Category Archives: Library

Lenders Start More Foreclosures to Catch Up with Delinquencies

What are we going to do with all the delinquent borrowers? Should we forgive their debts? Should we forgive $476,500 in HELOC abuse?

Irvine Home Address … 14 Foxglove, Irvine, CA 92612

Resale Home Price …… $586,550

{book1}

I am my own parasite

I don't need a host to live

We feed off of each other

We can share our endorphins

Protector of the kennel

Ecto-plasma, Ecto-skeletal

Obituary birthday

Your scent is still here in my place of recovery!

Nirvana — Milk It

Everyone is milking the system. I can't blame them. If I were a loan owner, and if I knew the end were coming, and if the lender were encouraging me to squat to protect their asset, I would squat indefinitely. If given the choice between paying rent or living for nothing, few are going to move out of a free house — a house they still feel like they own — to move into a rental. I don't know that entitlement dependency is good for the spirit long term, but short term, no housing cost is certainly good for the pocketbook so many people squat until the sheriff comes.

What are we going to do with all the borrowers in default?

Shadow inventory is a huge issue worth revisiting periodically. I wrote Shadow Inventory Orange County and Shadow Inventory Revisited and most recently I noted the S&P Reports Three Years to Clear Shadow Inventory and the Market Slices First Wave of Knife Catchers. When you look at the options for dealing with delinquencies, none of them look plausible.

  1. Loan Modifications have proven to be a dismal failure, and these programs will continue to fail; therefore, it is not reasonable to assume we will amend-pretend-extend our way out of this mess. And dancing until rising prices save the market isn't going to happen either.
  2. Rising prices do not absorb inventory. Rising prices can occur as a result of a lack of inventory, but buyers will not push through a massive overhead supply and make prices go up. That is fantasy thinking. Without rising incomes and a robust economy, absorbing shadow inventory will be difficult even at lower prices.
  3. Cash buyers do not take over. Cash buyers can buoy prices in small neighborhoods, but the supply of cash buyers is limited, and few homeowners have cash equity to move up because the market collapse eliminated equity from lower rungs on the property ladder. Those who have defaulted are eliminated from the buyer pool, and the calvary of cash-heavy first-time buyers is not going to ride over the hill and save us.
  4. Inflation will not save the market. Does anyone really think they will be seeing 10% YOY raises any time soon? If we do see inflation, it will come in the form of rising prices, which lower our standard of living, and in the form of currency devaluation which robs everyone of their wealth. If house prices are maintained by reducing the buying power of currency by 50%, I don't see how that is a benefit.
  5. Foreclosing on all the homes that should go through foreclosure will crush prices to the stone ages and keep them there for eternity. The people foreclosed will not be able to buy, so investors will need to convert them to rentals to shelter the recently foreclosed. This scenario is already taking place in Las Vegas, Phoenix, and Riverside County.

I really don't see the end game here. A quick recovery to peak prices followed by double-digit appreciation is not going to happen. Stabilization of prices is tenuous if millions of properties must go through the meat grinder. The areas least impacted by foreclosures will still face the substitution effect as beaten down neighborhoods attract bargain hunters.

If we push every defaulting borrower out and remove them from the potential buyer pool for five years, we will not have enough buyers to absorb the supply. If we don't push defaulting borrowers out, we encourage moral hazard on a grand scale. Once all sanity is lost, the taxpayer funded bailouts will continue to grow as we bail out every form of borrower foolishness. We don't have many good options.

For now, lenders are beginning to foreclose in earnest, but they are still falling behind the defaults and creating more shadow inventory.

Foreclosure starts up nearly 20 percent in California

DISCOVERY BAY

March 15, 2010 4:33am

  • But despite foreclosure inventories, foreclosure sales drop
  • ‘The disconnect between delinquencies and foreclosure sales continues to widen’

After reaching the lowest level in a year in January, Notice of Defaults, the start of the foreclosure process, increased by 19.7 percent in February, according to a report Monday from ForeclosureRadar Inc., a Discovery Bay-based foreclosure information company that says it tracks every California foreclosure.

The number of properties scheduled for foreclosure sale remained near record levels in February, yet foreclosure sales, either “Back to Bank” or “Sold to Third Parties,” dropped by 11.9 percent total.

“The disconnect between delinquencies and foreclosure sales continues to widen,” says Sean O’Toole, founder and CEO of ForeclosureRadar.

In short, we are building shadow inventory.

“While efforts to slow foreclosures are clearly working, it remains unclear that anything has yet addressed the core problem of excess household mortgage debt,” he says.

Nothing is being done because lenders see excessive household debt as a virtue to be preserved and policymakers don't care.

After four consecutive months of decline, Notice of Default filings bounced up by 19.7 percent to 31,004 statewide. Filings of Notices of Trustee Sale, which sets the date and time of the foreclosure auction, increased slightly as well, rising 3.6 percent to 28,195 filings, according to ForeclosureRadar.

Foreclosure sales are the last step in the foreclosure process and result in the property being transferred from the homeowner either back to the bank, or to a third party, typically an investor.

Foreclosure sales decreased 11.9 percent in February, with the portion going “Back to Bank” dropping by 14.3 percent and the portion to third parties dropping by 2.7 percent.

“Despite our prediction that we may see a wave of cancellations as the [Obama] Administration pushed to make trial loan modification permanent, cancellations remained flat, likely indicating that the Home Affordable Modification Program conversion drive is failing,” says Mr. O’Toole.

I am surprised Mr. O'Toole predicted a government bailout program had a chance at success. He must not watch the workings of government very closely. His observation is correct: the program is failing.

Despite the increase in Notice of Default filings in February, ForeclosureRadar’s estimated number of properties in Preforeclosure dropped 8.0 percent due to the relatively high number of Notice of Trustee Sale filings, it says.

Properties exiting the foreclosure process nearly matched the number of new Notice of Trustee Sale filings, leaving the number of properties scheduled for sale in February flat compared to January. Year-over-year, the increase in properties scheduled for sale “is a dramatic 126.3 percent, as more and more homeowners have found themselves on the brink of foreclosure,” the report says.

Banks continue to resell their bank owned (REO) property in “a timely manner,” with their inventories also flat from January to February, says ForeclosureRadar.

The courthouse steps remain highly competitive with discounts to market value dropping from 17.5 percent in January to 15.2 percent in February, the report says. “Despite fewer foreclosure sales overall in February, as well as smaller discounts due to competitive bidding, third party investors purchased more foreclosures, at 23.2 percent, than at any other time since we began tracking trustee sales in September 2006,” it says

Trustee sales are the action. Increased liquidity in this market is a dream for lenders. Once they begin catching up on their shadow inventory backlog, investors will be there to mop up the mess.

HELOC Abuse

You do have to wonder how a property that has doubled in value ends up as a short sale.

