Government policymakers have gone through heroic efforts to save the housing market. The question is: should they?

Irvine Home Address … 20 AVANZARE Irvine, CA 92606

Resale Home Price …… $599,000

There's nothing left to say

But so much left that I don't know

We never had a choice

This world is too much noise

It takes me under

It takes me under once again

Rise Against — Savior

Should US Taxpayers responsible for every underwater homeowner? Many in government act as if they should, and many in the mainstream media report as if the status quo should be preserved.

It's common at housing blogs to find calls for the government to get out of the housing market. It's rare when you find this sentiment coming from a local newspaper editorial in conservative South Carolina.

Should we work to 'save' housing market?

Source: Herald; Rock Hill, S.C.

Publication date: January 5, 2011

By Thomas Sowell

“Housing Market Setback Forecast,” the newspaper headline said. A recently released report on housing says that home sales are down more than 25 percent and the inventory of unsold homes is about 50 percent higher than it was the same time last year.

This is just one of innumerable stories about the woes of the housing market. We all understand about human beings having woes. But how can a housing market have either setbacks or woes? Moreover, why should politicians be riding to the rescue of the housing market with the taxpayers' money?

Investors lost money. Many of them were homeowners who over-indebted themselves to capture appreciation. That's our daily tale of woe. Politicians are riding to the rescue, not to save the crying masses who lost money on their homes, but to save their large campaign backers in the banking industry. The are raping the US taxpayer because they can.

We hear all sorts of sad stories about people whose homes are “under water” or who are facing foreclosure. But why should our attention be arbitrarily focused on these particular people, rather than on the many other people who would benefit from being able to buy those same houses if the prices came down? The government is artificially keeping the prices up with subsidies and with pressures on lenders to accommodate the current occupants.

Can we not walk and chew gum at the same time? Is our attention span so limited that we can only think about one set of people that the media and the politicians have chosen to highlight?

Hasn't that been the story of the housing bubble from the mainstream media? Renters don't exist. Not like real people who own houses. The interests of renters as a group does not capture the attention of anyone in the mainstream media. The story is rarely told from their point of view.

Do other people count for less just because the media don't put their pictures in the paper or on the TV screen? Or because politicians are ignoring them?

Sometimes we are more concerned about some people because they are especially deserving. But this cannot be said about those who borrowed money to buy homes that they could not afford, or who borrowed against the equity in their homes, and now find that what they owe is more than the home is worth.

If anyone is especially deserving, it is those who had the common sense to avoid taking on bigger financial obligations than they could handle, but who are now expected to pay as taxpayers for other people's irresponsibility.

The circumstance that angers me most from the housing bubble is what has been done to the people who were responsible.

No doubt some people who are facing foreclosures might have been able to continue making their mortgage payments if they had not lost their jobs. But since when were we all guaranteed never to lose our jobs? People used to put money aside “for a rainy day.” But now people who have spent like there are no rainy days are supposed to have the taxpayers pay to give them an umbrella.

Why are so few making more noise about this? Think of the message we are sending everyone. Once Uncle Sam commits to bailing out everyone, what incentive is there to be prudent?

What about the people who saved and put their money in a bank? Those who blithely say that the banks ought to modify the mortgage terms to accommodate people who are behind in making their monthly payments forget that, however “rich” a bank may be, most of its money actually belongs to vast numbers of depositors, most of whom are not rich.

Those depositors deserve to get the best return on their money that supply and demand can offer. Why should people who save be sacrificed for the benefit of those who spent more than they could afford?

When the federal reserve lowers interest rates it diverts money to banks that would have gone to savers. Stealing from the prudent for the greater good, right?

Why are politicians so focused on one set of people, at the expense of other people? Because “saving” one set of people increases the chances of getting those people's votes. Letting supply and demand determine what happens in the housing market gets nobody's votes.

If current occupants are put out of their homes and the prices come down to a level where others can afford to buy those homes, nobody will give politicians credit – or, more to the point, their votes. Nor should they.

Rescuing particular people at the expense of other people produces votes. It also produces dependency on government, which is good for politicians, but bad for society.

That is why politicians give what Adam Smith called “a most unnecessary attention” to things that would sort themselves out better and faster without heavy-handed government intervention.

Why do the media fall in with this arbitrary focus on particular people who are having trouble holding on to homes they cannot afford? Partly because it makes a good story and partly because too many people in the media simply go with the politicians' talking points. That is a lot easier than thinking.

But the rest of us have no excuse for not thinking – or for letting ourselves be stampeded by rhetoric about “saving” the housing market.

Thomas Sowell is a senior fellow at the Hoover Institution. His Web site is www.tsowell.com.

Actually, every homeowner in America has a huge incentive to let politicians do whatever is necessary to save them. Willful ignorance will rule the day. It always does.

The fate of sheeple

I am trying to do more posts on different mortgage situations I find in the property records. The HELOC abuse cases are still the most interesting, but they do not tell the full story of the housing bubble.

A sheeple would be a middle of the road borrower: someone who didn't take out the most exotic terms and who put some money down but less than 20%.

Your typical Irvine sheeple borrower at the top of the bubble was more like today's owners. They bought at the wrong time with the wrong financing, and they are losing their home, their equity, and their credit rating. California real estate is not always a pot of gold.

These owners paid $753.000 on 6/5/2005. They used a $602,400 ARM, a $75,300 HELOC, and a $75,300 down payment. Five and a half years later, and the owners are selling short, and the bank is hoping prices haven't dropped more than 20%. The owner doesn't care anymore.

