Riverside County foreclosure investor Bruce Norris correctly called the housing bubble. In his latest interview, he discusses shadow inventory and its effect on prices.

Irvine Home Address … 3131 MICHELSON Dr #907 Irvine, CA 92612

Resale Home Price …… $400,000

I'll be alright, one way or another

So let me go, or make we want to stay

If this is it

Please let me know

Huey Lewis and the News — If This Is It

Is the decline in prices finally over? If this is it, who will tell you so?

Nobody will accurately predict the bottom in pricing. Many realtors will claim to have called the bottom. Of course, they call the bottom periodically, so like a broken clock that's right twice a day, eventually they will call it correctly.

It's entirely possible the 4% interest rates currently available will cause prices to bottom this fall and winter, but I rather doubt it. What is also possible is that payment affordability may bottom this fall and winter. That scenario is far more likely than seeing an absolute bottom in prices. A $400,000 property purchased at a 4% interest rate is less expensive to own than a $350,000 property purchased with a 6% interest rate.

We are entering a time when the window to purchase is open. There are now properties available to purchase with a cost of ownership below rental parity. Are the conditions ideal for buying? No. But conditions are never ideal, and although it may be preferable to wait for higher interest rates and lower prices, it may take 5 to 8 years to see the next peak of the interest rate cycle. How long do you want to wait?

Personally, I am buying property in Las Vegas because prices are low and interest rates are low. I am likely to burn up all my savings in the process. I will look to buy two years from now in Orange County, but I may be forced into a less than 20% down loan. For me, buying the cashflow properties is more important than buying a primary residence. I may always be Irvine Renter.

Housing crisis is not over

October 1st, 2011, 12:26 am — posted by Jon Lansner

Southern California real estate investor Bruce Norris was one of the few people who saw the housing debacle coming.

On Oct. 14th, Norris will host a panel discussion — “I Survived Real Estate 2011” –among real estate experts at the Nixon Presidential Library. The event — featuring Doug Duncan of Fannie Mae; Vicki Golder of the National Association of Realtors; Debra Still, of the Mortgage Bankers Association; Sara Stephens of The Appraisal Institute; Sean O’Toole of Foreclosure Radar; and author Eric Janszen — is a fundraiser for the Susan G. Komen breast-cancer fight. (DETAILS HERE!)

We figured we’d ask Norris for his latest view of real estate’s plight …

Us: Is it over yet in O.C. and/or SoCal?

Bruce: No, unfortunately it isn’t over. There are many property owners delinquent by over 18 months who have yet to be foreclosed on. The amount of inventory in the MLS is misleading. It looks like a much healthier market than it is. Someday soon, these delinquent properties will hit the market either as a short sale or an REO. In Riverside, about 65% of properties sold are either short sales or REOs. Former owners with a foreclosure or short sale on their record don’t re-enter the market as a buyer because they can get financing. For every 1,000 sales, Riverside needs to find 650 new buyers to replace those that are now non-buyers. For Orange County, it’s closer to 30%, or 300 new buyers. Both areas are seeing all-time record numbers when comparing percentage of distressed sales to normal sales. That ratio prevents price support partially because each sale removes a formerly capable buyer from the market.

IHB: I have mentioned in other posts that we are now entering the liquidation phase of the housing bubble. The first drop was caused by the smaller loan balances resulting from a return to sane lending standards. The second drop will be caused by the liquidation of the huge supply of homes purchased by people who either can not or chose not to support a mortgage.

Banks have been successful so far in limiting the supply on the market locally to hold up prices. The impact has been a long-term reduction in sales volumes because the price levels they are trying to sustain is not affordable with local incomes. The only way to increase sales velocity and inventory absorption is to lower prices. This isn't rocket science.

Until lenders are willing to lower their prices, sales volumes will remain low, and the inventory overhang will slowly bleed the prices out of the market. Expect to see a pattern of spring rallies — with realtors calling the bottom each time — and fall plunges that take out the lows from the previous year. Over the next 5 years, this pattern will repeat until one of the fall plunges is the last. Timing the bottom will not be critical because the ensuing appreciation will be tepid at best.

Us: How bad could it get … again?

Bruce: How bad it gets will depend on how the government decides to handle the “shadow inventory” situation. By shadow inventory, I mean anything 90 days late through bank owned property. Up until now, the priority has been to find a new owner-occupant to buy the house. Since mathematically that won’t work, the most successful plan would include selling local investors properties able to be rented by the former owners. If investors aren’t invited to the party, then you could have a second dip in prices.

IHB: All GSE, HUD, and FHA liquidations have been geared to sell to owner occupants. Since the stated policy goals of the government are to maximize home ownership, it should be expected that government-controlled entities would show a preference for owner occupant sales. However, as Bruce Morris points out, the pool of buyers simply isn't large enough to absorb the inventory. Despite government resistance to the idea, cashflow investors will be the buyers who ultimately put a floor under house prices.

Us: Do you think the presidential political discourse will be a factor in the 2012 housing market?

Bruce: Unfortunately, yes. When political agendas trump common sense, distortions occur.

IHB: I am concerned will will see more lunacy out of Washington, particularly from the Obama administration who must pander to the extreme left. We might see principal reduction, underwater refinancing, loan modification squatting, government insured zero-down loans or any of a number of bad ideas which will simply prolong the process or encourage the worst in borrower behavior.

Us: Do any political proposals being floated right now stand out as extremely helpful or harmful to real estate?

Bruce: There’s one proposal that’s especially harmful. There is a belief that when a buyer puts up a down payment of 20%, the likelihood of them making their payment increases dramatically. This line of thinking was included in a new risk-retention proposal introduced as part of the Dodd-Frank financial reforms. In the proposal, financial institutions retain capital reserves of 5% of all but the safest mortgages, also known as the Qualified Residential Mortgages (QRMs).

Many of the details of this proposal are still in the works but the problem is the assumptions underpinning this proposal are wrong. A larger down payment does not significantly decrease the losses experienced by the lender. As a matter of fact, looking at a chart from 1980 to 2000, there is little difference between the performance and the losses from a 20% down program and a zero-down VA loan program.

