that fraud and cash back/incentive deals were becoming the norm for the already corrupt real estate industry in early 2006. It’s already being reported that many of the foreclosures are recent purchases .I want to know why the market existed for another 11/2 years when it was apparent in late 2005/ early 2006 that the party was over .
(6) I want to know why the real estate/loan industry continued to commit fraud and encourage their borrowers to commit fraud regarding loan application when it was clear that in late 2002 the affordability index had reached the top regarding real estate .Why didn’t the industry question where all this so called affordability was coming from all of a sudden ? Instead of sales going down in 2003 ,(as it should of ),the industry went on to have banner sales years ,in spite of the affordability question ? It’s clear that the affordability issue was resolved by creative lending ,fraud ,and hit the mark appraisals .
(7) Who gave the industry the right to make loans based on real estate going up, without any regard to the borrowers being qualified or the suffering it would cause the United States in the long run .
(8) Why didn’t anybody in the MSM question the outragous amount of real estate transactions that were going on as well as the repeated turning and refinancing of real estate that was creating false markets and debt spending . Why was the cheerleading for prices going up considered a good thing ,rather than a rather bizarre reaction to thousands of people being priced out of the market .
(9) Why were people conned into thinking that the buyers for this overpriced real estate were going to be rich baby boomers ?
Sure , the greedy or fear based borrowers got caught up in the mania ,but the industry is suppose to be the watchdogs for the people . After all , investor funds were used to finance this bogus mania and the real estate and loan industry had a duty to protect the borrowers as well as the funds that were put up in good faith .
Since when should the advertising industry have this much power as they did during 2000 to 2007 ,to the point that the self interest of the RE industry became the news .I even saw main stream media anchor news people cheerleading for real estate . Think back about the high perentage of commercials on TV that were real estate related for years now . I’m just starting to see aspirin commercials again .
Agreed on everything.
OR Answer=
(A) greed
on everything!
Ditto!
Just follow the money. Everyone in the chain was looking out for what was best for their wallet in the short term. Realtors want commissions. Lenders want the fees and profit from selling the loans. Same with the Wall St. boys. No regulators stepped in because all of these folks were spending lots of money on lobbying in order to keep the politicians and regulators from taking away the punch bowl. Reporters (typically) own their house, so they like to see prices rise. MSM will take all the ad revenue it can get, regardless of where it comes from. All in all, just follow the money and assume that everyone was looking out only for their own best (short-term) interest, and you understand how it happened. (I started to write that it “all makes sense” instead of “you understand how it happened,” but, of course, it doesn’t make sense at all).
Oh, and I think you’ll start seeing lots more commercials for aspirin, anti-depressants, and other similar medications.
The real estate business has always been a money business ,but never did a RE market stray this far from any reasonable check and balances .
This mass brainwashing of the people that took place regarding real estate being a no risk investments is one of the most bizarre cycles I have ever witnessed . Usually people are very concerned with what they can afford .
I can only conclude that people were so convinced that real estate always goes up that they were willing to commit fraud or put to much of their income toward the housing expense ,betting that it would pay off .
Again I say , had I known that I was in competition with unqualified no down buyers when I purchased my house ,and that the lenders were allowing this faulty lending ,I would of known the market was going to crash and burn .
I believe that all the feedback people were getting was just one big cheerleading song for real estate ,from the TV programs to the daily news .
It’s interesting to me how all the drones from the real estate business were saying the same thing .
It’s always about who receives the fees. Money rules. Lenders, real estate, ethical behavior out the door. Maybe next time buyers will be more knowledgeable but who knows.
When I was in the lending business years ago it was all about fees also ,but still the lenders didn’t breach their duty and make bad loans for most part . Even on low document loans ,it had to make sense during the prior lending cycles I was involved in . To think that the lenders agents were helping people commit fraud during this recent lending cycle is just mindblowing to me . To think that underwriters and loan management were just rubber stamping anything that the commission people were submitting is just a breach of duty to police commissioned salespeople .
Back in the old days of lending ,the secondary market would check a certain amount of loan packages to assure the quality of the loans . Also ,many secondary market loan investors would not purchase loans until they became “seasoned loans “,(meaning they had passed the test of time being a good pay for 2 years or more ).
The rules for lending changed and there was nothing that justified it other than a false model that “real estate always goes up “.
Wiz,
As you know, they eliminated the connection between the loan originator and the lender.
Then, to top it all off, they tied the interests of the appraisers to the originators instead of the lenders.
WTF????? Even a six-year-old should have been able to see the stupidity in that move.