Foreclosure Record

Recording Date: 11/24/2010

Document Type: Notice of Default

Irvine Home Address … 20 AVANZARE Irvine, CA 92606

Resale Home Price … $599,000

Home Purchase Price … $753,000

Home Purchase Date …. 6/3/05

Net Gain (Loss) ………. $(189,940)

Percent Change ………. -25.2%

Annual Appreciation … -4.0%

Cost of Ownership

————————————————-

$599,000 ………. Asking Price

$119,800 ………. 20% Down Conventional

4.79% …………… Mortgage Interest Rate

$479,200 ………. 30-Year Mortgage

$121,081 ………. Income Requirement

$2,511 ………. Monthly Mortgage Payment

$519 ………. Property Tax

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

$100 ………. Homeowners Insurance

$162 ………. Homeowners Association Fees

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

$3,292 ………. Monthly Cash Outlays

-$426 ………. Tax Savings (% of Interest and Property Tax)

-$598 ………. Equity Hidden in Payment

$219 ………. Lost Income to Down Payment (net of taxes)

$75 ………. Maintenance and Replacement Reserves

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

$2,562 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,990 ………. Furnishing and Move In @1%

$5,990 ………. Closing Costs @1%

$4,792 ………… Interest Points @1% of Loan

$119,800 ………. Down Payment

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

$136,572 ………. Total Cash Costs

$39,200 ………… Emergency Cash Reserves

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

$175,772 ………. Total Savings Needed

Property Details for 20 AVANZARE Irvine, CA 92606

——————————————————————————

Beds: 4

Baths: 2 full 1 part baths

Home size: 1,876 sq ft

($319 / sq ft)

Lot Size: 2,582 sq ft

Year Built: 1996

Days on Market: 210

Listing Updated: 40543

MLS Number: S622739

Property Type: Single Family, Residential

Community: Westpark

Tract: Trovata (Trov)

——————————————————————————

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

Short Sale: Light & bright detached home In desirable Westpark area. This beautiful home has 4 bedrooms, living room, family room & Formal dining room. Kitchen with tile floor, granite counters & breakfast counter. Large master suite w/walk-in closet, shower & large bath tub. Separate laundry room upstairs. Side yard w/patio. Wood floors downstairs, Laminate on stairs/hallway & carpet in bedrooms. Plantation shutters. Washer, dryer & Refrigerator are included. Walking distance to association pool, spa, tennis court & park. Walk to Plaza Vista Elementary school. Very close to shopping center. EZ access to freeway.

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

People will resort to some cooky rituals to make them feel good about living in a foreclosed home.

Irvine Home Address … 51 LAKESHORE 20 Irvine, CA 92604

Resale Home Price …… $499,000

Raven hair and ruby lips

sparks fly from her finger tips

Echoed voices in the night

she's a restless spirit on an endless flight

wooo hooo witchy woman, see how high she flies

wooo hooo witchy woman, she got the moon in her eye

The Eagles — Witchy Woman

Witches are being brought in to spiritually decontaminate foreclosed houses.

The Housing Slump Has Salem On a Witch Hunt Again

Buyers Worried About Bad Vibes From Foreclosed Homes Seek a Cleansing

By S. MITRA KALITA — JANUARY 13, 2011

SALEM, Mass.—There's a certain look and feel to a foreclosed home, and 31 Arbella St. has it: fraying carpet, missing appliances, foam insulation poking through cracked walls.

That doesn't faze buyer Tony Barletta since he plans a gut renovation anyway. It's the bad vibes that bother him.

So two weeks before closing, Mr. Barletta followed witch Lori Bruno and warlock Christian Day through the three-story home. They clanged bells and sprayed holy water, poured kosher salt on doorways and raised iron swords at windows.

It's amazing the silly things both big and small people do in order to feel good about a new purchase. Guys will typically run numbers on spreadsheets to convince themselves they can afford it. Women will imagine each room of the house, where the furniture goes, and whether or not the place gives them a warm and fuzzy feeling. I guess some people feel they need some dude with a broadsword to walk through their house and frighten the ghosts away. Sounds pretty stupid to me.

“Residue, residue, residue is in this house. It has to come out,” shouted Ms. Bruno, a 70-year-old who claims to be a descendant of 16th-century Italian witches. “Lord of fire, lord flame, blessed be thy holy name…All negativity must be gone!”

The foreclosure crisis has helped resurrect an ancient tradition: the house cleansing. Buyers such as Mr. Barletta are turning to witches, psychics, priests and feng shui consultants, among others, to bless or exorcise dwellings.

Normal, middle-class Americans don't go for strange rituals. No, if mainstream people have a problem, they turn to St. Joseph. He will help them out.

Sellers, too, are adopting the trend to help move a property stuck on the market.

In recent months, foreclosure and other distressed sales have represented about a third of all home sales, according to the National Association of Realtors. With so many foreclosures riddling the market, some buyers find that a coat of paint is hardly enough to rid a house of its creepy quotient.

“It's not entities or ghosts that we're dealing with anymore,” says Julie Belmont, a so-called intuitive who works in Orange County, Calif., where 40% of home sales last year were distress sales. “With foreclosures, a lot of it is energy imprints from past discussions, arguments, money problems. All of that is absorbed by the house.”

The Julie Belmont site is an interesting exploration of how some people make a living.

Homeowners of various faiths have turned to different rituals—called house cleansings or space clearings—for centuries. Catholics and Hindus, for example, might ask a priest to bless a new home before moving in. Before their new year, the Chinese cleanse the home to sweep away any bad luck accumulated over the past twelve months.

Ms. Bruno's process pulls from a few methods: Ringing bells, she says, breaks up the negative energy of a place. Iron keeps evil spirits away, says Mr. Day, brandishing a sword across the living room.

Mr. Barletta heard about the pair through his real-estate agent after his offer on the home was accepted. “I'm a spiritual person,” he says. “I just wanted to remove the negative energy first.”

In Salem, the site of the 1692 witch trials, the occult is a part of the everyday, from the high-school sports team known as the Witches to entrepreneurs such as Mr. Day and Ms. Bruno. He owns the Hex Old World Witchery magic shop downtown and she gives psychic readings there.

“It's a very spiritual city,” says Salem real-estate agent Janet Andrews Howcroft.

I think she means to say the city is filled with suckers who can best be appealed to with mumbo jumbo.

