Open Thread 1-17-2009

Bad to the Bone — George Thorogood

On the day I was born
The nurses all gathered ’round
And they gazed in wide wonder
At the joy they had found
The head nurse spoke up
Said “leave this one alone”
She could tell right away
That I was bad to the bone

No particular theme for this weekend’s post. Sometimes you just want a little testosterone rush…

I know some of you have been waiting for some sponsored posts. We have still been looking for the right property. Quite honestly, prices are still too high, and there are not many truly good deals in the marketplace.

In a normal real estate market (i.e. anywhere other than California), there are two types of properties: 1. Those properties desirable for owner-occupants that trade near rental parity, and 2. Those undesirable properties that trade at prices where cashflow investors can obtain a 10% – 12% return on their downpayment investment. Those are the properties we are looking for.

Right now in the market, there are many properties trading at or below rental parity. These are not hard to find. However, there are no desirable properties trading at rental parity, and the undesirable ones have not fallen far enough below rental parity to be a good rental investment. That only leaves one kind of “investment” property available: the speculative bet with positive cashflow.

One of the least intelligent investment decisions people made during the bubble was paying so much for their speculative bets that the property could not generate enough cashflow to cover the cost of ownership. An investment that consumes more cash than it generates is what Robert Kiyosaki calls an “alligator.” It is a great method for losing a lot of money. Our current crop of floplords is finding this out right now.

Prices in many markets are low enough that properties at least do not lose money each month, and some even generate a positive cashflow. The rate of return on these properties is very small, and you can probably earn as much money from a high-yield CD as you can from some of these rentals. However, if there is another bubble, you could make money on appreciation, and in the meantime, you can hold these properties indefinitely waiting for prices to go up.

Personally, I think properties that do not cashflow enough to be a valid investment without appreciation is a foolish way to invest. But then again, I have every confidence my fellow Californian’s will create another real estate bubble if given the chance. The bet an “investor” in these properties is making is that the lenders will be stupid enough to loosen credit and create another unsustainable Ponzi Scheme that will cost them a trillion dollars. I just don’t see that happening again soon.

We may put up some sponsored posts of properties in this grey area that have positive cashflow and are candidates for future appreciation. It may be a while before we see cap rates in excess of 8%, and with interest rates being very low, it may be a very long time before we see 10% to 12% cap rates in residential real estate. Despite how much prices have crashed in many areas, they are still too high.

{book}

There are some properties that are trading at prices that are so low that they do make sense as rentals. However, they are in such undesirable neighborhoods that it may be difficult to keep them rented. We do not want to profile these properties because we do not want to suggest a property that would require the buyer to be a slumlord.

Check out some of these properties:

2521 W Sunflower Ave #R2 Santa Ana,
CA 92704: $279,000 in 2004, asking $128,000 today.

2101 S Pacific Ave #75 Santa Ana,
CA 92704: $350,000 in 2006, asking $99,900 today. That is 72% off!

717 E Chestnut Ave #9 Santa Ana,
CA 92701: $270,000 in 2005, asking $83,000 today.

223 S Juanita St Hemet,
CA 92543: $265,000 in 2005, asking $54,900 today. That is 80% off!

344 ALESSANDRO Hemet,
CA 92543: $270,000 in 2005, asking $42,000 today. That is 85% off!

And just so I am not accused of only profiling really awful properties…

35756 Trevino Beaumont,
CA 92223: $492,000 new in 2006, asking $122,850 today. That is a property just over 2 years old (December 2006 to January 2009) selling at a 75% discount.

I may add some more properties to the list this weekend. I only looked for 10 minutes on Redfin to find these. Look in any fringe market, and you will see devastation that is almost hard to imagine. Many almost-new houses are selling for less than their replacement costs

Here is some fan mail I received this morning:

“
Roberts assumes too much without any knowledge of the facts.
Like most writers, he takes facts from the garbage can of other writers and
feeds it to the ignorant masses. I am a realtor and this makes me mad. Nothing
could be farther from the truth. A realtor, unlike a writer, has to research the
market in order to place a value on a listing that sells. A home that is
overpriced gets shown with other houses in the same price range. The average
buyer looks a 10 homes before choosing one among them. An overpriced home would
not show well among the 10 other homes the buyer has examined.

A realtor can earn more money by pricing a house low. All
top agents will attest to this. A well price or home will sell twice as fast.
The real estate agent can sell twice as many homes per year by pricing his
listings at a fair price. Only a pen head writer would not have discovered this
fact if he were researching for the truth instead of hoping for a
Pulitzer.“

Does anyone else think I am factually challenged?

I must have something left in my Reservoir of Schadenfreude because winding up a realtor does not upset me. I wish I knew what this message was in response to so I could comment further.

