Monthly Archives: October 2010

Private Property Rights: A Casualty of the Housing Bubble

Paul Jackson from HousingWire persuasively argues that private property rights are being trampled.

Irvine Home Address … 4152 HOMESTEAD Irvine, CA 92604

Resale Home Price …… $640,000

And all the clouds come in day by day

No one stop it in anyway

And all the peacemaker third war officer

Hear what I say

Police and thieves in the streets

Scaring the nation with their guns and ammunition

Police and thieves in the street

Fighting the nation with their guns and ammunition

The Clash — Police and Thieves

What do you do when the people who are supposed to protect you and serve your interests steal from you? Protest? To whom? What do you do when the government that is supposed to look out for us steals our money and gives it to greedy and corrupt corporations and bankers? It's happening to you right now.

The greatest heist in our country’s history

by PAUL JACKSON — Tuesday, October 5th, 2010, 5:29 pm

Our economy is being stolen from us, and our nation’s real estate crisis is providing cover for what will — if it goes unchallenged — go down as one of the greatest heists in our country’s history.

Yes, a mortgage crisis of historic proportions has now suddenly become a foreclosure crisis of historic proportions. And it’s front page news, too, bringing the market pundits out of the woodwork to exclaim as loudly as they possibly can that the entire U.S. mortgage system is a fraud.

Those three links are great supporting materials. If you are inclined to explore them, they are worthy of your time to read.

Banks are admitting to having taken shortcuts with their paperwork, or not having notarized documents properly, or delegated signing authority when they should not have. Yes, procedures haven’t been followed. And, yes, banks are going to pay for it, some far more than others.

Paul is referring to this tempest in a teapot: Paperwork storm hits nation's biggest bank. This news story isn't really news, but it serves to stoke the false hopes among debtors that mortgage relief is forthcoming. It isn't.

I’m even sure all of these procedural errors — and some that have yet to come to light — are on varying levels endemic and common throughout the mortgage servicing industry.

But in the end, am I the only one asking: who really cares? Does any of this make it more likely that a borrower will suddenly be able to afford their mortgage? Isn't that what really matters?

The Fallacy of Financial Innovation.

What really should matter is this: as a nation, we have lost at least $2 trillion in wealth thanks to the economic downturn, led by an absolute collapse of our housing and mortgage markets. It’s a collapse we have all yet to recover from, as a host of well-intentioned but ill-fated policies have done nothing except prolong pain — not only for banks, who are still playing hide-and-seek with bad assets on their balance sheets, but also for borrowers, who are being lied to by our government and by the very consumer advocates who claim to wish to help them.

The results emerging here threaten our nation’s very system of private property rights — a fundamental aspect of our democracy. But not because the banks have abused procedure, as so many pundits have conveniently alleged; instead, it’s because the very procedures designed to protect our nation’s property rights are now being used as a weapon against us.

And most of America doesn’t even know it’s happening.

An economy of lies

Just how much hide-and-seek is still out there, playing games within balance sheets of major financial institutions? Plenty. In March, I highlighted analysis from Laurie Goodman at Amherst Securities, who found that of more than $1 trillion in second mortgages outstanding, $963 billion remained on the balance sheets of commercial banks, thrifts and credit unions. As another way of slicing it, a look at Federal Reserve data shows that as of Sept. 22, U.S. commercial banks held $592.1 billion in revolving home equity loans — essentially unchanged from August of 2009, when banks held $605.2 billion.

Banks Refuse to Recognize HELOC and Second Mortgage Losses.

If you believe that the second liens and home equity loans banks are holding on their balance sheets are worth anything close to what they’re being booked at, you haven’t looked at what second liens tend to bid at on the secondary market: anywhere from 5 to 7 cents. And that’s for performing second liens.

Let that sink in a moment. Our banks are holding a trillion dollars of worthless second mortgages on their balance sheets. Do you see why short sales take forever? Banks don't want to recognize these losses, so they use the short-sale process as a means of facilitating negotiations with delinquent borrowers to get some recovery on their second mortgage loan debt.

Most properties that go to foreclosure quickly are those where the first mortgage is held by one bank and the second is held by another. Rarely do banks go to foreclosure if they hold both mortgages. Instead they endlessly amend-extend-pretend in hopes that these second mortgages will come back in-the-money from their currently worthless position. Banks live in a state of perpetual denial concerning these bad second mortgages. The horror of the reality of their situation is too terrible to be accepted.

Layer on top of that millions of borrowers who aren’t deleveraging yet, because Uncle Sam is telling them not to, and consumer advocates have swooped in to help. We’ve sold the American populace on the idea that their home truly is the American Dream, and that saving that dream is worth wallowing in bad debt and insolvency for years — rather than simply leaving it behind, deleveraging and moving on with their lives.

Foreclosure Is a Superior Form of Principal Reduction.

Toward this end, the HAMP program is an outright and unmitigated disaster: Consider that through August 2010, 468,000 of the 1.4 million homeowners offered trial mods had received "permanent" modifications. Even if only 40% of these “permanent” modifications redefault — an incredibly low redefault rate — that’s 280,800 borrowers that get to stay in their homes. Assume that number triples between now and 2012, when HAMP is slated to expire: that means 842,400 borrowers will be assisted by HAMP when all is said and done.

HAMP's program cost? $50 billion. The final price tag? $60,000 per success. We might as well have just given the whole lot of our nation’s delinquent borrowers a year’s worth of mortgage payments as a cash advance — it would have been just as effective.

But HAMP’s real crime isn’t its inefficiency and cost to the taxpayer. It’s the culture of ‘indentured servitude’ that it has spawned upon an unwitting American public. Our government has convinced millions that it is better for them to wait to resolve their bad debt, to wallow in insolvency — that they should attempt to see that debt restructured into some other bad debt, with much of this new, still-bad debt now guaranteed and backed directly by the U.S. government.

The Mechanism For Diverting Bank Losses to the US Taxpayer.

The result is that bad debt lurches along in our financial system, never really cleaning itself out; and borrowers are left with horrible credit for years as they work through attempting to restructure their debt again and again, damaging their future hopes of ever really contributing to GDP growth again.

It’s a crime upon our nation, financially and socially, yet it’s one that the American people have allowed themselves to be subject to. We are, after all, a government by the people and for the people.

But the real reason we aren’t seeing the sort of economic growth most have expected is precisely because we haven’t allowed the consumer to repair their balance sheets, a necessary and positive thing for the economy in general: we’ve encouraged them to do the exact opposite.

Eliminating Government Housing Subsidies Will Improve the Economy.

It’s somewhat convenient for the nation’s banks, too, that consumers decided to hold onto all of this debt, too — because doing so allows our financial institutions to continue to play hide-and-seek with their bad assets. Which avoids the need for messy additional government bailouts, politically untenable as they are these days.

So everyone plays along with the ruse.

Regardless, the inconvenient truth here is that until we allow this billions of dollars worth of bad mortgage debt to truly course through our economic veins, to work itself out, we won’t see an economic recovery. Deleveraging privately — and now, through transfer of debt, publicly — is a necessary prerequisite to future economic growth in our country.

Foreclosures Will Drive the National Economic Recovery.

Love me tender

Foreclosures, then, aren’t really the enemy at our gates; they’re instead a necessary and healthy indicator of market correction. They are proof that our nation’s well-developed system of private property rights is, indeed, actually working as it should.

