Love the new graphic.  Is that Gary Watts in the bottom of the pit?

BTW, The Register just published the new median figures:

Irvine 92602 $630,000   -24.6%
Irvine 92603 $1,179,000 20.9%
Irvine 92604 $565,000 -14.4%
Irvine 92606 $642,000 -5.6%
Irvine 92612 $490,000 -25.5%
Irvine 92614 $610,000 12.4%
Irvine 92618 $494,250 -16.6%
Irvine 92620 $745,000 -14.5%
——-

I think that is the first time I have seen two of the zip codes below $500K.

Great little graphic there….hillarious.

You should provide attribution to The Onion for the graphic.  BTW, you could have stuck with the original “Circle of Total Bastards”.

I don’t quite understand how 100% financing became so widely available in such an extremely short period of time.  It’s been used in auto financing for a long time, even though the lender always takes a loss on a repo, ‘cause it simply allows more loan volume.  It is, and I think will continue to be, available to prime borrowers when not combined with other risk factors (e.g. high debt ratios, teaser rate ARMs, etc.).  And as soon as housing nears historical pricing norms, I think 100% financing will be made available to some borrowers other than the most credit worthy.

Caveat - If Congress changes the tax code to make mortgage debt forgiveness non-taxable, then 100% financing may not be available to anyone.

Homebuilders Liquidate Assets as Threat to Survival Spurs Sales

http://www.bloomberg.com/apps/news?pid=20601109&sid=adFsGVxspArw&refer=home

Nationwide Auctions

``We might discount a home 20 percent if the profit margin was 30 percent, but we haven’t discounted any properties 40 percent, which some homebuilders are doing to raise cash,’’ Dietz said.

Officials from Standard Pacific and Beazer didn’t return calls seeking comment.

``We’re not focused on growth,’’ Ian McCarthy, Beazer’s chief executive officer, said at a homebuilding conference in New York on Sept. 18. ``We’re very much focused on today and getting through this downturn.’’

I understand the whole naming the street after a well-known location to make it sound nice and/or conjure up positive images…but Chula Vista?? Couldn’t they have picked a better place, instead of one that has “high to moderate gang problems”?

http://www.urbandictionary.com/define.php?term=chula+vista

Employment Rebounded in September As August Decline Was Revised to Gain
http://online.wsj.com/article/SB119158634981050085.html?mod=hpp_us_whats_news

The figures, which included an acceleration in wage growth, will likely force investors to rein in hopes for further aggressive easing by the Federal Reserve.

Washington Mutual Says Third-Quarter Profit Fell 75% (Update3)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUmuAojhEKM&refer=home

Oct. 5 (Bloomberg)—Washington Mutual Inc., the biggest U.S. savings and loan, said third-quarter profit fell about 75 percent after the worst housing slump in 16 years dried up demand for mortgages.

I don’t believe 100% financing will survive. The high default rates and the ease of committing fraud will make these loans a pariah in the investment community. If there is no secondary market for the product, there will not be any originations.

The market is not for 100% loans, it is for the 20% loan on an 80/20 piggyback. As we have documented here, the second mortgages are getting totally wiped out in this decline. How many 100% losses can an investor absorb? I think the bitter memory of this debacle will stick with investors for a while.

Correct me if I am wrong, but would not some of the banks go after those who can still PAY something?

I mean, if you had money, but could not carry your properties and let them foreclose, would the bank not go after you to get SOMETHING back?

If I understand correctly, you have to prove hardship, and some of these people can’t.

The whole employment number report back Sept for August decline to -4000 is sketptical.  Fed may have purposefully done so to make an excuse for rate cut of 50 basis points and thereby saved the day for financial institutions and large hedge funds from market collapse and to take people’s eyes off the credit crunch.

This whole Fed thing is total manipilation.  Nobody can save the falling housing market, and if someone thinks its bottomed, they are welcome to go buy now.

What would Fed do now on rate cut?  They now look like idiots by fueling inflation further

With Ruined Credit, Ex-Homeowners Search for Shelter
http://www.voiceofsandiego.org/articles/2007/10/06/housing/910shelter100407.prt

I think we are seeing the lull before the storm on collections. Before August it was hard to find REOs on the market because banks had not staffed up to deal with them. The same is true of collections right now. I cannot imagine banks failing to go after a defaulting borrowers assets in court on a second mortgage. They will staff up and go after these people. The dollars involved are just too large.

