Irvine Housing Blog

“Over the last two months, lenders have slowed the rate at which they allow properties to go to auction. I can only speculate as to their reasons, but a burgeoning MLS inventory is likely the cause.”

Coto may be different, but the main reason properties are not going to auction in Coto is because most of the NTSes are being canceled.  And there is very little shadow inventory in Coto.  REO seems to come onto the market within a couple of months after the auction.

So far, many of the canceled NTSes are refiled, and my guess is that almost all of them will be eventually.

Every week we post the scheduled auctions for Coto de Caza, http://www.cotohousingblog.com/?p=13953 .

Out of the 15 auctions scheduled for the week of 9/12/10, 6 are redefaults or properties which have had a recent NTS rescinded, (canceled), and have redefaulted.  Also, many of the properties with NTSes are sold as short sales and therefore never go to auction.

“I decided to do the conservative thing, collect rent on this place and wait a couple of years for the housing market to improve,” Donnelly said.”

  What amazes me about this is how agents have perfected using propaganda to convince people to buy when they shouldn’t, yet, when they really should sell agents have not educated themselves to be able to educate their clients and provide the sound advice and the knowledge it takes to show them rental parity or why it’s in their best interest to sell. I wonder what he leased this property for? The article was good; the only thing I wish he had added is an analysis on the rent and false logic of leasing this property. Moreover, the owner probably going backwards both from a deflation perspective and on a cash flow basis. Not working with a professional that could show him this likely will cost him 10’s of thousands if not hundreds of thousands. Moreover, not pricing it correctly right off the bat will also likely cost him. However, it’s also possible that based upon the psychology outlined he would not listen.

    I see both of these scenarios play out regularely. One, people choosing to rent their home rather than sell and “wait for prices to come back” and agents that do not use the closest comps and set the wrong expectation regarding what their clients home can sell for and costing the seller money in the long run. A great example of this was a recent transaction in which the property was listed circa 5-10% too high depending who you are talking to. It had been on the market for 90 days and its market value based upon the comps was a few percent over one million, however it was listed close to 1.1. Nevertheless, they immediately dropped the price circa 10% on our initial offer, below a million. While in my opinion, if they had just listed it under a million to begin with it would likely have had multiple offers and sold for more. Instead we went back and forth for about 3 weeks and instead lowering their price on the market and selling it for a million or possibly slightly more, it ended up selling to us for below one million. The seller mentality that my home is worth more and any minute it’s going to go back up so I’m not taking your offer, I’m going to list it for what it was selling for a year or two ago, or I’m going to rent my property out will play a role in lengthening the time for correction in Irvine but will cost most sellers in the long run.

IR -

...what are the reasons NTSes are cancelled so frequently on ‘high end’ properties like those in Coto?  I have seen the same house cancelled like 10 times. 

BD

Thanks IR… it seems that prices above $1M are the most out of whack.  These people seem to think we are not already back to 2004 pricing and falling.  Some of them are asking two and 3 times what they paid for the property in 2000. 

Seems like there is going to major pain here…

My .02

BD

Upon FC’ing the bank would need to pay the utilities and HOA on their property.  Delaying FC, delays start of those expense. 

Japan not only has the psycology of deflation, but has massive discouraged workers, who live and are supported by their parents for the last 15 years—not unemployed, but gave up.  Not much prospect of ever getting a job or being counted as marriagable material.  Very sad.

IR, I disagree on your last note on the banks expecting a turn around on the high end property owner’s status.  The goal is to move the liabilities by refinancing or sale to a GSE backed without bank liability.  Then defaults will be the taxpayers problem and not their problem.  In fact it will not be their problem, but their oportunity for picking up property on the cheap and FC/administrative fees.

Hold on and rent it out is attractive to those with steady income and if the property breaks even or losses very little.  I was a property that the sale fell through and I held.  Lost lots of money via bad renters, major repairs (HVAC units going out) and vacanacies.  Now it makes a little bit of money.  Not a business for most people with lots of unplanned expenses.

Renting for money,
Should of been
Squatting for free.

Even if a property looks attractive on a cash flow basis at current low rates, doesn’t the value of the home decline (even if the CF doesn’t change) if rates rise? Wouldn’t home become less affordable to others on a monthy payment basis?