Foreclosure is not the problem; foreclosure is the cure.

But our government has instead made foreclosures into a “last stop” measure instead, something to be avoided at all costs as well as something that probably rates just below Big Tobacco on most American’s scale of corporate loathing — this is a huge mistake, as NYU law professor Richard Epstein notes in a brilliant column published in Forbes magazine.

By giving in to sensationalism over robo-signers and who notarized what, we’ve allowed procedural gaffes to substitute for true substance. And we’ve forgotten why those procedures really exist in the first place — not to protect the hapless borrower, who has already defaulted, but to instead protect our nation’s sacred system of land rights. To protect the foundations of our very democracy.

Money Rentership: Housing and the New American Dream

“Foreclosure should be understood as a healthy form of market correction of prior transactions. It should not be regarded as a form of original sin, to be tolerated only under the most extreme circumstances,” writes Epstein. “The older rules were designed to allow strict foreclosures in order to clear title. The new rules will result in short-term victories for some besieged landowners — and fresh losses for everyone else.”

California, at least, seems to have had its priorities straight. Under California law, borrowers looking to challenge a foreclosure sale on grounds of any irregular procedure (like affidavit signing, notarization, and the like) must first make a “valid and viable” tender offer to the lender for the amount due on the loan. In other words: a procedural error doesn’t matter, if the borrower still can’t pay the debt.

After all, as I noted before and will say again: our nation’s detailed and paperwork-heavy procedural requirements don’t exist for the protection of the borrower in default. They exist to protect our nation’s very system of property rights.

I wasn't aware of this law prior to reading this article. It is a good law, IMO.

California’s "tender rule" has helped the courts in the Golden State avoid much of the same fate as those in Florida, which have quite literally been besieged by claims of procedural irregularities. It’s why California is more able to work through foreclosures, and the single largest reason why the state is closer to finding an equilibrium in housing than Florida is.

Actually, we are only at an equilibrium because we aren't foreclosing and putting supply on the market, but I don't want to take away from Paul's larger point.

But California attorneys I speak with now say that the “tender rule” in California is under heated attack from consumer attorneys that would see the rule turned around, allowing California’s courts to resemble the mess that is Florida’s.

Rather than fighting California’s “tender rule,” what we really ought to be doing is considering a national, federal law that makes something like the “tender rule” a national requirement. In other words, if you can’t make good on your debts anyway, procedural missteps in a foreclosure are immaterial and something for attorneys and their bar to worry about.

By subverting our nation’s real estate law to favor borrowers who have no intention of fulfilling their debts, we risk undermining everything that establishes private property rights in our country — and perhaps the coup de grâce of it all is that the American public will be cheering when it happens.

How very eerily Orwellian of it all.

The enemy at our gates threatening our very republic isn’t Wall Street, isn’t banks, isn’t foreclosure mills, isn’t botched paperwork, isn’t loan officers making empty promises, isn’t investment banks rolling loans into CDOs and other esoteric investments, isn’t rating agencies. Instead, we've met the enemy, and it’s us.

Paul Jackson is the publisher of HousingWire Magazine and HousingWire.com. Follow him on Twitter: @pjackson

Obviously, I think Paul Jackson really gets it.

$300,000 in HELOC abuse

Nearly every day I profile a house where someone extracted hundreds of thousands of dollars in HELOC money. Since these are almost always short sale and foreclosures, you know that these people have nothing to show for all that spending. They couldn't have buried it in the yard because they are losing the yard too.

  • Today's featured property was purchased for $475,000 on 10/15/2003. The owners used a $380,000 first mortgage and a $95,000 down payment.

  • On 11/5/2004 they refinanced with a $530,000 first mortgage.

  • On 5/3/2006 the obtained a HELOC for $150,000. We know they spent it because this property is listed as a short sale.

  • Total property debt is $680,000.

  • Total mortgage equity withdrawal is $300,000.

Do you want to pay off their debts? The bank is willing to loan you money at 4.3% to do it.

Irvine Home Address … 4152 HOMESTEAD Irvine, CA 92604

Resale Home Price … $640,000

Home Purchase Price … $475,000

Home Purchase Date …. 10/15/2003

Net Gain (Loss) ………. $126,600

Percent Change ………. 26.7%

Annual Appreciation … 4.3%

Cost of Ownership

————————————————-

$640,000 ………. Asking Price

$128,000 ………. 20% Down Conventional

4.74% …………… Mortgage Interest Rate

$512,000 ………. 30-Year Mortgage

$128,624 ………. Income Requirement

$2,668 ………. Monthly Mortgage Payment

$555 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$53 ………. Homeowners Insurance

$45 ………. Homeowners Association Fees

============================================

$3,321 ………. Monthly Cash Outlays

-$451 ………. Tax Savings (% of Interest and Property Tax)

-$645 ………. Equity Hidden in Payment

$230 ………. Lost Income to Down Payment (net of taxes)

$80 ………. Maintenance and Replacement Reserves

============================================

$2,535 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,400 ………. Furnishing and Move In @1%

$6,400 ………. Closing Costs @1%

$5,120 ………… Interest Points @1% of Loan

$128,000 ………. Down Payment

============================================

$145,920 ………. Total Cash Costs

$38,800 ………… Emergency Cash Reserves

============================================

$184,720 ………. Total Savings Needed

Property Details for 4152 HOMESTEAD Irvine, CA 92604

——————————————————————————

Beds: 5

Baths: 3 baths

Home size: 2,100 sq ft

($305 / sq ft)

Lot Size: 5,000 sq ft

Year Built: 1972

Days on Market: 77

Listing Updated: 40448

MLS Number: S625484

Property Type: Single Family, Residential

Community: El Camino Real

Tract: Gt

——————————————————————————

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

**** REMODELED TWO STORY FABULOS HOME IN A GREAT AREA. A BEDROOM AND BATH ON FIRST FLOOR.HARD WOOD FLOOR GRANITE KITCHEN AND MORE. NEAR SHOPPING, SCHOOLS AND PARKS . SHORT SALE, SEE REMARKS FOR SHOWINGS.

FABULOS?

20% of Mortgages Will Default: 11 Million to Lose Their Homes

A new report from Amherst Securities projects that 20% of all mortgages will default and 11 million people will lose their homes.

Irvine Home Address … 5151 DOANOKE Ave Irvine, CA 92604

Resale Home Price …… $549,000

I was thinking of a series of dreams

Where nothing comes up to the top.

Everything stays down where it's wounded

And comes to a permanent stop.

Wasn't thinking of anything specific,

Like in a dream, when someone wakes up and screams.

Bob Dylan — Series of Dreams

Is it possible for the housing market to stay wounded permanently? Will prices in Las Vegas fall forever? Will prices reach zero? Will Orange County prices stay high forever? Perhaps if lenders give away homes to the squatters the inventory will never hit the market and prices will not crash.

What does a delinquent squatter do if they want to sell? Oh, wait… since they don't have any equity, there really isn't anything to sell. They really don't own anything other than a big loan and dreams of future equity during the next housing bubble.

A Mammoth One in Five Borrowers Will Default

October 3, 2010 by Michael David White

A leading mortgage analyst predicts over 11 million homeowners will default and lose their home if the government fails to take more radical intervention.

Amherst Securities Group LP, one of the most respected names in mortgage research, has trumpeted an ambitious call-to-government arms in its October mortgage report.