But the city's real-estate market hasn't been so charmed. Home prices here fell by about a third in the past two years, according to Ms. Howcroft. And Essex, the county that Salem calls home, had the state's second-highest foreclosure level in October, says the Warren Group, which tracks real-estate data in New England.

Ms. Howcroft attributes recent requests for house blessings in part to the economic picture here. She counted at least eight transactions last year that involved a house cleansing, compared to the occasional request in prior years.

I attribute the recent requests to the last gasp of desperation on the part of loan owners who cannot get the price they need to get out of the hole. When denial is stretched to its breaking point, people can engage in some pretty bizarre behavior. Do any of you remember the bulls in 2006-2008 who used to spam Lanzner's blog with dozens of daily comments to talk up the market?

The house on Arbella Street is under contract for $167,000, and was appraised for nearly double, pending renovations. But, Ms. Bruno cautioned, that bargain comes with a price. She gestured toward an empty room with “Mike, Age 13” scrawled on the wall in child's handwriting. “If someone took your home away, how would you feel?”

Taking her cleansing agent of kosher salt in a bowl of water and lighting a candle, she led the group—including the buyer's agent—up the stairs. Arriving at the upstairs kitchen, gutted of its cabinetry and appliances, Ms. Bruno yelled into the air: “You will not hurt anything I hold dear. I am the exorcist of your garbage!”

LOL! Do I really need to comment?

She is quick to distinguish her services from that of a plain-vanilla psychic. “Unlike psychics, witches know you can change the future,” she explains.

They might be described as good witches. Ms. Bruno, who feels she is well compensated for her readings, doesn't charge for her house cleansings—she's done more than 100, she says. Rather, she considers them to be a form of charity work. “I don't want to live off people's sadness,” she says. Fellow Salem witch Lillee Allee also performs house blessings and, like Ms. Bruno, she doesn't take a fee.

Elsewhere, others are viewing the rituals as a real business opportunity. Austin, Texas-based feng shui consultant Logynn B. Northrhip is teaming up with Scottsdale, Ariz., real-estate agent Jason Goldberg to offer a package of services to create better vibes in a home, either before sale or after purchase. The two met at a yoga retreat.

In Sacramento, Calif., realtor Tamara Dorris also used feng shui to help speed the sale of a property that had been on the market for more than a year. She placed a jade plant, believed to bring good financial luck, in a “prosperity corner” and waited.

“Within two weeks, I had two offers,” she says. “Most homes have at least one or two prosperity flaws. Foreclosed homes have five or six flaws.”

Foreclosed homes only have more flaws is the flipper fails to renovate and fix those flaws.

Sometimes, it's bad feng shui to even attempt to buy a foreclosure. That was Grace Lee's discovery as she toured 30 houses in the San Diego area, her consultant Simona Mainini in tow, to find a new home. In the end, Ms. Mainini just advised her to buy new construction, saying it would save her money on repairs and other troubles in the long run.

“You can keep looking for deals in distressed properties,” Ms. Mainini recalls telling her client. “But they all have an energy that is very weak for money.”

Sorry, Ms. Mainini, but distressed properties are not very weak for money. Although, I suppose they aren't helping the distressed owners much.

Another owner hoping for 10% appreciation last year

I remember when the housing bust first started, it was common to see peak buyers offer their properties for sale at a price that would give them some negotiation room, pay the realtors's commission, and get them out at breakeven. Now that prices are double dipping, we are seeing this behavior all over again.

This owner probably thought she was getting a bargain. The previous owner paid $551,000 back in 2004. He imploded when his Option ARM went bad. She was getting a 20% discount in late 2009. Was it enough?

Irvine Home Address … 51 LAKESHORE 20 Irvine, CA 92604

Resale Home Price … $499,000

Home Purchase Price … $450,000

Home Purchase Date …. 12/22/09

Net Gain (Loss) ………. $19,060

Percent Change ………. 4.2%

Annual Appreciation … 9.6%

Cost of Ownership

————————————————-

$499,000 ………. Asking Price

$17,465 ………. 3.5% Down FHA Financing

4.79% …………… Mortgage Interest Rate

$481,535 ………. 30-Year Mortgage

$100,867 ………. Income Requirement

$2,524 ………. Monthly Mortgage Payment

$432 ………. Property Tax

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

$83 ………. Homeowners Insurance

$367 ………. Homeowners Association Fees

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

$3,406 ………. Monthly Cash Outlays

-$412 ………. Tax Savings (% of Interest and Property Tax)

-$601 ………. Equity Hidden in Payment

$32 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves

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

$2,487 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,990 ………. Furnishing and Move In @1%

$4,990 ………. Closing Costs @1%

$4,815 ………… Interest Points @1% of Loan

$17,465 ………. Down Payment

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

$32,260 ………. Total Cash Costs

$38,100 ………… Emergency Cash Reserves

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

$70,360 ………. Total Savings Needed

Property Details for 51 LAKESHORE 20 Irvine, CA 92604

——————————————————————————

Beds: 2

Baths: 2 baths

Home size: 1,610 sq ft

($310 / sq ft)

Lot Size: n/a

Year Built: 1979

Days on Market: 8

Listing Updated: 40553

MLS Number: S643538

Property Type: Condominium, Residential

Community: Woodbridge

Tract: Al

——————————————————————————

MODEL PERFECT & HIGHLY UPGRADED SINGLE LEVEL WOODBRIDGE HOME WITHIN STEPS TO THE LAKE! Lake! Lake! Spacious floorplan with lots of windows makes this home very bright and desirable. This spectacular home is maticulously upgraded with the finest materials. WOW! OVER 85k in upgrades!!! Spacious Living room, formal dining room, and the hallway has upgraded with the highest quality hardwood flooring. Large Gourmet kitchen with breakfast nook and garden window has upgraded with stainless steel Samsung refrigerator, dishwasher, microwave, stove, lighting fixtures, and beautiful TRAVERTINE flooring. Recessed lightings, Crown Moldings, LG washer & dryer, 3 tone painting, and designer draperies throughout the home are examples of more upgrades. Beautiful private frontyard, and remodeled large backyard completes the desirability of this home, and make it one of the nicest home in the community.

