As is becoming tradition, I would like to share with you some interesting blog posts I read this week at The Housing Chronicles Blog, and at the site of local realtor, Shevy Akason, who has been profiling OC properties at or below rental parity.
Apartment renters now getting caught up in foreclosures
Why is mortgage fraud still a problem?
Fannie Mae tightens rules on mortgages for new condos
Shevy’s deals:
In other news, IrvineRenter was mentioned on Portfolio.com on Wednesday: Six Bloggers of the Apocalypse.
Welcome to the Jungle — Guns n Roses
Welcome to the jungle
We got fun ‘n’ games
We got everything you want
Honey we know the names
We are the people that can find
Whatever you may need
If you got the money honey
We got your disease
In the jungle
Welcome to the jungle
Watch it bring you to your knees, knees
I wanna watch you bleed
I know I am not the only one who is thrilled to see the government move to tax the recipients of AIG bonuses. Welcome to the Jungle, baby. I get a schadenfreude overdose from that story.
What ever happened to performance bonuses being linked to good performance? The AIG bonuses were justified by the idea that the people who made this mess are the only ones who understand it, so we need to keep them around. Doesn’t this entrench incompetence? Have you ever worked with someone who developed a way of doing things only they could understand because they thought it gave them job security? I have, and it doesn’t.
{book2}
Since I reviewed another Stick Figure book this weekend, I thought it might be interesting to see where stick figures went wrong…
In unrelated personal news, close personal friends of mine have been on an emotional rollercoaster ride for the last year. Their baby was born at 17 ounces. He has survived the whole year, and it looks like he is going to make it. Check this out: Tiny survivor defies the odds, inspires others
And finally…
Six Bloggers of the Apocalypse
listen to them when they said the economy was headed off a cliff.
Should you listen now that they’re predicting the end of civilization?
If you spend enough time surfing the Web, you might think Nouriel Roubini, the pessimistic economist profiled in the April issue of Condé Nast Portfolio, is taking a walk on the sunny side of the street. There are bloggers who have been forecasting much worse for several years.
While bankers were still ordering $1,000 bottles of wine in trendy
Manhattan restaurants, these internet Sybils of the impending economic
apocalypse were already prophesizing food shortages and endless gas
lines.
Some are on the right side of the political spectrum,
others on the far left, but they all share one thing—traffic on their
sites has increased exponentially since Wall Street began to implode
last fall.
We caught up with a few of the more provocative
doommongers to see what they think is coming next. Hint: Before reading
further, you may want to uncork your most expensive bottle of wine.
You’ll need it.
Clusterfuck Nation
James Howard Kunstler
Novelist
and journalist James Howard Kunstler is the leading popular voice of
peak oil, the theory that says we have gone through more than half the
world’s supply of this much-needed resource. Kunstler’s regular Monday
morning posts foretell a world beset by oil shortages, which he
believes will lead to everything from financial shenanigans (sound
familiar?) to food riots, not to mention attacks on the wealthy,
abandoned suburban housing developments and a forced return to
small-town living.
Prediction: High potential for civil unrest and violence. “It won’t be good for your health to be a conspicuous consumer.”
The Trends Research Institute
Gerald Celente
Not
a blogger per se, trends researcher Gerald Celente publishes his
predictions for the future in a quarterly journal. In December 2007, he
called “The Panic of ’08,” featuring “failing banks, busted brokerages,
toppled corporate giants, bankrupt cities, states in default…. When
the giant firms fall, they’ll crush the man on the street.” The journal
is by paid subscription only, but Celente makes frequent radio
appearances, which his many fans record and post online.
Prediction: The current economic crisis will be worse than the Great Depression,
with a rise in alternative living arrangements. He’s thinking
self-storage units. “People are going to self-store themselves.” FYI,
Roubini’s offices just happen to be located in the same building as a
Manhattan Mini Storage facility. Coincidence? You decide.
Speaking Truth to Power
Carolyn Baker
The
site run by Carolyn Baker, an adjunct professor of history in Vermont,
is structured her site like an Utne Reader of global collapse lit, with
links to sites ranging from the very mainstream Marketwatch.com to some
of the bloggers on our list. Her goal is to connect the dots between
peak oil, global climate change, financial collapse and other ongoing
trends and debates. The common thread: Our way of life cannot be
sustained. And it will all end badly.
Prediction: “It’s not going to be like falling off a cliff but a slow descent with
tipping points. There are going to be different kinds of Katrinas,
economic crises, natural disasters, and nuclear exchanges—but I really
hope I am wrong about that.”