The Dirt on the Neighbors

http://finance.yahoo.com/real-estate/article/103638/The-Dirt-on-the-Neighbors

In your opinion, is it at least possible that the loss mitigation procedures are dramitaclly altered in the wake of this situation?  For example, short sales are a relatively new invention designed to avoid costly legal foreclosure proceedings (correct me if I’m wrong?).  Call it a what you want, but IMHO we may see even more flexibility in an attempt to minimize balance sheet w/o’s.  Like the homeowner who rides out the storm, as long as mortgage debt is being serviced, the bank can still keep it on paper.

Tale of Sam, the grocer and his family, and Gary, his long-time employee, two more victims of the housing boom and bust.

Thursday, October 04, 2007
Another one bites the dust

http://larrystake.blogspot.com/2007/10/another-one-bites-dust.html

I have always considered myself more like the guy that rows the boat across the moat to the rings of hell….......talking to people about their lives as the are being rowed to hell, and thinking about what they said as I go back to pick up a few more people doomed to hell.

Any others out there just like to row the boat, talk to the doomed, and then spend time thinking about it.

$290 million dollar flipper

Office landlords are flipping high-profile properties
http://www.dallasnews.com/sharedcontent/dws/bus/stories/100507dnbusinvest.35aced8.html

Excellent post, as always.  We spoke with a loan consultant with Wells Fargo earlier this week, and they told us the only people doing Jumbos in this area are Wells Fargo, BofA and WaMu.  She said the secondary market for jumbos is toast, so the lender has to “portfolio” the jumbos and they go on the bank’s books.  And, because the banks are lending their OWN money, the lending requirements are tight:  10% down minimum, and you MUST prove it is your own money.  Full income verification.  Full asset verification.  40% DTI ratio or 50% DTI if you escrow taxes and insurance AND put 20% down.

IR, you are correct.  100% deals are dead.  If you don’t have 10%, down, you’re not going to get a jumbo.

I think you are correct. The banks don’t want to write this debt off, so they are keeping them on the books even after the short sale. On the banks books, they still show the borrower owing them the full amount of the second mortgage. The key thing here is what the borrower believes. Right now, there is a widespread belief among short sale borrowers that they owe nothing because the banks have not come after them yet.

The banks will attempt to do work outs, extended payment schedules, reduced interest rates, etc. But in the end, banks expect to get their money back, and right now the borrowers don’t expect to pay them.

Buster,

Is the 40% DTI just housing? Or all debt? 

I cant imagine that it is just housing but stranger things have happened.

Late-Sept. home prices at April ‘05 level

http://lansner.freedomblogging.com/2007/10/05/late-sept-home-prices-at-april-05-level/

IR,

Great job on this blog, it has become a daily read for me now, I particularly loved the post on Monday, especially the graph showing how much add’l purchasing power the Neg Am loans really added to the market.  It’s incredible when you look at the facts like that.

Regarding this and other short sales, California is a no deficiency judgement state correct?  Or is that just on foreclosures?  Assuming this purchaser bought on 5 year ARM, can’t really afford the payments and can’t refi because the market has dropped 10% or more and not increased as hoped in 2005, he is trying to selling before this place plummets to $400k and he has no prayer of refinancing.  My question is, will the 2nd lender be able to go after him for the $75k they stand to lose?

I believe that non-recourse protections only apply to the first mortgage, and then only if it has not been refinanced.

Some of the people who post comments over at Lansner’s blog have some serious denial issues. Go read some of those comments, they are hilarious.

I’m a mortgage broker in Palm Desert, Ca. I’ve been in the business for 30 years and I have never seen such lunacy as the 100% down jumbo. At the peak of this mess Bear was offering 100% [80-20] to 1.5. Bon appetite on those puppies.
When I started the 100% VA loans were for qualified Veterans who did their stint and needed some help to get started. They were very limited and a pain to do but was the only option at the time.
In the 70’s we were working the edge by allowing the conventional borrower to put 10% down and have the owner carry 10% behind an 80% 1st. That was what passed for creative financing at the time.
If there is a point to this it is while we were working on ways to expand the market we were not violating rational fundamentals. I mean, would you go partners with someone if all they brought to the table was a fico score. I want anybody in biz with me to have some skin in the game. These 100% jumbos realize that they have almost no downside risk on a walkway. There is no margin call. The wind is at their back politically. This is getting spun already as they are the victims.
I have always made a good living in this field and I was able to do it without doing the stupid crap I was offered. Even so, I’m getting my head handed to me in the market now. All the good clients of mine who financed in the last 3-4 years who may need to move or just re-finance for proper reasons are underwater or near it. A short sale recorded near my house which is the new comp. 100k less. Anyone who thinks this will end in any of the bubble states with a 10% correction is just talking. My guess is that it is going to get very ugly before this is over. Hold tight.