A recent article in the LA Times expresses opinions of the fates of several key cities where the housing bubble fully burst.

Irvine Home Address … 97 STREAMWOOD Irvine, CA 92620

Resale Home Price …… $209,900

I know you feel these are the worst of times

I do believe it's true

When people lock their doors and hide inside

Rumor has it it's the end of Paradise

But I know, if the world just passed us by

Our memories of yesterday will last a lifetime

We'll take the best, forget the rest

And someday we'll find these are the best of times

These are the best of times

Styx — The Best of Times

When the housing bubble burst, it was the worst of time for loan owners and speculators, and it was the best of times for buyers and cashflow investors. Some cities and regions have dropped precipitously, and to the degree these areas were dependent upon homebuilding and construction is the degree to which they are suffering today. Some of these cities will come back. Some will not.

Housing bust creates new kind of declining city

A study says cities where home prices have fallen the most — including Riverside, San Bernardino and Fresno — could suffer long-term deterioration similar to that of the Rust Belt.

January 06, 2011 — By Alejandro Lazo, Los Angeles Times

In the Inland Empire and other former home-building hot spots, the housing bust has created a new kind of declining city, different from the nation's traditional rusting centers of industry, that could languish for years.

Although the causes of the decline in these metropolitan areas are distinct from the loss of employment from shrinking manufacturing and industry in some of the nation's old industrial powerhouses, these areas could experience fates similar to places such as Cleveland and Detroit, with neighborhoods experiencing high rates of vacancies for a very long time, according to a study to be released Thursday.

“Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly,” said James R. Follain, senior fellow at the Rockefeller Institute of Government and author of the study published by the Research Institute for Housing America, a division of the Mortgage Bankers Assn.

I wrote about this same phenomenon in Ireland last May: Ghost Estates: Twenty Percent of Ireland’s Houses Are Vacant.

The long-term health of any housing market linked to the local economy. In areas where jobs are scarce and low paying, prices are low. California witnessed wage growth in excess of national norms for many years. This wage growth stimulated household formation and new home construction, and it made house prices go up faster than in other areas of the country. As a result, California home owners believe their house prices are destined to always rise faster than prices anywhere else.

Potential candidates for long-term decline named by the study are the areas hit hardest by the drop in home prices in recent years. They include several inland California metropolitan areas that grew rapidly during the boom, including Stockton, Modesto, Fresno, Riverside and San Bernardino. Las Vegas and Miami also made the list.

Las Vegas house prices will take forever to get back to the peak. Prices there are currently far below fundamental valuations, and some houses in some neighborhoods will need to triple in value to regain their 2006 stature.

Far from being a problem, the low house prices will be a huge boom to the city as workers can take lower paying jobs and live more comfortably than their counterparts in other areas. Timing does matter (a great old read).

A traditional city in decline is one that has suffered a sustained population drop, leaving behind empty houses, apartment buildings, offices and storefronts. Cleveland and Detroit, for instance, suffered from the erosion of manufacturing and the loss of residents, who left in search of jobs.

Instead of eroding a particular industry, however, the housing bust left a glut of homes because of overbuilding and the foreclosure crisis. Follain argues that the future of these cities is threatened in similar ways to that of Rust Belt cities.

“Long-vacant neighborhoods are going to develop, and we can imagine what can happen,” he said, including potentially higher crime and lower property taxes.

In California, some coastal cities already are seeing a housing market recovery. But inland areas that were built on optimistic assumptions of continued population growth and ever-climbing home values are facing a much more difficult recovery.

Any coastal market recovery is an illusion. The coastal markets are still going to get their comeuppance. Every market was subject to optimistic assumptions about house prices. Some markets have crashed and are nearing recovery whereas some markets have not crashed yet.

Celia Chen, a housing economist with Moody's Economy.com, predicts that a full recovery in parts of California, Nevada, Arizona and Florida won't occur until 2030.

“The housing boom elevated home prices in a number of areas far, far above what can be supported by the economic fundamentals, and so prices have fallen significantly, and they will remain below their previous peaks easily for a decade, or even two decades,” Chen said.

Yes, since house prices had no real reason to be so high in 2006, it probably will take until 2030 in some markets for sustained economic growth to bring wages in line with 2006 house prices.

Some experts contend that foreclosures, which have pierced neighborhoods of all income levels throughout the country, are quickly turning developments on the outskirts of metropolitan areas into the nation's newest slums. Complicating any recovery for these beaten-down areas is the difficulty in predicting which neighborhoods will fare worst. That uncertainty could lead to increasing skepticism by buyers and lenders looking to make loans on homes in these areas.

“If you are looking at this from the perspective of a home buyer or a lender, it is one thing to say you are in a market where home prices may drop 10% or 20%.” said Michael Fratantoni, vice president of research and economics with the mortgage bankers group. “That is different from the idea that 80% to 90% of the value could evaporate. That changes the whole nature of the business.”

Changes the whole nature of the business? You mean, there is risk in lending on real estate? Is there risk in buying real estate too?

Many foolishly believed that the very real risks markets face did not exist. Real estate only goes up. You can always refinance. Interest rates always go down. Both borrowers and lenders need to understand this reality if these transactions are going to occur in a stable environment. If nobody believes they have any risk, they behave in ways that inflates bubbles.

Still, the future of these regions remains a point of contention. Economist John Husing argues that the inland regions of California don't have a long-term problem.

“What has driven the Inland Empire economy is, for the last 30 years, simply the fact that the rest of Southern California is completely out of dirt,” Husing said. “Right now the price differential between coastal counties and inland counties is $100,000. People will ultimately respond to that.”

Yes, the substitution effect will stimulate demand in Riverside County and drag Orange County prices lower.

