The Market Sleeps

The market is entering a restful period waiting for the arrival of shadow inventory.

8 NEW SEASON Irvine, CA 92602 kitchen

Irvine Home Address … 8 NEW SEASON Irvine, CA 92602
Resale Home Price …… $375,000

Block Party 11-9-2009


Near the village the peaceful village
The lion sleeps tonight

Near the village the quiet village
The lion sleeps tonight

Hush my darling don’t fear my darling
The lion sleeps tonight
Hush my darling don’t fear my darling
The lion sleeps tonight

The Lion Sleeps Tonight — The Tokens

The market is entering its winter hibernation. Transaction volumes are falling as part of the usual seasonal pattern; however, I suspect this winter will be a little different than the norm. We are entering the winter on below normal volume despite the apparent increase off last years record lows. There are a number of buyers who did not complete their purchases during the main buying season, so we will have some left-over demand from the summer to keep up volumes over the winter.

The circumstances today will persist indefinitely or until new supply shocks the system:

  • limited supply
  • unsatisfied demand
  • very low interest rates
  • high payment affordability
  • inflated prices
  • below normal volumes
  • huge overhang of foreclosure supply
  • high unemployment that is getting worse

The first four conditions are very bullish, but the last four are not. I am of the opinion that the negatives outweigh the positives and prices will continue to fall. Being bullish is not always a good thing….

BTW, I was emailed a press release from our Attorney General, Edmund G. Brown. Apparently he is quite worried about ARM resets,

“Homeowners with Pay Option ARMs are sitting on ticking time bombs that
the lending industry has the power to defuse,” Brown said. “Unless
these banks and loan servicers act quickly, hundreds of thousands of
mortgages will reset across the state, creating a new wave of

8 NEW SEASON Irvine, CA 92602 kitchen

Irvine Home Address … 8 NEW SEASON Irvine, CA 92602

Resale Home Price … $375,000

Income Requirement ……. $69,808
Downpayment Needed … $75,000

Home Purchase Price … $530,500
Home Purchase Date …. 3/20/2006

Net Gain (Loss) ………. $(178,000)
Percent Change ………. -29.3%
Annual Appreciation … -8.3%

Monthly Mortgage Payment … $1,629
Monthly Cash Outlays ………… $2,160
Monthly Cost of Ownership … $1,630

Redfin Property Details for 8 NEW SEASON Irvine, CA 92602

Beds 2
Baths 2 full 1 part baths
Size 1,187 sq ft
($316 / sq ft)
Lot Size n/a
Year Built 2005
Days on Market 2
Listing Updated 10/28/2009
MLS Number S594319
Property Type Condominium, Residential
Community Northwood
Tract Tamr

According to the listing agent, this listing may be a pre-foreclosure or short sale.

YOU WILL LOVE this sophisticated, split-level townhome, from the CUSTOM flagstone entry, stairs, and patio, to the INVITING interior with GORGEOUS marble flooring, crown molding, plantation shutters, recessed lighting, custom in-ceiling speakers for home-theatre surround-sound, stainless steel appliances, in-home laundry, attached 2-car garage, AND TWO master suites. NO ONE ABOVE OR BELOW….does NOT BACK to I-5 or Culver Drive. Just a block from Lower Peters Canyon Park, and steps to Tamarisk Community Pool, Spa, tennis courts, & BBQ. Close to Tustin Marketplace! ALL THREE Tustin schools are CALIFORNIA DISTINGUISHED SCHOOLS, scoring very high on API. This is your chance to live in a very DESIREABLE, NEWER neighborhood, built in 2005-2006. You MUST see this beautiful home!

WHY did the agent USE random CAPITALIZATION?

This was not the best speculative effort of 2006 from the lender’s perspective, but the buyer used 100% financing and even managed to get some HELOC money despite buying very near the peak.

  • The property was purchased on 3/20/2006 for $530,500. The owner used a $424,300 first mortgage, a $106,050 HELOC and a $150 downpayment (it technically was not 100% financing).
  • On 12/5/2006 he refinanced the first mortgage for $464,000 and took out another HELOC for $78,000.
  • On 4/5/2007 he managed to increase the HELOC to $116,000.
  • Total property debt is $580,000.
  • Total mortgage equity withdrawal is $49,500.