Excellent point. Unless incomes and rents rise signifigantly enough to keep up with rising interest rates the value to a new investor looking at cash flow will be much less and there will be downward pressure on prices when rates rise.

The received a loan modification on 5/20/2008, but they received a NOT shortly thereafter.

Wondering why this high $ property was even considered for modification when you had real folks in real trouble. The system is jacked up.

WSJ had a pretty detailed July article on bulk condo sales in Florida:

‘Bulk Sales’ of Condos Clear Supply, at a Cost
http://online.wsj.com/article/SB10001424052748704178004575351072635845474.html

Favorite quote: “The Vue, which has floor-to-ceiling windows, 20-foot ceilings and a rooftop terrace, cost $340 per square foot to build, but this latest purchase price works out to about $126 a square foot.”

I can see why some developers are pushing to have unsold tracts bulldozed. Hard to compete with a fire sale like that.

http://lansner.ocregister.com/2010/09/14/socal-home-sales-fell-14-in-august/81416/

Housesales drop 14% in OC, so in RE speak—never a better time to purchase a home than today.

Is a family included in the sale price? 
PS: Renting does not include renting a family in the rent agreement.  That’s why it’s not call homerenting.

Thanks for keeping us informed of current market conditions.

You relate: Obviously, I watch the trustee sale market closely. Over the last two months, lenders have slowed the rate at which they allow properties to go to auction. I can only speculate as to their reasons, but a burgeoning MLS inventory is likely the cause. Of the few properties that have gone to auction, almost none of them have been priced over $500,000. That isn’t likely to change considering we are still in a recession, there is too much inventory, and few buyers are stepping up to buy overpriced local properties. Any struggling property owner considering accelerating their default should do so now. There is little or no change a lender is going to begin foreclosure proceedings over the next 6 months or more. For anyone already squatting, they too will likely get through to next spring.”

I would like to focus on the part that sates “here is little or no change a lender is going to begin foreclosure proceedings over the next 6 months or more.”

I see pressure from the stock market causing banks to start agressively foreclosing, as I outline a rather drastic decline in stocks in my linked article A Higher Yen Stalls US Stocks, But Moves Gold Higher … A Higher Euro And A Swedish Krona Sustain A Rally In The European And Asian Shares

I write: There are those who are short the market, and to protect their investment, are committed to buying the Yen, FXY.  They will purse a higher yen, until other carry trader investors relent, going long the Euro, FXE, and long the Swedish Krona, FXS, and the Australian Dollar, FXA, and the desired response of lower World Stocks, ACWI, and an S&P, SPY, is achieved. The chart of both, shows an Elliott Wave 2 up being completed; and an Elliott Wave 3-of-3-of-3 waiting to commence

I believe that the rise in the Euro, FXE, today, September 14, 2010, to 129.59 will commence a Wave 3 of 3 of 3 Down; with a prior Wave 3 Down on April, 15 2010 at 135.47; and a prior Wave 3 of 3 Down on August 6, 2010, at 132.45. There had to come a definite rise in the Euro for the ultimate Wave 3 Down to commence; I believe that rise came in today.

My belief is that the newly announced Fannie Mae, that is GSE, loss mitigation policy will push home prices down and extinguish bank capital as short selling and credit default swaps will quickly and progressively pressure the capital of banks downward, because they have a legitimate claim that the banks will now be taking losses on foreclosed properties that are pushed out of shadow inventory. The GSE announced policy of loss mitigation and loan management is the antithesis of FASB 157; it will effectively extinguish banks and transform them into property leasing organizations. Furthermore in addition falling bank, KBE, prices, and I expect PowerShares Real Estate, PSR, and Residential Real Estate, REZ, to fall. It’s the opportune time to sell them short as well as ProShares Ultra Real Estate, URE, and Direxion, DRN,

And I also provide a complete listing of Stocks and ETFs to sell short for a debt deflationary bear market on StockCharts.com Public ChartList

So the concept here is that we are at the cusp of an Elliott 3 of 3 of 3 Wave Down.

Dear Irivne Renter, neither you, nor I have the capability to comprehend of the economic shock and awe that is coming. I can assure you 100%, that banks will be foreclosing and leasing at a pace that one will find unbelievable.