  • This property was purchased on 4/24/1998 for $293,000. The owners used a $263,500 first mortgage and a 29,500 downpayment.
  • On 10/9/2001 they opened a HELOC for $96,000.
  • On 8/6/2002 they opened a HELOC for 93,500.
  • On 8/25/2003 they refinanced the first mortgage for $322,700.
  • On 11/24/2003 they opened a HELOC for $70,000.
  • On 6/14/2004 they opened a HELOC for $125,000.
  • On 2/18/2005 they opened a HELOC for $282,500.
  • On 5/23/2007 they refinanced the first mortgage for $592,000.
  • On 6/8/2007 they opened a HELOC for $148,000.
  • Total property debt is $740,000.
  • Total mortgage equity withdrawal is $476,500.

Foreclosure Record

Recording Date: 06/11/2009

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 03/04/2009

Document Type: Notice of Default

JP Morgan/Chase wrote that last HELOC. WTF were they thinking?

Given the pattern of HELOC abuse, why would you loan these people money? Oh yeah, real estate prices always go up.

Even with all we have seen, the ignorance and sheer stupidity of lenders still amazes me.

Irvine Home Address … 14 Foxglove, Irvine, CA 92612

T-Sale Home Price … $586,850

Home Purchase Price … $293,000

Home Purchase Date …. 4/24/1998

Net Gain (Loss) ………. $258,639

Percent Change ………. 100.3%

Annual Appreciation … 6.0%

Cost of Ownership

————————————————-

$586,850 ………. Asking Price

$117,370 ………. 20% Down Conventional

5.05% …………… Mortgage Interest Rate

$469,480 ………. 30-Year Mortgage

$122,206 ………. Income Requirement

$2,535 ………. Monthly Mortgage Payment

$509 ………. Property Tax

$122 ………. Special Taxes and Levies (Mello Roos)

$49 ………. Homeowners Insurance

$133 ………. Homeowners Association Fees

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

$3,347 ………. Monthly Cash Outlays

-$435 ………. Tax Savings (% of Interest and Property Tax)

-$559 ………. Equity Hidden in Payment

$231 ………. Lost Income to Down Payment (net of taxes)

$98 ………. Maintenance and Replacement Reserves

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

$2,683 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————–

$5,869 ………. Furnishing and Move In @1%

$5,869 ………. Closing Costs @1%

$4,695 ………… Interest Points

$117,370 ………. Down Payment

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

$133,802 ………. Total Cash Costs

$41,100 ………… Emergency Cash Reserves

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

$174,902 ………. Total Savings Needed

Property Details for 14 Foxglove, Irvine, CA 92612

——————————————————————————–

Beds: 4

Baths: 2 full 1 part baths

Home size: 2,092 sq ft

($282 / sq ft)

Lot Size: 3,040 sq ft

Year Built: 1967

Days on Market: 77

MLS Number: P716613

Property Type: Single Family, Residential

Community: University Park

Tract: Cc

——————————————————————————–

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

4 Bedrooms,2.5 Bath,convenient floor plan,now shown by appointment only,Masterbedroom with two balconies,seperatedfamily kitchen area,gated side& backyard provide privacy,highly ratedtop schools,convenient location to shop,school & market,inside laundry

Trustee sale opportunity

Today's featured property is scheduled for auction on April 1, 2010. The short sale listing is for $590,000, but if we obtain the property at auction, we would sell it at $586,850. The comps suggest the resale value is above $600,000. The outlier, 20 Queens Wreath Way, is directly on the 5. The other 4 comps are better with 32 Foxglove being closest.

20 Queens Wreath Way — A 4 bed 1,896 SF SFR — 1965 5/05/2009 $ 455,000
18 Bayberry Way — A 4 bed 2,700 SF SFR — 1967 9/29/2009 $ 650,000
10 Wintersweet Way — A 4 bed 2,231 SF SFR — 1966 9/03/2009 $ 658,000
32 Foxglove Way — A 4 bed 2,000 SF SFR — 1967 8/04/2009 $ 650,000
26 Wintersweet Way — A 4 bed 2,145 SF SFR — 1966 1/28/2010 $ 658,000

This would be a reasonable deal by current market standards.

Arizona Officials Apportion Bailout Funds and Wrestle with Moral Hazard

Arizona officials are trying to help house debtors with bailouts. They recognize the moral hazards, and they struggle selecting whom to save and whom to let lose their houses.

Today's featured property is a Trustee flip in Woodbury scheduled for sale on 30 March 2010.

Irvine Home Address … 215 Groveland, Irvine, CA 92620

Resale Home Price …… $549,000

T-sale Home Price …… $571,912

{book1}

Sweet dreams are made of this

Who am I to disagree?

I travel the world

And the seven seas–

Everybody's looking for something.

Some of them want to use you

Some of them want to get used by you

Some of them want to abuse you

Some of them want to be abused.

Eurythmics — Sweet Dreams

Sweet dreams come from HELOC abuse. Every house debtor and kool aid intoxicated knife catcher is riding the dream of endless appreciation and unlimited spending power. Sweet dreams indeed.

What happened to the American Dream? Has a "better, richer, and happier life" come to mean money for nothing? Consumption without production? Gain without contribution?

Microcosm of Housing Crisis on an Arizona Street

Published: March 22, 2010

[Gary Setbacken, right, talks to his neighbors in the Tatum Ranch community of Cave Creek, Ariz. Mr. Setbacken and his wife, who arrived in 1993, paid down their mortgage even as home prices skyrocketed.]

CAVE CREEK, Ariz. — … Arizona is one of five states that, with money from Washington, hopes to help at least some of these people hold on to their homes. Under a new, federally financed pilot program for the hardest-hit housing markets, state officials will decide who will get a homeowner bailout, and who will not.

The idea is as controversial in Washington as it is here. Do the neighbors next door who lived beyond their means — the ones who, say, bought that house they could not afford, or who binged on home equity loans to buy new cars and flat-panel TVs — really deserve to be bailed out with taxpayer dollars? Do they deserve to have some of their debts forgiven? And is that fair to the cautious ones who paid their mortgages?

I am amazed those questions are not rhetorical. Someone, somewhere believes HELOC abusers should be given a pass — forgiveness without consequence. At least a few officials — the few whose primary job is not to enrich lenders — are concerned about moral hazard and do not want to help those that do not deserve it.

For the people of Cave Creek, the answers will fall to state officials like Michael Trailor, the director of the Arizona housing department.

A former real estate developer, Mr. Trailor knows firsthand about the perils of the property market.

“I feel for all of them,” Mr. Trailor said of the struggling homeowners. “But we do not have the funds to help all of them. If we can help 6,000 people, which ones should we help?”

The government never fails to reinforce my cynicism; they develop a program to keep house debtors paying for a house with no equity praying for a bailout that isn't coming. More people will win the lottery than will be helped by this program or any other.