Not a bad take considering how bad the timing was. Do you think this owner is sitting in his rental plotting his return to HELOC riches?

79 thoughts on “The Market Sleeps

  1. Freetrader

    Looks like our former Governor and current AG is firing the first shot in his (re) election campaign. I love the “Attorney General Brown is Fighting for You” image he is trying to push. Yes, he is fighting for those of us who have been SCAMMED into borrowing more money than we could afford to repay. Those damn banks. New York was lucky enough to get rid of Spitzer due to his predilection for prostitutes. Unfortunately, former Governor California Moonbeam is, for various reasons, unlikely to be found guilty of that particular crime.

    1. Geotpf

      Exactly how were you scammed into borrowing more money than you could afford to repay? Please provide details.

      1. just being sarcastic

        I think Freetrader was just being sarcastic about being “SCAMMED”. On another note, I agree he won’t do what Spitzer did, but Brown was rumored to be involved with Linda Rondstadt while in office (nothing to be ashamed of – to be sure).

    2. Modguy

      So he says lenders have the power to “defuse” the option arm debacle? How exactly?

      I am so sick of explaning to people everyday that the super low Option Arm payment they claim they can’t afford CAN NOT possibly be made lower… Not even under Obama’s HAMP program.

      Most option arms have a minimum payment equal to about a 1% pay rate. Even Obama’s plan sets a floor of 2% (for the first five years).

      So… Even if I can get approval to fix the rate at 2% (fully amortized) and extend the term to 40 years, the payment INCREASES. And, this will step up to a nice 5% fixed in the future…. Eventually doubling or tripling their already unaffordable payment! If you can’t afford a 5% fixed/40 year loan, then just move out. You’re underwater anyway.

      So I ask again… HOW exactly do lenders have the ability to make these already low/fantasy payments any more affordable?

      PS if all goes well, I won’t be posting as Modguy much longer. I’m burnt out. I can’t do this anymore. Instead of helping a few people in real need, we’re playing a big game of fraud and delay tactics with borrowers that should just go rent a nice nice apartment and stop with this mod BS.


        1. wheresthebeef

          Some quotes from the article:

          The rental program will allow Fannie to hold inventory off of already saturated housing markets and makes a bet that the housing market will be stronger one year from now.

          “Hopefully less foreclosure product on the market will help stabilize those communities.”

          “I’m sure Fannie is hoping that when they sell the properties, the values will be higher,”

          I see the words BETTING AND HOPING. What happens if their gamble fails…do the tax payers just pony up tens of billions more. I am sick and tired of these shenanigans played by the government. Based on past experience regarding government action and intervention…this mess will end in a big, ugly, bloody way.

          We’ll see who is right a year from now.

          1. Marc

            Seems it is time to get the Republicans back into power. Otherwise the US will become a socialist country.

      1. Perspective

        Are you burnt-out Modguy, or has SB 94 killed your business in CA? The CA Bar was not happy with attorneys charging huge up-front fees to anyone and everyone seeking help, regardless of any existence of hope for the homeowner. The Bar pushed for this bill to effectively kill the for-profit loan mod business.

        1. Modguy


          I work for a loan servicing company in the home retention dept. I’m glad the third parties are being chased out. All they did was manipulate financials to present a fraudulant hardship to lenders to get there client a “deal”.

          And, yes I’m burnt out. This whole HAMP thing is a joke, and borrowers just want a several hundred thousand dollar mortgage for nothing, or to play the game to stall FC and live for free as long as possible.

          There are a few little old ladies that I feel good about being able to keep in their home since they were deceived by shady brokers. The rest of the folks should go pound sand and just rent if they are that unhappy with having a “motgage”… The sense of entitlement is draining, and the low intelligence level of people across the country is astounding.

      2. Lee in Irvine

        You sound like my loan-mod buddy, who says he’s sick of talking to people about the same thing over and over. He says some of these people are victims of uncontrollable circumstances, but the vast majority of them are irresponsible dolts. He says they’re misinformed by stories read on the internet and/or stories heard from friends.

        1. wheresthebeef

          I know someone at Citi in their loan mod department. He says the same thing. He says he works hard to get people a loan mod. After the loan is modded, they will come up with more excuses that they can’t afford it or just stop paying and wait out the clock to be thrown out of the house.