“The death spiral of lower home prices, more borrowers underwater, higher transition rates (to default), more distressed sales and lower home prices must be arrested.”

Must the decline be arrested? I suppose it depends on the market. If the decline is stopped to early, you end up with inflated markets like Orange County. If the decline is not stopped and the market is cleared through capitulation, prices get pounded back to the early 90s like they are in Las Vegas. I proposed a method to stop the decline in Should Government Mortgage Subsidies Be Offered to Cashflow Investors?, and anyone who reads the comments can see how well that idea went over.

The authors dismiss recent talk of mortgage performance improvement as statistical sleight-of-hand magically conjured by modifications.

“This ‘improvement’ (in mortgage performance) simply reflects large scale modification activity having served to artificially lower the delinquency rate” (Please see the chart above of mortgage balances delinquent and re-performing. All charts in this post are from “Amherst Mortgage Insight” dated October 1, 2010.).

It's refreshing to see an analysis that goes beyond the headlines and takes a hard look at the effectiveness of these programs and the redefault rate. It's obvious that the loan modification programs have been a complete failure, and the statistical blips these programs create merely foster false hope that the problems in housing will somehow cure themselves.

The report offers an astounding forecast of the fate of severe negative-equity properties. Nineteen percent of properties with a loan-to-value (LTV) of 120% or greater are defaulting every year. A death-defying 75% of mortgages on 120% LTV properties will eventually go bad (19% + 19% + 19%, …).

The current crop of mortgages is already “impaired” at the one-of-five level. Nine of 100 are seriously delinquent. Six of 100 are “dirty current” (made current by modification). Five of 100 are seriously underwater (LTV greater than 120%) (Please see the chart above categorizing the forecast of 11 million defaults.).

The authors, who describe current conditions as leading to “an impossible number” of defaults and one that is “politically unfeasible”, unveil a major arms race of measures to counteract the default tide.

Brace yourself: if you didn't like my idea to stabilize prices, wait until you read through this list….

The solutions include

  1. mandatory principal reductions,

  2. looser underwriting of new mortgage loans,

  3. leveraged capital pools for investors, and

  4. penalties for defaulting homeowners.

Amherst reports that a family who defaults can live rent-free for 20 months on average. They propose that missed mortgage payments, including property taxes and insurance, be counted as W2 income.

I love that idea! Tax the squatters!

They make note of recent new signs of distress including two record-low readings of existing home sales in the last two reports. Another block is that underwriting standards have grown much stricter at Fannie and Freddie. Only 2% of Freddie purchases are now bad-credit borrowers where they represented about 20% of borrowers in 2006. FHA purchase mortgages, however, which have by definition much more lenient lending guidelines, have exploded upwards from roughly 10% of their lending in 2006 to more than 50% today.

The buyer pool is also compromised by the fact that 17% of borrowers now have a seriously compromised credit history. After mortgage default a typical wait-time to qualify again is anywhere from 3 to 7 years. One of the more desperate measures suggested by the authors seeks a new mortgage for those who are now behind or in danger of failing. “This (default) can be fixed by re-qualifying borrowers who are in a home they can’t afford into one they can afford.”

The dilemma of a deflating bubble is that supply grows while demand shrinks largely due to tigher credit standards and increasing borrower delinquency. There is no easy solution. The process must move forward to completion. There is no magic wand the government can wave and make everything better.

Risk is so high in today’s real estate market that private money has largely left the mortgage category. The retreat is most easily seen in the jumbo mortgage market. Total jumbo mortgage origination has fallen from a high of $650 billion in 2003 to $92 billion in 2009 (see the chart above). Government loans account for 90% of current originations.

“If government policy does not change, over 11.5 million borrowers are in danger of losing their homes (1 borrower out of every 5),”‘ the report said, which estimates the total of homes with a first mortgage at 55 million. “Politically, this cannot happen.”

I have heard this bogeyman thrown out before. What does it mean to say this politically cannot happen? What if it does? I doubt we will see rioting in the streets or the collapse of government. What you would see is a lot of renters who used to be owners saving a lot of money on their housing costs.

Don't loan HELOC abusers money

Every once in a while, I see a private party loan get recorded in the property records. These usually come at the end of a long series of refinances and represent a personal loan from a friend or family member. These are almost always a bad idea. Whatever relationship these two people had is now ruined because the loan will likely never be repaid.

  • This property was purchased for $265,000 on 6/23/1999. The owner used a $212,000 first mortgage and a $53,000 down payment.

  • On 5/22/2002 he obtained a stand-alone second for $50,000.

  • On 5/27/2003 he refinanced with a $304,500 first mortgage.

  • On 11/13/2003 he obtained a stand-alone second for $120,000.

  • On 2/7/2005 he refinanced with a $455,000 first mortgage.

  • On 5/3/2006 he got a stand-alone second for $150,000.

  • On 4/22/2008 he borrowed $20,000 from a private individual.

  • Total property debt is $625,000.

  • Total mortgage equity withdrawal is $413,000.

He hasn't been served a default notice yet, but I image this owner is part of the non-paying shadow inventory. People who put their houses up for short-sale rarely make payments during the process. Why would they?

Irvine Home Address … 5151 DOANOKE Ave Irvine, CA 92604

Resale Home Price … $549,000

Home Purchase Price … $265,000

Home Purchase Date …. 6/23/1999

Net Gain (Loss) ………. $251,060

Percent Change ………. 94.7%

Annual Appreciation … 6.3%

Cost of Ownership

————————————————-

$549,000 ………. Asking Price

$109,800 ………. 20% Down Conventional

4.74% …………… Mortgage Interest Rate

$439,200 ………. 30-Year Mortgage

$110,335 ………. Income Requirement

$2,288 ………. Monthly Mortgage Payment

$476 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$46 ………. Homeowners Insurance

$0 ………. Homeowners Association Fees

============================================

$2,810 ………. Monthly Cash Outlays

-$387 ………. Tax Savings (% of Interest and Property Tax)

-$554 ………. Equity Hidden in Payment

$198 ………. Lost Income to Down Payment (net of taxes)

$69 ………. Maintenance and Replacement Reserves

============================================

$2,136 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,490 ………. Furnishing and Move In @1%

$5,490 ………. Closing Costs @1%

$4,392 ………… Interest Points @1% of Loan

$109,800 ………. Down Payment

============================================

$125,172 ………. Total Cash Costs

$32,700 ………… Emergency Cash Reserves

============================================

$157,872 ………. Total Savings Needed

Property Details for 5151 DOANOKE Ave Irvine, CA 92604

——————————————————————————

Beds: 4

Baths: 2 full 1 part baths

Home size: 1,976 sq ft

($278 / sq ft)

Lot Size: 5,543 sq ft

Year Built: 1970

Days on Market: 18

Listing Updated: 40437

MLS Number: P752184

Property Type: Single Family, Residential

Community: El Camino Real

Tract: Ch

——————————————————————————

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

TWO STORIES, 4 BEDROOM, 3 BATHS, EL CAMINO TRACT. NEW KITCHEN CABINET, NEW GRANITE COUNTER TOP. PROPERTY SOLD 'AS IS' CONDITION. SELLERS ARE VERY MOTIVATED, CO-LISTING AGENT PHU NGUYEN 714-210-0204.

I can tell you why the co-listing agent is involved with this transaction, but that might give away too much….