IHB: Bruce Norris is wrong. I think he has been reading the propaganda from the lending lobby. The accurately presented data clearly shows a large increase in defaults when the down payment is less than 20%; in fact, it more than doubles.

We may soon get the most stringent loan guidelines to “protect” us against something that history proves doesn’t exist. As I said, when political agendas trump common sense, distortions occur.

IHB: Common sense says less than 20% down should have higher default rates. It was a lobby of lenders who put together a study to distort this truth, and Mr. Norris has fallen victim to this false information presented for political reasons. Be careful what you read. The proposed guidelines will protect us from something history has shown does exist and is very costly.

Regulators are now overreacting to the damage stated-income and subprime did to the market. However, now we’re at historically high affordability levels, historically low interest rates, and a market that is already struggling to find the next pile of first time homebuyers.

IHB: Regulators are not overreacting. In fact, they are not going far enough. We don't need more housing bubbles. Regulators should not be concerned with maintaining current pricing, they should be concerned with preventing loan terms from propagating in the market which do not sustain ownership. Stated-income, interest-only, negative amortization, 100% financing, and a plethora of other terms have proven fatal to home ownership. Regulators should be working to craft policies which prevent these Ponzi loans from proliferating. So far, I haven't seen anything substantive that will prevent the next housing bubble.

Us: If you had a magic wand and could do one thing overnight to help the housing market … what would it be?

Bruce: We recently responded to HUD’s request for information seeking input on how they might handle their portfolio of foreclosures. I suggested a three-pronged solution that: helps three underserved markets; could be implemented quickly using strategies FHA has used in the past; and utilizes current infrastructure already in place.

1. No-down program. Launch a new no-down loan program that mirrors the qualification guidelines set forth by the no-down VA program. This serves a younger market that wasn’t involved in the boom; they still have intact credit but lack the down payment requirement. Think of this as a varied version of the $8,000 tax credit we tried in 2008/2009 which, in many areas, created a no-down situation.

He is joking, right? Zero-down loan programs are a Ponzi virus. They create the worst possible incentives to gamble with the banks — or in this case the taxpayers — money. The solution to a diminished buyer pool is not to bring back failed loan programs to find more owner-occupants. There are only so many owner-occupants who can sustain ownership, and those without at least a 3.5% down payment have proven too irresponsible to sustain home ownership. If we implemented this idea, we would merely repeat a mistake of the housing bubble and create a fresh wave of delinquencies in defaults.

2. Bring back simple assumptions. For this program only, bring back the simple assumption policy FHA had in the 1980s. Should the buyer in part one of this solution default, the loan could be made current by an individual or family that may not have perfect credit due to a past foreclosure or short sale. An investor might also participate. In either case, the new buyer would make the loan current and send in a check to take over the loan. This saves the credit of buyer one and also opens up the market to two underserved markets.

This would effectively open up the market for hard-money second loans at onerous interest rates which would greatly benefit investors at the expense of the poor. This would be a ripoff like most lending programs to the poor are.

3. Trustee sale back payments only. Should buyer two fail, at the trust sale, instead of the opening bid being the full amount owed on the property, make the opening bid for this program the back payments and fees to make the loan current. Investors would gladly take over low interest rate financing and most likely create an overbid situation. The surplus funds could go to insure and pay for the administration of the entire program.

This solution only works if the first is not underwater and the current interest rate is lower than the interest rate on the first mortgage. Those conditions don't exist today, put if he is looking to kick the can down the road, making the first mortgage into an assumable loan and the late payment and fees into a second might have some value to the banks.

Not only does this three-part solution help three underserved markets, it also puts the real estate industry (Realtors, appraisers, title, escrow, construction, etc.) back to work. Having clarity on how the inventory will be handled and clarity on financing will also make buyers, investors, and lenders more comfortable and willing to participate. Also, the backlog of inventory could finally clear — and maybe builders could get back to work in the foreseeable future.

IHB: He is correct. If we implement some of these foolish ideas, would would inflate a mini-bubble which would extend the pain of the housing market another decade but create some short-term benefit to the real estate industry.

Most of the policies proposed to solve the non-problem we have with foreclosures involve re-inflating the bubble in one form or another. IMO, we would be far better off letting the market correct itself and regain the firm footing of fundamental values supported by stable debt and real incomes.

More than 50% off in the North Korea towers

By far the worst investments of the housing bubble were the condos apartments in the Marquee at Park Place. It was so bad, I feel sorry for all the people who believed the hype and lost everything they invested.

From my way of looking at the value of real estate, this was the most obvious sign of the real estate bubble. With an HOA of about $1,000 a month, these properties were worth about $250,000 back in 2006 when interest rates were 6.5%. With the cheap units selling for over $600,000, there was no explanation for the pricing other than mass insanity.

Today's featured property was not one of the cheap ones on the lower floors. This ninth floor unit sold for $843,000. Today, the bank is hoping for $400,000. That is more than 50% off.

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 3131 MICHELSON Dr #907 Irvine, CA 92612

Resale House Price …… $400,000

Beds: 2

Baths: 2

Sq. Ft.: 1492

$268/SF

Property Type: Residential, Condominium

Style: One Level, Modern

View: City Lights, Panoramic, Yes

Year Built: 2006

Community: University Park

County: Orange

MLS#: S675239

Source: SoCalMLS

On Redfin: 1 day

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This unit is a 2 bedroom 2 bath condo, all on one level, located in Marquee at Park Place in beautiful Irvine. Living at its finest. City lights and panoramic views! Desirable location for shopping, dining, parks, churches, access to freeways and public transportation. Easy, short drive to the beach areas.