If lenders keep people in place long enough, debtors will be invested in their own poor decision, and they will endure. It will take forever for house debtors to pay off these monster loans. As each debtor gives up and sells, it adds supply and prevents appreciation from saving other debtors.

The federal government will pay for pilot programs in Arizona, California, Florida, Michigan and Nevada with $1.5 billion from the federal banking rescue. That figure is a small fraction of the funds that would be needed to help all of the people at risk. Arizona, for instance, received $125 million. If it allocates $30,000 of aid for each residence, 4,166 homeowners would benefit. But the Phoenix area is bracing for as many as 50,000 foreclosures this year alone.

Mr. Trailor said he was reluctant to help homeowners with “self-inflicted wounds,” like those who overspent or cashed out the equity in their homes during the bubble years. He wants the banks to match the public money being used for debt forgiveness, and he is focusing on people whose incomes have fallen but who still hold jobs.

He is considering an approach known as “earned forgiveness,” where the state and the banks promise to forgive mortgage debt later on, but only if the homeowners stay in their homes and keep making their payments.

OMG! How much more obvious can they be. Prove you're worthy of debt slavery by making onerous payments with no hope of equity, and the government will modify your loan in a way that keeps you in your house and maintains your fantasies of appreciation. What a deal!

Delusion is the new American Dream.

Three out of four abuse their HELOCS

Do you remember to old Trident gum ads, "Four out of five dentists surveyed…?" Well, Three out of four neighbors surveyed for this article were HELOC abusers. This is one typical street in a typical suburban town. From the many cases I have documented here, do you think Irvine is any different?

New Heroes

The new reality is evident on East Montgomery Road, where the bust is playing out in a variety of ways.

There are the Setbackens, at 4355, who arrived in 1993 and paid down their mortgage even as home prices skyrocketed. [lower right couple.]

I think you all know how I feel about what these people did; they observed the insanity around them and failed to participate. They passed up hundreds of thousands of dollars in consumer spending, and now they are going to keep their house while others search for rentals. They are true heroes and great role models.

Rationalizing their own bailout

Across the street are the Chatburns, Tim and Leslie. They also arrived in the 1990s, before prices exploded, but struggled recently to keep up with the bills after an injury kept Mr. Chatburn out of work.

Mr. Chatburn, an air-conditioning repairman, used to say that bailing out his neighbors would be unfair, but he changed his mind after watching news programs about the rescues of big financial companies like the American International Group.

“I started thinking about all this money we paid as taxpayers to the banks,” he said, “and I thought, ‘Why don’t we take care of our own a little bit?’ ”

Why don't we take care of our own? Because they are HELOC abusers! Let me buy a house and spend foolishly so I can reach into his pocket and see how he feels.

And notice the bullshit about how an injury added $100,000 to his mortgage. Perhaps, if he was injured and unable to earn as much money, they should scale back on lifestyle expenses and even downsize. No, that would require sacrifice. It is much more expedient for house debtors to live as entitled and pass the bills on to us.

Ms. Carter, at 4344, arrived in 2005, as the bubble was inflating. She took out tens of thousands of dollars in home equity for repairs and other items, and by this year, she was underwater on her mortgage by $86,000. A single mother, she moved out this month, days before her home was sold in a short sale, which meant her mortgage lender allowed her to sell for less than the value of her mortgage and the lender took the loss.

What "other items" did she purchase? What was she entitled to that she could not afford?

And then there is the young couple with a toddler, at 4343. They moved out on the same day as Ms. Carter, before a scheduled foreclosure of their home that was $115,000 underwater. The couple, who asked not to be named, also bought near the peak and took out a home equity loan to pay off their student loans and other debts. Then, a year ago, they stopped paying their mortgage, after both of them lost their jobs for a time. They now have office jobs again.

This couple really benefited from the bubble. Their student loans could not be bankrupted out of, but since they paid it off with a HELOC — a debt obligation removed in bankruptcy — they could wipe the slate clean. Of course, like everyone else who did what they did, they are hoping they never hear from either their former lender or the tax man and they will not need to declare bankruptcy. What becomes of their $115,000 debt?

Who should we help?

The Arizona official faces an easy decision about who to help. Have you noticed that the people you would feel good about helping are those that do not need it? And those people who you do not feel good about helping — HELOC abusers — are the ones who are going to get help? The frugal couple who paid down their mortgage; I would help them out if they became unemployed. The HELOC abusers; screw them, they can move into their cars like unemployed renters.

Mr. Setbacken, a salesman, said he had warned his neighbors not to get in over their heads but they did not listen. He and his wife might have stepped up to a bigger house if they, like so many of their neighbors, had gambled recklessly on the housing market, he said.

“Everybody that I know that got themselves in trouble was because of one word: greed,” said Mr. Setbacken, 63, a former Marine who remains in tip-top physical condition. “I have no sympathy for any of them, on the financial end. When I hear about dropping the amount you actually owe, I could stick my finger down my throat.”

I could care less about the default, it is paying the bill that makes me want to puke.

… Ms. Carter said she felt guilty about leaving. With her short sale, the price of the home went down to the benefit of the new homeowner. But it dragged down prices in the neighborhood, she said.

Ms. Carter, a mother of two and a real estate agent who poses as an angel with wings on her Web site, has been through hard times before. Years ago, she considered filing for bankruptcy but then changed her mind. She said she was accountable for her actions and was making what amounted to a business decision to leave her home.

“I had to take emotion out of it,” said Ms. Carter, 36. “If I had a business, and every single month I was losing money, would I keep on paying? No, I wouldn’t.”

Strategic default is now the norm. Everyone has finally realized it makes no sense to keep paying when they are at scuba depth.

Sitting at her dining room table, before a large tank of fish, she recalled how she had made this a perfect home. It is one of the few on East Montgomery Road with grass in the yard, an expensive proposition in the desert. A Mercedes sits in the driveway.

She said she did not feel she deserved to have her debts forgiven, but added that if her mortgage had been lowered, she would have tried harder to stay. The worst part, she said, is that her decision will hurt Mr. Setbacken, who has watched out for her over the years. “For Gary, he’s going to have to deal with the ramifications of what I’m doing because I’m bringing his property value down,” she said. “I pray at church. I feel horrible for what I’m doing to my neighbors.”

That guilt will disappear a nanosecond after she leaves the area. She will not keep in contact with any of those people, and she will not give them a second thought. She wouldn't worry so much about what the neighbors thought about her if she realized how little they did.

Later, after Mr. Setbacken talked to Ms. Carter — she “cried and cried and cried,” he said — he had a change of heart. In an e-mail message, he said that perhaps wealthy Americans could donate money to aid homeowners. If he had more money himself, he might help some neighbors pay their mortgage bills.

He feared that he looked heartless and sent an apologetic email to the reporter. He has nothing to be ashamed of. He is the only character in this story worthy of respect and admiration.