The development of industrial facilities to handle cargo from Southern California's ports will also continue inland because they require lots of space, said Husing, principal of Economics & Politics Inc. in Redlands. Such development, he said, will create jobs for workers who will need housing.

alejandro.lazo@latimes.com

Has the low end appreciated since early 2009?

Housing markets crumble from the bottom up, but they also stabilize from the bottom up too. The people who buy the bottom of the housing ladder at the bottom of the market have equity they can take with them to bid up prices in the next rung of the property ladder. This unit is the bottom of the Irvine property ladder — which actually says a lot for Irvine. If this is the worst Irvine has to offer, things are pretty good here.T

The owner of today's featured property paid $188,000 on 5/18/2009. He is asking enough to pay the realtor plus make 5% or at least give himself some room to negotiate.

Of course, this brilliant plan requires a willing buyer to play along. Is someone going to step forward and pay a higher price for this unit today?

Irvine Home Address … 97 STREAMWOOD Irvine, CA 92620

Resale Home Price … $209,900

Home Purchase Price … $188,000

Home Purchase Date …. 5/18/09

Net Gain (Loss) ………. $9,306

Percent Change ………. 5.0%

Annual Appreciation … 6.3%

Cost of Ownership

————————————————-

$209,900 ………. Asking Price

$7,347 ………. 3.5% Down FHA Financing

4.79% …………… Mortgage Interest Rate

$202,554 ………. 30-Year Mortgage

$42,429 ………. Income Requirement

$1,062 ………. Monthly Mortgage Payment

$182 ………. Property Tax

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

$35 ………. Homeowners Insurance

$242 ………. Homeowners Association Fees

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

$1,520 ………. Monthly Cash Outlays

-$99 ………. Tax Savings (% of Interest and Property Tax)

-$253 ………. Equity Hidden in Payment

$13 ………. Lost Income to Down Payment (net of taxes)

$26 ………. Maintenance and Replacement Reserves

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

$1,208 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,099 ………. Furnishing and Move In @1%

$2,099 ………. Closing Costs @1%

$2,026 ………… Interest Points @1% of Loan

$7,347 ………. Down Payment

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

$13,570 ………. Total Cash Costs

$18,500 ………… Emergency Cash Reserves

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

$32,070 ………. Total Savings Needed

Property Details for 97 STREAMWOOD Irvine, CA 92620

——————————————————————————

Beds: 1

Baths: 1 bath

Home size: 639 sq ft

($328 / sq ft)

Lot Size: 690 sq ft

Year Built: 1977

Days on Market: 2

Listing Updated: 40555

MLS Number: S643991

Property Type: Condominium, Residential

Community: Northwood

Tract: Is

——————————————————————————

Charming and Peaceful lower end unit, 1 Bedroom, 1 Bath, with Beautiful views from Dining, Kitchen, and Bedroom. The sounds of the creek right outside your windows. Spacious Patio. North facing unit across from laundry and assigned carport with storage. New carpeting and light maple wood laminate floors. Freshly painted. Community Pool, spa, BBq's, tennis courts. Close to award winning schools. Walk to stores and shopping center.

Foreclosures are expected to increase as banks begin to process the backlog of both visible (NOD, REO, MLS) and shadow inventory.

Irvine Home Address … 6 DELAMESA Irvine, CA 92620

Resale Home Price …… $530,000

Livin' simple and trying to get by

But honey, prices have shot through the sky

So I fixed up the basement with

What I was a-workin' with

Stocked it full of jelly jars

And heavy equipment

We're in the basement…

10-20-30 million dollars

Ready to be spent

B-52s — Legal Tender

Ben Bernanke is intent on printing out way out of our economic slump if necessary. As Bernanke continues printing money and giving it to banks at zero percent interest, our banks are beginning to return to health. Some banks are healthy enough to begin taking the necessary write downs on their residential real estate loans.

U.S. Foreclosure Filings May Jump 20% in 2011 as Crisis Peaks

By Dan Levy and Prashant Gopal – Jan 13, 2011 8:04 AM PT

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.

“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”

The Promissory Note and Mortgage are complicated series of promises lenders and borrowers make to each other in the loan transaction. Regardless of how borrowers perform, they are going to become emotionally attached to their properties.

If borrowers do not perform to the specifications of the repayment agreement, they generally sell, but they can simply squat and wait until foreclosure. More and more loan owners are choosing to do that.

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year — including a 26 percent drop in December — as lenders came under scrutiny for their practices.

Foreclosures have weighed down U.S. housing prices as the nation’s unemployment rate is stuck at more than 9 percent. Home values may rise 0.6 percent for the year, the first annual jump since 2006, according to Fannie Mae, the largest U.S. mortgage buyer. They have fallen as much as 33 percent since peaking in 2006, based on the S&P/Case-Shiller Index of 20 cities.

Banks seized more than 1 million homes in 2010, according to RealtyTrac. That was up 14 percent from a year earlier and the most since the company began reports in 2005.

About 3 million homes have been repossessed since the housing boom ended in 2006, Sharga said. That number could balloon to about 6 million by 2013, when the housing market may “absorb the bulk of distressed properties,” he said.

With sales well off historic norms and near 10% unemployment, who is going to step forward and buy all the distressed inventory over the next 3 years? This is going to linger on for a very long time.

Foreclosure Pipeline

“What makes this almost inevitable is the fact there are 5 million seriously delinquent loans not yet in foreclosure,” Sharga said. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”

I think many believe the invisible hand of the market is somehow going to make all these problems go away. These delinquent borrowers are either going to be given free houses as squatters, or they will be foreclosed on. Cure rates are very low because the debts are so large, and the employment and wage picture is so weak. Low cure rates will persist.

The foreclosure crisis is the biggest threat to U.S. economic growth, according to Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. Lender delays in processing defaults may prolong a decline in home prices, he said in an interview this week.

As many as 250,000 foreclosure filings that would have occurred at the end of 2010 were delayed by the ongoing probe into lender practices, according to RealtyTrac. Those proceedings will be pushed into this year, resulting in an “ugly” first quarter, Sharga said.