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Proprietary IHB commentary and analysis

Resale Home Price …… $400,000

House Purchase Price … $843,000

House Purchase Date …. 2/2/2006

Net Gain (Loss) ………. ($467,000)

Percent Change ………. -55.4%

Annual Appreciation … -12.8%

Cost of Home Ownership

————————————————-

$400,000 ………. Asking Price

$14,000 ………. 3.5% Down FHA Financing

4.00% …………… Mortgage Interest Rate

$386,000 ………. 30-Year Mortgage

$148,712 ………. Income Requirement

$1,843 ………. Monthly Mortgage Payment

$347 ………. Property Tax (@1.04%)

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

$83 ………. Homeowners Insurance (@ 0.25%)

$444 ………. Private Mortgage Insurance

$1125 ………. Homeowners Association Fees

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

$3,842 ………. Monthly Cash Outlays

-$408 ………. Tax Savings (% of Interest and Property Tax)

-$556 ………. Equity Hidden in Payment (Amortization)

$19 ………. Lost Income to Down Payment (net of taxes)

$70 ………. Maintenance and Replacement Reserves

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

$2,967 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$4,000 ………. Furnishing and Move In @1%

$4,000 ………. Closing Costs @1%

$3,860 ………… Interest Points @1% of Loan

$14,000 ………. Down Payment

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

$25,860 ………. Total Cash Costs

$45,400 ………… Emergency Cash Reserves

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

$71,260 ………. Total Savings Needed

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In a sign of extreme desparation, mortgage insurers and lenders are signing up for a new program that pays borrowers to keep paying their mortgage.

Irvine Home Address … 28 GREENFIELD Irvine, CA 92614

Resale Home Price …… $335,000

Pay me my money down

Oh pay me, oh pay me,

Pay me my money down,

Pay me or go to jail,

Pay me my money down

Bruce Springsteen — Pay Me My Money Down

I have long contended that people who are underwater and paying more than the cost of a comparable rental should strategically default. They are pouring their money down a black hole never to be seen again.

Lenders have tried appealing to morality, but unfortunately for them, strategic default has become common and accepted. Their efforts at appealing to morality have failed.

As families strategically default get out from under their crushing mortgage payments and get to keep living in their houses for two years or more, their friends and acquaintances take notice. As others observe the benefits people obtain from strategic default, they consider it themselves. Once people see someone they know and respect strategically default, all moral compunction vanishes.

Lenders have tried incentivizing loan owners to continue to pay by modifying the terms of the loan to make payments more affordable. Most of these programs provide a temporary benefit and increase the balance owed. Their only measure of success is how many additional payments they can squeeze out of a borrower before they strategically default.

The latest effort to keep loan owners from doing what is in their financial best interest is to dangle a carrot in front of the borrower by offering them direct cash rewards if they continue to pay their loan. This has the same desperate quality as car rebates when the automakers pay people to buy their cars. Perhaps in recognition of how bad things have become that crazy ideas like this are actually being implemented, the American Banker magazine is exploring the ramifications of this loan program.

Pay for Performance

By Laura Thompson Osuri — OCT 1, 2011 12:00am EDT

With nearly one-fourth of Americans underwater on their mortgages and home prices still on the decline, homeowners who resist the temptation to strategically default and make efforts at meeting their obligations should be applauded. But should they be paid for it?

Only a banker would think loan owners should be applauded for pouring money down a rat hole.

Loan Value Group, a firm in Rumson, N.J., has been experimenting with the idea. It has a program, called RH Rewards, through which banks, mortgage servicers, hedge funds, insurers—pretty much any institution that carries mortgage risk—can offer a financial incentive to their underwater customers, mainly targeting those who remain current on their mortgage.

Once a customer accepts the invitation to the program, every time an on-time mortgage payment is made, the reward grows, up to a predetermined maximum, typically no more than $20,000. When the loan is paid off, either through refinancing or a sale, the homeowner gets the reward.

The dangling carrot approach. The lender makes a phantom payment to an account the borrower only gets if they pay on the loan until the loan is paid off by sale, refinance or full amortization. For an underwater loan owner, they can't sell, and they can't refinance, so they only way they see this pittance is to keep paying their mortgage for a decade or more until they have enough equity to get out of their property.

Rewarding people just for doing the bare minimum, for following through on promises made of their own volition, feels unsettlingly un-American somehow.

No, abdicating lender responsibility and unleashing a Ponzi scheme which dramatically inflated house prices feels unsettingly un-American. Making the bankers eat their losses and bear the consequences of their foolishness feels settlingly just.

I am amazed at the mindset of these bankers. This article was written for their consumption. They really believe that debt is as American as apple pie, and the terms of a promissory note are moral obligations. Perhaps widespread strategic default will get them to reconsider their attitudes and actions, but I doubt it.

But RH Rewards also borrows from that most American of ideas—using financial incentives to drive desired behavior. That's a concept that has been used in programs to encourage everything from good grades to healthier lifestyles.

Bribery is a very old concept, but I hardly consider it American or desirable.

In the case of underwater homeowners, establishing rewards for on-time payments is a way to replace incentives for a group whose original payment motivation has been lost.

A group whose original payment motivations has been lost? LOL! That is the best euphemism I have read in ages. The group they are talking about was motivated to pay as long as prices were going up and they were given more Ponzi debt to make their payments. Once the HELOC money was not forthcoming, they lost their motivation. ~~ giggles to self ~~

“It's a clever way to create a mutual benefit between all parties involved,” says Sayta Thallam, director of the financial markets group at the free markets-leaning Mercatus Center at George Mason University. “It's essentially changing the terms of the mortgage, and people do that and refinance all the time. You can't begrudge your neighbor because he refinanced and got a better deal.“

Yes, you can. In fact, it's relatively easy to begrudge your spendthrift neighbor who got this deal because they borrowed themselves into oblivion with reckless HELOC abuse. The prudent get screwed while the imprudent get rewarded.

While the reward will not be enough to make up for the negative equity a homeowner has, Frank Pallotta, a managing partner of Loan Value Group, is confident that that the program, particularly the extra $100 or so up for grabs each month, is enough to make someone rethink a strategic default. “The reward is not intended to put someone 'in the money,' but is more of a 10-year light at the end of tunnel,” Pallotta says.

The incentive is too small and too far off in the future to have much effect. Ask any employer who has put together an employee benefit program. If the incentives are not tangible and obtainable in a reasonable period of time, employees do not respond, neither will borrowers.