“I have focused on the financial issues during these times and overlooked what was more important, the emotional stress that my neighbors are feeling,” Mr. Setbacken wrote. He walked down East Montgomery Road and gave a bottle of wine to the young couple facing foreclosure. It was, he said, “to help them pack.”

That is compassion. He helped them get on their way to their new sustainable life with fewer entitlements. It is far more compassionate to help them pack than try to keep them in a home they cannot afford, particularly when someone who can afford the home is waiting for it to be vacated.

Mr. Setbacken,

I salute you.

You represent the best of American character.

Irvine Home Address … 215 Groveland, Irvine, CA 92620

Resale Home Price … $549,000

T-sale Home Price …… $571,912

Home Purchase Price … $293,000

Home Purchase Date …. 4/24/1998

Net Gain (Loss) ………. $244,597

Percent Change ………. 95.2%

Annual Appreciation … 5.7%

Cost of Ownership

————————————————-

$571,912 ………. Asking Price

$114,382 ………. 20% Down Conventional

5.05% …………… Mortgage Interest Rate

$457,530 ………. 30-Year Mortgage

$119,095 ………. Income Requirement

$2,470 ………. Monthly Mortgage Payment

$496 ………. Property Tax

$305 ………. Special Taxes and Levies (Mello Roos)

$48 ………. Homeowners Insurance

$39 ………. Homeowners Association Fees

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

$3,358 ………. Monthly Cash Outlays

-$424 ………. Tax Savings (% of Interest and Property Tax)

-$545 ………. Equity Hidden in Payment

$226 ………. Lost Income to Down Payment (net of taxes)

$95 ………. Maintenance and Replacement Reserves

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

$2,710 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————–

$5,719 ………. Furnishing and Move In @1%

$5,719 ………. Closing Costs @1%

$4,575 ………… Interest Points

$114,382 ………. Down Payment

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

$130,396 ………. Total Cash Costs

$41,500 ………… Emergency Cash Reserves

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

$171,896 ………. Total Savings Needed

Property Details for 215 Groveland, Irvine, CA 92620

——————————————————————————–

Beds: 3

Baths: 2 full 1 part baths

Home size: 1,971 sq ft

($279 / sq ft)

Lot Size: 2,100 sq ft

Year Built: 2005

Days on Market: 163

MLS Number: P709421

Property Type: Condominium, Residential

Community: Woodbury

Tract: Wdgp

——————————————————————————–

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

This property is in backup or contingent offer status.

Lovely home in the award winning Woodbury Community, a perfect place to live, dine and shop. Conveniently located next to the Woodbury Towncenter, I5 Frwy. and the O.C. Great Park. This luxurious home features a formal dining room, a great room perfect for entertaining, harwood floors throughout 1st level, Santa Cecilia granite counter tops, plantation shutters, recessed lighting w/ dimmers, a walk-in closet and balconies. —- Enjoy the Woodbury outdoors! Jeffrey Open Space Trails, lagoon & competition pools, tennis, basketball and volley ball courts, play parks, bbq and much more. Agents, please see remarks.

It is looking increasingly unlikely this will be an approved short and will instead become a trustee sale.

Short Sale Asking Prices

Have you noticed that short sale asking prices are low just to attract 20 offers? Today's featured property is no different. The resale comps suggest a value of about $590,000.

115 Spanish Lace — A 3 bed 1,960 SF CONDO — 2006 12/09/2009 $ 550,000
84 Townsend 1 — A 3 bed 2,100 SF CONDO — 2005 12/22/2009 $ 594,000
81 Mission — A 3 bed 1,960 SF CONDO — 2005 8/28/2009 $ 560,000
53 Chantilly — A 3 bed 1,960 SF CONDO — 2006 12/31/2009 $ 625,000

Is the bank going to sell this property as a short for less than comparable sales at $549,000?

Lenders use the short sale offer time to establish fair market value for resales which is useful information for their loss mitigation teams. Many times they are a servicer who isn't authorized to sell as a short which is why you often see properties go to foreclosure when there are short sale bids at higher prices. Knowing fair market value also gives the lender guidance on how much they can drop a bid at auction.

Irvine has been seeing action among cash buyers, and the gap between trustee sales comps and resale comps is small on the more desirable properties. The trustee sale comps suggest this property will go for about $490,000 at auction; although, we would not bid that high. Even at a $571,912 trustee flip price, the maximum bid is probably too low to get the property.

84 TOWNSEND — A 3 bed Condominium — 2005 9/23/2009 $ 502,200
92 TOWNSEND — A 3 bed Condominium — 2005 12/3/2009 $ 451,000
68 TOWNSEND — A 3 bed Condominium — 2005 2/3/2010 $ 501,000
89 WINDING WAY — A 3 bed Condominium — 2005 2/10/2010 $ 515,597
77 CANAL — A 3 bed Condominium — 2005 2/17/2010 $ 430,000

84 Townsend was a quick flip for about a $90,000 gain. Rental parity is a surprising $585,000, courtesy of Ben Bernanke and 5% interest rates.

62 Shadowplay — 3 bed SF CONDO — 2,146 33 $ 2,900
28 Pink Sage — 3 bed A SF CONDO — 1,745 66 $ 2,800

If you believe rents and interest rates are stable, or if you see this property as a long-term personal residence, there are reasons to consider this property.

Market Slices First Wave of Knife Catchers

Many who "bought the dip" in 2007 and 2008 are discovering the market correction is more severe than they realized.

Today's featured property is one of the ugliest in Irvine, but some knife catcher saw an opportunity — an opportunity to get sliced….

Claremont Kitchen

Irvine Home Address … 3922 CLAREMONT St, Irvine, CA 92614

Resale Home Price …… $485,485

{book1}

Sweet child in time, you'll see the line

Line that's drawn between the Good and the Bad

See the blind man, he's shooting at the world

Bullets flying, ooh taking toll

If you've been bad – Oh Lord I bet you have

And you've not been hit oh by flying lead

You'd better close your eyes, you'd better bow your head

Wait for the ricochet

Deep Purple — Child in Time

Buying into a declining market on speculation is a fools game. When I first studied stock trading, I noticed an important truth about picking tops and bottoms versus playing a trend; every attempt to pick a top or a bottom fails except the last one which is a big winner. Every attempt to trade momentum is a winner except the last one which is a big loser. It is better to hit many singles trading momentum than it is to try to hit home runs picking bottoms.

Many active buyers today are basing their decision on the belief that the market has bottomed, and they are betting on appreciation. They may be right, but I rather doubt it. It is much wiser safer to wait and see if positive price momentum can continue through the removal of government market props and the disposition of shadow inventory.

Mortgage delinquencies at historic highs

The state of the housing market has long reached a point where it's good news to hear, "It's not getting worse." Unfortunately, according to a firm that tracks borrowers behind on their mortgages, you can conclude at best, "It's getting worse, but less quickly."