The Market Is Accepting That House Prices Will Not Go Up

Hope springs eternal, and denial rules downtrodden financial markets. However, locally it appears that housing market watchers are beginning to accept that house prices will not be going up soon.

Irvine Home Address … 22 BUTTERFLY Irvine, CA 92604

Resale Home Price …… $460,000

There's gonna come a time when the scene'll seem less sunny

It'll probably get druggy and the kids'll seem too skinny

There's gonna come a time when she's gonna have to go

With whoever's gonna get her the highest

The Hold Steady — Stay Positive

No matter how bad things get, some people just choose to stay positive. It is a healthy way to manage one's emotions, but it is an incredibly poor way to manage one's finances.

Is 'flat' the new 'normal'

BY JONATHAN LANSNER — Sept. 30, 2010

Perhaps "flat" is the "new normal."

It's hard to find anybody who's really excited about housing's short-run outlook as the real estate market seems to be having some difficulty adjusting to homebuying without federal tax incentives.

LOL! Having some difficulties? If by difficulties he means that New Home Sales Plummet with Expiration of Tax Credits and Existing-Home Sales Sink to Lowest Level Ever Recorded, then yes, the market is having some difficulties.

Take housing tracker Veros from Santa Ana. They project Orange County home prices will rise 2.2 percent in the year ended September 2011.

Eric Fox, Veros' economic modeling VP, says "affordability is the driver" that will keep local housing prices up. Previously, Veros' forecast that home price will be up 1.8 percent in the year ending June 2011.

To Fox, local home affordability – a mix of depressed values and cheap mortgage rates — will largely offset the area's relatively weak job market. Fox also think rent-seeking investors will play a big role in supporting local home prices, as these cash-rich buyers won't have the tall hurdles — overall angst or loan qualification challenges — that currently chill some buyers seeking their own shelter.

Nearly every market myth in one brief statement. I can't say Mr. Fox has earned much of my respect.

First, market values are not depressed. We are recovering from a housing bubble, and prices are still artificially elevated not depressed.

Second, cheap mortgage rates are not offsetting the weak job market. Low Interest Rates Are Not Clearing the Market Inventory. The banking cartel's withholding of inventory is what is offsetting the weak job market. Demand is very low as sales volumes are well off historic norms. Only the lack of inventory is preventing a total price collapse.

Third, rent-seeking investors are not attracted to Orange County's housing market. Why would anyone accept a 4% return in Orange County when they can get an 7% return in Riverside County or a 9% return in Las Vegas? Only foolish speculators who believe rapid appreciation will return to Orange County are buying at current valuations.

Forth, foreign cash buyers can not, will not, and are not saving the Orange County housing market. This dumb idea is brought up periodically, and it is crazy. Perhaps FCBs have some small impact in some small neighborhoods and isolated enclaves where the activities of a few buyers can make a difference, but the OC housing market is much too large, and the number of FCBs is much too small to stem the tide.

That outlook for essentially flat pricing fits a pattern we've seen lately: Home-price gains – at least what's reported in various indexes — have been shrinking.

The latest reading of the price pulse in Los Angeles and Orange counties in July's Standard & Poor's/Case-Shiller housing indexes:

  • On a month-to-month basis, LA/OC prices rose 0.35 percent in July — fourth consecutive gain but the smallest since a drop in March.

  • On a year-over-year basis, LA/OC home prices rose 7.5 percent in July — seventh consecutive gain but also the smallest since March.

  • Sobering thought: Even with the recent gains, LA/OC prices by this measure are 35.6 percent below the 2006 peak.

Be prepared to watch the Case-Shiller index roll over in the coming months. We all know that the market hit some severe "turbulence" in May when the tax credits expired. Since the Case-Shiller is both a moving average and delayed by three months, we are only now seeing the impact of the sudden drop in demand and pricing. Nobody watching the market since May has reported increasing demand or rising prices. Going into the fall and winter with elevated inventory, these numbers can only get worse.

… HARD SELL …

And it's not just pricing, as buyers pull back in many parts of the market

In the 22 business days ending September 8, DataQuick found 52 of 83 O.C. ZIPs had year-over-year sales declines as overall countywide sales were off 14.9 percent vs. a year ago. The current sales pace is 69 percent of the average 3,597 homes sold per month in the 20 years ended in 2009.

Statewide, California Association of Realtors said August's homebuying was down 14.9 percent from a year ago. And what sells takes more effort: CAR's unsold inventory index for single-family resales in August was 6.1 months (to deplete the supply of homes on the market at the current sales rate) vs. 4.6 months a year earlier.

These sales numbers are a catastrophe. If the majority of the market were not tied up by banks who refuse to sell, prices would crater.

As expected, homeowners sense house shoppers' change of heart.

According to surveying by online real estate trackers HomeGain, 15 percent of Californian homeowners predicted this summer that their home's value will rise in the next six months — slightly less than half of the 34 percent who foresaw appreciation just three months earlier in the spring. Nationwide, the drop off wasn't as steep as 18 percent expected appreciation in the most recent survey vs. 27 percent in the second quarter.

But here's what really noteworthy: when just 15 percent of Californian homeowners see appreciation — and that makes our state a national leader in property optimism!

That is a very low number. Homeowners are the group most likely to have a rosy outlook for appreciation because they all want home prices to go up. Position bias is strongest among those who stand to make large amounts of money if a position goes in their favor.

HomeGain's third-quarter survey placed California in a tie for 9th place ranking among the states (along with Maryland) for the share of folks predicting upcoming appreciation. (Back in the second quarter, optimism was tied for 7th with New York and Colorado!)

California real estate agents, who were also polled, had equally and curiously "high" relative optimism — as 14 percent told HomeGain pollsters that they foresaw appreciation within six months. That tied us for the 6th most upbeat real estate pros among the states (withTexas.)

I am shocked! realtors think house prices are going up? Actually, I am surprised that so few (only 14%) do believe house prices are going up. Of course, all of them are telling their buyer-clients that house prices are going up in order to manipulate them into buying, but secretly only a small handful truly believe prices will rise. The duplicity is disgusting.

Perhaps, growing Californian pessimism comes from what buyers (or the lack thereof) are saying, as pollsters found agents saying 25 percent of California homebuyers currently believe homes are overpriced by 10 percent or more vs. 13 percent in the second quarter

… BUT NO 'DOUBLE DIP'?

Still, the market watchers at Beacon Economics don't think the current malaise will turn to anything ugly.

"Although home prices are not going to rocket back to pre-recession peaks anytime soon, fears of a significant double dip in home prices are likely exaggerated," Beacon economists wrote in a recent forecast. "The fundamental drivers of long-term home prices paint a picture of a housing market that has emerged from collapse healthier. Home prices have largely stabilized despite a small drop in the wake of falling sales; the price of an existing home is still more than 16% above the April 2009 trough. Additionally, measures of affordability show that California appears poised for slow but steady growth once the labor markets have healed. At roughly 6-times per capita income in the state, home prices are beginning to make sense again. As income continues to grow at a moderate pace, home prices will likely follow suit at a more tepid but sustainable pace."

Six-times income is now a good measure of affordability? It is amazing how super-low interest rates distort reality. Ordinarily, I embrace most of what I read from Chris Thornburg and Beacon Economics, but the above statement reads a bit like market cheerleading. I'm sure many loan owners read that will a small sense of relief. Denial requires constant reinforcement.