Another condo = more evidence we are still in the early stages. When the s——really hits the fan it will be far more desirable properties enjoying huge losses.

Also, is anyone still paying 6%? Bueller?

I disagree with both of you.

The ease of mortgage fraud combined with the illiquidity of homes will ensure that 100% doesn’t even survive for most prime programs.

The only way 100% financing continues is through gov’t programs like My Community simply bc of the gov’t backed nature.

I don’t think we’ll go back to requiring 40% down, but I wouldn’t be surprised if the minimum DP became 20% again.

I think new auto loans can be up to 115% or even 120%. Don’t recall exactly, but the point is it allows them to take your upside down trade in.

What really doesn’t make sense is the stock market reaction to the news. It went up, even after many analysts speculate with this info that the FED cannot reduce the FFR again.

The market has not made sense to me for a year now. I don’t understand these values.

Recourse or no, once the house is sold this is all just unsecured debt. Chapter 7 and poof, it’s gone.

Short sales are not a new invention. They may seem new since in the last 8 years there was hardly any reason for them. They were quite popular in the 90s. But they can only be approved by the lender if there is a financial reason that the seller needs a short sale. If they have been making their payments or have money in the bank or elsewhere the lender will say sorry if you want to sell the house for $50k less than what you owe then you bring that $50k to the closing table. Now if they are having financial trouble and have not been making their payments they might approve a short sale.

It also sounds like to me you were thinking of a loan mod where the lender and the borrower work something out to keep the house. This is a really sticky subject and some lenders have the flexibility to do something to help whereas others are limited to what the prospectus of the MBS deal says. For example if the prospectus says loan mods are limited to 5% of the pool balance and 15% is in default they can only help one third of those in default. I could ramble on but I think you get the picture if that is even the picture you wanted.

I am curious as to how they define “saving.” If your savings are less than the increase on your debt, I don’t see how that is saving.

It reminds me of our discussion about cash recently. The Wrights believe they have cash because they still have $40,000 of the $100,000 loan. If your liquid net worth is negative, you don’t have cash, you have borrowed liquidity. There is a difference.

Link to the article discussed above

Life and debt in suburbia
Like middle-class families everywhere, the Mendells, Steins and Wrights judged their own financial health by how they thought their neighbors were doing. How wrong they were.

http://money.cnn.com/2007/10/02/pf/100400117.moneymag/index.htm?postversion=2007100514

Phew… at least you’re not claiming that this New Level of Hell resides within the Walls of the City of Irvine.

That would be a most Evil Thing to do.

Why do you think that wall is there?
The 405 and 5 get pretty noisy on the other side…

Mortgage apps down despite rate drop
Volume declines nearly 3 percent in previous week despite recent decline in interest rates; 30-year fixed rate hits 6.32 percent.

http://money.cnn.com/2007/10/03/real_estate/bc.apfn.mba.applications.ap/index.htm?postversion=2007100307

Not on point, but does anybody have any idea what is
going on with the stock market?  Are all the buyers insane?

It’s helped me out in selling out some shares, so that’s nice,
but what do these buyers think is going to happen?  I’m selling everything but my energy stocks, and will then lurk.

Home builder Standard Pacific cuts staff, merges offices

http://biz.yahoo.com/bizj/071004/1531266.html?.v=2

Standard Pacific Corp. will merge its South Bay operations into its East Bay office, its Northern California regional President Douglas C. Krah said today.
Of 75 people working in the South Bay, Irvine-based Standard Pacific (NYSE:SPF - News) laid off about 25 people. He declined to give the status of Division President Steve Delva.
…
“I am feeling very challenged,” Krah said. “Closing an office is a very difficult experience for all of us.”

No single event precipitated the moves, he said.