I hope that soon the lenders will have to hold their own mortgages and sell through in-house (their own employees) appraisers and mortgage brokers. Much of the problem was due to the game of pass the trash that all the independent players were playing…
Housing Wizard. May I plagiarize your comment for a letter to my congress critters?
Sure ,anytime .
Thanks Wiz. Local paper too?
Wiz: Letters ( emails) are going out as we speak Fingers are crossed, but not expecting much. Too much has to be fixed, and special interests are too firmly entrenched.
Your post gets 5 stars and post of the day status.
I am going to copy this and keep it for my files… Hope you dont mind but I will as well be forwarding your questions from this post to the MSM blogs and emails on an as needed basis.
thanks
I guess I should post when I’m pissed .
I guess I should post when I’m pissed .
so it’s settled… you’re English then….
Don’t live in a neighborhood where all this is happening around you, even if you paid $34K in 1993 and have made each and every single one of your mortgage payments, good guys still get screwed too. The preditory lenders are driving up the values so quickly that your neighbor who bought her house for $13K 5 years ago, got it appraised for $145K this week. Sounds good so far, right? But the people who are buying these expensive pigeon coops can’t afford them, abandon them, and guess what my neighborhood looks like now? What about me, who wants to keep living in this house? Am I forced to move? What if I get behind on some consumer loan. Will my creditors jump to seize my home at the first chance they get?
Lets add to the mix all the fake bids their agents proped up.
Still saying at open houses that multiple offers are common. Sheeple guliable even today and still overbid, yet number of buyers down by half and inventory without forclosures is double.
Superb questions, now if we could only get the answers. It would be easier to steal the Crown Jewels than squeeze out honest retorts.
“Southern California…saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
Oh just you wait till we get into October. We’ll see how “well below” the foreclosure number is. Just you wait…
“We’ll see how “well below” the foreclosure number is. Just you wait…”
(Looking at Credit Suisse loan reset chart yet again…)
WHOA YEAH.
This can’t be happening - everyone wants to live here!
And they’re not making any more land.
“If the market price of the house falls, then you wake up one morning and you owe more than what it’s worth”
Welcome to 1991
But you can just turn over and fall back asleep, comfortable in the fact that you’re not throwing your money away on rent like all the losers in those bubble blogs.
Bitter, jealous renter…
For local Silicon Valley Readers…
Local home-loan defaults spike
HIGHEST RATE IN 14 YEARS AS PAYMENTS BALLOON
“The default notices are the first step in the foreclosure process, and are typically sent to homeowners who have failed to make their mortgage payments for a few consecutive months. Foreclosures and defaults were relatively rare in Santa Clara County and the Bay Area in 2004 and 2005, when rising home appreciation and a seller’s market meant that most homeowners who found themselves in financial distress were able to sell their homes and pay off their lenders. But with appreciation now flat or falling in many areas, that’s not as feasible these days.”
Yet Business Week shows San Jose as hottest area with ARM loans.
A 800K home in east san jose was listed around 150K 10 years ago.
Any reason for increase 500% increase? Yet many making 100K are unable to afford home in Santa Clara.
http://www.businessweek.com/common_ssi/map_of_misery.htm
LA Times Video-I love Paula’s huge NEW SUV in the driveway. Who wants to bet that it was paid for by a heloc?
Is it just me, or do these numbers from the LA Times story not seem to jive:
“Foreclosures [statewide] soared to 17,408 for the three months ended June 30,”
“Southern California, buoyed by the relative strength of L.A. County, saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
“Statewide, the previous peak for foreclosures was 15,418 in the third quarter of 1996.”
If these numbers are correct, then it would mean that in 3Q96 foreclosures in Southern California represented 74.5% of the foreclosures statewide, while in 2Q07 foreclosures in Southern California represented 54.6% of the foreclosures statewide. Oh, and we’re at 82.7% of the peak foreclosure rate set in 3Q96 - all while the economy is still reportedly doing fine.
Whatever the correct numbers are, I’m finding all these excruciating FB news stories in the MSM to be extremely heartening, uplifting, and inspiring. Why, if this continues, I can just about envision REO properties for sale in some very prime coastal areas. Oh, what a lovely image that is.
Which leads me to want to add, I totally disagree with regulation to prevent these sorts of bubbles (as if that were really possible), they serve a very useful purpose: transferring wealth from the stupid speculators to the patient investors. And not so patient investors. And what’s wrong with that?
Which leads me to want to add, I totally disagree with regulation to prevent these sorts of bubbles (as if that were really possible), they serve a very useful purpose: transferring wealth from the stupid speculators to the patient investors. And not so patient investors. And what’s wrong with that?
Oh where to start with this one?
