Part of the bearish argument for a dramatic drop in prices is predicated on an infusion of “must sell” inventory to the housing market. Sellers won’t sell at a loss unless they have no choice. This is why prices generally are sticky in a housing market decline.
Foreclosures and short sales are by their nature must-sell inventory. For this must-sell inventory to be forced onto the market people must be unable or unwilling to make the payments on their mortgage. The “unable” part will come from reseting ARMs with higher interest rates; the “unwilling” part will come from people walking away from 100% financing deals when market prices do not continue to rise.
It is this latter category of unwilling homedebtors that is unusual in this market. In previous bubbles, lenders were not so stupid as to offer 100% financing, so there were not as many people who utilized “jingle mail” as they went underwater. It is my opinion that jingle mail will be epidemic as this bubble unwinds.
Today’s property is a typical short sale. The seller overpaid with 100% financing and now is going to walk away.
Purchase Price: $410,000
Purchase Date: 3/20/2006
Prior Purchase or Refi: 10/17/2005 — $405,000
Prior Purchase or Refi: 6/3/2005 — $395,000
Address: 10 Van Buren, Irvine, CA 92620
Sq. Ft.: –
Lot Size: –
Year Built: 1987
On Redfin: 53 days
From Redfin, “Lower Unit w/ Front Patio. 2 Bedroom, 2 Bath CONDO. Great Opportunity for First Time Buyers. This is a SHORT-SALE. Sales Price, Terms, Conditions Subjet To Lenders approval of Short Sale. Very clean Unit includes, Range, Microwave, Dishwasher.”
Did you spot the misspelled word?
The bank is going to lose money. Depending on how much commission they pay (they don’t like to pay 6%) and how much more this unit is discounted, they stand to lose between $20,000 and $80,000. I would guess it will be closer to the bigger number.
(I GOT SPURS) JINGLE JANGLE JINGLE
– words by Frank Loesser, music by Joseph J. Lilley
I got keys that jingle, jangle, jingle
As I go ridin’ merrily along
And they sing, “Oh, ain’t you glad you’re single”
And that song ain’t so very far from wrong