The South Bay office will likely remain open “through a transition period” until the end of the year.

Construction stalls on high-end development
Developer mum; councilman says sales offices closed

http://www.mydesert.com/apps/pbcs.dll/article?AID=/20071004/BUSINESS04/710040331/1003/business

Miami-based home-building giant Lennar Corp. has stopped pouring foundations for new homes at the upscale gated development east of Gene Autry Trail and south of Vista Chino.

“They shut down their sales offices and are not finishing construction on the clubhouse. It is 95 percent done. They are not going to finish it,” Councilman Chris Mills said.
...
Fifty-three-year-old Lennar, which builds homes in at least 18 states, has focused on reining in expenses, slashing construction costs and pushing sales to convert land and new-home inventory into cash, CEO Stuart Miller said in a news release in June, when announcing the company’s second-quarter losses.

Lennar has cut back on housing starts by more than 50 percent year over year as it unloads inventory, company officials said.

“Market conditions have eroded so much over the past six months that we are now focused on limiting the loss for the year,” Miller said in the release, adding later that uncertain conditions made him “suspect that we will not know that a recovery is coming until it is upon us.”

sounds like a terrible moral hazard dilemma.  if i get in a jam, there’s no incentive to cut my lavish spending, save my money, and continue paying the mortgage.  if the lender is going to make me bring money to the table, i might as well blow through my savings first, stop making payments, and let lender cover difference!

Short sales were called “deed in lieu of foreclosure” in a textbook I used to use in an undergraduate class I taught.  And that was nearly 20 years ago, so I don’t think the concept is too new.
Terry

Vice Chairman Donald L. Kohn
At the Greater Philadelphia Chamber of Commerce 207th Annual Meeting, Philadelphia, Pennsylvania
October 5, 2007

http://www.federalreserve.gov/newsevents/speech/kohn20071004a.htm

Our policy action will not be able to avert all of the weakness in the economy that may be in train for the next several months.  Monetary policy works with a lag, and the effects of our easing action will have their maximum effect only after several quarters.  In particular, housing markets are likely to remain depressed in coming months as housing demand is restrained by the difficulty in obtaining mortgages and perhaps also by spreading expectations on the part of buyers that house prices will fall, as they already have in a number of markets.  And, although builders have reduced housing starts sharply, they have made very little progress in reducing the number of unsold new homes on the market.  As a result, even absent a further deterioration in sales, residential construction would probably decline further in the months ahead, imparting a significant drag on overall growth in real gross domestic product.

You’re at the mall, so why not buy a house?
A tent sale for new homes may be a first.

http://www.sptimes.com/2007/10/05/Business/You_re_at_the_mall__s.shtml

Everybody is a victim now.  People are even showing up on T.V. like, “We signed the papers because our agent swore to us it was a fixed mortgage.  Something has to be done! We were vicimized.”  When did any of these victims have a gun to their head?

The lack of personal accountablilty in this day and age is sickening.  In bubble mania, there are winners and many, many losers.  The press will likely tell every loser’s story and over time when the mindset shifts to the point where nearly everyone cringes at the words “real estate”, you’ll know we’ve reached bottom.
. .
. .
Oops, I guess my reservoir of schadenfreude still runs deep.  Although, I’m not sure it runs as deep as the Major’s.

I read an article some time ago that claimed people no longer define themselves by how much money they can earn working and save.  Instead, they define themselves by how much they can make by “working smarter, not harder” by investing in the right thing.

.com’s in the 90’s, housing after that, now stock market again

If Greenspan is right about the decades long term decline in interest rates being over, people are going to have to eventually change that mindset.

This is Hilarious! From now on, we can start using the word NINJA (no income, no job or assets) for loans that were 100% financed as most flippers are as such.

The era of NINJA (“no income, no job or assets” ) is OVER!

Even in those terms it’s insane. How much further up could it go even without the housing debacle?

I guess it’s just herd mentality.

Yeah, the market has been nuts.  My portfolio is well diversified and I’m in for the long haul, but I do find it strange that both my buy-and-holds and my hedges (like gold) are all moving upwards and I’m not sure what to make of it.

One thing is for sure, I’ve been hoarding cash and holding off investing for the time being.  Thus I’m looking at a really nice downpayment in a couple years or if the market falls, I can pick up some stocks on the cheap.  Either way, I feel time is on our side.