For starters, how many informed, intelligent people (who can add 2 + 2 without help) have been forcibly sidelined for years by this bubble? How many here have ended up putting life plans on hold and involuntarily remained transient, all because the Fed and Wall Street decided that anyone who can fog a mirror should be able to “qualify” for $XX million-dollars in suicide loan financing?
Stupid or not, how many million FBs will face bankruptcy and/or divorce in coming years while the crash pays out, drip by painful drip? And how many truly ‘innocent’ bystanders (their children, spouses, etc.) will pay the price for the borrower’s fear & greed, or the banksters’ insane lending practices, not to mention willful non-oversight by our fearless “regulators”?
How many here will pay a price for this collective mass-scale insanity? How many of us will lose our jobs through no fault of our own, because the HB/hedge-fund/credit implosion triggers a recession in the overall economy? How many of us will end up paying for this mess directly or indirectly, via taxpayer bailouts of Wall Street & banksters?
Sorry, but you can put me in the “ounce of prevention is worth a pound of cure” camp. It’s true that better government regulation cannot always prevent asset bubbles from forming. But at the very least, they should have avoided creating this one in the first place. I.e, “if you can’t take away the punchbowl, at least don’t spike it yourself”.
Report from the war trenches… Freshly relocated from East Coast I thought to try my hand at home buying in Southern OC. I started interviewing for a buyer’s agent. You cannot believe what I heard. “It’s best time to buy”, “Hurry it won’t last!”. I met only one honest RE guy that told me that if I can wait I can get better deals by winter with foreclosures. Open houses both Saturdays and Sundays, unheard where I came from. I had the chance to see the poster child of this bubble, Ladera Ranch!. Homes on top of each other, sales signs everywhere, I did a quick check, most of the homes will have HOA + Mello + Property taxes around $1000 a month for an unspectacular 1500 sqft, patio home (I have never heard of this term before). You add your cool $3500 a month mortgage (assuming you bought with 20% down a reduced to $600k POS), and you’ll have a housing cost of $4500 a month. Anyway, numbers did not add up and I signed a 12 months lease today, despite wife’s protests. Will try again in 6 months.
LOL it’s always the wife who protests. God, I don’t ever want a wife!!!!!!!!!!!
“Comment by Bye FL
2007-07-25 20:41:31
LOL it’s always the wife who protests. God, I don’t ever want a wife!!!!!!!!!!!”
You’re safe, Bye FL. No woman would be interested in a 17 yo living in his parent’s basement.
LOL basement? Don’t you know Florida houses rarely if ever have a basement? Might wanna think more before replying. I got a good laugh!
Bombo,
Please forgive me for offering unsolicited advice, but in six months, we will still be in the beginning stages of this downturn, IMHO.
Best to tell the wife to enjoy what she’s got and get on with life **as a satisfied renter** for at least a couple of years.
If things go as many here have predicted even years ago, this will be a very long and bumpy ride.
Best to stay completely out of debt and flexible, in case you need to move for a job, etc.
Just my humble opinion… I wish you the very best, whatever you decide to do!
That’s not how I would approach it. Bombo should ask his wife how much she would enjoy the prospect of eating Top Ramen everyday for the next 20 years, shopping for clothes every two years or so at TJ Maxx, and going on recreational bottle-and-can hunts on the weekends. Such questions might help focus the mind a bit.
Harm,
nice post, and you could add that the massive foreclosures now certain will roil cities and counties, leading to an almost certain rise in crime. Political stability goes hand in hand with economic stability. I find it hard to believe that anyone who claims to live in LA can’t remember the riots…when angry, heavily armed folks who feel they’ve been had and have nothing to loose, take to the streets. Sure, this crashing bubble is going to transfer wealth on a massive scale…but what does that do for your personal safety? Why not follow W’s lead and explore real estate in Paraguay? That’s where he bought…not west LA.
Remember that Rodney King Riots were in 1992, during the last downturn.
I know people who say it wasn’t about economics but as someone who was at Parker center, it was most certainly was.
One of the most telling images I have of the event is walking around the the side of building away from the crowd after it turned really violent and about a block away, the parking lot for LAPD was packed with police making sure nothing happened to their cars while the body of the mob was pushed into the poorer portion of downtown LA.
I’ve been wondering lately what is going to spark our next RKR.
I moved to Irvine because my wife has family here. I’m actually free to live just about any where. I need a major airport within a few hours drive and high speed internet thats it.
I make a good living 150-200+ but I just could not justify buying anything here and have decided to move to Oregon once the bubble blows over. Irvine really has nothing to offer me I can afford to send my kids to top notch schools for a fraction of the extra charges and inflated mortgages and live in a far better house.