While Loan Value Group operates all aspects the program, it does not provide the cash incentive. That's where partner companies come in. There are eight so far, with the latest one, PMI Group, signing up in early July. The Walnut Creek, Calif.-based insurer says it will role out the RH Rewards program to customers in the Florida and Arizona first, and will decide from these results whether to offer the program on a larger scale.

Mortgage insurers are the ones with the most to gain by buying time. A mortgage insurer is on the hook for the losses from strategic default. As the party assuming this risk, they have the most incentive to pay people to keep paying their mortgages.

Loan Value Group touts that RH Rewards is used in 40 states, offering more than $113 million in rewards covering $1 billion of mortgages. Pallotta says that partner mortgage holders have been able to reduce defaults rate by 50 percent through RH Rewards, with nearly all the invited homeowners agreeing to participate in the program. The default rate among those in the program is “under 5 percent,” he says.

This program hasn't been going long enough to know if it really cuts down on strategic default. Further, a 5% default rate is still atrocious. Most borrowers who sign up for this program have likely already decided not to strategically default for whatever reason, so for them, this is just free money for doing what they would have done anyway. Why not sign up?

Still, this is a very small piece of the $14 trillion mortgage pie. And it provides rewards to only a select group of underwater homeowners, leaving millions of others dutifully paying their mortgages with no cash incentive.

Yes, one billion out of a 14 trillion dollar market is very small. Also, it would be interesting to know the criteria they used to select their borrowers. I doubt they were picking Las Vegas borrowers who owe $300,000 on their $120,000 homes.

But Alex Edmans, the Wharton finance professor who developed RH Rewards, hopes the program will gain traction with some of the larger banks and mortgage servicers, and that the most distressed homeowners will be moved to the head of the line.

“With anything, you first offer the program to those who have the greatest need for it,” Edmans says.

In his paper last summer outlining the RH Rewards concept, Edmans referenced a statistic from the National Bureau of Economic Research showing that 31 percent of foreclosures in March 2010 were strategic, up from 22 percent a year earlier. More recently, a report from Moody's in July noted that the risk of strategic default is rising among performing mortgages as loans-to-value ratios, a strong predictor of future default, “are now approaching the LTV of loans that have defaulted since 2009.”

Dean Karlan, an economics professor at Yale University, says that with such unusually high rates of strategic defaults, banks are acting like any other troubled retail business, scrambling to find a way to keep some wayward consumers (homeowners) interested in their product (mortgages). “They are just tinkering with price to find the profit maximizing point,” Karlan says.

That is exactly what they are doing. If they pay out a few incentives but keep a few extra borrowers paying, they will make more than what they pay out.

“Consumer firms do that all the time with coupon and sales,” Karlan notes. “We do not live in a world in which everyone pays the same price for the same service.”

There is no justice in finance, and finance professionals are okay with that.

California Housing Finance Agency gets stiffed

The California Housing Finance Agency has been featured on the IHB twice before. The first was when they implemented their $2 billion loan owner welfare California initiative. The second was when they announced they wanted to give money to HELOC abusers. Today we are going to look at one of their bad deals here in Irvine.

This property was purchased on 6/21/2007 for $469,500. The owners used a $455,657 first mortgage and a $14,085 second mortgage to cover the down payment. The buyers put nothing down. The borrowers defaulted, and the California Housing Finance Agency bought paid off the first lender with a $478,584 payment. They are now looking to lose about $150,000 on the liquidation.

Idiots.

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 28 GREENFIELD Irvine, CA 92614

Resale House Price …… $335,000

Beds: 3

Baths: 2

Sq. Ft.: 1267

$264/SF

Property Type: Residential, Condominium

Style: One Level, Contemporary

Year Built: 1982

Community: Woodbridge

County: Orange

MLS#: P797311

Source: SoCalMLS

Status: Active

On Redfin: 1 day

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SPACIOUS FLOOR PLAN WITH BRIGHT LIVING ROOM, COZY FIREPLACE, OPEN KITCHEN, 3 GREAT SIZE BEDROOMS WITH LOTS OF CLOSET SPACE, 2 FULL BATHS, NEW CARPET IN BEDROOMS, NEW INTERIOR PAINT AND MUCH MORE. ASSOCIATION AMENITIES HAS POOL, TENNIS COURT, AND BBQ, GREAT FOR A STARTER FAMILY.

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Proprietary IHB commentary and analysis

What exactly is a starter family? So now we have starter homes for starter families?

Resale Home Price …… $335,000

House Purchase Price … $469,500

House Purchase Date …. 6/21/2007

Net Gain (Loss) ………. ($154,600)

Percent Change ………. -32.9%

Annual Appreciation … -7.8%

Cost of Home Ownership

————————————————-

$335,000 ………. Asking Price

$11,725 ………. 3.5% Down FHA Financing

4.10% …………… Mortgage Interest Rate

$323,275 ………. 30-Year Mortgage

$104,824 ………. Income Requirement

$1,562 ………. Monthly Mortgage Payment

$290 ………. Property Tax (@1.04%)

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

$70 ………. Homeowners Insurance (@ 0.25%)

$372 ………. Private Mortgage Insurance

$414 ………. Homeowners Association Fees

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

$2,708 ………. Monthly Cash Outlays

-$244 ………. Tax Savings (% of Interest and Property Tax)

-$458 ………. Equity Hidden in Payment (Amortization)

$17 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves

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

$2,085 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$3,350 ………. Furnishing and Move In @1%

$3,350 ………. Closing Costs @1%

$3,233 ………… Interest Points @1% of Loan

$11,725 ………. Down Payment

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

$21,658 ………. Total Cash Costs

$31,900 ………… Emergency Cash Reserves

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

$53,558 ………. Total Savings Needed

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More than 20% of OC loan owners owe more on their mortgage than they could obtain from a sale. With declining prices, this percentage is expected to grow. Foreclosure is the only savior.