Rising sales, largely spurred by first-time buyer credits, have given people hope that the beleaguered housing market has finally hit bottom and is even showing signs of life. It's been impossible, however, for me to get excited about this, considering that the number of people falling behind on their loan payments is growing, not shrinking. Unemployment continues to produce new delinquencies, and it's been many quarters now since we were talking only about subprime mortgages. No, delinquencies are hitting regular old fixed-rate mortgages to borrowers with good credit, too.

And here's the latest report from Lender Processing Services out of Jacksonville, Fla.: Delinquency rates have hit historic highs. More than 7.4 million home loans nationwide are in some stage of delinquency or foreclosure, with another 1 million properties either bank-owned or sold out of foreclosure. An incredible 10% of all U.S. loans are delinquent.

The worst-hit areas are the usual suspects: the boom-and-bust states of Florida, Nevada, Arizona, California, plus the economically savaged areas of Michigan and Ohio. Also up there are Mississippi, Georgia, Indiana and Illinois. But few states are escaping the problem; it's just that the worst states are so, so bad it makes the others look relatively good.

LPS says, "The pace of deterioration has slowed." That's the supposed good news. But I have a hard time thinking optimistically about this, not just because in January alone 346,000 borrowers fell behind on their payments for the first time. The other disturbing statistic is that older loans make up a higher percentage of new delinquencies — that means people who already had fallen behind and pulled themselves out of it (maybe through a loan modification program) are delinquent again. This confirms what many have said about the federal programs to reshape mortgages into loans people can actually pay: They're not doing the job for enough people.

The sheer number of bad loans surely means more foreclosures, which means more houses on the market being sold at bargain-basement prices. And that means we'll watch our property values continue going down, down, down.

Bulls are dismissive of shadow inventory as if it is just another argument bears make about house prices. Shadow inventory is a result of every expedient decision lenders made to avoid recognizing losses.

Every problem bears noted over the years — ARM loans, liar loans, negative amortization loans, artificially low interest rates, excessive speculation with 100% financing and so on — have all proven to be prescient. The predictable result of each of these problems is mortgage default followed by foreclosure which leads to more inventory and lower prices. Lenders have merely delayed this step-by-step process by refusing to foreclose. That doesn't make the problem go away; it just makes the problem worse. Appreciation from a strong economy is not coming, and even if it were, it wouldn't counteract the effect of so many distressed homeowners.

Lender Processing Services Chart Porn

Last week when I posted One Defaulting Owner’s Free Ride: Three Years and Counting, many wondered how common it was to find home debtors who have not made payments for a very long time. Take a careful look at the numbers in the chart below. According to LPS, there are almost a quarter million homeowners who have squatted for more than two years, and 33,723 of them have not begun the foreclosure process.

The shadow inventory and foreclosure problem is growing. For each property we resolve through the foreclosure process another two and one-half properties are defaulting.

If you had a virus, and if the medication you were taking to combat the disease were killing viruses at a slower rate than they reproduced, would you consider yourself healthy or improving?

Can you find good news in these conclusions?

Dean Baker: We’re Still In a Housing Bubble

Housing economist Dean Baker, the co-director of the Center for Economic and Policy Research, laid out his case at a risk conference last week for why we still have a housing bubble. Adjusted for inflation, home prices are still 15-20% higher than they were in the mid-1990s. “There’s no plausible fundamental explanation for that,” he says.

Why? Simple, he says: Economic fundamentals are all going in the other direction. Rental apartment vacancies are reaching record highs. Many segments of the housing market are still oversupplied. And the core demographic in the country—the baby boomers—are reaching the age where they’re more likely to downsize, buying less house in the years to come.

Far from some rosy estimates that housing is going through a temporary, once in a lifetime downturn, and that once the market bottoms, homes will again appreciate well beyond the rate of inflation, Mr. Baker argues that home prices are far more likely to increase annually at the rate of inflation, at best.

“If anything, I expect housing to be weaker than normal rather than stronger over the next decade,” he says. “People who say this is a temporary story, there’s no real reason to believe anything like that.”

The recent burst of good housing news has been fueled by government stimulus, including the tax credit, low mortgage rates and easy financing from the Federal Housing Administration. Mr. Baker, who had been a skeptic of the tax credit, concedes that it has worked. So, too, he says, has the FHA effectively supplied credit to goose sales.

But that’s likely for the worse, he argues, taking the opposite view of policymakers at the FHA.

“As a matter of policy I can’t see that we want people to buy a house in 2009 that’s 10-20% higher than it would sell for in 2011,” he says. “In so far as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the homeowner. We didn’t do those people a favor.”

We are not doing ourselves any favors as taxpayers who are guaranteeing the inevitable losses these loans will incur. When our current batch of knife catchers realize they overpaid and prices are not going to recover any time soon, they will strategically default.

Knife Catchers and the second wave of foreclosures

Today's featured property is an example of what Dean Baker is worried about: defaults and foreclosures among those who were encouraged by the government to overpay during the price decline.

I first profiled today's featured property back in September of 2007 in You Ugly:

This listing is the least desirable single family detached home in Irvine. Everything about this property is a negative:

  • It is 36 years old.
  • There is no back yard.
  • It only has 1 full bathroom.
  • The front elevation has no windows. It looks like a 3 car garage next to a 2 car garage. Nice…
  • The colors are awful. Check out the dark brown flooring and the blue cabinets and walls. The view of the block wall is a reminder of your prison sentence.
  • The living room has three incompatible shades of ugly.
  • The house itself is right on the 405 on ramp at Culver. A location guaranteed to have maximize noise and air pollution as people accelerate onto the freeway.
  • If that wasn't bad enough, it is adjacent to a huge power pole with enough electricity running through it to make your hair stand on end and give your children brain cancer. Perhaps the hum of the power lines drowns out the freeway noise. Who knows?

I would not live in this house.

The property was purchased on 2/28/2008 for $458,500. The owner used a $412,650 first mortgage and a $45,850 down payment. It appears he paid for less than one year before giving up:

Foreclosure Record

Recording Date: 02/11/2010

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 04/01/2009

Document Type: Notice of Default

The lender, HIGH TECH LENDING INC, danced for ten months before deciding to push this owner out.

Ideal Home Brokers and Financed Trustee Sales

Today's featured property, ugly as it is, will probably sell to a third party at auction. Thanks to 5% interest rates, recent comparable sales value the property at $500,500 — which surprises me that the owner is not trying to sell it an get his down payment back — but this property is headed to auction.

If a buyer steps forward and puts 3% down on a $485,485 purchase price, our hard-money capital partner will authorize us to go to auction and bid on the property. In the event we are the successful bidder, the property is automatically in escrow with the buyer who placed the down payment.

Personally, I can't recommend anyone pay $485,485 for this house, but based on the requirements of our hard money lender and the other costs in the deal, that is the price we must charge to make the deal work.