Flat is not where it's at

House prices are going to head lower in Orange County. When the bulls start to accept that prices may actually stay flat, it becomes pretty obvious that prices will head lower. We are not witnessing the despair after the crash which signals the bottom, we are witnessing the acceptance that comes before capitulation. Expect to see house prices grind lower for the next two or three years with greater declines at the high end than at the low end. Afterward, expect tepid appreciation until the overhang of distressed inventory is pushed through the system. The bear rally engineered by the Federal Reserve is over. The second leg down — a less steep and more controlled decline — is about to begin.

HELOC Metamorphosis

I don't think most HELOC abusers set out to be thieves. It is a slow transformation. Like Patty Hearst went from being a shy heiress to a gun-toting bank robber, most HELOC abusers get a taste of free money, like what they get from it, and then they just dig the hole deeper and deeper until there is no escape. Perhaps HELOC abusers will blame banks for keeping them financially hostage and claim mass insanity as another manifestation of the Stockholm syndrome.

  • The owners of today's featured property paid $317,000 on 10/31/2001. They used a $253,600 first mortgage, a $31,700 second mortgage and a $31,700 down payment.

  • On 2/26/2003 they refinanced with a $290,000 first mortgage.

  • On 10/23/2003 they took out $100,000 in a HELOC.

  • On 4/7/2004 they got a $150,000 HELOC.

  • On 5/7/2004 they obtained a $136,000 HELOC.

  • On 3/17/2006 they opened a $250,000 HELOC.

  • Finally, on 8/3/2006 they refinanced the first mortgage with a $560,000 Option ARM.

In short, these people committed every sin of bad mortgage management including periodic refinancing and obtaining an Option ARM. The worst part is that they probably don't realize they did anything wrong. I imagine they think they were behaving responsibly and if the housing market hadn't crashed, everything would be fine. I believe people have failed to learn the lessons of poor financial management, and I also believe we will likely repeat this cycle because of the poor lessons people have learned.

Irvine Home Address … 22 BUTTERFLY Irvine, CA 92604

Resale Home Price … $460,000

Home Purchase Price … $317,000

Home Purchase Date …. 10/31/2001

Net Gain (Loss) ………. $115,400

Percent Change ………. 36.4%

Annual Appreciation … 4.2%

Cost of Ownership

————————————————-

$460,000 ………. Asking Price

$16,100 ………. 3.5% Down FHA Financing

4.74% …………… Mortgage Interest Rate

$443,900 ………. 30-Year Mortgage

$92,448 ………. Income Requirement

$2,313 ………. Monthly Mortgage Payment

$399 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$38 ………. Homeowners Insurance

$215 ………. Homeowners Association Fees

============================================

$2,965 ………. Monthly Cash Outlays

-$377 ………. Tax Savings (% of Interest and Property Tax)

-$560 ………. Equity Hidden in Payment

$29 ………. Lost Income to Down Payment (net of taxes)

$58 ………. Maintenance and Replacement Reserves

============================================

$2,115 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,600 ………. Furnishing and Move In @1%

$4,600 ………. Closing Costs @1%

$4,439 ………… Interest Points @1% of Loan

$16,100 ………. Down Payment

============================================

$29,739 ………. Total Cash Costs

$33,300 ………… Emergency Cash Reserves

============================================

$63,039 ………. Total Savings Needed

Property Details for 22 BUTTERFLY Irvine, CA 92604

——————————————————————————

Beds: 3

Baths: 2 full 1 part baths

Home size: 2,000 sq ft

($230 / sq ft)

Lot Size: 2,720 sq ft

Year Built: 1976

Days on Market: 122

MLS Number: S619416

Property Type: Single Family, Townhouse, Residential

Community: El Camino Real

Tract: Ig

——————————————————————————

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

Great Value for SQ/Footage, Spacious Home with Vaulted Ceilings, Open Floor Plan. HUGE Family Room with Lovely Bricked Fireplace and Wet Bar. Living Room with Fireplace, Formal Dining Room, Kitchen with Newer Appliances and Countertops. Extra Room with air conditioner off of the Large Master Bedroom that can be used as an office, den, playroom or storage. Central air through rest of the house Large Private backyard that backs to Greenbelt 2 Car Garage with newer roll up door. Walk to shopping, Restaurants, Award winning Schools

Should Government Mortgage Subsidies Be Offered to Cashflow Investors?

Among the dumb ideas being floated to resolved the housing crisis, one good one has appeared: Help investors buy up distressed homes and rent them out.

Irvine Home Address … 6 HERITAGE Irvine, CA 92604

Resale Home Price …… $319,000

Situation could be much better

much better than today

you know that you could do much better

much better than you do today

but how come you never try to change situation

how come you always escape

out of a serious conversation

dont't you know it can't never be too late

for us to succeed

out of every misery

you can be released

as long as you beleive

Ayo — Help Is Coming

In housing markets where a significant number of properties are being converted from owner-occupied to rental status, there is no government program or help for this transition to occur. Without government help, prices fall far below fundamental valuations as the imbalance of supply and demand becomes extreme. The only solution is to reduce supply and increase demand. To accomplish this, I propose that the GSEs promote investor programs that reduce the cost of ownership to small investors and encourage them to keep the supply off the resale market.

I am about to argue for something that would benefit me personally, so take everything which follows with a dose of skepticism. I would like to think I can set my personal biases aside and propose a solution better than those coming out of Washington. Feel free to disagree.

Should Treasury Help Investors Become Landlords?

Emily Peck — September 27, 2010

The government’s tried a lot of tactics in propping up the housing market: Tax credits for home buyers. Mortgage modifications for distressed homeowners. A program to buy up mortgage-backed securities.

Now, some analysts from Bank of America are proposing another plan: Help investors buy up distressed homes and rent them out.

In a recent research paper, the BofA analysts frame this as the second phase of the Public Private Investment Plan. Funded by TARP, which expires Oct. 3, PPIP offered investors funds and credit to buy up residential and commercial mortgage backed securities. The paper calls that program an unqualified success for driving up the value of mortgage backed securities.

Through their proposed PPIP 2, Treasury would use the same model to help investors to directly buy up foreclosed homes.

The analysts propose funding the purchase of up to $400 billion worth of homes by a select group of property management companies given the task of home oversight. Treasury could provide, they suggest, up to $100 billion in equity, matching the property management companies, as well as up to $200 billion in debt capital.

I like the basic idea of helping investors to purchase homes and convert them to rentals. I really hate the idea of it being done as another form of crony capitalism where the select few chosen by the Treasury department would get to make all the money. There is a much better way to make this happen.

The analysts propose that PPIP 2 investors be required to hold on to these homes for a certain amount of time, to avoid weighing the market down with low-priced foreclosed properties.

The U.S. homeownership rate, at about 67%, is “adjusting to a more natural level of 62-64%,” the analysts write. That means we’re in the process of converting owners to renters–sometimes painfully via foreclosure. The authors write that some of these folks probably never should have owned homes anyway and, since modification won’t (and doesn’t) always help them, the ability to rent distressed properties might do the trick, while also avoiding a flood of foreclosures onto the market.

This is exactly the problem. The home ownership rate must fall. Far too many people who were not prepared for home ownership were given title to property. These people must go back to being renters, but there is no mechanism in place to cost effectively make this transition. in fact, since investors loans carry a higher interest rate and are difficult to qualify for, there are roadblocks to this transition that must be removed.