Oops, “holding off investing new money” that is.

Stong corporate balance sheets.  Positive outlook for global growth.  Buoyed by the winds of falling interest rates…

S&P trades between 14-16x 2008 earnings.  Fair multiple by historic standards.

So in the valuation equation the G and X are fine.  The only real problem now is the D.  With a ~1.5% dividend yield, the S&P is offering nearly 300 basis points less yield than was paid on average during the last century (Ibbotson data).

Ergo, if the G doesn’t grow significantly faster, and/or multiples don’t expand beyond historical averages, ex-ante returns should fall within the 7% nominal range.  As expected the equity risk premium provides some excess returns over fixed income, the question is are investors being compensate for the downside risk.

Go read the link.  Sam didn’t speculate at all.  All he did was run his grocery store.  Then some speculator cleared all his customer’s homes out, started building some new thing, then left it incomplete.  So no new customers to replace the old ones.

That’s why I linked this article - I’m sick of the home debtor and finance company, and neighbouring homeowners who expected more apprediation sob stories.  This one, out of them all, actually seems legit.

The real problem is that when the credit card limits are reached, people will stop buying stuff.  Which isn’t going to help the corporate balance sheets at all.

Seeing how the rest of the world seems to be going though a time delayed version of the US housing bust, the export party can’t last that much longer, for the same reasons.

Sue, my comments were made in general due to the liberal use of the word “victim” in today’s media regarding the housing bust.  I was piggybacking off your comment and not actually talking about Sam, so I wish I would’ve been more clear in making my comment.  Thanks for helping to drive clarity.

“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”
-Alan Greenspan

“Before August it was hard to find REOs on the market because banks had not staffed up to deal with them. The same is true of collections right now. “

I’ll bet some ex-mortgage brokers (and RE realtors for that matter!) will fill these positions.

Wouldn’t that be something to get a phone call from your ex-broker who set you up with a dubious loan and now he/she is calling you from the bank telling you you’re deliquent!  LOL!!!

“I would be happy to buy sooner rather than later…”

This reminds me of the last sentence of an email a realtor sent me :“It would be better to buy sooner rather than later.”

Except that was in the spring of ‘05!  LOL!!!

Bloggers-

Isn’t a falling dollar and positive inflation inevitible as countries such as China and India, Eastern Europe and Central/South America develop?  Their currencies will gain strength relative to ours.  And in the process of development, bid up the price of limited resources (moderate inflation)—while at the same time raise the overall standard of living?

Isn’t this what the do-gooders have been wanting for so long?  Economic prosperity for all?

Sounds to me like we can finally concentrate on being truly competitive again. 

Will the tide of outsourcing blue collar jobs be turning in favor of outsourcing white collar?

It can go up alot farther.  As long as Japan has a 1% interest rate and the yen is at 116, there is really nothing to keep equities from rising.

How about when the U.S. gets to a 1% rate?

“Will the tide of outsourcing blue collar jobs be turning in favor of outsourcing white collar?”

Some may argue that that is already happening.  Ask computer science majors about the many programming jobs now done overseas by their foreign ex-classmates.  In the 90’s Microsoft could brag about “all their assets going home at the end of the day.”  The problem with a career that features such portability is you are now competing with people throughout the world.

“And in the process of development…raise the overall standard of living…”

Our standard of living IS going up!  For example, who would have thought 25 years ago that obesity would be a national (and probably soon-to-be world-wide) concern?  The only reason people starve today is because of politcal situations.

I am a comp sci grad and I have been waiting for this. Companies aren’t going to send our jobs overseas if they can’t be done more cheaply there. Because believe me, the quality is not the same. I clean up crap from our Indian team all the time and my boss spends several hours a night on the phone with them answering their questions.

Last year my company sent all the support jobs to Canada. I bet that’s looking like a poor decision now with the USD dollar an even trade. Not to mention the protections to employees there which I hear from our company lawyers are much more stringent that what’s in the US. So they sent the jobs there, are paying more for them now, and they can’t fire them! Ha ha ha ha ha….

Did they refi?  I had read that their house in Philadelphia sold for $100,000 more than the one they purchased in this neighborhood.  So rather than a refi or a loan, this was actual money for them.  That said, you think they’d use it to pay off their credit card debt…

Stupid is smart about reaching the limits of the credit card thing.  No more cash outs.  No more increasing second mtges.