Irvine Home Address … 31 CASTILLO Irvine, CA 92620

Resale Home Price …… $460,000

Well, if you told me you were drowning

I would not lend a hand

I've seen your face before my friend

But I don't know if you know who I am

Well, I was there and I saw what you did

I saw it with my own two eyes

So you can wipe off the grin,

I know where you've been

It's all been a pack of lies

Phil Collins — In The Air Tonight

Many loan owners in OC have no equity. No equity means no real ownership. They own a loan. They are still on title, and most still feel like homeowners, but they have no more financial interest in the property than a renter does, and if they stop paying the rent on the money they borrowed, they will (eventually) get evicted just like a renter.

Some who are underwater are victims of poor timing. Many of these people qualify for loan modifications, and they have been helped. Many more are victims of their own poor choices. They HELOCed themselves into an underwater situation, and the government is not throwing them a debt preserver.

1-in-6 O.C. borrowers still ‘under water’

September 15th, 2011, 12:04 am — posted by Jeff Collins

Real estate data giant CoreLogic reported that 17.3% of Orange County homeowners with a mortgage still owed more than their property was worth at the end of the second quarter.

In all, 96,747 Orange County homes were “under water” last spring.

Most of these numbers are poor estimates. Zillow for instance only calculates underwater based on the original first mortgage and does not include seconds, refinances or HELOCs. Obviously, that understates the problem. CoreLogic may have better methodology, but the 17.3% seems suspiciously low to me.

While the number of underwater homeowners has dropped steadily over the past 18 months, it’s likely that some of that drop is due to lenders foreclosing on a portion of those properties, taking them out of the mix.

Since properties have declined more than 10% in value over the last year, many more have submerged beneath the waves. Amortization may have helped a few, but foreclosure is how most of the underwater have been relieved of their burdens.

The figures show also that five years after home prices hit their peak and began to fall, large numbers of borrowers still are under water.

The CoreLogic figures show also:

• The number of underwater homeowners fell 5.2% over the past year, a decline of 0.8 of a percentage point. There were 102,000 “negative equity” homes in O.C. at the end of Q2 2010.

0.8%? Less than a 1% drop is not exactly making major progress. At that rate, loan owners will be underwater for about 120 years.

• 4.2% of O.C. homeowners with a mortgage are above water but have debt representing 95% or more of their home’s value.
• More than 23,300 homeowners are just barely above water because they owe 95% or more of their home’s value.

When the dubious 17.3% number who are underwater is added to the 4.2% who couldn't pay a realtor commission to get out, and 21.5% of loan owners are effectively underwater and unable to sell. With 21.5% unable to sell without bank permission, and with no buyers in the last 10 years having any move-up equity, it shouldn't be a big surprise that the move-up market is dead and sales volumes are more than 25% below historic norms.

Orange County has about 120,000 underwater borrowers by CoreLogic's measure, but what about the rest of the country?

Mortgage Delinquencies Drop

By Kevin Chiu — Published September 23, 2011

The number of homeowners behind on their mortgages has dropped as a result of a higher number of mortgage modifications, according to one of the nation’s largest providers of mortgage data. The drop in mortgage delinquencies is a positive sign for the housing market, despite an uphill battle banks and mortgage companies are waging with the foreclosure crisis.

Mortgage delinquencies fell 2.5% in August from July, according to Lender Processing Services, which gathers its data from nearly 40 million mortgages it tracks for the U.S. lending industry. Total delinquencies, which include loans that are 30 days or more past due, dropped to 8.13% last month.

Still, however, the number of single family homes 90 days or more delinquent are near record highs with 1,866,000 late but not in the foreclosure pipeline. Another 4.25-million homes are 30 days or more past due on their mortgages, but not in foreclosure. About 6.4-million homes are 30 days or more delinquent or in the foreclosure process.

6.4 million homes are 30 days or more delinquent or in the foreclosure process. That is an astonishingly high number. And it's expected to get worse as there are 10 million more mortgage delinquencies to come.

The drop in delinquencies, however, is not a clear indication that foreclosures are easing nor are they expected to slow by real estate analysts over the next few years. Aggressive action by government leaders combined with bankers are the only avenues that could aid the housing market as high unemployment and other financial worries trouble the nation’s economy forcing more mortgage holders from their homes, and at risk of foreclosure.

Forcing more mortgage holders from their homes? He means to say that more loan owners will be relieved of their debt burdens on properties they have no ownership in. The language we use to convey information has hidden assumptions and meanings. The people who go through foreclosure are being forcibly removed from properties they no longer own. Many of them had no equity in the property, or they would have sold it prior to the foreclosure. Nobody sheds a tear when a renter gets evicted, but government is supposed to do everything in its power to stop a loan owner from facing the same fate. I think that's bullshit.

Losing HELOC income: when the house in unemployed

During the rally of the housing bubble, houses were like a third wage earner in the family. In fact, for nearly five years in Irvine, the median home price went up by an amount equal to the median income. With access to this windfall through HELOCs, every home owner had another source of income, and best of all, this income was not taxed.

The former owners of todays featured property bought back in 1993. By April of 2006, they ran up a $487,000 mortgage. This was easily double what they paid. But the house was not done working for them. They stopped paying in early 2008, and they were allowed to squat for 3 full years.

Foreclosure Record

Recording Date: 03/25/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/24/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 03/04/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 12/01/2008

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 08/22/2008

Document Type: Notice of Default

Irvine real estate is wonderful, isn't it?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 31 CASTILLO Irvine, CA 92620

Resale House Price …… $460,000

Beds: 3

Baths: 2

Sq. Ft.: 1337

$344/SF

Property Type: Residential, Single Family

Style: One Level, Contemporary

Year Built: 1977

Community: Northwood

County: Orange

MLS#: S674172

Source: SoCalMLS

Status: Active

On Redfin: 3 days

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This REO property is located in the highly desired area of Irvine, Northwood. Close to the 'Blue Ribbon' high school, Northwood High, shopping and hiking trails. No Mello Roos and low HOA which includes a tennis court. Walking distance to shopping and parks. This single story home has an open floor plan with vaulted ceilings in the living/ dining area. A side entry for privacy. A real brick wood burning fireplace for your family to gather around on those cold winter nights. With a little work this could be the home of your dreams.