The authors say that they haven’t seen any proposal along these lines. One possible reason? TARP fatigue. From the paper:

To put it mildly, in spite of its successes, TARP has not been particularly popular. We believe reauthorizing this type of spending on even a limited basis would be next to impossible, at least until after the upcoming election.

I agree; doling out another crony payoff is not going to be very popular either before or after the election. This is a transparent corporate giveaway that people are growing tired of.

The real reason you haven't seen proposals like this is because everyone in the administration is still focused on owner occupants. There have been no policies implemented or discussed that might hurt the home ownership rate — even is such a policy will help reduce taxpayer losses. A high home ownership rate has become a sacred cow in Washington, and until we admit maximizing the home ownership rate may not be a good thing, our policies will continue to be counter productive.

The GSEs should insure investor loans

Let's start by acknowledging that the GSEs no longer have any semblance of what they used to be. They were founded to support a secondary mortgage market and make capital available for low and middle income Americans to buy homes. Since they went into conservatorship in 2008, they have been largely used to prop up the housing market. Let's acknowledge that their primary function is currently to prop up the housing market by providing mortgage insurance at below-market costs to stabilize the housing market.

Once we accept the new role of GSEs, we can then discuss how this can best be accomplished. Our current policies are geared toward keeping owner-occupants in properties and Prop Up the Flagging Owner-Occupancy Rate. This policy will largely fail because many homes have to be converted to cashflow rental properties. If the government and the banks really want to limit their losses on mortgage loans (and GSE mortgage insurance), then they need to focus on how they can raise the property bids of cashflow investors.

If the GSEs offered the same loan insurance to cashflow investors as they do to owner-occupants so that interest rates were similar, and if the rental cashflow from the property could be counted toward the qualifying income, bids from cashflow investors would be much higher. Think about it: if you lower the cost of ownership for investors and make it easier for investors to qualify, you will get higher bids and more investor competition for properties. This in turn will raise prices and reduce the losses both banks and the GSEs will endure on those properties that must be converted from owner-occupied to rental status.

The truth of this fact is plainly obvious when you look at Las Vegas's housing market. The home ownership rate in Las Vegas is going to drop 25% or more from the 2006 peak. Nearly every household there is underwater, and they have little or no hope of price recovery. Accelerated default is the norm, and a huge number of homes are currently being converted from owner-occupied to rental status. Each time this happens, some lender is losing a fortune, and the only way to stop the bleeding is to raise the bids for cashflow rentals. The only way that is going to happen is to lower the cost of ownership for investors and increase the size of the borrower pool by qualifying more investors.

This is a problem I am very familiar with. I know the math as I face it myself with each property I consider buying personally. I know that investors pay a higher interest rate, face higher equity requirements, and have fewer loan programs that consider the rental income in qualification (it still must be cashflow positive). Each of those barriers lowers my bid for any particular property, and since everyone is facing the same issues, it lowers everyone else's bids as well. Lower market bids for these properties make for larger lender losses.

If the government and the GSEs were serious about combating this problem, the GSEs could offer relief in these areas (interest rates, equity requirements, and income qualification) to investors who agree to keep the properties off the market as rentals for three to five years. That would keep these properties out of the for sale market (or the loan would have a stiff financial penalty), and the reduced supply would also help stabilize prices.

This doesn't have to be some crony capitalist handout. It could be a grass roots program for small investors and prudent savers with good credit — you know, the people who have been being screwed at every turn in favor of banking interests and corporations with all the bailouts. I openly admit my personal bias, but I still believe this is a good idea that would be far more effective than any of the programs that have actually been implemented to date.

What do you think? Has the time come for the GSEs to help the small investor clean up this mess?

The California Housing Foreclosure Cycle

People often talk about the real estate cycle in California without having any idea of what causes it. In short, irrational exuberance among buyers enabled by foolish lenders causes prices to go up, and when buyers who over-borrowed stop repaying their loans, lenders tighten credit, and prices crash. This most recent housing bubble was actually the third such housing bubble here in California. It probably won't be the last.

  • Today's featured property was purchased by the Federal National Mortgage Association for $138,000 on 8/23/1996. It was an REO. They later sold the property Glendale Federal Bank who sold it to the current owner on 5/17/1997 for $100,000. The current owner used a $97,500 first mortgage and a $2,500 down payment.

  • On 8/24/1998, the owners obtained a stand-alone second for $37,300.

  • On 9/21/199 they refinanced the first mortgage for $163,946.

  • On 10/1/2004 they refinanced again for $220,000.

  • On 6/5/2006 they refinanced one last time for $237,000.

  • Mortgage equity withdrawal is $139,500.

If you believe the property description, this is a standard sale, but they don't have much cushion before this becomes a short sale.

How many other REOs from the last cycle will end up as REOs this time around? How many of today's REOs will end up as tomorrow's foreclosures?

Irvine Home Address … 6 HERITAGE Irvine, CA 92604

Resale Home Price … $319,000

Home Purchase Price … $100,000

Home Purchase Date …. 5/17/1997

Net Gain (Loss) ………. $199,860

Percent Change ………. 199.9%

Annual Appreciation … 8.6%

Cost of Ownership

————————————————-

$319,000 ………. Asking Price

$11,165 ………. 3.5% Down FHA Financing

4.74% …………… Mortgage Interest Rate

$307,835 ………. 30-Year Mortgage

$64,111 ………. Income Requirement

$1,604 ………. Monthly Mortgage Payment

$276 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$27 ………. Homeowners Insurance

$273 ………. Homeowners Association Fees

============================================

$2,180 ………. Monthly Cash Outlays

-$149 ………. Tax Savings (% of Interest and Property Tax)

-$388 ………. Equity Hidden in Payment

$20 ………. Lost Income to Down Payment (net of taxes)

$40 ………. Maintenance and Replacement Reserves

============================================

$1,703 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$3,190 ………. Furnishing and Move In @1%

$3,190 ………. Closing Costs @1%

$3,078 ………… Interest Points @1% of Loan

$11,165 ………. Down Payment

============================================

$20,623 ………. Total Cash Costs

$26,100 ………… Emergency Cash Reserves

============================================

$46,723 ………. Total Savings Needed

Property Details for 6 HERITAGE Irvine, CA 92604

——————————————————————————

Beds: 2

Baths: 1 full 1 part baths

Home size: 1,022 sq ft

($312 / sq ft)

Lot Size: n/a

Year Built: 1977

Days on Market: 23

Listing Updated: 40451

MLS Number: S631821

Property Type: Condominium, Townhouse, Residential

Community: El Camino Real

Tract: Hv

——————————————————————————

Regular sale: stop wasting your time on short sales. No need to wait for the bank on this one. A wonderful, upgraded townhouse in the Heritage Park community of Irvine featuring dual master bedrooms with lots of closet space, and a spacious, upgraded kitchen featuring custom cabinets, tile floors, and beautiful Corian counters. Both bathrooms have been recently tastefully upgraded. Newly-installed laminate flooring. The enclosed patio is perfect for enjoying the great Southern California weather and there is an inside laundry area. Walk to the huge Heritage Park, association pool, large county library, basketball, tennis and other sports courts, and the area tot lot. The area is close to many restaurants, shops and entertainment venues. Walk to local, highly-rated schools. No Mello-Roos and low HOA! Easy access to major freeways, this is an excellent opportunity to live in one of the safest cities in America. Motivated seller – and this is a regular sale!