Oregon has its on little bubble and a lot of BS prices at the high end esp. Once the BS clears out and real 500k+ homes are all thats on the MLS I’ll think about a move. In the meantime rent.
In any case people like me that can choose to live just about anywhere are not going to choose Irvine.
Sorry.
And most of those rioting people have left LA for Palmcaster or IE, they can riot all they want out there.
One thing I’ll say for you investorgirl, your world view presents itself as seamlessly consistent.
Why imploder, that’s the nicest thing you’ve said to me all year
Right on Harm .
Well said, HARM.
I agree with HARM. Another sad effect of bubbles is that they induce an incredible waste/ misallocation of resources. Businesses moving to lower cost areas from artificially-inflated ones, houses build too large or in areas where there were not jobs or growth to support them. Think of all the wood, plastic, cement etc that went into houses that are going to rot in place… and all the junk that nobody really needed that was bought with HELOC money…
I can’t agree with “banning bubbles” (think about what that would mean across asset classes), but totally agree from a free market standpoint about not giving the gov’t the power to CAUSE them with its unconstitutional control over interest rates, not to mention insuring stupid loans through FNMA and others. I also don’t think discomfort or emotional suffering by all those you mentioned justifies yet another intrusion by the gov’t into the free market, including the free market of lending. If you do lose a job or whatever due to a RE shakeout, that is unfortunate but the government does not exist to protect you against the stupid consensual behavior of others, and so long as the gov’t stays out of this, our economy will bounce back on its own and so will your job prospects. As for having your life forcibly sidelined, I assume you mean being forced to rent, what’s so bad about renting.
lainvestorgirl,
We obviously agree that government should not be causing bubbles through moral hazards, rate-rigging, etc. And we also agree that the government cannot be everyone’s “nanny”, protecting them from the consequences of their own stupid decisions –far from it. I am anti-bailout for that very reason.
However, where you and I part ways somewhat is that I believe that “free market” does not = anarchy. All markets, highly regulated or not, depend upon some basic set of rules in order to function. Some of those rules exist to prevent some actors from coercing or defrauding others. Other rules (think antitrust laws) exist to promote competition and prevent one supplier –or a cartel of suppliers– from gaining monopolistic control over a given market.
Well designed regulations that promote competition, but discourage fraud, information hiding, price fixing and collusion are essential to well functioning free markets, IMO. I don’t want Big Brother in the RE market –just an occasional visit from the cops to prevent the mob from taking over the whole show. Is that really too much to ask?
Thanks for all the kind words, guys. Regardless of whether or not there will be some incredible bargains at the end of this mess (and I’m sure there will be), I think it’s important to keep some perspective. No amount of future bargains can even come close to compensating for all the social and economic damage this bubble has inflicted –and will continue to inflict for years to come.
And it’s not just the blatantly stupid or greedy who got roped into this massive Ponzi scheme. I know quite a few educated professionals that did, simply because they did not understand how the real estate and credit markets really operate. Let’s face it, outside of forums like this, how many people do you think have studied it in much detail? Lots of smart people got flim-flammed and arm-twisted by anxious spouses, manipulative agents, lying brokers, ignorance, and plain old FUD.
In 1-2 years when you’re at the auctions and you can buy 2-3 properties instead of just the one you had wanted to get, just remember LAIG told you cycles are good. Besides, we need bubbles because we aren’t producing much anymore, where would our economy be without inflating of assets to create phantom wealth, pummelling the dollar to generate exports, it’s all smoke and mirrors now and it’s going to get worse so get used to it and like it.
Oh, I can get used to it, but that doesn’t mean I have to like it.
“‘These are unprecedented circumstances,’ said John Husing, an economist at Economics & Politics. ‘Anyone who says they’re not guessing is a liar.’”
So, how much does Mr. Husing charge his clients for his guesses? Or, is he a liar?
OMFG - the folks over at Realtor.com now have their own blog. I say let’s make some comments over there!
http://talk.realtor.com/
That’s like kicking a dying horse…count me out.
We could send them a link over here
Better yet, ask them if they want to advertise on this blog.
I just left a comment but it’s “awaiting review”. I’ll be surprised if they let it through.
“Arthur Rosbury-Yoder wrote an insightful article that highlights 10 factors that are influencing current market conditions. His conclusion is that these10 factors actually lead to a balanced market:
“Unlike the previous market trend which was marked by selling frenzies and unhealthy rapid price growth, the current market is solid, growing and good for both sellers and buyers.””
—
“the current market is solid, growing and good for both sellers and buyers.”
OK, my mistake, have at them, they deserve it.