Generational Dynamics
John Xenakis
Xenakis,
a computer consultant, analyzes previous and current generations in
American history to predict catastrophe to come. He believes the exit
of the Greatest Generation from the workforce in the 1990s set the
stage for disaster as Baby Boomers, who are uncomfortable with
authority, fell prey to the amoral Gen Xer’s right behind them. The two
groups combined to bring us the current financial crisis as the Baby
Boomers want money badly enough not to ask many questions about its
provenance, while the equally greedy Gen Xer’s are nihilistic enough to
do what it takes to get it.
Prediction: The
misbegotten combination of the Boomers and the Gen Xers will continue
to cause trouble for several more decades, leading to complete
financial collapse and war before Xers are able to turn things around
in their old age. Says Xenakis, “I don’t expect to live through it.”
Itulip
Eric Janszen
Janszen,
an investor and analyst, first started Itulip at the height of the tech
bubble. The tulip is, of course, a reference to the infamous Dutch
tulip bubble of the 17th century. He retired the site when the Internet
bubble burst, only to return in 2006, when he saw a housing bubble
developing. Janszen predicted it would end badly, with a mass deflation
leading to a multi-year economic crash. Parts of the site—including its
many reader forums—are subscription only.
Prediction: The United States will, over time, right itself, but will first have to
survive a period where one million folks will be added to the
unemployment rolls every month by the end of 2009.
Irvine Housing Blog
Larry Roberts
Many
bloggers are writing about the housing bust but perhaps Larry Roberts,
a.k.a. IrvineRenter, has found the best way to demonstrate how everyone
from the lowliest buyer to the highest paid financier was implicated in
the bubble. Almost daily, he posts a house for sale in Irvine,
California, taking readers on a journey through the home’s recent
financial history. He reveals the price the home was originally
purchased for, how much money was taken out of the home during various
re-financings, and what the potential loss to the bank is if the house
sale goes thru. Needless to say, sardonic comments abound.
Prediction: Roberts is the cockeyed optimist of our bunch. He plans to change his
handle to IrvineHomeowner in 2011, when he believes the housing market
will bottom out.
{book4}
Many bloggers are writing about the housing bust but perhaps Larry Roberts, a.k.a. IrvineRenter, has found the best way to demonstrate how everyone from the lowliest buyer to the highest paid financier was implicated in the bubble. Almost daily, he posts a house for sale in Irvine, California, taking readers on a journey through the home’s recent financial history.
If you are a blogger of the apocalypse, does that make me the author of Blade Runner II?
I have a question about some of the mortgage fraud stories I have seen recently. Perhaps someone in the industry can answer them.
Why on earth would someone be lying about their income or finances in order to buy a home now? They are in a hurry to buy a depreciating asset? Are they lying to try to get a better rate, or qualify for some program they wouldn’t otherwise qualify for?
For people who are lying on refinance applications, the fraud makes much more sense to me. If they are underwater on a depreciating asset, desperation is not surprising. I’m guessing they are lying to try to get out of their variable rate, option arm, high rate fixed, or other undesirable loan. Is that generally the case? Maybe some of them are even trying for a cashout refi to pay some other bills?
The cash-on-cash returns are remarkable on the properties Shevy is finding. You can make 2.4% in a bank, or 24% in a rental property. Hmmmm…
I can also make 24% on BBB rated bonds. That’s what’s really scary. I have bonds ranging from B- to AA-. None of them yielding under 10%. I have some that are just plain insane yields, and that’s coming from a cautious investor who reads bond documents. Hey, I used to WRITE bond documents, so I have some idea what to look for.
Hmm.. I’d love to here about your bond choices…
Maybe IR can forward you me email address?
Thanks
a great calculation->Math genius->too good in common sense->Fraud
Maybe I missed this explanation, but why are you endorsing this real estate agent Mr. Akason on a weekly basis? I went over to his web site and it looks to me like the deals he has posted are all closed sales.
I refer traffic to his site because he analyzes deals the way I would. He is using the IHB calculator to show first-year cashflow. This would not be the end of the analysis, but if it doesn’t get past this first look, there isn’t much point in analyzing it further. He has not and does not pay me for these links, although he might sponsor posts in the future. It is like the posts over at The Housing Chronicles. I link to them because I like Patrick Duffy’s writing. I link to Shevy’s site because I like his thinking and his quick analysis.
The cartoons may be funny, but they’re wrong. In the first one, Uncle Sam should be pointing the gun at the taxpayers, looting them and their children so he can give the money to his cronies at AIG and Goldman Sachs. In the second one, “Wall St. Fraud” isn’t the biggest part of the problem, the government handing Wall St. trillions in taxpayer loot instead of letting the financial sector pay for its own mistakes is.