Claremont Kitchen

Irvine Home Address … 3922 CLAREMONT St, Irvine, CA 92614

Resale Home Price … $485,485

Home Purchase Price … $458,500

Home Purchase Date …. 2/28/2008

Net Gain (Loss) ………. $(2,144)

Percent Change ………. 5.9%

Annual Appreciation … 2.7%

Cost of Ownership

————————————————-

$485,485 ………. Asking Price

$16,992 ………. 3.5% Down FHA Financing

5.05% …………… Mortgage Interest Rate

$468,493 ………. 30-Year Mortgage

$101,097 ………. Income Requirement

$2,529 ………. Monthly Mortgage Payment

$421 ………. Property Tax

$101 ………. Special Taxes and Levies (Mello Roos)

$40 ………. Homeowners Insurance

$50 ………. Homeowners Association Fees

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

$3,142 ………. Monthly Cash Outlays

-$419 ………. Tax Savings (% of Interest and Property Tax)

-$558 ………. Equity Hidden in Payment

$34 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves

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

$2,280 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————–

$4,855 ………. Furnishing and Move In @1%

$4,855 ………. Closing Costs @1%

$4,685 ………… Interest Points

$16,992 ………. Down Payment

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

$31,387 ………. Total Cash Costs

$34,900 ………… Emergency Cash Reserves

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

$66,287 ………. Total Savings Needed

Property Details for 3922 CLAREMONT St, Irvine, CA 92614

——————————————————————————–

Beds: 3

Baths: 2

Sq. Ft.: 1222

$/Sq. Ft.: 375

Lot Size: 5,521 Sq. Ft.

Property Type: Residential, Single Family

Style: One Level, Traditional

Year Built: 1971

Community: Westpark

County: Orange

MLS#: S503237

——————————————————————————–

You'll love this great home in a wonderful school district. The light and bright floorplan features neutral carpet, pergo flooring and cathedral ceilings. The large yard provides lots of space for entertaining & play. This home is located just steps to the community pool and park. Plus, there are no Mello Roos! This is a bank owned property. Bring us an offer!

Home Owners Associations Block Guests When Owners Are Delinquent

Home Owners Associations are enduring a major budget crisis because so many delinquent homeowners are also delinquent on their HOA dues.

Today's featured property is scheduled for Trustee Sale on April 5, 2010. Will the short sale process in time?

4 WINDROW Irvine, CA 92618 kitchen

Irvine Home Address … 4 Windrow, Irvine, CA 92618

Resale Home Price …… $446,879

{book1}

But we’re running through the fire

When there’s nothing left to say

It’s like chasing the very last train

When we both know it’s too late (too late)

You can’t play our broken strings

James Morrison — Broken Strings

People want to play even if they have broken strings. Many money renters squat in homes they are not paying for. They fail to pay their home owners association dues as well as their mortgages, but they still want access to the facilities as if they were current on their dues.

I first discussed Home Owner Associations, HOAs, in the post I Want My HOA.

Homeowners associations are formed to maintain facilities in common ownership, and to maintain property values in an area through the enforcement of covenants, conditions & restrictions (CCRs). It has been shown, painfully, that individuals acting without governance will allow their properties to deteriorate, appropriate public spaces, and express their individuality in ways which harms neighborhood values (anybody remember the clip below from Cheech and Chong's Next Movie?).

Later, with help from Gus Ayers, the IHB published this post: Ownership Cost: Homeowners Associations. That post has a detailed discussion of HOA related matters.

Today, we look at how Florida has cracked down on owners who are not paying their HOA dues.

Homeowner association blocks guests when fees go unpaid

1:16 a.m. EDT, March 17, 2010

Melissa Solis said she understands that she can't use her community pool or clubhouse because she's late paying her homeowner-association fees.

But it's unfair, she said, that security guards at the gated entrance to her neighborhood prevent her friends, family, babysitter and even the delivery man from Winter Garden Pizza Co. from getting to her home. They wouldn't even allow her mother-in-law inside the gates for a family birthday party.

Instead, she has to meet her visitors outside the community's entrance, pick them up and drive them inside in her car. Unlike residents who are current with their fees, even Solis cannot enter through the automatic gates; she must instead get the guard's approval to access her home.

"I think it's more them trying to humiliate us," said Solis, who works in food services. "It's very embarrassing for our daughter. She's 10 years old, and she doesn't understand that the economy is tight and Daddy doesn't have a job."

[Melissa Solis, who lives in Stoneybrook West, says she feels like the homeowners association is trying to humiliate her for not paying overdue fees. (GEORGE SKENE, ORLANDO SENTINEL / March 16, 2010)]

Unfair? She isn't paying her share of the maintenance for the facility. Why should she be able to use the facilities? It is only her sense of entitlement that makes it seem unfair.

How many of you who regularly get Disney passes didn't do so during the recession? Should Disney continue to let you in the park?

Stoneybrook West's guard-shack standoff underscores the mounting frustration of homeowner and condominium associations in the Orlando area and across Florida. Many associations face mounting delinquency rates of 30 percent to 50 percent, in a state with one of the highest foreclosure rates in the country. As state legislators meet in their annual session this month and next, they will consider several bills designed to ease the financial woes of homeowner and condominium associations.

One bill, filed by state Sen. Mike Fasano, R-New Port Richey, would allow associations to suspend residents from using common areas if they are three months or more behind paying fees. It also empowers associations to collect fees from renters, and prohibits association members from serving on the board if they are three months delinquent.

I don't think they thought this one through; if you were a renter, and if you were approached by a representative from your landlords HOA and asked to pay, what would you do? After I finished laughing, I would either move, or pay the fee and deduct it from my rent. If the deadbeat landlord had the nerve to complain, I would point out their breach of contract and move — I might even sue for damages.

"These homeowner associations are crippled, and they're looking for any kind of edge," said Sarasota lawyer David Muller, co-executive director of the Community Association Leadership Lobby, which represents more than 4,000 associations. "But actually preventing a guest from accessing the gates — that's something that's going a little too far, in my opinion and when concerning the statutes."

But the law is on Stoneybrook's side, said Orlando lawyer Jim Gustino, who represents the 13-community golf-course development in Winter Garden. State Circuit Judge Thomas B. Smith ruled last year that the association for sister development Stoneybrook East, in east Orange County, could restrict guest access for residents who are 90 days late making payments and who were given the chance to start a payment plan.

"We have to bring whatever lawful pressure that we have to bear on these folks. No one feels good about it, but it does result in collecting money," Gustino said. "Many folks will, by some miracle, come up with the money they couldn't come up with before, because they don't want their family members to be denied entry."

As a result of such actions, Stoneybrook West's delinquency rate is 5 percent or 6 percent, Gustino said, but only because it has been aggressive in keeping residents up to date. Dozens of homeowners who face financial hardships have entered into payment plans, he said.

"If you don't take an aggressive enforcement position, you will discover you will be ignored," the lawyer said. "Associations try to be nice to people and try to be more accommodating than Stoneybrook West is with its people and, as a result, those association are in distress. They have to increase dues and, as a result, they have more defaults."