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Proprietary IHB commentary and analysis

Resale Home Price …… $460,000

House Purchase Price … $200,000

House Purchase Date …. 8/5/1993

Net Gain (Loss) ………. $232,400

Percent Change ………. 116.2%

Annual Appreciation … 4.5%

Cost of Home Ownership

————————————————-

$460,000 ………. Asking Price

$16,100 ………. 3.5% Down FHA Financing

4.10% …………… Mortgage Interest Rate

$443,900 ………. 30-Year Mortgage

$124,254 ………. Income Requirement

$2,145 ………. Monthly Mortgage Payment

$399 ………. Property Tax (@1.04%)

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

$96 ………. Homeowners Insurance (@ 0.25%)

$510 ………. Private Mortgage Insurance

$60 ………. Homeowners Association Fees

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

$3,210 ………. Monthly Cash Outlays

-$335 ………. Tax Savings (% of Interest and Property Tax)

-$628 ………. Equity Hidden in Payment (Amortization)

$23 ………. Lost Income to Down Payment (net of taxes)

$78 ………. Maintenance and Replacement Reserves

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

$2,347 ………. 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

$35,900 ………… Emergency Cash Reserves

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

$65,639 ………. Total Savings Needed

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Far from being the end of the world, the pain of the Great Recession caused by the housing bust will have long term beneficial effects on society — assuming we learn the right lessons.

Irvine Home Address … 34 BROOKSTONE Irvine, CA 92604

Resale Home Price …… $484,900

Always look on the light side of life…

If life seems jolly rotten,

There's something you've forgotten!

And that's to laugh and smile and dance and sing,

When you're feeling in the dumps,

Don't be silly chumps,

Just purse your lips and whistle — that's the thing!

And… always look on the bright side of life…

Monte Python — Always Look On the Bright Side of Life

The fact that prices are falling is not a bad thing, not that loan owners who rely on HELOC income would agree. Financial market implosions purge irresponsible and unsustainable habits from the populace. HELOC dependency serves no one, not even the sheeple who got to enjoy it for a time. The unceremonious fall from entitlement is inevitable, and although the fall is emotionally devastating, getting off the HELOC heroin is better for borrowers in the long term.

Falling prices bring affordability to the prudent who understand valuation and their cost of ownership. Many people have put off their purchases because they understand the power of rental parity. Those people will be rewarded with lower debts, and the ability to move without feeding a black hole on their family balance sheet. The lower debt service payments will benefit the local economy as money that used to go to a lender is now circulating in the local economy to buy goods and services.

The housing bust has a good side

Published 03:15 p.m., Friday, September 23, 2011

Anyone who has seen a friend kick an addiction — be it to alcohol, drugs or cigarettes — knows the extreme discomfort and force of will required. America has long suffered repeated bouts of binging on real estate. The booms inevitably trigger busts, one of which we're now in deep.

But there is some bright side here. As they say, with pain comes gain.

The collapse in house prices could help the environment, stabilize family finances and strengthen our economic base over the long term.

True, the housing crash continues to drag down today's economy. Prices have fallen nearly 32 percent from their 2005 high, according to the Standard & Poor's Case-Shiller 20-city index. One in five Americans with a mortgage is “underwater.” That means these owners owe more on their home than the home can sell for. Economists expect house prices to rise only about 1 percent between now and 2015, leading some to call this a “lost decade” for homeowning.

Housing woes are still the primary cause of our weak economy. An entire industry is sitting on the sidelines. Construction related unemployment is over 30%, and new home sales continue to set record lows. Realtors and mortgage brokers are similarly hurting as lower prices and lower transaction volumes have caused sales commissions to plummet. None of these industries is forecast to improve in the near term.

What we really have is a return to certain realities obscured by the housing bubble. Ten years ago, soaring house prices created a “wealth effect.” This was an illusion of newfound prosperity, which prompted homeowners to borrow heavily off their rising equity and spend the money, much of it at the mall.

Apparently, I am not the only one who noticed. You don't read much about rampant HELOC abuse in the mainstream media.

They didn't save much for retirement, figuring that they could live off the proceeds from selling their home.

i am always shocked when I read about the stupid things some people did to destroy their security in retirement.

Shabby lending practices exploded, snaring many Americans who could not afford what they were buying into paycheck-to-paycheck existences or foreclosure.

The only way out for many struggle families is strategic default. Those with the most financial distress have already walked away, but those who are barely getting by are continuing to hold on with hope that rising prices will give them equity again soon. Unfortunately for them, prices will fall, and even with the lower balance of an amortizing mortgage, many households will be years before they have equity again.

When the music stopped, the wealth effect geared into reverse. Families pulled back on spending. They began to “de-leverage” their finances — that is, start paying off their debt. Construction workers, landscapers, salespeople and others living off the bubble lost their jobs.

The resulting unemployment is troublesome, but won't the American economy become stronger when families start carefully investing for their future, rather than relying on the magic-mushroom “high” of ever-rising home prices?

Isn't it better for the environment that prospective homebuyers now value smaller houses that use less energy, take up less space and are often located closer to work, schools and shopping?

And isn't it good for American towns and cities where these smaller and older houses are located? Once rejected by status-conscious house hunters as “starter homes,” bungalows and capes are becoming the permanent and beloved family residences that they were a couple of generations ago. Neighborhoods populated mainly by older folks and unmarried hipsters now draw families with children, bringing new life to formerly struggling commercial centers.

The housing bust in California has enabled many renters to buy properties closer in to employment centers. The commute through the valley on the 91 is no longer a necessary price to pay to have a nice house for many who work in Orange County.

Speaking of which, the so-called lost decade for homeowners has become a “found decade” for homebuyers. Young people can easily find far more affordable housing, although getting a mortgage has become tougher. They don't have start off their working lives drowning in debt.

The mainstream media is so caught up in the distress of loan owners that they completely fail to mention the benefits current buyers are obtaining. For the first time in a decade, people are able to buy houses with a lower cost of ownership than a comparable rental.

One must feel for the homeowners who now owe more on their mortgages than their homes' value. Some borrowed recklessly, but many just got caught up in a frenzy whipped by powerful interests. The real-estate industry peddled homes as no-lose investments. Deregulated lenders became debt pushers (while passing the risks onto others).