Attorney General Probe

Attorneys general in all 50 states are investigating whether banks and loan servicers used faulty documents and signatures on loan documents, a process that has come to be known as robo-signing. Companies including JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. halted some repossessions as they reviewed their procedures.

Foreclosure filings in December totaled 257,747, the lowest monthly tally since June 2008. The number fell 2 percent from November and 26 percent from a year earlier, the biggest annual decline in RealtyTrac records.

In Florida, among the states most affected by delays because the courts oversee foreclosures, filings plunged 54 percent from a year earlier to the lowest level since July 2007.

Total U.S. filings in the fourth quarter fell 8 percent from a year earlier to 799,064. The tally for the three-month period was the lowest since the fourth quarter of 2008.

Nevada had the highest U.S. foreclosure rate in 2010 for the fourth consecutive year, with more than 9 percent of the state’s households receiving a filing.

I will be busy.

Arizona was second at 5.7 percent and Florida third at 5.5 percent.

California’s rate was 4.1 percent, Utah’s was 3.4 percent and Georgia’s was 3.3 percent. Michigan, Idaho, Illinois and Colorado rounded out the top 10.

Five States

Five states accounted for 51 percent of the U.S. filing total, with almost 1.5 million. California led with 546,669, down almost 14 percent;

Less filings in California almost certainly means larger shadow inventory. Unemployment remains very high, and as the high prices attest, the debts here are enormous. California is not over the hump.

Florida was second at 485,286, down 6 percent; and Arizona was third at 155,878, down 4 percent.

Illinois ranked fourth at 151,304 and Michigan was fifth at 135,874, both down about 15 percent from 2009.

Georgia, Texas, Ohio, Nevada and New Jersey also ranked among the top 10, said RealtyTrac, which sells data from counties representing 90 percent of the U.S. population.

To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Prashant Gopal in New York at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Over 1 million Americans seen losing homes in 2011

After a record 1 million home foreclosures in 2010, this year is likely to be even worse

Janna Herron, AP Real Estate Writer, On Thursday January 13, 2011, 3:21 pm EST

NEW YORK (AP) — The bleakest year in the foreclosure crisis has only just begun.

Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and industry experts say more people will miss payments because of job losses and also loans that exceed the value of the homes they are living in.

“2011 is going to be the peak,” said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc. The firm predicts 1.2 million homes will be repossessed this year.

I don't know. Two Thousand Eleven might be the peak of foreclosures, but some markets will take much longer to clear out, and some will process quicker. I suspect we may see a peak in foreclosures, but the for-sale inventory may not peak for a year or two after that as we process the backlog.

Banks will undoubtedly be selling into the upwelling of the new recovery. IMO, the recovery will be weak because people will continue to pay down debt, and no HELOC money will be made available because there has been no appreciation to create any free money. The lack of mortgage equity withdrawal will be a drag on the economy An unpleasant side effect of government meddling falsely propping up prices and delaying the bottom.

The blistering pace of foreclosures this year will top 2010, when a record 1 million homes were lost, RealtyTrac said Thursday.

One in every 45 U.S. households received a foreclosure filing last year, a record 2.9 million of them. That's up 1.67 percent from 2009.

On Thursday, Freddie Mac reported that fixed mortgage rates dipped this week for the second straight time, extending a sliver of hope for some home owners.

A sliver of false hope? Interesting that this news story actually states they are giving the hopeless something to cling on to. Denial must be the driver of investment related reporting.

The average rate on the 30-year mortgage dropped to 4.71 percent from 4.77 percent the previous week. The rate on the 15-year loan, a popular refinance choice, slipped to 4.08 percent from 4.13 percent.

But both are a half-point higher than the lows they reached in November. The 30-year loan rate hit a 40-year low of 4.17 percent and the 15-year mortgage rate fell to 3.57 percent, the lowest level on records starting in 1991.

The dip has led more borrowers to apply for a refinance, but would-be buyers remain hesitant, according to Wednesday's mortgage indexes from the Mortgage Bankers Association. It will take more than low mortgage rates to jumpstart a housing market plagued by high unemployment, falling prices, tighter credit standards.

The glut of foreclosures has compounded the problem and while the pace moderated in the final months of 2010, that isn't expected to last.

Foreclosures are expected to remain elevated throughout the year, pushing home prices down another 5 percent nationally before finally bottoming out.

The number of homes that received at least one foreclosure-related filing in December was the lowest monthly total in 30 months. Total notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said.

Banks temporarily halted actions against borrowers severely behind on their payments after allegations of improper eviction surfaced in September.

Are you starting to suspect that banks will either invent or embrace any story that allows them to delay foreclosure?

However, most banks have since resumed foreclosures and the first quarter will likely bear that out, Sharga said.

The pain likely will be the most acute in states that have already suffered the worst. For the most part, it will be states that saw the biggest housing booms: Nevada, Arizona, Florida and California. They will be joined by states hit hardest by the economic downturn, including Michigan and Illinois.

And on Wednesday, Illinois lawmakers approved a 66 percent income-tax increase in a desperate bid to end the state's crippling budget crisis.

I hope Jerry Brown isn't getting any ideas….

More than half of the country's foreclosure activity came out of five states in 2010: California, Florida, Arizona, Illinois and Michigan. Together, these states recorded almost 1.5 million households receiving a filing, despite year-over-year decreases in California, Florida and Arizona.

Nevada posted the highest foreclosure rate in 2010 for the fourth straight year, despite a 5 percent decline in activity from the year before. One in every 11 households received a foreclosure filing last year in the state. In December, foreclosure activity increased 18 percent from November with a 71 percent spike in bank repossessions.

Arizona and California also showed sharp December increases in the number of homes that banks reclaimed, at 52 percent and 47 percent, respectively. Arizona, along with Florida, finished the year at No. 2 and No. 3 for the highest foreclosure rates.

One in every 17 Arizona households got a foreclosure filing last year, while one in 18 received a notice in Florida.