I was posting some low to medium end properties in Riverside a little while back. Want to see what the high end gives you out here in the boonies?
http://www.redfin.com/CA/Riverside/17860-Bella-Colina-Pl-92508/home/17331388
17860 Bella Colina Pl
Riverside, CA 92508
Price: $675,000
Beds: 4
Baths: 3.5
Sq. Ft.: 4,400
$/Sq. Ft.: $153
Lot Size: 32.8 Acres
Property Type: Detached, Single Family Residence
Style: Mediterranean
Year Built: 2009
Stories: 1
View: City Lights, Hills, Mountain, Panoramic, Valley
Area: Riverside
County: Riverside
MLS#: I09033359
Source: MRMLS
Status: Active
On Redfin: 1 day
New Listing (24 hours)
View & privacy flag lot! Spacious floorplan, formal entry, large formal dining room & separate formal living room. Granite countertops and 10′-12′ ceilings throughout. Awesome family room, approx 20’x21′, w/ panoramic view of hills, city & mtns. Raised hearth fireplace w/ stacked stone, 2-double french doors opening to your patio. Massive kitchen, stainless appliances, huge breakfast bar, large island w/ veggie sink, butler pantry w/ loads of cabinets & counterspace. Bedroom 4 for guest/maids qtrs w/ private full bath. Bedrooms 2 & 3 w/ jack & jill double sink bath. Master bedroom w/ raised hearth & stacked stone corner frplc, loads of windows for your views, exceptionally large bathroom w/ huge separate shower & raised soaking tub. Stereo speaker system throughout most of home with surround sound in the family room. Security system currently active. Bdrms pre-wired for ceiling fan. Dual HVAC. Huge laundry rm w/ loads of cabinets, sink, room for freezer & 2nd frige w/ ice maker water service
That’s right, a brand new 4,400 sq ft house on 32.8 acres.
Yes, but it’s still stinking Riverside. In a year or two, you’ll be stringing razor wire around those 32.8 acres.
It lookes like the developer is throwing in a most of his unbuildable land with this lot. If you can keep the mountain bikes, motorcycles and ATVs off, you’d have your own private park.
One of the deals he listed looked interesting so I did some digging. If I remember correctly it was a short sale with multiple lenders. The odds of buying such a property is almost zero. If you are going to list shorts sales, at least list properties with only one lender to agree to a deal. He has access to this data through the MLS for free.
“Prediction: Roberts is the cockeyed optimist of our bunch. He plans to change his handle to IrvineHomeowner in 2011, when he believes the housing market will bottom out.”
What are your thoughts on the current talk of inflation fears following the feds debt purchasing plan announced this past week? I’ve picked up on various conversations here and there with people propagating this fear. Some have picked up the pace on looking to buy their first homes to as soon as July 09 due to fears that inflation will shortly make their housing goals unachievable.
I am a bit more skeptical on the ability of the situation to so rapidly decline in a short period, but I can’t help but be interested in some more objective opinions on the matter. Maybe a blog post on the matter would be nice 🙂
We may experience general consumer price inflation, but we are almost certainly not going to have house price inflation. I am planning a post on Monday to address this topic and related matters.
Sounds great! I look forward to it and will probably remind a few friends to remember to read on Monday 🙂
Wow, more hyperinflation LULZ.
Magically the price everything is going to increase while unemployment rises, under-employment rises, and salaries for most jobs decline… all over the world !!!
Hi Good question, Larry wrote me about this as well.
First, this question can be used to demonstrate a couple of important points to those considering entering the market soon.
1) The price a Short sale is listed for means absoluteley nothing. They could list it for $1 or $1,000,0000 and myself and my clients could not care less
2) A good investor makes 10+ offers to get a deal—- or finds a way to acquire property that gives them a competative advantage
You are correct, this property on the Laguns Hills listing is currently listed as a short sale at $200,000 and may sell at or above that price. Moreover, they have requested highest and best and it will most likely sell for close to $200,000.
I use opportunities that are available on the MLS whenever I can however, I occasionally use opportunities that correspond with similar investments I am working on and can not disclose actual address as it would be to the detriment of my clients. Regardless, based upon prices buyers I work with at trustee sales can/are picking these up for their will/are opportunities for investors that want to use leverage to acquire these at the price indicated.
Regardless, the numbers I use for my rental parity posts are sometimes examples when I cannot use actual deals because it would jeopardize my client’s interests in the deal. The numbers and areas I use are in relative line with deals that are happening on similar properties, please keep in mind I can’t list the properties that my investors are pursuing and in that case I use the closest examples without jeopardizing my client.
Although I try to show examples of deals at prices that I believe they can be acquired for even when the property is listed on the MLS occasionally I use numbers based upon comparables that have sold at Trustee sales plus enough margin to make it worth the trusee sale buyers time, money, and effort to have a guaranteed exit strategy with a long term buy and hold investor.