Then. . . no more spending.  Then. . . fewer corporate profits.

The filings with the Clerk of Court in Miami are now half the volume they were.  A lot of stuff gets filed that has nothing to do with real estate, like probates and divorce stuff, and final money judgments, and there’s no reason for those to drop off, so I assume this is a leading indicator of a really bad drop in real estate filings.

In Fla, you have to pay a fair amount of tax to file those things, so revenue is really gonna drop.

The grocer is in my other neck of the woods—Brevard County where Magnolia Bay is.  Magnolia Bay is still taking out huge ads in the local paper every weekend.  I haven’t looked at it.  My hobby of reading the real estate ads every weekend isn’t fun any more.

More lender stupidity.  An appraiser I know can’t make his mtg payments.  He called his 2nd mtgee, which is out of business or in bankruptcy, and offered to make some payments, if extremely reduced.  Apparently this lender (or its Trustee in bankruptcy) has not got the idea that some money is better than no money and will lose the entire $60,000 as a result.

And WaMu and Citi write down their assets a little bit, nowhere near the amount their need to, to be honest, and get rewarded with their stock going up???!!!  I too can use exclamation points like a realtor!!

I don’t know anything about G and X and D.  Explain please.  I just buy good companies, time my buying and selling to be the opposite of what everybody else is doing.  I buy when I think the mkt is ridiculously low and sell when I think it is absurdly high, and ignore it at all other times.  I didn’t even open my quarterly IRA reports for 2 years, why bother, and when I checked, preparatory to selling out my portfolio had gone up by about 40% in those 2 years.

Come on, Canada IT help on the phone isn’t so bad.

You could be on the phone like this instead…
http://www.consumerist.com/consumer/subprime-meltdown/countrywide-mortgage-adjustment-getting-outsourced-to-india-305781.php

would at least suggest reading the book The Intelligent Investors by Ben Graham.  This is a pretty easy read and will provide a thorough overview of the concepts of securities valuation.

Don’t be deceived by you returns in the market.  We are coming off an unprecedented bull run, that will not be paralleled over the next 20 years.  Consider that fact the DOW Jones Industrial Average did not advance beyond the peak of 1929 until 1955.  For a buy and hold investor you made NOTHING over than 26 year span (In fact you lost money to inflation).  Don’t think that can happen again?  Wrong. 

When you invest money, you are giving you money/consumption today in order to receive money/more consumption tomorrow.  All investment are valued based on the expected present value of all the money you will receive.  This present value is the “fundamental value of an investment”.  Comparing the fundamental value to the current market price informs the investor about the “richness” or cheapness of an investment.

Buying “Good Companies” when the market it moving away from them is not always a good idea.  This is a recipe for , to use the IHB vernacular, knife-catching.  It may be contrarian, but lacking some insight into the driver of value…

Without some concept of valuation you are shooting in the dark.  Now the monkeys with the darts have been able to win over the past quarter century, but my guess is that era is over. Peter Bernstein, noted economist, has articulated a strong case for a secular decline in asset returns, requiring a far greater focus on diversification beyond traditional asset classes and a more tactical view on investment with a keen eye on valuation.

Valuation of equities comprises three component.  The Dividend Yield = D, the Growth of that Dividend = g, and the multiple of the stock price relative to earnings = x.  The finaly piece is the discount rate = R (well actually r).

The basic formula is Value V = D*(1+g)/(r-g).  This is the Gordon growth model, which assumes a constant growth rate in dividends.  Notice that the price multiple, x, is not included in this equation.  This is because the multiple is a market variable, not a fundamental value.

To incorporate the multiple into the equation we can say that your return as an investor includes the present value of the cash received and any changes in the X that the market applies to that company.  X is most commonly reported as the price to earnings ratio (P/E).  Thus your overall return includes, the Dividends you receive, the growth of the those dividends, and any change in the markets price of the earnings for the security in question.

BTW, there are ton of valuation models, the one I outlined is the simplest I could l think of.  Virtually all valuation models incorporate the basic principal of discounted present value, or market earnings multiples.

“To Hell in a hot tub”.

Paul, thanks for posting.  I plan on purchasing a home in the desert once this debacle plays out. 