          For the most part, loan mods are a complete joke. They will benefit only a fraction of the people who need them. For most people who are hopelessly underwater, this is just another stall tactic to live rent free for two years on the tax payer dime.

          THIS DISGUSTS ME!!!!!!!!!!!!!!!

          1. Chris

            “For the most part, loan mods are a complete joke. They will benefit only a fraction of the people who need them. For most people who are hopelessly underwater, this is just another stall tactic to live rent free for two years on the tax payer dime.

            THIS DISGUSTS ME!!!!!!!!!!!!!!! ”

            I’ve been saying this since this bear market rally.

            It’s not fun watching the freeloaders wait for FC while renters like those that are frequent IHB readers pay rent on houses/condos/apt (fortunately, I’m no longer in US but will have the future unfortunate situation of returning because of kids’ education).

            And people wonder why retail sales are going up when we’re facing record amount of NODs and NOTs? Look no further than the freeloaders that are **suppose** to use the money for ‘motgage’/prop tax/HOA and what not on Cash for Clunkers, etc.

            After all, you need to look good in a Mercedes while being thrown out of your freeloading shack 🙂

        2. caloshua

          And we have a never ending supply of these dolts. I am thinking this second wave of dolts are propping up this mini-bubble thinking 8000 is the godsend. We will be supporting these as well in the future.

      3. norcal

        Hi Modguy. If you read Dr. Housing Bubble’s most recent post, he includes a letter from the AG to the Option ARM banks asking them to describe their actions forestalling foreclosures by Nov. 30 (I think), and if they have no actions to describe, to explain why.

        He also hints in this letter that it would behoove them to lower the principals. Good luck with that. Don’t know if he has any power to compel.

        1. Modguy


          yes, principal reduction is often thrown around as a “solution”.

          First of all, do you realize what kind of reduction is required to “lower” an already artificial low option arm payment? Probably half the balance. I’ve run numbers on this.

          Second, most lenders (including where I’m at) will NOT forgive principle. We might, however, “defer” principle which means you don’t pay on that part, it just sits on the side to be paid back when you refi or sell in the future – which is just kicking the can down the road.

          Finally, if the govnm’t forces principle reduction, then I hope people take to the streets and riot. How is it fair that an iresponsible liar-loan borrower that chose an exotic/toxic mortgage gets his balance cut in half, while you the responsible neighbor still owe twice on your home next door. Then, when they sell in the future, they walk away with a windfall? Or, what if they took out hundreds of thousands in cash-out (and you didn’t), and his balance is “forgiven”? Is SEARS going to cut the balance on the patio set I charged last year, since it’s worth less now?

          Principal reduction is a bad idea, a real moral hazard, and will lead to catastrophic “unintended” consequnces.

          NO MORE BAILOUTS!!

    3. Alan

      Spitzer? It was the banks, hedge funds, insurance companies that got rid of Spitzer. Whether or not he was really benefitting the little guy or not, he was hurting the multi-million dollar bonus folks, and they searched for and found a way to make him go away.

      1. Freetrader

        If he hadn’t been caught with a prostitute, Spitzer would still be the governor of New York, so your comment is simply nonsense. Spitzer was an awesomely hypocritical individual who was hoist on his own petard. The validity, or lack of validity, of his positions is a completely different issue.

  2. tkaratz

    Really? I thought this was the Irvine Housing Blog, not the broad ambiguous commentary blog.

    There is no shadow inventory in Irvine.

    I even question if there is a shadow inventory in So Cal as it has yet to manifest itself despite IR’s hopes to funnel more business to his new real estate agency.

    I think we are underestimating the number of people who are not paying their mortgage in order to benefit from some sort of relief. They are receiving notices of default and when they go back in to re-work, they are told they are idiots and they make themselves whole.

    1. AZDavidPhx


      Tell yourself that there is no shadow inventory enough times until you believe it. Just as those before you proclaimed that there was no bubble.

      You are failing to see through the haze puffed up by the smoke and mirrors trickery to convince the masses that all is well and to go shopping this holiday season.

      Your neighborhood is about to experience large scale defaults. Your excuse that these people are just bluffing the lender is hilarious. Yea, that must be the reason huh huh huh huh.

      What is much more likely is that you have a large group of people who know that they are screwed and trying anything they can to avoid the inevitable.