The Federal Reserve sustained the market's boil by keeping interest rates very low, with the Fed chairman himself dismissing the manic speculation as “froth.” The boom-bust cycle in real estate has repeated itself so often in our history that it would be foolish to declare the housing addiction “cured.” We are, after all, a land of bounteous acreage and a certain grandiosity when it comes to the material. But since this latest excess had to come to an ugly end, let's at least get something good out of it.

It's natural for people to want free money. When a Ponzi virus is released into the financial system, it spreads because it's human nature to want something for nothing. People wanted house prices to continue to rise in order to fund their spending. People were willing to push prices every higher to obtain the free money that came from ownership. The system worked until the pipers stopped the music and demanded to get paid.

The damage this Ponzi virus did to the US economy is evident in this recession that goes on and on. The government tells us the recession ended two years ago. Does it feel that way to you? It doesn't if you work in real estate.

The Great Recession will finally end, and prosperity will return. When it does, I hope we have learned the lessons of history. So far, I haven't seen any of the causes of this debacle cured through preventative legislation. Our collective memories will only last so long, and when the Siren's song of free money beckons, the next Ponzi weed will find a fertile soil in which to germinate.

Happy Birthday IHB!

The Irvine Housing Blog turned five years old yesterday. Welcome to the Irvine Housing Blog!

Kitchen is ready for your personal touch and upgrades

This house has no kitchen. The previous owner must have ripped it out and sold it before moving on. The bank took this property back at the end of June and has no idea what to do with it. The strategy right now is to find an all-cash buyer who will put in their own kitchen. This all-cash buyer must be willing to pay $337/SF for a property which backs onto the the Culver/Warner intersection.

Never going to happen.

This property might fetch $525,000 if the kitchen were in place, but nobody looking to profit on the flip would touch this place for $484,900, and given its inherent negatives, I don't foresee many all-cash owner occupants willing to buy this place.

Either the bank is going to have to lower its price significantly, or they are going to have to spend the money to put in a kitchen and hope for the best.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 34 BROOKSTONE Irvine, CA 92604

Resale House Price …… $484,900

Beds: 3

Baths: 2

Sq. Ft.: 1440

$337/SF

Property Type: Residential, Single Family

Style: One Level

Year Built: 1981

Community: Woodbridge

County: Orange

MLS#: K11124093

Source: CRMLS

Status: Active

On Redfin: 2 days

——————————————————————————

GREAT opportunity to own your piece of Woodbridge. Close to Northlake and many of the other association amenties, including one of their many parks, pools, sports courts etc!! Seller is contemplating repairs, send your CASH offers to get this price. .. 3 bedrooms and 2 baths, kitchen is ready for your personal touches and upgrades. Brick fireplace in family room and sliding glass door to rear patio area.

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Proprietary IHB commentary and analysis

Resale Home Price …… $484,900

House Purchase Price … $635,000

House Purchase Date …. 8/26/2004

Net Gain (Loss) ………. ($179,194)

Percent Change ………. -28.2%

Annual Appreciation … -3.7%

Cost of Home Ownership

————————————————-

$484,900 ………. Asking Price

$16,972 ………. 3.5% Down FHA Financing

4.10% …………… Mortgage Interest Rate

$467,928 ………. 30-Year Mortgage

$131,822 ………. Income Requirement

$2,261 ………. Monthly Mortgage Payment

$420 ………. Property Tax (@1.04%)

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

$101 ………. Homeowners Insurance (@ 0.25%)

$538 ………. Private Mortgage Insurance

$85 ………. Homeowners Association Fees

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

$3,405 ………. Monthly Cash Outlays

-$353 ………. Tax Savings (% of Interest and Property Tax)

-$662 ………. Equity Hidden in Payment (Amortization)

$25 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves

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

$2,495 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,849 ………. Furnishing and Move In @1%

$4,849 ………. Closing Costs @1%

$4,679 ………… Interest Points @1% of Loan

$16,972 ………. Down Payment

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

$31,349 ………. Total Cash Costs

$38,200 ………… Emergency Cash Reserves

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

$69,549 ………. Total Savings Needed

——————————————————————————————————————————————————-

Two presentations this evening Wednesday, September 28, 2011

We still have seating available for tonight's presentations. I hope to see you at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618).

You may still attend if you have not provided an RSVP; however, if the crowd is too large, you may have to stand in the back.

The Orange County resale home sales market enjoyed its seventh consecutive month of increasing affordability. The lack of a move-up market has depressed sales more than 25% below the long-term average.

Irvine Home Address … 11 VERNAL Spg Irvine, CA 92603

Resale Home Price …… $4,895,000

Are you ready to crawl out?

Are you ready to take my hand and see?

Are you ready to crawl out?

From within the slow bleed?

Thousand Foot Krutch — Slow Bleed

The story of the housing market over the next few years will be a slow bleed. Prices won't likely crash hard as lenders have learned to control the price descent by slowly releasing product. They know if they release too fast, prices will crash, so they slowly bleed the market drop by drop. This slow bleed will go on until the inventory of distressed properties is cleared from the system. At current rates, that will take a very long time.

O.C. home prices at 7-month low

September 25th, 2011, 12:01 am — posted by Jon Lansner

DataQuick’s first glance at September and Orange County homebuying trends shows pricing at a 7-month low — suggesting that a summertime price bump may have lost steam.

For the 22 business days ending Sept. 8 – the latest numbers — Orange County’s real estate market saw …

• Median selling price for all residences of $417,500 – that is off 6.2% vs. a year ago. Last full month that was lower was February 2011 at $410,000.
• Total Orange County sales of 2,683 residences closed in the latest period — that is up 6.8% vs. a year ago.
• Note: 16 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2010:

Slice	Price	Price vs. year ago	Sales	Sales vs. year ago	Sales vs. ’88-’10 avg.
Houses	$470,000	-11.3%	1,784	+8.6%	-21.0%
Condos	$269,500	-10.2%	749	+4.5%	-13.0%
New	$583,000	+12.2%	150	-2.0%	-71.5%
All O.C.	$417,500	-6.2%	2,683	+6.8%	-26.4%

Take a careful look at the chart above. Note the price change on resale houses and condos are both down over 10%. Only new home sales — numbers which can be easily gamed by incentive programs — shows any strength at all in the market. And since the actual sales volumes of new homes is declining, the price gains are largely an illusion.

