Irvine Housing Blog

There is a debate as to whether unemployment today is structural or cyclical.  Structural is when there is a big skills or geography mismatch.  That is somewhat the problem in Detroit (auto jobs have moved out).  That is the problem with RE & mortgage banking.  A healthy level of employment in those businesses is NOT what we had in 2006.  I predict mortgage volume to be very low the next 5-10 years as rate increase and no one refinances. 

The other source of refinance activity won’t be around either - appreciation fueled equity to extract.  Yesterday someone posted that 40 years from now, no one will care if you bought in 2005 or 2010.  Looking at a realistic time frame of 10 years (isn’t the average stay at a home 7 years?).  What has buying in a bubble area 2005-2007 done?  Can you refinance into lower rates or move w/o bringing cash to the table?  Consider if someone stretched to get into the home that really fit them (that they can now afford comfortably).  A decision about when, where, and what to buy can have a huge impact on a family’s finances for a long time.

> One of the biggest drags on the economy at every scale is unemployment among real estate agents, mortgage brokers, appraisers, home builders, engineers, architects, and a number of related fields.

McDonald’s has 50,000 openings. Problem solved.

As one of the appraisers that luckily saw this coming I:

-sold the house and vacation condo in 2005
-was ridiculed by various used house salesman through 2006 for doing so
-just ran into a “high profile” used house saleswoman who tried to have me offed an approval list for not hitting value working the makeup counter at Macy’s (schadenfreude in full effect!)
-transitioned into a new industry where I no longer have the advantage of working for myself but I’m earning a good living
-love reading this forum, learning viewpoints and laughing a lot
-trying not to be a “drag” on the economy but have definitely changed my consumer ways forever!

As far as land and structure, the not often talked about method to determine real estate value is the Cost Approach.  In SoCal its a little harder to do as vacant lots that are able to be built on are rare, but it is doable.  Think about it, LAND is the only thing that really can appreciate.  The minute the toilet is flushed is it now worth more?  Everything in the STRUCTURE is depreciating.  Can the house be liquidated in parts?  Can the nails be pulled out of the 2” x 4”‘s and sold at an appreciated price?

This is the same reason much of the graniteel stuff was BS promoted by agents, contractors, building suppliers, etc.  Travertine has the same function as linoleum.  Any value (theoretically) that is assigned to a feature of the property, should be proven in the market.  i.e. All other major things being somewhat equal, sq. footage, BR/Bth count, yr built, location,  the $20,000 “adjustment” for the travertine should clearly be demonstrated by comparing 3 all else equal linoleum homes to 3 all else equal travertine and extrapolating the $20k difference.

Unfortunately, the banks and brokers able to shuffle stuff off to Wall Street were only interested in the fees, not in the long term returns of holding paper.  That is where a competent valued professional turned into a hit the number by turning a blind eye for $350 a pop idiot!  The only thing now is that they are $125 hit the number idiots, driving 100+ miles round trip into areas where they are not market competent, and if lucky are doing 5 a week.  No thanks! I’m enjoying working for the man and not dealing with the numerous scumbags the industry has within it!

I have a question about the language and process of short sales.

I may or may not be the current buyer of a house in a short sale, and I’m a little confused by the process.  After sending in a formal backup offer several weeks ago, the original buyer has dropped out, and the listing agent contacted my realtor this week and said that I should re-submit my offer at $5K below my original offer, and that I should add the terms, “seller to credit buyer by 3% towards closing.”  This seems odd, but short sales, as far as I can tell, are really strange in general.  Also, since they haven’t formally accepted an offer from me, I don’t know that I’m actually the only buyer.

So why, given that the agent had an offer from me for X, do they want me to pay X-$19K?  My first thought is that the lienholder has taken (at least) six weeks to arrive at a set of terms that they could agree with for the previous buyer, and apparently the bureaucratic overhead for just getting the various sides of the bank to agree might cost more than $19K, so the bank and/or listing agent is just being pragmatic.  Or perhaps it’s just because regardless of their internal overhead, they know it will take six more weeks to deal with my higher offer.  Or perhaps they know that there’s something that’s already come up in inspection that they’d like to give me $19K to deal with after they’re out of the picture.

Or maybe the listing agent isn’t telling the bank that I made a higher offer several weeks ago.

Or maybe the bank has some internal rule that they can’t sell via the listing agent’s counter-offer and must only agree to an “original” offer from the specific buyer, or maybe some other weird thing.  I’m assuming it’s some combination of everything: pragmatism, manipulation by the realtor, inefficiency and timeliness.  Does anyone have any experience with this behavior?

Homebuyer suggestion to builders:

“Buy one, get one free,” Sally, suggested. They had a good laugh over that.”

NYT: Builders of new homes see no signs of recovery: With sales down 80 percent since 2005, analysts expect long-term changes in behavior