Posted on their July 18 story. After submit, I see this:
1. buckyball - July 25, 2007
Your comment is awaiting review.
So much for open input.
I forsee lots of Pain for the NAR!
The blog wont last long! Too many negative comments
heading their way.
Actually, take a look at THIS RE blog, by a Realtor:
http://ar3thur.topproducerwebsite.com/read-my-blog.asp?p=3
“The bottom line - it’s a balanced market. There is now a good inventory to choose from with mostly fair market prices and willing sellers. Buyers are coming back to the table and making offers again, but don’t have to act as quickly as before. Unlike the previous market trend which was marked by selling frenzies and unhealthy rapid price growth, the current market is solid, growing and good for both sellers and buyers. Interest rates are still low by historical standards.
It’s a good time to sell and to buy, if that’s what you are ready to do. So, ignore the media hype, select a responsible and experienced real estate professional and go forward with confidence! “
Time for a repost on this (notice the year, 1984):
New York Times
THE DAY LOS ANGELES’S BUBBLE BURST
By BENJAMIN STEIN
Published: December 8, 1984
http://tinyurl.com/btoj4
“The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ”It can’t go on.” But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ”But the rich will always be able to buy.” Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ”Never mind, the music business people will buy anything.” The music business fell into a depression in 1979, and the brokers said, ”The
foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.”
Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ”The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.”
Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.
The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason…”
A San Francisco take (similar, but more cultural focusing):
http://www.salon.com/news/feature/1999/10/28/internet/index.html
Blame it on the East Coast mentality coming to SF.
Yes very much destroyed the spirit of the city
by the bay.
great article
“Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick.”
It was different then.
1) You needed a downpayment.
2) You needed to struggle with payments from the start (no teaser rates reseting into broken ARMs).
Consequently, homes could not get as far out of line with incomes or rents.
We are seeing this in many parts of USA(although less extreme)
“‘This is unquestionably the worst I’ve seen,’ said Bill Pfeif, a 30-year veteran agent in Fresno who sells lender-owned real estate. ‘Every week, the pace increases. You just wonder where it is going to end.’”
It’s going to end in the retirement of my handle….
Houseless but definitely not witless
“‘The pendulum swung pretty far to one side, and now we are seeing balance being brought back to the market,’ he said. ‘There is a demand [for housing]. But it got out of reach and kept going because of the crazy debt [that] people were willing to take on.’”
That pendulum swung to unaffordable back in 2001-02 with most of California well under 10% being unaffordable. Everything since was due to low rates, it will take nearly 2000 prices to be back to balance. Not just the 3 year but also the 5 year ARM loans from 2002 have been resetting.
Precisely, ThomasPS. What many don’t realize (often because they’ve moved to CA after the credit bubble was already mature) is that home prices were topping in 2001. IMHO, all price increases from that point on are strictly due to the credit bubble.
Since 2001 prices were already too high, and if (when) this bubble crash causes a recession, we can certainly entertain the idea that prices will revert to pre-2001 levels.
We have a long way to go…
I just spent 30 minutes reading every word of this topic. This is one of the best I’ve read. Boys and girls, you are truly on a roll!
“‘I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this, that we would need to refinance, we’re starting to fall behind, and it just amazes me that they help you get into these places and when you need help, they run the other way.’”
I’m disgusted that we keep seeing these articles in print (aka, lack of any personal responsibility). No one forced him to walk into a RE office to purchase anything. He walked in a RE office under his own volition, chose a house and signed the papers. And just when did he tell them that he needed to refi? Now to whomever writes these cameos please include the following: Do they have a big screen tv, how many cars do they have and include make, model and year, how many times a week do they eat out, how many vacations do they take a year or how many trips to amusement parks to they make, how much do they put into savings, what is their CC debt?
I couldn’t agree more. What happened to personal responsibility? You gambled, you lost. ‘We told them that we couldn’t afford this, that we would need to refinance’. Riiigght, I’m sure that’s what they said when they signed the papers. Whether it’s greed, lack of responsibility, trying to get in on the hot market, etc. Part of being an adult is that you accept the consequences of your actions. Help is for abandoned children, animals, etc. Not for people who tried to live beyond their means.
I know this wasn’t directed as us sane folks, but here are my answers:
No. Two Toyota Scion xA’s (2004 & 2005) - $12,995 each and 36mpg. Once or twice/week. Around two vacations/year (plus 2-3 Japan trips to visit inlaws). $4,500/month. Zero debt, period - not just CC.
I bet there are some folks around here who put us to shame. Anyone want to share?
OK, I’ll play. In a way, this is a “mines smaller than yours” sort of challenge. Weird.