      It’s going to happen. The moment that government life support runs out, these buyers are cooked. The government knows this and the plan is to pretend everything is cool to keep these people ignorant of their fate (and not walk away from their albatross).

      It is going to happen. Whether you like it or not, prices will fall to income supported levels once the funny money exits the system.

      Your employer does not care about your 2000$ month rent on your humble abode. Someone in Colorado could do your job just as well and be able to live comfortably on less. The days of California living excessively compared to everyone else are coming to an end.

      Get ready for all of the shock and indignation among the masses as jobs leave the state along with an over-capacity labor force now unable to pay its bills.

      Only a matter of time. Keep your head in the sand, it eases the pain.

      1. Geotpf

        Nobody knows what will happen in the future. It’s quite possible that little of the pre-shadow inventory becomes bank owned. It’s quite possible a lot of it does. It’s also quite possible that the true answer is somewhere in between.

        But, for now, it is true there is basically zero actual shadow inventory (defined as properties that are bank owned, and are not on the market or actively being prepared to be put on the market), in Irvine or anywhere else.

        1. AZDavidPhx

          Not true at all. You are playing games with semantics. That is the definition of shadow inventory : properties not on the market RIGHT NOW but will be in the future.. Your definition is a spin in the most restrictive and narrowest of interpretations. I am guessing that that is one of your sales pitches that you use on your clients. Crafty. Intellectually dishonest, but crafty.

          1. Geotpf

            That is the definition of shadow inventory : properties not on the market RIGHT NOW but will be in the future

            By that definition, every property on the planet is shadow inventory.

          2. AZDavidPhx

            By that definition, every property on the planet is shadow inventory.

            I thought we were talking about bank owned homes and the pending Option-ARM implosion.

            Why are you acting confused? Have no argument and trying to go off on a tangent, perhaps?

          3. Geotpf

            You didn’t say bank owned. Lots of people include non-bank owned properties as shadow inventory; I assumed you were as well, because you didn’t say you were limiting it to it.

            Look, sometimes a bank owned property has a former owner who fights the foreclosure. That’s not the bank’s fault; that’s not shadow inventory. The properties always need a couple months to clean, repair, list with an agent, and otherwise prepare the properties for sale. That’s not shadow inventory.

            Shadow inventory is when a bank forecloses on a propetry and then does nothing with it for a long period of time, even if they could. My take is that this never, or almost never, happens.

        2. Perspective

          AZDavidPhx has always done a very good job of not just throwing predictions out there with no substantiation. Whether of not calamity occurs in Irvine is as debatable as any forecast. However, every single point in AZDavidPhx’s comment above is an absolute threat to house price levels.

        3. Chris

          Tell me then: why are bank owned inventories that are listed on dropped off after a while?

          Answer: because banks can and will do so after concocting our very own gubbermint to rig the rules favoring them. Mark-to-fantasy GAAP accounting has favor them into valuing the inventories/mortgages higher than the **current** market value while simultaneously selling the higher valued mortgages to the Fed (unloading them to us, the taxpayers).

          Even if the Fed stops buying them from the banks, Mark-to-fantasy can keep them inflated.

          The real question is cash flow: I guess that question has been answered by the Fed pumping billions into banks coffer.

    2. IrvineRenter

      Let’s go through this one more time, since you may have missed the post with the detailed discussion of
      Shadow Inventory in Orange County

      Reports are the the default rate is north of 10% which means that several thousand Irvine borrowers are in default. The data is either accurate or it is not. If it is accurate, then we have a much larger number of defaults than we have foreclosures.

      The only other way out of the system with through curing the loan, but there are also reports that the cure rate is 6.6%. Both you and the UCLA Anderson Forecast make the same slight-of-hand maneuver to make this inventory disappear: you simply deny its existence with no alternative explanation.

      You said, “they are told they are idiots and they make themselves whole.” No, they don’t. If they did, the cure rate would not be 6.6%. What is your alternative explanation of that fact?

      BTW, How exactly does it funnel business to Ideal Home Brokers when I am vocal about telling people not to buy?

      1. norcal

        Hi IR. Obviously, by portraying yourself as a trustworthy person who wouldn’t sell worthless properties to someone unless that someone ABSOLUTELY INSISTED on buying them, you compel, yes, compel, everyone to buy through you.