Also note the rate of sales versus the long-term average (1988-2010). Sales of all housing types is down well below their historic norms. It is particularly bad in sales of both new and resale detached houses. This is explained by the lack of a move up market due to the utter collapse of low end pricing. Nobody at the bottom of the housing ladder has any money to purchase a move-up home.

And more analysis ….

• $417,500 median selling price is 35% below June 2007′s peak of $645,000.
• Current price is 7.2% below 2010′s peak (May and July) of $450,000; 2% above end of 2010′s median ($410,000.)
• The most recent median is 13% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 17% of the $275,000 price drop from the peak.

While it's true that the median does not show the double dip that both the hedonic and the $/SF measures show, the median is more susceptible to changes in the mix than either of those measures.

Basically, when the bottom dropped out of the market, the only thing that was selling was low-priced homes. With the complete seizure of the high end of the market, a radical change in mix caused the median to decline more rapidly than actual home values. Therefore, the increase in the median since then is more reflective of a change in sales mix than an actual increase in sales prices of individual homes.

• Compared to cyclical low, single-family house median is 12% higher ($418,250 in January 2009); condo median is 7% higher ($252,000 in March 2009.) Builder prices for new homes are 38% above June 2009′s $424,000 bottom.

Does anyone believe builders are selling the same houses for 38% more than they were in 2009? Do you see how the change in mix effects the numbers?

• The median selling price of a single-family home is 36% less than their peak pricing (June ’07). Condos sell 43% below their peak in March 2006. Builder prices for new homes are 33% below their February ’05 top.

Those are some sobering numbers. Most of that drop is due to a return to sane lending standards and the commensurate decline in loan balances.

• Single-family homes were 74% more expensive than condos in this period vs. 77% a year ago. From 1988-2010, the average house/condo gap was 57%.

This disparity portends a continuing decline in high-end pricing. Prices at the high end are generally pushed up from below as move-up buyers take their accumulated equity and increase buying power to bid up prices in the next rung of the housing ladder. With the collapse of low end pricing, what is ordinarily a price push is turning into a price pull — to the downside. Without a move up market, high end prices are floating in air with little real demand to support them.

The chart from Global Decision displays how during the price rally, condos rose more rapidly than SFRs, so prices were pushed up from below. Now with the decline at the low end, the price push has reversed and a price pull has taken its place.

As the lack of a move up market squelches demand, the substitution effect will also pull demand away from higher priced properties as each successive rung on the property ladder falls to more affordable levels.

• Builder’s new homes sales were 6% of all residences sold in the period vs. 6% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.

Despite the fanfare regarding the Irvine Company's new home products, sales continue to be very weak. Given the price points they are wishing for, sales should continue to be very weak indefinitely.

Delusions at the high end

Wealthy home owners seem to live in their own world. For them, the price crash never happened, and no matter how much they paid, they believe a great fool is waiting in the wings to pay them substantially more when they want to sell. For some, this has proven to be true.

The owners of today's featured property paid $3,350,000 on what was a distressed sale back in April. Did they really buy this for 40% under its “real” value back in April? If they pull off a $1,251,300 profit on a Shady Canyon flip in less than six months, I will be very impressed.

Personally, I don't give them much chance. Where was their take-out buyer willing to pay so much more back in April? If so, was this a flop?

What do you think? Will they sell this for a profit in this market environment?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 11 VERNAL Spg Irvine, CA 92603

Resale House Price …… $4,895,000

Beds: 5

Baths: 7

Sq. Ft.: 7577

$646/SF

Property Type: Residential, Single Family

Style: Two Level, Spanish

View: Mountain

Year Built: 2004

Community: Turtle Rock

County: Orange

MLS#: U11003897

Source: SoCalMLS

On Redfin: 14 days

——————————————————————————

With a private and expansive corner lot, this beautifully customized estate reflects Hacienda-style Spanish Revival architecture and is located within the exclusive residential golf preserve of Shady Canyon. The home was recently expanded and completely remodeled, opening up the living space and providing a soft contemporary flair to the custom home sized estate with 7,577 square feet. The well-designed additions created a full theater room, family room, and two additional bedrooms. The one of a kind home now features an incredible outdoor kitchen, dining area, and covered logia adjacent to a spectacular new yard complete with a pool, fire pit, custom lighting and water features, and pool bathroom.

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Proprietary IHB commentary and analysis

Resale Home Price …… $4,895,000

House Purchase Price … $3,350,000

House Purchase Date …. 4/21/2011

Net Gain (Loss) ………. $1,251,300

Percent Change ………. 37.4%

Annual Appreciation … 78.3%

Cost of Home Ownership

————————————————-

$4,895,000 ………. Asking Price

$979,000 ………. 20% Down Conventional

4.10% …………… Mortgage Interest Rate

$3,916,000 ………. 30-Year Mortgage

$982,420 ………. Income Requirement

$18,922 ………. Monthly Mortgage Payment

$4242 ………. Property Tax (@1.04%)

$585 ………. Special Taxes and Levies (Mello Roos)

$1020 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$610 ………. Homeowners Association Fees

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

$25,379 ………. Monthly Cash Outlays

-$2145 ………. Tax Savings (% of Interest and Property Tax)

-$5542 ………. Equity Hidden in Payment (Amortization)

$1414 ………. Lost Income to Down Payment (net of taxes)

$632 ………. Maintenance and Replacement Reserves

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

$19,738 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$48,950 ………. Furnishing and Move In @1%

$48,950 ………. Closing Costs @1%

$39,160 ………… Interest Points @1% of Loan

$979,000 ………. Down Payment

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

$1,116,060 ………. Total Cash Costs

$302,500 ………… Emergency Cash Reserves

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

$1,418,560 ………. Total Savings Needed

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