IHB News 10-2-2010

Irvine Home Address … 18 DELAWARE Irvine, CA 92620

Resale Home Price …… $799,000

What a shame we never listened

I told you through the television

And all that went away was the price we paid

People spend a lifetime this way

And that’s how they stay

Oh what a shame.

Words come easy, when they’re true

Words come easy, when they’re true

Robbie Williams — Shame

realtors Debasing Themselves

Soylent Green is People emailed me a link to a story Realtor gimmicks and blue light specials reek of desperation. The story links to a site Real Estate Coupons (http://realtycoupons.com/).

Real estate coupons!? Please tell me this is a joke. RealtyCoupons.com says it “allows Real Estate Professionals to dramatically increase their Business and Production by offering Coupons for their Real Estate related business.” This is nothing but a cheesy gimmick aimed at despondent agents who think that lowering themselves to this level is going to procure business. What gets me most is that there are actually agents who buy into this and fork over their time and money. Glancing over the coupons posted by agents, it literally reeks of desperation. We do not need to stoop that low.

One of the more outlandish coupons offered is 50% off all real estate services, valid through 07/2012. It’s an agent firesale! Besides the fact you’ll probably go negative giving away half your earnings after factoring fees, taxes and expenses, you might as well strap a mobile police light atop your car, driving around the neighborhood with a speakerphone blaring “Attention Kmart Shoppers!” Who in their right mind wants to be known as the “Blue Light Special” Agent?

For those agents who are even remotely thinking about creating coupons, make no mistake… No client is ever going to have the following conversation with their friends and family:

“Sue is a great agent! You ought to give her a call”

“Wow, she must be an ethical and knowledgeable expert.”

“No, you silly. She accepts coupons! Here‘s one I clipped out for you. Hurry, though. It expires tomorrow.”

Furthermore, real estate coupons are a dangerous path to go down. One day you’re doling up coupons to drum up business, and pretty soon, you find yourself accepting food stamps for your commission. Have some standards, people! If you continue debasing yourself, you are going to find yourself one day blurting out “Yes, I do!” when a prospect asks you, “Can we pay you on layaway?” Where does it end?!

Who goes to realtycoupons.com to look for coupons anyway? If you have to coupon, at least look less desperate by putting on on your Google Places profile, on Yelp or Groupon. Please!

For the love of Lady Gaga, there is no need resort to these foolish antics. Instead of wasting time and money on real estate coupons (and incidentally demeaning your brand), allocate your resources elsewhere to attract clients. Can I get an Amen!?

IHB News

I bought another house in Las Vegas this week. I wasn't planning on buying another one, but the deal was so good, I couldn't pass it up. I picked up a 3,300 SF house with a 3-car garage in a nice neighborhood for $201,700. It comps for $285,000 to $300,000. It will take a few weeks before I get pictures for this one as it is currently occupied. I should have a post on the first property I purchased this week. It is being photographed Monday, and if I like them, I will put up the MLS listing in Las Vegas and profile the property here.

I spent most of the week getting my systems in place to analyze, acquire, and process these properties. As I go through the process with these first ones I will refine my systems to be prepared to process more. I originally planned to put these systems in place before acquiring any properties, but the deals I spotted were just too good to let pass.

The company I work with in Las Vegas has the ability to find last-second dropped bids. The property I bought for $201,700 was $15,000 under my maximum bid price. Since nobody else had a chance to check out the property, I was the only bidder. Banks are pretty stupid when it comes to late dropped bids. They could have gotten a significantly better price if they had given potential bidders more time to research the properties. I can't say it upsets me to profit from the stupidity of banks.

As I mentioned last week, the window is closing on the investment fund. The first property is being listed next week, and when it closes escrow, the fund is closed for good.

Writer's Corner

I went to Mickey's Not-So-Scary Halloween Party on Friday evening. It was a great family event, and a good time was had by all. I highly recommend it. I want to offer a special thanks to Jamie Griffin who gave me the tickets she was unable to use.

I am a Disney regular. We have season passes, and my son and I go nearly every Sunday morning. We like to arrive just as the park opens and go on his favorite rides before the lines get too long. It is the high point of my week, and my son and I have many fond memories of Disney. Sometimes, we go on Splash Mountain first thing, and if there is no line, we stay on the same log and go over and over again. There are some aspects of Southern California life you can't duplicate in other places.

Housing Bubble News from Patrick.net

Fri Oct 1 2010

Price slide likely to continue as shadow inventory comes to light (chicagotribune.com)

Central Fla. House Prices To Take Major Dive (msnbc.msn.com)

Study Finds Sharp Rise in Mortgages 90-Plus Days Delinquent (nationalmortgageprofessional.com)

Foreclosure postings on million-dollar Dallas houses on the rise (housingwire.com)

Distressed Houses Sell at 26% Discount in U.S. as Supply Swells (bloomberg.com)

More Foreclose Sales Will Drive Down Prices (theatlantic.com)

43% of CA. houses sold in foreclosure (mortgage.ocregister.com)

More than 1 in 3 South Florida house sales are foreclosures (miamiherald.com)

When Foreclosure is a Good Option (money.usnews.com)

Ohio Foreclosures and How They Work (stockmarketsreview.com)

Sale prices lowest on bank-owned houses (pe.com)

More Hawaii houseowners doing short sales to avoid foreclosure (staradvertiser.com)

Kaboom! Referral of Chase to federal prosecutor (4closurefraud.org)

J.P. Morgan Chase to freeze foreclosures over flawed paperwork (washingtonpost.com)

Should Treasury Help Investors Become Landlords? (blogs.wsj.com)

You're going to be paying your neighbor's home-equity loan (dailybail.com)

Highest property taxes in the country (money.cnn.com)

Patrick.net Now Has Health Insurance Forum (patrick.net)

Is it time to be your own landlord yet?

Thu Sep 30 2010

NODs and NOTS continue to stunt California real estate "recovery" (firsttuesdayjournal.com)

Forth Worth Area foreclosures may reach all-time record in 2010 (fwbusinesspress.com)

Census snapshot of S. Florida: Poverty up, wealth down (miamiherald.com)

Florida's 'Amendment 4' Would Give Voters Say on Overbuilding (theatlantic.com)

Case Shiller Index Overly Optimistic and Quite Misleading (boombustblog.com)

GMAC's Robo-Signers Draw Concerns About Faulty Process, Mistaken Foreclosures (propublica.org)

Banks Just Counterfeit Documents… No, Really! (market-ticker.org)

JPMorgan halts 50K foreclosures for possible flaws (sfgate.com)

Lost in the system that took the house (washingtonpost.com)

Government Must Continue To Subsidize Debt-Trap, Bankers Tell Lawmakers (bloomberg.com)

William K. Black on Banking Rackets. Too big to JAIL (dailybail.com)

Iceland ex-PM faces possible charges in meltdown (news.yahoo.com)

Tokyo Landlords Lose Century-Old 'Gift Money' as Rents Slump (bloomberg.com)

U.S. Dollar One Step Nearer to Crisis as Debt Level Climbs, Yu Says (bloomberg.com)

Money manager Bruce Fred Friedman arrested in France, faces fraud charges (latimes.com)