These deals serve to demonstrate where the market is going and where the opportunities are. I hope that answers your question regarding the price.
Thanks for the feedback. My concern was not so much about the price of the property, but that properties with multiple lenders will be all but impossible to get approved for a short sale. These properties are on the market, but they are not for sale. Instead, they are future foreclosures.
When I am researching properties for clients, I only present them short sale properties with one lender to get approval from. This way you have a decent chance if you are very patient.
If you are putting properties on your site as an example of what is possible, you could label it as such. Or if I understand what you are saying, you are using these to generate activity that you can redirect to other properties that you can not list on your site.
Hi Walter— You are right regarding short sales, many agents and buyers have learned to avoid them all together. In addition, many of them are future foreclosures thus making these very attractive to buyers looking to purchase at trustee sales. Of course if a property that is likely to be foreclosed on is on the market and a trustee buyer can see it before the sale, it is much more attractive than a property that one can only see from the outside prior to purchasing, as you may know many trustee sale buyers have to choose to buy occasionally without seeing the inside of a property.
You are smart to complete the due diligence for your clients regarding the number of lenders prior presenting the properties to your clients, especially clients that can only purchase conventionally using a mortgage and are looking for a home for their family. Of course most investors are not in a hurry and buying for the right price is more important than buying to move in before Easter dinner.
I try to find properties that make sense, of course, I need to try to keep the information fresh to keep my clients coming back and thinking about real estate and interacting with me. As a result it is not unusual that once I complete the due diligence necessary to bring a client to the next step the property I feature has been eliminated due to one of many reasons. The post that you referred to is a great example, as I had not yet completed the due diligence that I would once I had a serious buyer, however, I noted today that the association that the property is in may be involved in litigation as well. As a result, if I had a serious buyer for this property it may quickly be eliminated after completing further investigation. Moreover, I have been doing research regarding the foreclosure problem on HOA’s in general and I am hoping to come out with a report detailing what a huge issue it can be not only for investors but also for long time homeowners that have equity and may be on fixed incomes as they end up paying HOA dues for buyers and banks that are not.
Thank you for keeping me on my toes and providing excellent information to IHB readers.
Thanks for the back in forth. I now have a better understanding of what you are doing.
This little conversation highlights the different approaches needed when dealing with different type of buyers. And while vetting out properties before offering them to clients is a good idea, deals will be lost if one moves too slowly. Hopefully we find the balance that best suites our clients.
IHB can be a rough place for a Realtor. I don’t much publicize I am one. Instead I have a link to a web service for small business I am developing.
Good luck and keep up the good work.
Anytime, I love talking with good realtors. The IHB can be tough on realtors and much of it is justified. I would be interested so speak further and learn more about your new small business. Is it real estate related? Larry mentioned a couple of readers that are doing some neat things. I believe that interacting with IHB readers and Larry in particular is good because there is always something new to learn and real estate is quickly becoming a business that many will fail at if we stop learning and trying to improve what we are doing. Thanks again, you have helped me to think more critically regarding my posts and also helped to share with readers different aspects that they may not have been aware of.
IMHO:
IR is one of the most realistic in his predictions and analysis.
NR is an optimist with lots of politics involved (pre-election: Bush baad, Obama goood. Post election: No appointment from Obama, Obama not so goood.)
As for the cartoon, it should have the gun pointed be on the tax payer, and AIG, GS, Feds and ilk with a bomb under uncle Sam. If the US defaults, international banker will move their capital to other countries for a score or more and undermine the political stability in the USA. Selling off of public property and services to payoff debt (highways, bridges, utilities, parks, etc.).
The US will look much different from the continuing crisis’ and national emergencies: War on Poverty, War on Drugs, War on Terror, War on Foreclosures = increased power for administrative seizures on its subjects (no longer citizens), erosion of US sovereignty to world govt. and banking.
“Needless to say, sardonic comments abound.”
We’ll take that as a complement. IR, they saved the best for last.
I like Shevy’s analysis. I may become a landlord before I become a homeowner.
Walter you hit the nail on the head regarding short sales— they are a waste of time for the most part.
Prudential Realty has in internal monthly sheet tabulating sale price vs. asked broken down into type of sellers –short, REO, regular and a few others. Last summer 2008, the discounts on closed contracts showed the most discount with regular sales in Irvine. Anybody know what happen now?
A short sale with multiple lenders is hard to get approval. I know of one seller that went to the wire to get approval. She had to bring money to the closing, but not the bulk of the loss.
Don’t know if you know, but the IHB was mentioned on Redfin here: http://blog.redfin.com/blog/2009/03/reos_foreclosures.html?src=alerts
Keep up the good work!
Thanks for the link. How pre-sale house inspections work for REOs is something I’ve been wondering about, and that article fills in my understanding somewhat.