        Sheesh. What an obvious ploy.

        (Please note that this comment has a snark content of about 75%.)

    3. Chris

      Yes, there are no shadow inventory in Irvine.

      And, yes, there are UFOs.

      I’ll take the latter bet, thank you very much.

  3. Lee in Irvine

    Brown said ~ “Unless these banks and loan servicers act quickly, hundreds of thousands of mortgages will reset across the state, creating a new wave of foreclosures.”

    Why would the owners of all this debt offer to restructure these mortgages, when they don’t have to. The fed govt has already indicated that they will backstop losses and make mortgage bond holders whole.

    Brown seems to think that the banks have a heart.

    1. Anonymous

      I find this part of the article interesting: “California homeowners hold almost 60 percent of the nation’s exotic Pay Option ARMs originated between 2004 and 2008”.

      Do the federal voter math – do you win or lose more votes by getting the rest of the country riled out by bailing out mostly California?

      1. norcal

        Well, let’s not forget that the rest of the country would also be bailing out Arizona, Nevada and Florida.

        These states represent what, 30% of the national population? So it’s arguably in the national interest. To say nothing of all those poor banker dudes eeking out a living on Wall Street – we’re helping them out, too!

        High feel-good factor.

  4. LongTime Reader

    The million dollar question is ‘When will the shadow inventory show up’. Not ‘if it will show up’.

    The Government tried to put a floor under housing prices with there tarp program, to keep people from walking away who could otherwise pay for there home. They changed accounting rules ‘mark to market’. And they loaned banks money at 0% so they can trade and have a cushion.

    The shadow inventory will show up when the government stops lending at 0% and banks need money.

    1. Lee in Irvine

      Even when (or if ) the Fed raises rates, it’s gonna be a slow, drawn-out process. I predict the fed funds rates will be less than 3% in 30 months. We’re falling into the same trap as the Japanese.

      From the federal reseve statement yesterday:

      ” Exceptionally low rates for extended periods of time…” = The lost decade/s

      1. mike in irvine

        rates will remain low for a long time, the only reason for the fed to change this policy is when ROC decides not to play ball..hence the presidents refusal to meet the Dalai lama and his grovelling trip to ROC to pay homage our new overlords.

        1. Freetrader

          “I for one welcome our new Communist overlords”.

          One quick comment about this. The housing bubble and the resulting credit crunch were caused just as much by the PRC as by Wall Street or the Fed. The PRC’s government policy is to support its export sector and build up industry and infrastructure. In the normal course of events, trade flows would force the US dollar to depreciate, making US exports cheaper and Chinese ones more expensive. To prevent this, the PRC ties its currency to the US dollar, in effect undervaluing it. The US treasury debt they collect is the price of this strategy.

          So, I wouldn’t worry about the PRC refusing to buy treasuries — to let the Yuan float, they will lose their biggest export market. BTW, the Chinese are already under pressure from Mexico which is a lower cost provider. In effect, the Chinese tactic of fixing their currency against the dollar is a bit like a bank’s modification of its loan rates — simply putting the pain off to a later date. Sometimes that tactic pays off, sometimes it doesn’t.

        2. Chris

          Guess what? PRC is NOT the biggest Treasury holder.

          Rates will remain low even if foreign central banks decide otherwise.

          There will be no hyperinflation because there is no longer any possibility of wage/price spiral like we’ve seen in the 70s/80s.

          Please do not compare us with Zimbabwe. That country cannot even be self-sufficient if it wants to. We have proven we can during WWII.

          My only uncertainty is the comparison between us and Japan. Frankly, Americans DON’T SAVE (as proven in the freeloaders scenario).

          1. Freetrader

            Actually PRC is the biggest foreign Treasury holder. The biggest Treasury holder, though, is the US government and its citizens. The current recession has changed American savings patterns: instead of spending they are saving. Their saving is making up for the decreased purchases of Treasuries by foreigners (e.g., the PRC) and allowing US citizens, not foreign citizens, to pay for the current fiscal stimulus.

            The Japanese alternative is more instructive, I think, but Japan has so many other problems, including a shrinking and aging workforce, that it is unlikely that we are entering into a decade or more of stagnation like the Japanese have experienced. It is true, though, that one of the reasons for the Japanese lost decade was an unwillingness to accept the pain – a risk that we are running by trying to forever extend out the deadbeat default date.