No TV, no cable, stolen internet, cell phone only. Do have Netflix but thinking long-term puts.
1993 MB 190E. ‘Nuff said.
Once a month (but I do cook whatever the f*** I want at home)
Telluride Bluegrass festival once a year ($300 for one week camping, four days music and travel expenses)
Only about $500 per month with no employer match yet. Changed careers since the business world crushed my soul.
No debt. ‘Though my apt is WAY too big and WAY too expensive in SF. Still looking for a cool roomie for the next 4 months…
BTW — Housing Wizard. Hate your punctuation. Love your posts. Thanks for being on the one.
You know I have heard reference to a Realtor(tm) being akin to a “Carnival Barker”. I looked up the term and found it to be oh so appropriate since every Realtor, and every RE insider is usually a shifty character. I put in parenthesis the realtor portion from this description, hope you enjoy.
Carnival Barker: Hustlers of all types can find their life’s calling or an exciting summer job working as a carny (Realtor). The job offers good pay (commission averaging $250(6%) per week (sale)in lucrative locales), travel (driving in leased BMW’s to impress), and excitement (sweating it out in empty open houses). Long hours–often an 18-hour shift–are standard, and strong vocal cords are a must (you make the call). It’s also necessary to learn carnival language: A barker is a carny (realtor or RE insider), a customer is a mark (FB), a booth or concession (McMansion or Condo) is a joint, cheap prizes are slum (”100K worth of UPGRADES!!!!). To apply, go to the nearest State or county fair when it opens and speak with the joint-owners (NAR, pretty much the same for a realtor). Tell them you want to be a “1st-of-May” carny for short-term or new employee, (I want to be a Spring Buying Seasoner!!).
You can almost envision RE agents standing outside an open house… “STEP RIGHT UP FOLKS, TRY YOUR LUCK AT FLIPPING THIS GRRRREAT DEAL, MUST SELL!!!!!!! ALL BUYERS (PIGIONS, MARKS) PREQUALIFIED).”…”YOU THERE, YEA YOU, WANNNA win a new Jag with this house for yer lady!” Woman: “Oh please do, Suzanne researched this, I really want it”.
I want to know when is a good time to start speculating in Real Estate. This will be my first time for buying an investment property. I made a boat load of money from the stock market and I want to diversify to real estate. Any comments are welcome
When the cover story in Business Week is “The Death of Real Estate”.
I have a feeling this will appear around the time the last boomer retires, so we’re in for a bit of a wait.
When no one wants it. We’re not even close yet.
Side story goes in the same issue “Bob Toll CEO of Toll Brothers get fired by Board of Directors for not adapting to new market. New CEO cuts prices on already swelling inventory”.
“when is a good time to start speculating in Real Estate”
(You might want to “invest” and not “speculate” (look up the two meanings in the dictionary).
The time is right when your shoeshine girl/boy, barber/hairdresser, or waiter/waitress tells you “never invest in real estate”.
To be honest, probably never. This bubble was the biggest in history. peak oil will change all this. Youll be investing in food for survival.
did anyone catch the new show flipping out last night.. this one looks fun.. guy is throwing up in his sink as he is broke and this is the first show..
seriously?
Check out first episode here…
http://video.bravotv.com/player/?id=124124#videoid=124124
Just watched it…it’s like watching “The Office”, only boring.
It looked interesting in a sick, twisted, “I hate flippers and want to see them eating beans out of a rusty can, wearing rags on a street corner” sort of way. I might have to watch.
“‘These are unprecedented circumstances,’ said John Husing, an economist at Economics & Politics. ‘Anyone who says they’re not guessing is a liar.’”
guess most posters here are liars and have been calling this since 05
David Crisp Sister in Law EXPOSED:
Megan Balod, 29, is Crisp’s sister-in-law. A year ago, she went on a shopping spree in southwest Bakersfield and bought a house on Walderi Street for $380,000, as well as a house for $920,000 on Covent Garden Court, and a home on Vista Bonita for $549,000.
Then, in one week last May, she bought two houses, one for $795,000 and another for $475,000.
In all, records show she borrowed more than $3 million that spring.
That’s more than $15,000 a month in interest payments for Balod, who answers the phones at her father’s CPA business.
She’s the only borrower listed on the loans; even her husband has been taken off the deeds.
Balod’s sister is married to Crisp, so one might think she’d get a good deal when she goes house shopping.
http://bakersfieldbubble.blogspot.com/
They were probably gaming the system, trading FICO score for mortgage $$$ that will never be repaid. The banks might be able to claim fraud, but what were they thinking lending out that kind of mpmey to here anyways?
Oh yeah, they probably put her numbers into The Model, and it came back with “It’s All Good”.