I can understand their pressures to get people to pay. HOAs do not have outside sources of revenue, so people who do not pay get a free ride on everyone else.

Stoneybrook's actions did raise some concerns among lawyers and other individuals who cited Florida statutes that require associations to provide access to their residents.

Veteran homeowner-association board member Hobie Fisher, who serves on two boards for the Avalon Lakes community in east Orange, said his board have been actively taking over properties in foreclosure. But prohibiting access to residents' guests, he said, is going too far.

"I think that's wrong. You can't deny people the right to come in there. You can't deny people and their guests the right to property," Fisher said.

Stoneybrook's prohibition of certain guests also raises concerns about gated communities. Fisher, half jokingly, said such subdivisions should just charge visitors a small toll to help underwrite community expenses.

The idea is good although impractical. If Ms. Solis is embarrassed now, how will she feel when her mother is charged $1 to visit?

Solis said her view of living behind gates has changed since the blockade began keeping her friends and family at bay.

"I moved here thinking, ‘A gated community, how nice,' " she said. "If I knew then what I know today, I would have never gotten into a gated community."

What would happen if we did this here in Irvine? We have dozens of gated communities and most of our facilities in open communities are gated. We would quickly find out who isn't paying their dues….

Gustino said the very expense of operating a guarded-and-gated entry makes it imperative that all residents pay their fair share of those security costs.

Solis estimated that she is behind about $1,400 on her association fees. She said she would like to get current, but her family's budget has been cut due to her husband's unemployment. She said she has been tolerating the gate situation for more than a year before she got fed up this week and decided to speak out.

"You know, I'm not going to back down because they try to intimidate you," she said. "At least I'm going to hold my head up."

Perhaps some attorney will take on a case like hers to attempt overturning the Florida ruling, but other than that, I don't see what this woman can do about her exclusion.

Mary Shanklin can be reached at mshanklin@orlandosentinel.com or 407-420-5538.

MORE FALLOUT FROM HOUSING'S MELTDOWN

Mind paying HOA dues for empty homes? Empty Homes Mean Others Pick Up Tab

What do you think about this practice? Should squatters who are not paying their HOA dues have continued access to the facilities?

Ideal Home Brokers and Financed Trustee Sales

Since we launched our Trustee Sale buying service in January, we have been exploring methods of structuring a deal with various hard-money lenders. We have lined up two sources (which isn't enough) and we are now able to put financed buyers into Trustee Sale properties. Today's featured property may sell to a third party at auction on April 5. Thanks to 5% interest rates, recent comparable sales value the property at $460,700.

If a buyer steps forward and puts 3% down on a $446,879 purchase price, our hard-money capital partner will authorize us to go to auction and bid on the property. In the event we are the successful bidder, the property is automatically in escrow with the buyer who placed the down payment. We are discounting the property 3% from comparable sales because we don't have the uncertainty and market risk of searching for a buyer. The deal is attractive to the hard money lenders because they have very little risk when a buyer is already in escrow, and the offer is attractive to buyers because they obtain a discount from comps, and they have exclusive access to a market other financed buyers cannot access.

This isn't a negotiation. Based on the requirements of our hard money lender and the other costs in the deal, that is the price we must charge to make the deal work. Someone has been waiting on this property as a short sale, and the lender may approve the short before April 5, but if not, there is an opportunity to get this property at auction.

Next week, we will have a series of posts outlining the details of this offer, and for the remainder this week, I a profiling more eligible properties (anything under $600K). In short, we can put financed buyers into Trustee Sale properties at a 3% discount to comparable sales.

Featured Property

Today's featured property was first profiled last year in the post Dust in the Windrow.

4 WINDROW Irvine, CA 92618 kitchen

Irvine Home Address … 4 Windrow, Irvine, CA 92618

Resale Home Price … $446,879

Home Purchase Price … $530,000

Home Purchase Date …. 11/9/2004

Net Gain (Loss) ………. $(109,934)

Percent Change ………. -15.7%

Annual Appreciation … -3.1%

Cost of Ownership

————————————————-

$446,879 ………. Asking Price

$15,641 ………. 3.5% Down FHA Financing

5.05% …………… Mortgage Interest Rate

$431,238 ………. 30-Year Mortgage

$93,058 ………. Income Requirement

$2,328 ………. Monthly Mortgage Payment

$387 ………. Property Tax

$93 ………. Special Taxes and Levies (Mello Roos)

$37 ………. Homeowners Insurance

$183 ………. Homeowners Association Fees

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

$3,029 ………. Monthly Cash Outlays

-$385 ………. Tax Savings (% of Interest and Property Tax)

-$513 ………. Equity Hidden in Payment

$31 ………. Lost Income to Down Payment (net of taxes)

$74 ………. Maintenance and Replacement Reserves

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

$2,235 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————–

$4,469 ………. Furnishing and Move In @1%

$4,469 ………. Closing Costs @1%

$4,312 ………… Interest Points

$15,641 ………. Down Payment

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

$28,891 ………. Total Cash Costs

$34,200 ………… Emergency Cash Reserves

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

$63,091 ………. Total Savings Needed

Property Details for 4 Windrow, Irvine, CA 92618

——————————————————————————–

Beds: 3

Baths: 2

Sq. Ft.: 1450

$/Sq. Ft.: 328

Lot Size: 2,739 Sq. Ft.

Property Type:: Residential, Single Family

Style: Two Level, Contemporary

Community:: Orangetree

County: Orange

MLS#: S597251

Source: SoCalMLS

——————————————————————————–

Best of both worlds. .. detached homes with low maintenance yards and HOA ammenities . .. less land but well used so yard and patio are enclosed for privacy while grassy front yard is rolling lawn maintained by HOA. Living room with vaulted cathedral ceilings has double patio doors overlooking the rose garden and yard. Spacious kitchen has remodeled Euro-style cabinets with big island cooking area and breakfast bar. Direct access to laundry in garage and dining room/family kitchen with corner windows onto yard. Master suite is the only room perched above overlooking living room and corner windows over the yard. 2 Bedrooms down and next to bath. One has double door entry for use as work at home office or den or library.

ammenities?

This owner paid $530,000 on 11/9/2004. He used a $424,000 first mortgage and a $106,000 down payment. On 7/30/2007 he managed to get a HELOC for $98,055 which withdrew most of his downpayment (and earned him a HELOC abuse grade of D). Having obtained what he could, he defaulted in early 2009:

Foreclosure Record

Recording Date: 12/30/2009

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 05/22/2009

Document Type: Notice of Default

realtors Slammed in New York Times

I last pounded realtors back in January in Urgency Versus Reality: realtors Win, Buyers Lose. It's a subject entertaining to revisit. Today, the New York Times takes a shot.