    2. Geotpf

      It’s quite possible that a lot of the pre-shadow inventory (properties behind on the payments but not yet foreclosed upon) will self-cure (arrange a short sale, arrange a loan mod, or pay what is owed).

      As for actual shadow inventory-it doesn’t exist. Banks are not sitting on foreclosed properties en masse after they have foreclosed on them. It simply isn’t happening. Most foreclosures turn into listed REOs within three months or so, and the ones that don’t usually have good reasons to not be resold immediately (major repairs in process, unresolved legal issues, etc.).

  5. RoLar_USC

    Once again, what is the normal activity? Our current activity is about 20% below 2005 levels… not too bad. Since you’re saying normal, I know you’re not talking about activity during 2000-2004 because post after post have stated that the activity during this time was not normal and was supported by bad loan products. If we were experiencing that level of activity, wouldn’t we be experiencing the same price increases that occured during that time as well? Is being 20% below 2005 levels without stated income, 0% down, and 2nds on mortgages really that bad of a level(coming back)?

    As to the title of this post, “The Market Sleeps,” are you looking at the data? Yes, both homes for sale, in escrows, and closes will eventually slow down from their high, the point is that the high is right now. As of 11/2/2009, in Southern Orange County, there are 2249 homes in escrow, down a whopping 24 units from its high of 2273 on 10/26/2009.
    As I said, it will slow down, but I’d say activity is a pretty bearish sign right now, given that it hasn’t slowed down and it is not November…

    Unemployment? Even though it’s still projected to go up, I’d say some pretty positive news has come out recently about that too. It’s going to increase… a little… but it’s defintiley rounding the bend and about to turn around. How much is that projected .2% increase in unemployment expected to hurt housing prices?

    Just another perma-bear post! Volume is doing great, and unemployment forecasts are not bad at all. And, one more thing… bearish point #5 inflated prices… that’s an opinion tryig to support itself. It’s like saying, gold will go up because gold is undervalued..

    1. RoLar_USC

      And to top things off, I’ve been asking myself this for some time now. Is everyone in Irvine as angry at the world as the people on this forum? (not everyone) Post after post, on the forum and especially this blog, all I read is about people who have lost money over the past 4 years. Going as far as pointing out how much money they put down and exactly how much money they have lost. Why so angry?

      1. IrvineRenter

        Many people are angry because they did not participate in the madness, yet they are being asked to pay for the party.

        Perma-bear post? I report the action as I see it. It has been nothing but bearish for the last few years. BTW, did you not read the bullish market conditions I identified in the post? You just like to come here and make perma-bull comments because you want to believe the market is rosy, and you want others to believe it. You will enjoy this blog much more in a couple of years when the market gives us reason to be bullish.

        1. RoLar_USC

          It was bearish. For the past 6 months strong, it’s been pretty positive. I read the bullish section, but it was followed by reasoning why it’s not enough… so is it really a bullish section?

          Right now, all the perma-bears are still holding on tight to their shadow inventory reasoning because when it comes down to that’s all you have now. And there’s no way to prove it or determine where will it will lead, so its a way to hide behind the unknown and that what cannot be proven. That’s why your posts each week lose more and more data and relevance, and you’ve resorted to these “Look at this idiot” posts, where you just try to put down people who bought a house during the bubble.

          Activity is up at its peak for the past 3 years, and 20% off the peak in 2005, and it’s NOVEMBER. Interest rates are low and will remain low for AT LEAST 6 months, probably another year. Unemployment is slowing and near the worst it’s going to get. And, 9 months later there’s still no sign of this wave of REOs.

          1. bltserv

            Rolar just keep chanting “Activity is up”.

            This housing market is like a tsunami. The first wave has come and gone. Now the next couple of waves are heading our way. Until Unemployment and the Commercial market recover. Residential will trail and continue its slide. Population is not increasing either. The RE business model in California is very broken in almost every way it could be.

            Now continue your Cheer Leading efforts.

