Irvine Housing Blog

From my brief look, it appeared Miami-Dade county had the worst overall 90+ day default rate, at 23%.  There is another, probably less important, but still significant factor - the cultural hurdle to default.  I think that is similar to the cultural hurdle to suing your doctor.  So it should be no surprise that Miami-Dade county is one of the worst places for medical malpractice

With the 6% commissions on sales and significant other transaction costs (closing costs, moving, cleaning) the housing market needs some positive price appreciation to stay lubricated.  Higher rates of appreciation fuel even higher rates of appreciation because of the ability to extract equity to put towards down payments.  Say the 20% down payment is the limiter on prices.  10% appreciation per year gives you enough equity to double your home ‘value’ in 4 years.  Do it for more years and higher or lower rates and you’ll see a lot of down payment equity for most of the bubble areas.

I suppose that many of the high Vantage scoring crowd in the Morgan Stanley study had purchased properties for investment value, versus to occupy themselves? Assuming that is true, there would certainly be less of an impediment to strategic default, either on psychological/moral grounds, or from an investment strategy standpoint…. Not that the potential effects on the RE market are any less onerous regardless of the reason…

Fascinating article.  Two questions:

1)  I’ve seen the Zillow estimate of 28% underwater, and other estimates.  And I’ve read that HELOCs are notoriously difficult to fully count.  But even if they’re difficult to count, why would Zillow publish something misleading?  If Zillow did not count the HELOCs, then their 28% underwater figure is totally inaccurate.  Especially here in SoCal, where HELOC abuse was endemic.  So my question is this:  Is the Zillow statistic (and others I’ve seen that are also in the 25% underwater range) TOTALLY BOGUS???

2)  IR, you said that “Lenders are merely laying in the weeds waiting for borrowers to become solvent again before pursuing collections. No lender has forgotten they are owed money.”
—What about situations where the loan was settled?  I know several people who settled their 2nd mortgages (with the 2nds actually being recourse) for less than full amount with a particular lender.  They signed the settlement contracts, paid the settlement amount,took a hit to their credit scores, and declared it in their taxes.  In the settlement contract, the lender explicitly stated that after the loan is settled, the lender won’t go after them for any deficiency.  Can the lender still go after them?  Wouldn’t that be violating the contract?
—What I asked one of them was this:  What if the bank sells the loan to a collector, and the collector goes after you?  Would that be legit, where the bank says “See, we’re following the terms of the contract.  It said WE can’t come after you for the deficiency, but it never said HE can’t come after you, Ha Ha Ha!!!”

H

not too fret ; we’re all saved ; post just now on my facebook from the NAR meetings going on in DC as we speak :“Economic and Residential RE Outlook at NAR - Lawrence Yun sees stronger second half. Good news!”

Why is the author of the article “sobered” to learn that many people think it is OK to walk away from their mortgages?  Of course it is OK.  It is a contract, and the contract states in essence “pay this money each month or we take back the house”.  So, they are satisfying their obligation by giving back the house.  (Squatting for months is a bit of a gray area…)  A mortgage isn’t a sacred covenant signed in blood, for God’s sake.  The lenders would like you to think that way, because then maybe you will make a few more payments on your dead weight asset.

The lenders and corporate America in general exhibit this kind of behavior ALL THE TIME.  If you have a bad year in sales, you lay off a bunch of workers.  Very, very few companies will dip into reserves to pay workers, and I’m sure companies that will take onerous loans to maintain their workforce are quite few and far between.  An office building downtown in the city where I work was recently foreclosed on.  It was a 100 Million dollar foreclosure or something so it made the news.  The CEO or CFO or something of the Commercial Real Estate firm that owned it said something like “We didn’t feel it was a viable investment going forward”.  Now THAT is a strategic default.  Damn.  “Just Business.”  I’m sure he sleeps quite well at night after pulling his Lexus into his Newport Beach garage.

FCBs money in Irvine is geared toward new and contemporary. 
Turtle Rock does not fall into that category.

“...The attorney was providing sound advice. After a strategic default or a foreclosure on a non-recourse loan, borrowers should declare bankruptcy…”

I think you meant to write “on a recourse loan.”

There’s no concern here in California on purchase money mortgages, as they’re non-recourse.

From Mark Hanson Advisors:

<i>“With respect to negative equity as it relates to the housing market and repeat buyers — the much needed but missing ingredient to a magic housing fix — effective negative equity is far greater. This is because to rebuy a homeowner has to sell, which means paying off the first (and second) mortgages, paying a Realtor 6% and putting 10% to 20% down on the new purchase. When you lower the negative equity thresholds to real life, effective negative equity is epidemic and will keep the organic buyer — especially at the mid-to-high end — <u>at bay for a generation</u>.”

Building Wealth through Renting

In contrast, for most occupancies beginning during the 1980s, renting and investing unambiguously built more wealth. Renting and investing is also likely to build more wealth than homeownership for many of the occupancies that started in 2000 through 2009. These results suggest that either homeownership or renting and investing can be reasonable strategies for building household wealth.

Link to Fed Paper

Irvine Renter -

Your hardwood graphic should say

“I love scraping hardwood”.

The divergence between List Prices and Sale Prices in Irvine is now $25/sf: <a >Irvine Market Trends graph as of May 9, 2011</a>

Sellers are listing at an average of $342/sf, but properties are only selling for an average of $317/sf. The divergence on SFR’s is even worse! SFR sellers are listing at an avg of $366/sf, but they are selling at $338/sf.

That’s some powerful kool-aid!

-Darth

Testing…
Test

Finding a remodeled home that actually used their heloc money could be a decent buy because they have been forced down in price but real value is inside these homes because they have been upgraded or remodeled.

Those without mello roos and in lower tax areas are competing with the older homes that owners still want their perceived value out of them but can’t compete with the fixed up home.

Those folks who bought before 03’ possibly 00’ and made these repairs have equity in their homes are now seeing prices come under their gains are now putting them up for sale.

It appears ten years has been lost in some homes for equity gain. Especially those without any improvements.
What happens to these older homes they eventually go for sale much lower and are on the market the longest amount of days. No investor will pick them up because the cost to fix them up is too high unless they become foreclosure victims.

And even in some cases the loans on them are still so high that cost to repair is prohibitive to any kind of gain. This pressure is more intense further south of Irvine I have noticed in my home shopping experience—-jmo

Y’know something I haven’t heard in several weeks, at least? The NA[r], or any of its state-level parrots, attempting to spin this as a good housing market. It’s probably been at least since March that I heard the last bit of ridiculous BS from Lawrence Yun or one of the other NA[r] tools. It seems that this current market is so bad (and they are so low on credibility), that even the spinsters are ashamed of their own BS.

Even the shills at the OC Register have caught on a bit. They aren’t even shameless enough to slap cheery headlines on the dismal news anymore. Here are 3 current OC-Reg articles:

O.C. home sales dip, 9th fall in 10 months
http://lansner.ocregister.com/2011/05/12/o-c-home-sales-dip-9th-fall-in-10-months/109533/

Analyst: Spring homebuying looks lame
http://www.ocregister.com/articles/analyst-300200-call-spring.html

Housing market ‘in a rut’
http://www.ocregister.com/articles/-300334—.html

-Darth