Irvine Housing Blog

Those figures for the floor area can’t be right, can they? 868 sq ft for 3 beds / 4 baths - do you have to sleep standing up?

IR, a word of warning: DO NOT WALK AWAY BEFORE TALKING TO AN ATTORNEY IN YOUR AREA.

The advise to just walk away works for some people, but not for others.  States have different laws concerning housing debt.  Some states are non-recourse states (many loans in CA are non-recourse).  Other states, like Florida, are recourse states, meaning the bank can pursue you after the foreclosure for the deficiency.

So I repeat: DO NOT WALK AWAY BEFORE TALKING TO AN ATTORNEY IN YOU AREA.  Preferably one who is savy on foreclosure proceedings and debt collection law.

OUCH!

The denial flavored Kool-Aid is still flowing nicely. 

I was told over the weekend that prices have nowhere to go from here but UP.  Of course, nobody can give a coherent reason as to why prices can only go up from here - apparently, house debtors can wield the power of magical thinking to put a floor under their declining equity.

I was told that the jerk next door just up and left because he figured out that he could go and rent a nicer house down the street for cheaper than owning!  GASP!

Now his old unmaintained house sits out on the market dragging down everyone’s value in the neighborhood!  Yes, that is it - this one Joe Blow single handedly brought down all the values in the metro area by walking away to go rent.

SIGH - what a tragedy we have inflicted upon ourselves.

I love this listing description.  I give it a Realtor(C) Thumb’s Up stamp of disapproval.

3BED+4BA+3CAR

Clever use of the “+” character combined with the CAPS.  Now the whole thing looks like one long jumble of unreadable SH_T.

A MUST SEE!

Crap filler statement?  Why not say “AVOID - STAY AWAY”.

GRANITE COUNTERS IN KITCHEN

In the kitchen! AH, YES! Of course!  Of course!  That’s where these things go.

TENNIS CT

Tennis in Connecticut?

RUN/WALK

HUH? Random brainwashing commands.

I take issue with the term ‘most’ that is peppered throughout the paper.  Is ‘most’ closer to 51%, or 99%?  You also need to weigh based on amount underwater.  No one will strategic default 5% underwater, or possibly even 10%.  What about those 50% (or more) underwater (100% financing 50% value drop)?  Also the further underwater, the higher premium you’ll be paying relative to rent.

Consider three identical homes next to each other.  One rents for $2000, next bought in 2004 for $450k, the other bought in 2006 for $800k.  What do you think will happen?

What might keep the person with the $800k-price from strategic default is the fact that they might have the savings to eat the loss or negotiate some sort of short-sale.  If they are completely stretched, I do not see many people keeping up with those payments.  Few people in 2006 were conservative about DTI, so nearly everyone that bought then was stretching…in ‘good’ economic times…so a huge number are stretched now.  Maybe that shows up in the paper as something else, but it is closely linked to being underwater.

I don’t like the paper because of their example.  I’ve looked at a lot of housing transactions in FL, and have not seen a price go from $585k to $187k.  Their data is not same-home sales, but looking at averages for an area.  Also their couple makes $167k/yr.  Put them in a 50% gross DTI (closer to what people were actually doing), and you’d see a much different outcome than the author posits.

I do like their conclusion that we should not make this a moral decision, it is a market failure.

what’re the chances that the current owner was one of those who camped out overnight to get into the condo buying lottery when this was built in 2007?
All that effort to lose a hundred grand per year.

I have a problem with the numbers again:

Income Requirement ....... $95,908
Downpayment Needed ... $91,800

Monthly Cash Outlays ............ $2,800

First off, go find me someone in Southern California who earns $96K and has $91K saved up. There may be a few people, but realistically do you think that most people have this kind of savings?

Second, $2800 a month? Perhaps that’s closely in line with rent for one of these homes, but that’s about half of the monthly take home pay on a salary of $96K. While I’m sure some people can handle that, it seems awfully dangerous as it leaves very little for other necessities especially if you have a family.

Am I’m just too conservative with my finances?

Meanwhile the pressure on the banks continues:

OC Shadow Inventory Expands, and 7.4% 90 days+ behind

A troubling disparity is growing in Orange County’s housing market.

Banks and loan servicers are holding few foreclosures. That’s somewhat good news, because it shows buyers are taking foreclosures off the market.

The ratio of bank owned properties (REOs) against all outstanding first mortgages in Orange County has fallen steadily since August 2008. It dropped as low as 0.27% at the end of October 2009, reports First American CoreLogic. (REOs are the red columns in the chart below.)

But the ratio of loans 90 days or more past due has increased every month for the past 43 months! (The chart to the right only goes back to 2007, but 90 day lates have been rising since early 2006). At the end of October the ratio hit a record 7.4%.

The expanding gap between 90-day lates and REOs suggests a growing backlog of shadow inventory — homes that must some day be sold as short sales or foreclosures. (Of course some of those bad loans may be against properties listed for sale now.) In a short sale, a property is sold for less than debt owed to the bank.

One reason for the rise in shadow inventory: all loan modification programs to date seem to have delayed more than prevented foreclosures.

Luxury Homeowners in U.S. Use ‘Short Sales’ as Defaults Rise

(Bloomberg) — Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.

As defaults on the biggest mortgages rise, borrowers such as Steve Holzknecht are turning to short sales to exit loans that now are larger than the market value of the house. In such a transaction, the lender agrees to accept less than a 100 percent payoff on a mortgage to expedite the property’s sale.

“Pay or leave”
That’s only 2 of the 3 options.
With the new FHA extension of the subprime loan market of only 3.5% down.  The 3rd option becomes sweeter.  Buy a house at inflated price with a 3.5% down and $8000 tax credit. 

Live rent free for a year to two years! 

Run/Don’t walk to your nearest RE to buy an overpriced property. 

Consult a trustworthy and knowledgable local attorney on the law and local practice deciding.

IrvineRenter,
How much downpayment did the victim put down?

They should call HAMP something different like, Homes Unaffordable Modification Program, or HUMP, since it results in payments that still can’t be made.  And, it props up prices keeping renters out of the market.  And, finally, because we all feel the effects of the government HUMP.

This is an FHA purchase and not a 20% down transaction. The 20 percenters are buying SFD’s, leaving the Condo market to the FHA buyers.

So…. if you have a recourse loan…. is a bank in this market really going to come after you? Do we “know” this by experience (please comment) or “know” this anecdotally?

My .02c

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