A billion here a billion there, and before you know it, the market losses add up to a lot of money.
Irvine Home Address … 2305 APRICOT Dr 2305 Irvine, CA 92618
Resale Home Price …… $244,900
Dad believed what Maggie said
Get a mortgage buy a home
So dad took out a great big loan
For a while there we were chuffed
Now the market has collapsed
And we're absolutely stuffed
Our house, in the middle of a slump
Our house, no one wants to buy this dump
Dad is desperate to sell
But now our homes worth even less
Than a pension from Maxwell
Our living room's a mess
Full of magistrates and bailiffs
Trying to repossess
Our house, in the middle of the boom
Our house, it was worth a small fortune
Our house, left us in a dreadful state
Our house, why the hell'd we decorate
We really caught a cold
Nowhere we can go to now
All the council houses have been sold
Our dads taken some stick
He's still voting Tory though
By God he must be thick
Our house, didn't work out like we planned
Our house, prices dropped by fifty grand
Our house, threw us out and changed the locks
Our house, it is now a cardboard box
Spitting Images — Our House
The headline about cratering home values is catchy, but what are we really talking about here? The underlying value of houses hasn't changed much, but the trading price of properties went way up and now way back down in a classic asset price bubble. The $1.7 trillion dollars in "value" was imaginary. If we had never had a housing bubble, we would not have had a crash, and nobody would believe in their own minds that they "lost" so much value in their property.
For the people who did not abuse their HELOC, buy at the peak with a toxic mortgage, or lose their job during the recession — let's hope this is still the majority — those people did not "lose" anything other than their imaginary wealth. For those that made the mistakes of the bubble and those who were swept up in the recession in the bubble's wake, those people lost their houses. Losing imaginary wealth is not as painful as losing the family home.
by KERRY CURRY — Thursday, December 9th, 2010, 10:19 am
U.S. homes are expected to lose more than $1.7 trillion in value this year, 63% more than the estimated $1 trillion lost in 2009, according to Zillow.
The decline brings the total value lost since the market peaked in June 2006 to $9 trillion. By comparison, from 2001 to the end of September 2010, the war in Iraq has cost $750.8 billion, according to a September report by the Congressional Research Service.
The second half of the year was more punishing on values. From January to June, the housing market lost $680 billion. From June to December, Zillow projects residential home value losses will top $1 trillion.
Less than one-fourth, or 31, of the 129 markets tracked by Zillow showed gains in total home values during 2010. Among those were the Boston metropolitan statistical area which gained $10.8 billion in value, and the San Diego MSA, which gained $10.2 billion.
“Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year. It's a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand,” said Zillow Chief Economist Dr. Stan Humphries. (Click to expand.)
When we bounced off the false bottom in 2009, the market gained strength through the expiration of the government tax credits. The second half of 2010 saw house prices roll over and begin another leg down. The downtrend is expected to continue throughout 2011.
by JASON PHILYAW — Thursday, December 9th, 2010, 12:37 pm
Fitch Ratings expects another 10% decline in home prices in 2011, as the supply of distressed properties continues to weigh down the housing market.
Accordingly, analysts maintained the agency's negative outlook for the residential mortgage-backed securities space and said 53% of all investment-grade RMBS rated by Fitch have a negative outlook. The number of downgrades will once again outpace upgrades in RMBS, but not as severely as the past few years, according to analysts.
Fitch said the robo-signing debacle plaguing loan servicers, loan buyback pressures hitting mortgage lenders and a handful of other macroeconomic issues cause analysts to "remain cautious" regarding a sustainable stabilization for the market.
"Key factors that will continue to weight on performance include negative equity for recent vintage collateral, lower loan modification volume, and slightly higher loss severities," analysts said.
Fitch also said the market for commercial mortgage-backed securities should improve next year, as property market fundamentals have turned the corner. Still loan performance within the CMBS space will begin to diverge from the fundamentals next year because of asset-specific tenant rollover and high leverage, according to analysts.