Open Dissent at the Fed: Charles Plosser Philly Fed Opposes QE2 (Mish)

Economic Outlook and the Current Tools of Monetary Policy (minneapolisfed.org)

Prominent Tiburon, CA realtor dead in apparent suicide (marinij.com)

Find cashflow-positive property easily. Free Trial

Wed Sep 29 2010

House Prices to Take Hit Next Year in Many Markets (nytimes.com)

Newport Coast land in foreclosure $6 million (mortgage.ocregister.com)

SF Bay Area Housing Graphs (patrick.net)

5 reasons why renting in California today makes sense over buying (doctorhousingbubble.com)

Hawaii residential subdivision heads for auction (staradvertiser.com)

Foreclosed houses headache for neighbors (but do they want prices low enough to sell?) (thegazette.com)

Case Says Housing Will Grow Slowly After Free-Fall (bloomberg.com)

Tax auctions look 'like government-sponsored loan-sharking' (bnd.com)

QE Engine Revs, Car Goes Nowhere (Mish)

Will quantitative easing 2 bail out commercial real estate market further? (mybudget360.com)

U.S. Household Income Falls for 2nd Straight Year (bloomberg.com)

Savers told to stop moaning and start spending (telegraph.co.uk)

China illegal immigration: Vietnamese pour into China seeking work (latimes.com)

Former bank rep gets the runaround from Capital One (latimes.com)

The Left Right Paradigm is Over: Its You vs. Corporations (ritholtz.com)

Patrick.net forum now has user search (patrick.net)

Thank You Cudick A. ($50) for your kind donation.

Find cashflow-positive property easily. Free Trial

Tue Sep 28 2010

House prices need to go down (cnbc.com)

Credit Scores May Hamper Housing Inflation (blogs.wsj.com)

Foreclosure Flaws May Slow House Price Fall, Delay Recovery (bloomberg.com)

Calif. houseowner optimism plummets (lansner.ocregister.com)

From $740,000 to $540,000 and still overpriced (doctorhousingbubble.com)

California is in trouble, more forecasters say (latimesblogs.latimes.com)

How Americans' Love Affair with Debt Has Grown (theatlantic.com)

Student loans have terms the mafia would love (studentloanjustice.org)

Housing Cash Flow and Rental Yields (deptofnumbers.com)

Walking away from a mortgage might make sense (mercurynews.com)

Housing less affordable in Ontario (yourhome.ca)

House prices fall across all of England (telegraph.co.uk)

Chinese Property Bust Like Cooking Crabs (bloomberg.com)

China: Proudly Demolishing Buildings Before Completed (zerohedge.com)

Raters Ignored Proof of Unsafe Loans (nytimes.com)

Where Are All the Prosecutions? (dealbook.blogs.nytimes.com)

What the Rich Don't Need (nytimes.com)

Hedge Fund Crackdown May Snare European Real Estate Investors (bloomberg.com)

Failed Banks Graphic (s.wsj.net)

Zombie Bank Song (dailybail.com)

Thank You Damon S. ($20) for your kind donation.

Find cashflow-positive property easily. Free Trial

Mon Sep 27 2010

Denver high-end housing market falling (denverpost.com)

New US House Sales Hold at Second-Lowest Level Ever (bloomberg.com)

August house sales rebound will be short lived (housingwire.com)

House sales on pace to finish year as bad as 2009 (finance.yahoo.com)

Housing Prediction: Bottom in 2014, Then Decade of Stagnation (Charles Hugh Smith)

Only one fix for housing crisis (hotair.com)

Walking away with less (washingtonpost.com)

LA housing bubble not dead yet (patrick.net)

Condo prices plummeted in Florida (gainesville.com)

Gung-ho' house repo agents change the locks even before foreclosure (miamiherald.com)

Tax credits leave housing inventory higher, not lower (newsok.com)

Australian housing bubble debate boils over (au.finance.yahoo.com)

To buy or not to buy? The Japanese Experience (japantimes.co.jp)

Trashing the dollar to save the economy (latimes.com)

What does it cost to produce an ounce of gold? (from 2009) (miningweekly.com)

Shopping Patterns Show When the Government Checks Come In (Mish)

Average property-price gap in US cities varies by more than $1M (guardian.co.uk)

Widening gap between rich and poor Americans (sfgate.com)

The Angry Rich (nytimes.com)

The cost of buying in a flat market

The best case scenario of prices while the banks dispose of their inventory is for prices to remain flat. Even if the banks can manage to engineer that miracle, there is still a cost to buyers who need to sell during the flat period: broker's commissions.

During the last period of flat to slowly declining prices in the early 90s, the most common lie realtors told their victims was that prices would rise 4% to 7% next year. The reason for this particular brand of bullshit is the need to convince a buyer that the commissions will be covered if they need to sell. What happens when prices don't go up?

You lose the amount of the resale commission….

Irvine Home Address … 18 DELAWARE Irvine, CA 92620

Resale Home Price … $799,000

Home Purchase Price … $805,000

Home Purchase Date …. 1/30/2008

Net Gain (Loss) ………. $(53,940)

Percent Change ………. -6.7%

Annual Appreciation … -0.3%

Cost of Ownership

————————————————-

$799,000 ………. Asking Price

$159,800 ………. 20% Down Conventional

4.74% …………… Mortgage Interest Rate

$639,200 ………. 30-Year Mortgage

$160,579 ………. Income Requirement

$3,331 ………. Monthly Mortgage Payment

$692 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$67 ………. Homeowners Insurance

$75 ………. Homeowners Association Fees

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$4,165 ………. Monthly Cash Outlays

-$804 ………. Tax Savings (% of Interest and Property Tax)

-$806 ………. Equity Hidden in Payment

$288 ………. Lost Income to Down Payment (net of taxes)

$100 ………. Maintenance and Replacement Reserves

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$2,942 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$7,990 ………. Furnishing and Move In @1%

$7,990 ………. Closing Costs @1%

$6,392 ………… Interest Points @1% of Loan

$159,800 ………. Down Payment

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$182,172 ………. Total Cash Costs

$45,000 ………… Emergency Cash Reserves

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$227,172 ………. Total Savings Needed

Property Details for 18 DELAWARE Irvine, CA 92620

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Beds: 4

Baths: 3 baths

Home size: 2,800 sq ft

($285 / sq ft)

Lot Size: 4,419 sq ft

Year Built: 1985

Days on Market: 66

Listing Updated: 40431

MLS Number: P745761

Property Type: Single Family, Residential

Community: Northwood

Tract: Cs

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This gorgeously upgraded and expanded Courtside home, full of natural sunlight, has over $100,000 in recent upgrades: dazzling travertine floors, white plantation shutters, crown molding, recessed lighting, a gorgeously remodeled kitchen with golden topaz granite, tumbled stone backsplash and top-of-the-line Bosch appliances, and three FULL elegantly remodeled baths with a spa tub in the master. For an older parent or visiting guest there is a convenient bedroom and full bath downstairs. So much livable space! In addition to the spacious downtairs family room with wet bar, there is an additional big crafts/study room leading to the backyard, another family room upstairs with wood flooring, and an upstairs landing off the bedrooms which is suitable as a T.V. room. Vaulted ceilings and skylights allow maximum vibrant sunlight into the home. This beauty is located next to a greenbelt/walking path, with additional side privacy and frontal privacy with no houses facing it across the street!