From what I can see, everything seems to have seized up out there.  I’m getting three to four emails a day from the same realtard advertising yet another “MAJOR PRICE REDUCTION”.  I’ve seen some reductions hit the 150K mark (from 700K down to 550K).  Seems like this has been a faster fall than in OC/LA.  Please share your thoughts of what you think housing prices will look like 3 years from now.  So my dream house in P.D. (3/2.5, 2000, own the land, pool) is 650K right now, what do you estimate it to be then?

Also, will lenders shy away from the area because it’s more of a “second home/investment” market ?  Thanks.

FDIC to mortgage servicers: Freeze ARM rates
Top bank regulator suggests industry cuts losses now to prevent foreclosures.

http://money.cnn.com/2007/10/05/real_estate/fdic_rate_freeze/index.htm?postversion=2007100517

Nah, I came out ahead just a bit; my original investment went up 600%.  And, so far, haven’t caught any knives.  Well, one, lost a grand on Lucent.  Somebody from the Chicago school some years ago hypothicized that the stock mkt was a random walk, unless you had inside information.  At the time, it was pretty convincing.  After that, I rather lost interest in modeling, as it seems throwing darts at the Wall Street Journal’s stock listings does just as well.  Haven’t been reading the Journal recently, but I seem to remember they ran quarterly contests between darts and the so-called experts.  The darts did pretty well, and sometimes won, as I recall.

I think that the important thing was that I

oops, wasn’t finished and hit the wrong button, twice.

put money away and then I kept it.

This is why real estate used to be important and, I hope, will be again.  It’s the one way ordinary people have been able to get and keep a really large asset.  If cashouts go away.

They can’t do that if they’re just servicers.  Anyway, silly me, isn’t there something in the Constitution about contracts?

Good Luck!

BTW , you are referring to Burton Malkiel, of Princeton.  His theory was based on index investing, NOT individual security selection.

Humm. It looks like we all know which was the original planned community.

“This time is different” - that’s a classic.  Kinda like “Real estate never goes down, they’re not making it anymore!”

There are many levels of denial, though, and we are just starting.

1.  This time is different.
2.  My state is so unique and desirable, it is different.
3.  My county is so unique and desirable, it is different.
4.  My city is so unique and desirable, it is different (subset of this: Rich dumb Asian people will always write blank checks for houses in my city).
5.  My neighborhood is different.
6.  My street is different.
7.  My house is “special” and different.

There isn’t capitulation until we get through all stages.  We are probably somewhere around 4 right now.  Like we were in around 1992, during the last cycle (OC prices continued their decline through 1992, 93, 94, 95 and 96 before finally capitulating and bottoming around 97/98).

Warning, Bill iR(obinson).... Warning…

Cocytus…. be careful for what you wish.

THAT WILL BE A COLD DAY IN HELL when the market turns around.

But, by Dante’s definition, sunlight never reaches Cocytus because it’s so deep and the place is VERY COLD thus the sinners there lay submerged in frozen ice.

So, by definition, if you throw those realtors there, then you got yourself a cold day in hell and a turn around ipso facto.

Time to read Dante. 

Seized up is the right word. We are in free fall. When the listings to sales are this high there are not enough comps. The builders’ reported sales are inflated with incentives. 
I keep changing my forecast estimates for the worse. Things are worsening so fast that 3 years out seems like an eternity. I notices several of the listing near my house are rentals now. That is not something everyone can do.
I think out here we may be at or near 2001 prices within 12 months. Your PD house will be about 400k. Forgive the analogy but it seems as if all there sellers are piled onto a boat that can’t hold much more. They want to turn people away, say come back later, it will be better for us all, but they can’t. Instead it keeps filling and getting closer and closer to sinking.
We don’t have a good blog here. I may start one. My phone is 760-341-3333. Perhaps I’ll at least start a newsletter and I can include you.

I forgot to answer your question about 2nd homes. They were pretty loose before. When there is biz someone will do it. We may not get the LTV’s we did before. You may need to put an extra 5% down. We’ll see.

Paul,

Thank you for the response.  That (unfortunately for you) is music to my ears.  A P.S. area blog would be wonderful and I’m surprised there isn’t one yet.  I’m going to buy in either P.S. South, or, if I can afford it, Deepwell in P.S. proper.

If you wish to contact me, go to the forums and “whisper” me your email address.