Analysts said vacancies have peaked in many of the largest metropolitan areas of the country while rents have reached bottom indicating some stabilization. But the lack of construction financing over the past three years skews those gains, meaning "it will be some time before income growth is seen."
We discussed the market's fate in High prices, low demand, and large supply means lower prices ahead. Lower prices is the consensus opinion among economists outside of the NAr.
No money in. Much money out.
Many Ponzi borrowers simply ripped off the banks. Of course, lenders asked for this treatment when they gave people property with no money down and then gave them the appreciation as the values increased. It is difficult to resist the offer when lenders are willing to give you property and lots of money if you keep it.
The owner of todays featured property probably didn't set out to game the system. In fact, she probably still believes there is nothing wrong with what she did or what the bank did, particularly since the rest of us are picking up the tab. There is no reason to believe she will not do this again if given the chance.
- This property was purchased on 5/11/2001 for $174,400. The owner used a $165,850 first mortgage, a $8,550 second mortgage, and a $0 down payment. Basically, she was given a free house by the bank.
- Since the free house was not good enough, she then refinanced with a $207,200 first mortgage on 9/24/2003.
- On 6/11/2004 she refinanced again with a $244,600 first mortgage.
- On 11/24/2004 she refinanced with a $323,200 first mortgage.
- On 11/8/2005 she obtained a $30,500 HELOC.
- On 10/27/2006 she obtained another $30,500 HELOC.
- On 7/3/2007 she refinanced with a $373,000 first mortgage.
- On 2/14/2008 she got a stand-alone second for $10,000.
- Total property debt is $383,000.
- Total mortgage equity withdrawal is $208,600.
- She quit paying in early 2009, and she got to squat for about 18 months before the bank finally took the property back.
Recording Date: 08/19/2009
Document Type: Notice of Sale
Recording Date: 05/18/2009
Document Type: Notice of Default
BTW, you know your house is a glorified apartment when there is a number on your front door….
Irvine Home Address … 2305 APRICOT Dr 2305 Irvine, CA 92618
Resale Home Price … $244,900
Home Purchase Price … $174,400
Home Purchase Date …. 5/11/2001
Net Gain (Loss) ………. $55,806
Percent Change ………. 32.0%
Annual Appreciation … 3.5%
Cost of Ownership
$244,900 ………. Asking Price
$8,572 ………. 3.5% Down FHA Financing
4.71% …………… Mortgage Interest Rate
$236,329 ………. 30-Year Mortgage
$49,048 ………. Income Requirement
$1,227 ………. Monthly Mortgage Payment
$212 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$41 ………. Homeowners Insurance
$372 ………. Homeowners Association Fees
$1,852 ………. Monthly Cash Outlays
-$114 ………. Tax Savings (% of Interest and Property Tax)
-$300 ………. Equity Hidden in Payment
$15 ………. Lost Income to Down Payment (net of taxes)
$31 ………. Maintenance and Replacement Reserves
$1,485 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$2,449 ………. Furnishing and Move In @1%
$2,449 ………. Closing Costs @1%
$2,363 ………… Interest Points @1% of Loan
$8,572 ………. Down Payment
$15,833 ………. Total Cash Costs
$22,700 ………… Emergency Cash Reserves
$38,533 ………. Total Savings Needed
Baths: 2 baths
Home size: 910 sq ft
($269 / sq ft)
Lot Size: n/a
Year Built: 1979
Days on Market: 26
Listing Updated: 40491
MLS Number: S638534
Property Type: Condominium, Residential
According to the listing agent, this listing is a bank owned (foreclosed) property.
Great Value! Top Floor Unit. Spacious Condo two private balconies. Plenty of natural light. Enjoy high ceilings & fireplace In Living Room. Nicely sized bedrooms. Enjoy reading on your private balcony of your master bedroom. Master has Mirrored Closets & Double Sinks. Formal Dining Room & Breakfast Bar Living Room. Inside Laundry Area. Extra storage in balcony closet. Must See!
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.
Have a great weekend,