California, Utah, Georgia, Michigan, Idaho, Illinois and Colorado rounded out the top ten states with the highest foreclosure rates.

RealtyTrac tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure.

As more shadow inventory is brought into the light, prices will remain under pressure. It doesn't look like a vibrant economy is coming to save the market. Even if a rebound were robust, it wouldn't save many of the indebted anyway. Like those who got Option ARMs with 1% teaser rates.

Selecting Pay-Option default

The Option ARM, also known as the pay-option ARM, allowed a borrower to select a payment: (1) the fully amortized payment they could not afford, (2) the interest-only payment they probably could not afford, and (3) the teaser rate payment they could afford as long as the teaser rate was offered in perpetuity.

• The owner of today's featured property paid $433,000 on 12/10/2003. He used a $411,350 first mortgage and a $21,650 down payment.
• On 9/8/2005 he refinanced with a $508,000 Option ARM with a 1% teaser rate, and he obtained a $50,800 HELOC.
• On 5/17/2006 he enlarged the HELOC to $85,800.
• Total property debt is $593,800 plus negative amortization on a 1% teaser rate.
• Total mortgage equity withdrawal is $182,450.

He isn't in default, but he can't pay off the mortgage, so this is a short sale.

Irvine Home Address … 6 DELAMESA Irvine, CA 92620

Resale Home Price … $530,000

Home Purchase Price … $433,000

Home Purchase Date …. 12/10/03

Net Gain (Loss) ………. $65,200

Percent Change ………. 15.1%

Annual Appreciation … 2.8%

Cost of Ownership

————————————————-

$530,000 ………. Asking Price

$106,000 ………. 20% Down Conventional

4.79% …………… Mortgage Interest Rate

$424,000 ………. 30-Year Mortgage

$107,133 ………. Income Requirement

$2,222 ………. Monthly Mortgage Payment

$459 ………. Property Tax

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

$88 ………. Homeowners Insurance

$81 ………. Homeowners Association Fees

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

$2,851 ………. Monthly Cash Outlays

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

-$530 ………. Equity Hidden in Payment

$194 ………. Lost Income to Down Payment (net of taxes)

$66 ………. Maintenance and Replacement Reserves

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

$2,205 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,300 ………. Furnishing and Move In @1%

$5,300 ………. Closing Costs @1%

$4,240 ………… Interest Points @1% of Loan

$106,000 ………. Down Payment

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

$120,840 ………. Total Cash Costs

$33,700 ………… Emergency Cash Reserves

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

$154,540 ………. Total Savings Needed

Property Details for 6 DELAMESA Irvine, CA 92620

——————————————————————————

Beds: 3

Baths: 2 baths

Home size: 1,325 sq ft

($400 / sq ft)

Lot Size: 4,365 sq ft

Year Built: 1977

Days on Market: 3

Listing Updated: 40554

MLS Number: P765471

Property Type: Single Family, Residential

Community: Northwood

Tract: Ps

——————————————————————————

Great opportunity to own a Charming house in Park Paseo. open airy and bright floor plan with laminated wood floors and High ceiling. Walking distance to Award Winning Santiago Hills Elementary School & Northwood High School. Large yard with patio. Association ammenties are pools, Tennis, Spa, clubhouse, Tot Lots, BBQ's. Walk to Shopping, parks & trails. Low Tax Rate, No Mello Roos, Association Dues $81/month. DON'T MISS THIS CHANCE!!!

ammenties?

Jack Guynn, Atlanta federal reserve bank President, expressed concerns about the housing bubble in 2004 and presented evidence in 2005. Alan Greenspan did nothing.

Irvine Home Address … 68 WOODLEAF Irvine, CA 92614

Resale Home Price …… $270,000

I tried to warn you somehow

You had your way

Now you must pay

I'm glad that you're sorry now

Connie Francis — Who's Sorry Now?

As Alan Greenspan guided the economy into the abyss, some voices both inside and outside the inner sanctum warned Greenspan of impending disaster. I wonder if Greenspan is sorry he didn't listen?

There were many people who saw the housing bubble for what it was. Many readers of this blog chose not to buy when others lost their senses. Though they may lack the resources of professional economists at the federal reserve, but many people inside and outside the industry pointed to problems that culminated with the housing bubble.

Few insiders with positions of power and influence saw the housing bubble. One notable exception is Jack Guynn, former president of the Atlanta federal reserve bank (not Fred Guynn the actor that played Herman Munster.)

Atlanta Fed's Former President Jack Guynn Is The Original Housing Crash Prophet

Tyler Durden on 05/02/2010

As we were perusing the just declassified full 2004 FOMC transcripts, our attention was caught by two specific things in the December 14 uber-grouthink session. First, the original housing prophet is not Hoenig, not Lacker, and certainly no other Fed member: it is former Atlanta Fed president Jack Guynn, who prudently got out of dodge on October 1, 2006. Guynn was the first to point out, in the long ago days of 2004, that Fed policy could be leading to a massive housing bubble. Good thing the Maestro was more concerned about his misplaced dentures than to listen to voices of reason at the Eccles building. Yet speaking of the Maestro, we catch an amusing anecdote, in which it becomes obvious that none other than the Fed Chairman looks at the CFTC's Commitment of Traders reports to get an indication as to what may or may not happen to the relative strength of the dollar. When one considers this fact, and juxtaposes it with observation that the Fed runs the formerly free world, does it imminently follow that the people in charge are not brilliantly scheming and conspiratorial, but merely very, very, very dumb?

Here's Guynn:

The substantial run-up in house prices, which we have followed in Florida and also see in the populous Northeast and West Coast of the United States, may be at least partially attributable to unusually low mortgage rates influenced by our very accommodative policy, which has been in place for some time. Those developments and the risks associated with the run-up in house prices probably deserve further study and thought as we decide how to posture policy.

I continue to be comfortable with the policy path we’re on. And barring some surprise, I judge that we still have a considerable way to go to get back to a more neutral stance. My concern is that, with a real fed funds rate that continues to be near zero, we could unintentionally be encouraging further imbalances in both the inflation environment and in the international sector. I hope we will not try to signal that we may soon pause in our removal of policy accommodation. Thank you, Mr. Chairman.