          2. RoLar_USC

            Ok okay smart guy. Address my points next time… Unemployment is slowing, close to the peak. Will RE not turn around when unemployment does? Are you saying my statistic are wrong on activity? Or are you justnot going to touch that? Please try to say something useful

          3. thrifty

            RoLar: Where do you think the trillions of dollars are coming from that are causing this turnaround you describe? It’s all loans from the government. What happens when the loans stop? When the Fed stops buying troubled mortgages?
            And where will the repayment of the govt loans come from? I can only think of one place – taxpayer pockets.
            I look forward to your posts after the govt stimulus ends. Til then, it’s premature to make any long term prediction regarding regaining economic health.

          4. RoLar_USC

            The govt aid is a short term solution until other economic factors ease, like unemployment for one. Which is expected to decrease Q2 of 2010. After that the govt support will be phase out

          5. norcal

            My reason for thinking prices are inflated is that they are not supportable given the median income. If the median income in Irvine is indeed $100K, that supports a median house price of $380K. Ratios above that are not sustainable without wierd financing and hyper-easy credit. And if we’ve got rising unemployment and falling income, then even $380K is not likely to work.

            If you disagree with this data, by all means go out and buy a house now, with my blessing. But the foolish activity of many others does not mean that the activity is necessarily wise. Why join it?

      2. wheresthebeef


        I previously owned a house and now rent. I think renting will be a much better deal than owning for the foreseeable future. I would love to own again…but only if prices come back to a reasonable level.

        The reason you see such anger on this board is because many people didn’t participate in the party, but they are forced to pay for the clean up (like IR said). Now the government is doing everything possible to delay the inevitable. We hear people HELOCing hunderds of thousands of dollars from their house and then walking because the ATM machine won’t give anymore. People not making a mortgage payment for years and still living in their house. People who signed up for suicide loans and are now be offered 2% rates. This should piss off any responsible person.

        Like I said, I would love to own a house today. The greed, fraud, corruption, stuipidity we have seen in the last decade will prevent me from doing so anytime soon.

        Rant off!

        1. RoLar_USC

          No rant. It is slightly upsetting, but nothing new. Bail outs happen everyday, and the government has set up a number of programs that bail out individual constantly. I’m about as upset with mortgage abuse as I am with unemployment benefits, increasing minimum wage, and etc… Especially last week when I heard about a movement to give illegal workers minimum wage, enforcable by law.

          But, there’s a difference between being upset and being angry and acting like a child about it by making post after post about individual people who are underwater on their home.

          Plus, I think a number of people, whether they admit it or not, are angry because they did purchase and have lost their home.

          1. badcandy

            It’s relatively anonymous, there are no names/photos of the people involved, just the property. Honestly, if it bothers you that much, don’t read the blog. 😛

            As to why I’M angry… well, after looking at mortgages in the UK and being shocked that they don’t OFFER fixed rate 30 year mortgages (they’re *all* 2/28, 5/25 etc ARMs) because back in MY country, we recognize the DANGERS of ARMs so we protect the citizenry from the evil banks… I moved back to the states only to find that while I was gone everyone went crazy over here and threw common financial sense out of the window! 3-4x your income wasn’t good enough anymore, had to go 5-8x. When I told the mortgage broker that someone insisted I talk to that I only wanted 400k in mortgage, she said, ‘what kind of house can you buy with that?’ I had 3 years of people telling me how STUPID and FOOLISH I was to be renting, and god knows maybe they were right, as the IAC is raking me over the coals for 2775 for month-to-month and I could be living in a bigger place RENT FREE and only sacrifice my credit score.

            The interest rates are devastating to my retired in-laws, and it’s infuriating to me to see CD rates under 2%. We’re getting slapped around for being financially responsible and saving money for the future.

            It’s hard NOT to be angry.

        2. Geotpf

          In general, renting is a better deal than owning in expensive areas and owning is a better deal than renting in cheaper areas. This is nothing new.

          1. wheresthebeef

            I should have clarified my point. Relative to historic norms, renting is currently far cheaper than owning.

            I will once again own, when the rent to own ratio gets smaller.

      3. Lee in Irvine

        Why so angry?


        That’s why we’re angry!


  6. Blueberry Pie

    Home “buyers” tax credit extended and expanded.

    “Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. ”

    “Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn’t owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.”

    “The government wants renters to go fuck themselves as they can be the ones to pay all the taxes.”

    Oops…I made up that last one.

    1. AZDavidPhx

      Of course it was extended. And now the predators are going to cast an even wider net this time.

      How much more money can they spend to keep the music going just one election longer?