KGET
Crisp & kin circulate houses, money between them
“…Crisp does lots of deals with families, especially his own.
Carl Cole was the listing agent when the owners of a home on Draper Court in Seven Oaks sold it for $615,000 in 2004.
Six months later, it was back on the market for a $234,000 increase.
But at $849,000 and with Crisp as the listing agent, it didn’t sell.
Cole took the listing back in January 2005, and even though it had been on the market for months without sell, he raised the price.
It still didn’t sell.
Then, last September, Crisp and Cole’s Michael Munoz was the listing agent. He found a buyer and sold the house for more than $1 million, $421,000 more than the previous price.
The buyer was Jennifer Crisp, David Crisp’s wife and Balod’s sister.
17 News attempted to contact her last week about some of her real estate purchases, but she declined to comment.
Jennifer got two loans for the house, again from Suntrust Mortgage. She got $1 million the first time, and $295,000 the second time.
A month ago, the mortgage company began foreclosure.
It is one of four of her properties on which notices of default have been filed… “
Wow was she even rich enough to get all those mortgages? She may go to jail for fraud! In a normal market, youd need to be rich to afford ONE $500k house and she bought 5!
There are special circles of Hell reserved for the likes of Crisp and his family. This video (from Bakersfield local TV) is a must-see: (warning - for those with a sense of ethics or principles, this may result in nausea, detached jaws, or excessive moral outrage)
http://www.kget.com/mediacenter/local.aspx?videoId=19236
Agree! Outrage for locals, these clowns really tried to screw our town!
“Among the hardest-hit areas are Riverside and San Bernardino counties. Their low prices drew first-time buyers who used adjustable loans. More than 1 out of 5 foreclosures in the state take place there.”
Sing along with Jim…
http://www.youtube.com/watch?v=9DfG1SNydnc
Real estate analyst Robin Kane of Fresno said home values skyrocketed beyond the ability of families to pay and are now falling back to earth.”
A favorite movie of mine…
http://en.wikipedia.org/wiki/The_Man_Who_Fell_to_Earth_(film)
Have you noticed how the CAR hasn’t mentioned their affordability index in a while? They way they do the numbers houses are getting less affordable in California, and that kind of news really goes against their desire to work down some of that inventory.
Prices are starting to come down a bit in the coastal areas. Two examples: MLS ID# S487323 (Dana Point, Lantern Village - previously listed at $849K) and MLS ID# S484242 (Monarch Beach - been on market off and on for ages).
“Among the hardest-hit areas are Riverside and San Bernardino counties. Their low prices drew first-time buyers who used adjustable loans. More than 1 out of 5 foreclosures in the state take place there.”
Serves you right for not doing research on the market and taking a toxic loan
“Ryan Grothe thought he was making the right decision when he moved his family into a two-bedroom condo he purchased in Rancho Peñasquitos in late 2005. Their one-bedroom apartment had become cramped, and he wanted a roomier place for their daughter.”
“A year and a half after moving into their new home, the Grothes are renting again, unable to make the nearly $3,000 monthly payment on their $370,000 loan and are facing foreclosure.”
“‘The lenders told us if we didn’t do something, our place would go into foreclosure,’ said Grothe, who is hoping to sell the condo, but for far less than the purchase price. ‘We had called both lenders trying to refinance and they said, ‘No, the property values are going down and you’d have to fork over money in advance to refinance.’”
“‘I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this, that we would need to refinance, we’re starting to fall behind, and it just amazes me that they help you get into these places and when you need help, they run the other way.’”
I have no symphathy for you. You got greedy and drank the kool aid. Why did you overpay for that condo when you knew renting was far cheaper? You could have rented a 2 bedroom!
These borrowers are defaulting ,not because of job loss ,or medical bills ,or some emergency ,but because they could never afford the property payments long term to begin with .
Its amazing that this borrower thinks that you address the affordability issues way after you purchase the home ,(apparently the RE industry had this notion also ). I think that alot of borrower were told to just get in the property and refinance later . Somebody should of told these people that real estate doesn’t always go up and lenders don’t always give you a loan in a tight money market . How dare the RE/loan industry promise borrowers that a refinance will save them from a loan they couldn’t afford to begin with .I bet this borrower got a no down loan and the income was false on the loan application .
The mess these borrowers got themselves into is just unreal ,not to say that the real estate industry didn’t help these people make these grave mistakes .
“I think that alot of borrower were told to just get in the property and refinance later”
Yup, IMHO, that’s what happened to quite a few of them.
I used to routinely call lenders to ask what kind of “programs” they had & try to get more dirt on the latest “affordability products”.