Warning! This post has a graphic with an objectionable four-letter word… and perhaps another seven-letter word….

Irvine Home Address … 35 MORNING Vw Irvine, CA 92603

Resale Home Price …… $1,275,000

{book1}

Oh I should have seen the signs

Now we're falling back in time

So far from where we started

So far from what we wanted

And I'm trying to right this wrong

So I need you to be strong

So far from where we started

So far from what we wanted

State of Shock — Money Honey

As the housing bubble deflates, I am struck by how far we are from where we started, and rather than try to regain our sanity, we blow air into the bubble, we foster moral hazard, and we embrace any get-rich-quick scheme available. There is no concern for the collective good any longer. Or are we only concerned with homeowners. If so, then everyone should own a home; thus it must be a great time to buy, right?

Great Time to Buy (Famous Last Words)

By DAMON DARLIN

Published: March 12, 2010

“IT’S a great time to buy a home.”

Real estate agents were saying that in 2001, as home prices were rising. They also said it when home prices peaked in 2005 — in fact, David Lereah, former chief economist of the National Association of Realtors, published a book that year titled “Are You Missing the Real Estate Boom?”

And many real estate agents said it was time to buy as prices began to drop — and continued to say it over the past several years as prices fell by an average of 33 percent in America’s 20 largest cities.

Mr. Lereah would acknowledge that he had gotten it wrong. But from the perspective of many real estate agents, it is always a good time to buy.

I suppose I should be content trashing David Lereah in the Wall Street Journal, but since his name popped up in this article, I couldn't resist.

“What they are really saying is that it is a good time to be involved in a transaction that generates a commission,” says Barry Ritholtz, C.E.O. and director of equity research at FusionIQ, a quantitative research firm. He’s also author of “The Big Picture,” an irreverent blog on markets.

Barry is the man! [pictured right]

Glenn Kelman, chief executive of Redfin, is not.

“I can’t prove to you that housing prices have definitely bottomed out,” Mr. Kelman says. “I can say with a fair degree of certainty that the cost of money will go higher.” [I agree]

OF course, if rates go up, home prices tend to dampen. Borrowing $300,000 at 5 percent costs you $1,610 a month. If rates rise to 6 percent, that’s $188 a month more, or $67,680 over 30 years. Would the price of a $375,000 house fall because of a half-point rate hike? Now you are back to guessing about home prices. Don’t go there. Maintain your focus.

WTF? Don't go there? Don't think about future house prices? I thought I was going to be able to praise Redfin's guy, but then he spouted nonsense like a realtor, so I will try not to focus on that.

“People are frequently buying for the wrong reasons,” says Frank LLosa, a real estate agent working in northern Virginia. In most cases, he says, they think that they are getting an income tax break or that their home is an investment.

He points out that a buyer of a $300,000 home would have to see the house appreciate $18,000 just to cover the commission and closing costs. Then figure in the predictable costs of maintenance, the opportunity costs of the mortgage down payment and the amount one could have saved by renting a similar place more cheaply.

Mr. LLosa thinks that many people — including him — would be better off renting. People ought to buy a house for what he calls “warm and fuzzy feelings,” but they shouldn’t try to predict home prices. Nor should real estate agents, who aren’t much wiser.

“I don’t think real estate professionals should be in the business of telling people when it is a great time to buy,” he said.

I like this guy. Might he be a Realtor with a capital R? "An alternative perspective on Real Estate… the truth." Wow! This is promising. Check out some of these posts: Go FSBO! Save $20,000! Agent Tells All!; Agent Rebates. Free Money or Expensive Savings?

A good time to buy?

Bulls celebrate massive government intervention as a good thing, as if we are rescued from a temporary downturn and prices are set to head to the moon. Personally, I think that is crazy, particularly locally and closer to the coast, but I am just an opinionated blogger.

What do you think? Do you believe this is a good time to buy?

Irvine Home Address … 35 MORNING Vw Irvine, CA 92603

Resale Home Price … $1,275,000

Home Purchase Price … $695,000

Home Purchase Date …. 8/28/2001

Net Gain (Loss) ………. $503,500

Percent Change ………. 83.5%

Annual Appreciation … 7.0%

Cost of Ownership

————————————————-

$1,275,000 ………. Asking Price

$255,000 ………. 20% Down Conventional

5.00% …………… Mortgage Interest Rate

$1,020,000 ………. 30-Year Mortgage

$264,001 ………. Income Requirement

$5,476 ………. Monthly Mortgage Payment

$1105 ………. Property Tax

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

$106 ………. Homeowners Insurance

$376 ………. Homeowners Association Fees

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

$7,063 ………. Monthly Cash Outlays

-$1476 ………. Tax Savings (% of Interest and Property Tax)

-$1226 ………. Equity Hidden in Payment

$496 ………. Lost Income to Down Payment (net of taxes)

$159 ………. Maintenance and Replacement Reserves

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

$5,016 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$12,750 ………. Furnishing and Move In @1%

$12,750 ………. Closing Costs @1%

$10,200 ………… Interest Points @1% of Loan

$255,000 ………. Down Payment

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

$290,700 ………. Total Cash Costs

$76,800 ………… Emergency Cash Reserves

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

$367,500 ………. Total Savings Needed

Property Details for 35 MORNING Vw Irvine, CA 92603

——————————————————————————

3 Beds

2 full 1 part baths Baths

2,415 sq ft Home size

($528 / sq ft)

5,000 sq ft Lot Size

Year Built 1979

3 Days on Market

MLS Number S608552

Single Family, Residential Property Type

Turtle Rock Community

Tract Rp

——————————————————————————

35 Morning View is the home that you have been waiting for.Sit and look out at spectacular views of Shady Canyon,Strawberry Farms Golf Club,the lake/reservoir, mountains and city lights.This secluded home is located at the end of a cul da sac with a large landscaped island. As you enter the courtyard,with bubbling fountain,through the Dutch Entry doors you are in the homes entry and formal dining room,with vaulted ceilings and wood floors. A few steps up and you are in the formal living room with it marble fireplace,handcrafted mantle and panoramic,sit down view.The master bedroom is on this level with a walk in closet,built-ins,French Doors to the deck and views,views, views.Downstairs is a family room with another fireplace,built-ins,a door to the large patio and more views. There are also two bedrooms and a full bath downstairs.The kitchen is on the main level and is light and bright with an oversized skylight,built in refrigerator and an eating area. Don't miss this fantastic home.

Did the agent forget to mention THIS IS A DUPLEX!!! $1,275,000 for a duplex that needs an updated kitchen. Hmmm… No bubble here.

Nice view…

I am not sure if these owners deserve a B for mortgage management. They refinanced their mortgage in 2003 with a lower balance and lower interest rate, so it appears they may have even accelerated their payoff which would earn an A, but there is no way to be certain. There are two HELOCs that appear later which would earn them a C, but there is no other evidence that they took out the money.

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,

Irvine Renter