So much for further study and thought. While we can't fault Greenspan, the man was like 500 years old at this time, we wonder what vice-Chairman Geithner was doing when presented with these words of caution – aside from reading the tax code of the US from cover to cover of course.

The 2005 transcripts have just been released.

The FOMC Debates the Housing Bubble in 2005

by CalculatedRisk on 1/14/2011 04:05:00 PM

The Federal Reserve just released the transcripts of the FOMC meetings in 2005. This will take some reading, but the June meeting was focused on housing. From then Atlanta Fed President Jack Guynn:

[T]there is the housing situation, which we talked about for a long time yesterday afternoon. As I’ve been reporting for several meetings, some of our markets, especially those in coastal areas of South Florida and the Florida panhandle, are experiencing a level of building activity and price increases that are clearly, in my view, unsustainable. Nearly every major Florida city now has experienced increases in the double-digit range, and some, like Miami, Palm Beach, Sarasota, and West Palm, have been reporting increases in housing prices on a year-over-year basis of between 25 and 30 percent. While our discussion yesterday did not seem to indicate a consensus on a national housing bubble, based on past experience I’m reasonably comfortable characterizing the housing feeding frenzy in some of our markets as being a bubble or a near bubble. For example, the number of major projects planned or under construction in Miami now totals 114, most of which are high-rise developments. That includes 61,000 condo units—eight times the number that were built in the last decade—and a total of 100,000 new parking spaces. I know we don’t have any process for introducing exhibits into the record, but I’d like to pass Dave Stockton this pictorial of the new projects in Miami, so that he can continue to worry a little bit along with me. [Laughter] My supervision and regulation staff thinks this is an accident waiting to happen in our area. And while the local market excesses probably do not represent systemic national risk, the shakeouts could have serious regional consequences. My bank supervision staff points out that housing-related credit risks to our bank lenders are not so much from defaults on permanent mortgage financing that we talked about yesterday, but rather from lending for land acquisition, development, and construction. The ugly picture we have seen before—and that they think we may very likely see again before long—goes something like this: the drying up of sales of new units; the painful decision of developers to go ahead and complete the construction of additional units to make them saleable, further depressing the market; and speculators who had hoped to see big capital gains walking away or defaulting on their contracts, giving their properties back to the lender. Perhaps it’s because of where I sit, but I am less comforted than some of my colleagues about the housing situation. … CHAIRMAN GREENSPAN. Let’s take a break for coffee.

Here are the presentation materials for the June meeting with plenty of graphs on housing.

Jack Guynn strongly suspected there was a housing bubble in 2004. He sets a team of researchers on the problem, and the results showed there was clearly a problem. He correctly foresaw the collapse of the high-rise markets in Miami, Las Vegas, and Orange County. What did Greenspan do? Nothing.

For those with historic interest on the housing bubble, the complete text of the Great Housing Bubble is available on as a PDF on the right sidebar, and the online version is available by clicking on the bookshelf below or in our library.

Ponzi Squatter

Living as a Ponzi was common during the housing bubble. Those that flamed out are squatting in their broken ATM machines.

• The owner of today's featured property paid $207,500 on 3/15/2002. He used a $186,542 first mortgage and a $20,958 down payment.
• On 7/29/2003, he obtained a $55,400 stand-alone second.
• On 12/3/2004 he refinanced with a $290,000 Option ARM with a 1% teaser rate.
• On 9/16/2005 he obtained a $40,000 stand-alone second.
• On 11/1/2007 he refinanced with a $360,000 first mortgage. It looks like he paid for about a year.

  

Foreclosure Record

Recording Date: 02/10/2010

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 07/22/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 04/17/2009

Document Type: Notice of Default

Total mortgage equity withdrawal is $173,458. That plus two years of either squatting or rent skimming is this owners compensation for a ruined credit score. I think the borrower got the better end of the deal.

Irvine Home Address … 68 WOODLEAF Irvine, CA 92614

Resale Home Price … $270,000

Home Purchase Price … $207,500

Home Purchase Date …. 3/15/02

Net Gain (Loss) ………. $46,300

Percent Change ………. 22.3%

Annual Appreciation … 2.9%

Cost of Ownership

————————————————-

$270,000 ………. Asking Price

$9,450 ………. 3.5% Down FHA Financing

4.79% …………… Mortgage Interest Rate

$260,550 ………. 30-Year Mortgage

$54,577 ………. Income Requirement

$1,365 ………. Monthly Mortgage Payment

$234 ………. Property Tax

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

$45 ………. Homeowners Insurance

$414 ………. Homeowners Association Fees

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

$2,058 ………. Monthly Cash Outlays

-$127 ………. Tax Savings (% of Interest and Property Tax)

-$325 ………. Equity Hidden in Payment

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

$34 ………. Maintenance and Replacement Reserves

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

$1,657 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,700 ………. Furnishing and Move In @1%

$2,700 ………. Closing Costs @1%

$2,606 ………… Interest Points @1% of Loan

$9,450 ………. Down Payment

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

$17,456 ………. Total Cash Costs

$25,300 ………… Emergency Cash Reserves

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

$42,756 ………. Total Savings Needed

Property Details for 68 WOODLEAF Irvine, CA 92614

——————————————————————————

Beds: 2

Baths: 1 bath

Home size: 1,060 sq ft

($255 / sq ft)

Lot Size: n/a

Year Built: 1983

Days on Market: 7

Listing Updated: 40553

MLS Number: P765314

Property Type: Condominium, Residential

Community: Woodbridge

Tract: Ad

——————————————————————————

Very lovely condo in Woodbridge area. Down stairs home with enclosed patio and storage. Light and Bright end unit. Master bedromm with walk in colset. A larege community park, play ground and swimming pool with spa.

bedromm? colset? larege?

Enjoy your holiday!