In every single phone call, they claimed that we could “just refi in a couple of years, before the loan resets.”
BTW, i had no real intention of taking on anything other than a standard 30-year FRM with 20% down. Just wanted to see what was going on in the mortgage industry.
Badagliacco? Anyone else notice this also spells “A Bad Cico Gal”?
Not saying it’s a Voldomort thing, but amazing that her initials would also be a cancer treatment (a BCG).
#6; “Harry Potter and the Secret Chamber of the Housing Bubble…. in Phoenix.”
(A ‘Wall Street’ Production….written and directed by: A. Greenspan)
“‘These are unprecedented circumstances,’ said John Husing, an economist at Economics & Politics. ‘Anyone who says they’re not guessing is a liar.’”
Scary bit of honesty there…
They’ve been at this a long time. They knew what they were doing.
http://www.economagic.com/em-cgi/data.exe/fedbog/fedfund
This puppy is just warming up. Wait until 2008 and 2009!
They will be very dark times for real estate.
Buying now = suicide.
Tell that to these knob bonnets
http://tinyurl.com/2opfae
I tried.
These are the buying the dips zombies of RE.
I thought of registering to rebut/reply, then thought, nah, why waste the time.
I mentioned this at the end of another posting but I don’t think many saw it. Today, the local radio news reported that the number of cases of west nile virus in CA has doubled over last year. Health experts believe the culprit is foreclosed homes, where unkept pools are huge breeding grounds for infected mosquitoes. Looks like there will be more casulaties of the foreclosure boom than just FB’s after all.
Banks sitting on REO with green pools should be required to pay extra fees to public health departments for creating a public health menace.
I believe Sacramento and your town are already talking about assessing large fines on vacant homes.
Excellent. It actually serves the banks’ interests to give them a kick in the pants to move the REO, anyway. Nobody gains by letting perfectly good homes deteriorate due to desuetude just because the owner can’t command his wishing price under current market conditions. And it would be a pity if many, many lenders collectively caught falling knives…
We have a REO here in La Costa in my complex. 2bd/2ba 299k. Been sitting and sitting. Really nice complex, we rent the same thing for 1300/mo. The bank is going to take a bath on it. The kicker is there are 3 other places here in the complex, much less sq ft, in fact 2 of them are just 1 bedrooms, they are asking 325k and one 350k. HAHAH. We checked them out at the open house, no better than our rental, and no where near as nice as the 299k one. Who are these idiots who price 25-50k more for a smaller unit in the exact same complex. Its going to be a LONG year for these sellers. Nothing is moving in Carlsbad as far as condos.
You moved?
We’re in LC, too.
Impac Mortgage just cut 20 percent of workforce……
http://mortgage.freedomblogging.com/
Is it just me or could this read like 2009 not 1929.
http://en.wikipedia.org/wiki/The_Great_Crash,_1929
Ron Paul music videos.
http://www.ronpaulforums.com/showthread.php?t=9123
Best thing to do now in southern California is for buyers to counter with much lower prices to help drive outrageous housing prices down. Sellers can refuse them, but sooner or later, they’ll realize buyers are onto them. Buyers, at this point are willing to wait a long time, as they know prices have to go down before the housing market will stabilizes…the housing slump is just beginning to hit southern California hard. House prices need to drop at least 30-40% and still they will be high. I for one will wait because I don’t want to pay a price that my house value will never see again and that’s about what’s going to happen. House value is only going to go down as more and more people are not able to afford them and in southern California that is increasingly a fact. Two working people with no children are struggling at decent jobs, and still they cannot afford a starter home at half-million $$. Southern California is too expensive to live in, and with all the future problems of illegal immgration, is not the most desirable community. Too much crime as well as traffic does not help as people are house poor.
Well said! You should probably relocate. I am leaving Florida for good reasons.
Don’t even waste time low balling sellers, the good deals won’t start till 2010-2012. It’s best just to ignore sellers and if every other buyer does the same, those sellers will be forced to lower prices because they got no interest, no offers. Boycott those sellers!
The number of foolish buyers drinking kool aid is rapidly shrinking as subprime is about dead and more and more buyers are starting to get the hint that house prices just might not be going up or in fact starting to go down.
I am a lawyer by trade but a student of human psychology w/overall good intuition. It is my sense that here on the SoCal freeways, where I have the pleasure of spending 3 hous a day, there is a noticeable uptick in agressive/stressed/tailgating/road-raged drivers on the road. I am getting regularly tailgated even when already speeding or just stuck in slow traffic. One guy tried to throw his coffee on me becuase he thought I cut him off. People are stressed, and my guess it is a bunch of FB’s.