      Your tax money being spent to keep your house debtor neighbor above water and not walking away.

      How long can they keep it up? Maybe we can just double the credit every year from here on out.

      1. MRexpert

        Had a meeting with a very well knwn development company recently re starting a project with CFD financing. I was trying not to fall out of my chair hearing them talk about the bottom has already happened and from now on it’s on the up and up.

        ironically, I rcvd this press release from the NAHB today:

        WASHINGTON, Nov. 5 – The National Association of Home Builders (NAHB) today applauded Congress for passing legislation that will extend and expand the $8,000 first-time home buyer tax credit, stating that this will provide a much-needed boost to the fragile housing market and economy.

        “We commend lawmakers for acting in a bipartisan manner to extend the first-time home buyer tax credit beyond its Nov. 30 deadline and expand it to a wider group of home buyers,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “The tax credit has proven to be a powerful economic incentive. Today’s action by Congress will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices.”

        The new law will extend the $8,000 credit for first-time home buyers for sales contracts entered into by April 30, 2010 and closed by June 30. Further, it has been expanded to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence. An existing home owner can claim the $6,500 tax credit if they have been residing in their principal residence for five consecutive years out of the last eight. Additionally, the income eligibility limits to claim the full credit amount for both groups of home buyers have been raised to $125,000 for individuals and $225,000 for married couples.

        NAHB estimates that the extended and expanded home buyer tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.

        The legislation, which also extends unemployment insurance benefits and offers relief to cash-strapped firms by providing broader tax benefits for businesses with net operating losses (NOLs), is expected to be signed into law shortly by President Obama.

        “The new NOL rules will throw a lifeline to struggling businesses, allowing them to continue making payrolls, paying business loans and otherwise keep their doors open until the economic recovery takes hold,” said Robson.

    2. norcal

      Even more news from Calculated Risk – Fannie Mae is asking for permission to initiate a “deeds to lease” program. If you’re in default, your lender can take the property then lease it out to you at market rates for a year. After that the lease is renewed, or goes on month-to-month basis, and if the bank/ex-lender/owner sells the property, the lease is sold with it.

      So this keeps people in homes, but not for free – they at least have to pay rent to the bank, which is probably a good thing. The bank keeps the property until it can sell at lower/sustainable prices – probably wreaks havoc on the bank’s books, but that was going to happen anyway.

      Good or bad? What do you think?

      1. thrifty

        I think that if leasing until sold worked, banks would have been doing it for decades. More than one experienced realtor has stated that is the last thing banks want to do. They will have to pay for managing – collections, repairs, maintenance, etc. Do renters take care of a house and always have it in shape to be shown? And why would they be able to afford making payments after one year that they can’t make now – are raises guaranteed for all these millions of people who can’t afford teaser rates?
        The leasing program is doomed at the start.

        1. newbie2008

          If bank get money for 0.25%. Very sweet for the banks at the taxpayer expense. The bank will need to pay for property taxes, repairs, upkeep, and management fees. That will be 5 to 6% lower than the typical non-owner occupied investor.

  7. EconRules

    IR, I’m glad you’re not doing this blog to be popular. Keep preaching the truth; I for one appreciate it.

  8. Pissed in Pennsylvania

    I’m fed up. Let’s put these scummy bastards in debtor’s prison, and give their spiffy houses away to HUD. If it wasn’t for the sand states, the rest of us would be still doing just fine.

    Oh yeah. Let’s send pitchforks and burning torches to go after the likes Barney and Chris and Timmy and Hank and Helicoptor Ben and Angelo and that moonbat Attorney General.

    And and and and

    Eventually we should get clear of this, but California must slide into the sea.

    I’m pushing, you need to get out of the way or help.

  9. Best CD Rates

    I like the way you presented your views. This is simply great. In addition I would say you have portrayed a co-relation between lions and real estate which is out of imagination. Keep the good work going.

  10. jimfromJaxFla

    Did you all happen to here George Soros pontificating how our finacial system is broken (thanks for causing that Captain Obvious) and we America needs ” A New World Order, a new finacial Order”
    Wonder how this will affect the future Real Estate market…
    and we think it’s a Republican and Democrat thing !!!

    I read that the $8,000 tax credit costs $47,000 per person.. Is this True ????
    Seems there must be some overhead..

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