More Articles

Roberts, Lawrence D. “How Do Debt-To-Income Ratios Impact House Prices?.” How Do Debt-To-Income Ratios Impact House Prices? EzineArticles.com. http://ezinearticles.com/?How-Do-Debt-To-Income-Ratios-Impact-House-Prices?&id=1853776

Roberts, Lawrence D. “Home Equity – What is It?.” Home Equity – What is It? EzineArticles.com. http://ezinearticles.com/?Home-Equity—What-is-It?&id=1841771

Roberts, Lawrence D. “Paying Off Mortgage Debt is Becoming Fashionable Again.” Paying Off Mortgage Debt is Becoming Fashionable Again EzineArticles.com. http://ezinearticles.com/?Paying-Off-Mortgage-Debt-is-Becoming-Fashionable-Again&id=1857241

Roberts, Lawrence D. “Exotic Loan Programs Always Fail.” Exotic Loan Programs Always Fail EzineArticles.com. http://ezinearticles.com/?Exotic-Loan-Programs-Always-Fail&id=1867505

Roberts, Lawrence D. “Pick-a-Pay Option ARM Loans – What Are They?.” Pick-a-Pay Option ARM Loans – What Are They? EzineArticles.com. http://ezinearticles.com/?Pick-a-Pay-Option-ARM-Loans—What-Are-They?&id=1867521

Roberts, Lawrence D. “The Home Mortgage Financing Impact on Home Equity.” The Home Mortgage Financing Impact on Home Equity EzineArticles.com. http://ezinearticles.com/?The-Home-Mortgage-Financing-Impact-on-Home-Equity&id=1867509

Roberts, Lawrence D. “The Truth About Renting Versus Owning Residential Real Estate.” The Truth About Renting Versus Owning Residential Real Estate EzineArticles.com. http://ezinearticles.com/?The-Truth-About-Renting-Versus-Owning-Residential-Real-Estate&id=1867510

Roberts, Lawrence D. “Conventional 30 – Year Amortizing Mortgage – Why Use It?.” Conventional 30 – Year Amortizing Mortgage – Why Use It? EzineArticles.com. http://ezinearticles.com/?Conventional-30—Year-Amortizing-Mortgage—Why-Use-It?&id=1867511

Roberts, Lawrence D. “The Interest-Only, Adjustable-Rate Mortgage is Very Risky.” The Interest-Only, Adjustable-Rate Mortgage is Very Risky EzineArticles.com. http://ezinearticles.com/?The-Interest-Only,-Adjustable-Rate-Mortgage-is-Very-Risky&id=1867516

Roberts, Lawrence D. “Lies Realtors Tell – Ten of Their Favorites.” Lies Realtors Tell – Ten of Their Favorites EzineArticles.com. http://ezinearticles.com/?Lies-Realtors-Tell—Ten-of-Their-Favorites&id=1867526

Roberts, Lawrence D. “Bring Back Paternalism in the Mortgage Market.” Bring Back Paternalism in the Mortgage Market EzineArticles.com. http://ezinearticles.com/?Bring-Back-Paternalism-in-the-Mortgage-Market&id=1868727

Roberts, Lawrence D. “House Prices Are Supported by Fundamentals – Not!.” House Prices Are Supported by Fundamentals – Not! EzineArticles.com. http://ezinearticles.com/?House-Prices-Are-Supported-by-Fundamentals—Not!&id=1890440

Roberts, Lawrence D. “Stated-Income Loans – How Common Were They?.” Stated-Income Loans – How Common Were They? EzineArticles.com. http://ezinearticles.com/?Stated-Income-Loans—How-Common-Were-They?&id=1905417

Roberts, Lawrence D. “Future Loan Terms and Residential Real Estate Markets.” Future Loan Terms and Residential Real Estate Markets EzineArticles.com. http://ezinearticles.com/?Future-Loan-Terms-and-Residential-Real-Estate-Markets&id=1905522

Roberts, Lawrence D. “Home Improvement Loans Are a Bad Idea.” Home Improvement Loans Are a Bad Idea EzineArticles.com. http://ezinearticles.com/?Home-Improvement-Loans-Are-a-Bad-Idea&id=1905456

Roberts, Lawrence D. “Down Payments Are Back! What Happened to 100% Financing?.” Down Payments Are Back! What Happened to 100% Financing? EzineArticles.com. http://ezinearticles.com/?Down-Payments-Are-Back!-What-Happened-to-100%-Financing?&id=1905430

Roberts, Lawrence D. “Inflation and Home Equity – What is the Relationship?.” Inflation and Home Equity – What is the Relationship? EzineArticles.com. http://ezinearticles.com/?Inflation-and-Home-Equity—What-is-the-Relationship?&id=1905441

Roberts, Lawrence D. “Judicial and Non-Judicial Foreclosure – What is the Difference?.” Judicial and Non-Judicial Foreclosure – What is the Difference? EzineArticles.com. http://ezinearticles.com/?Judicial-and-Non-Judicial-Foreclosure—What-is-the-Difference?&id=1905460

Roberts, Lawrence D. “Mortgage Equity Withdrawal – Are Americans Addicted to It?.” Mortgage Equity Withdrawal – Are Americans Addicted to It? EzineArticles.com. http://ezinearticles.com/?Mortgage-Equity-Withdrawal—Are-Americans-Addicted-to-It?&id=1905466

Nobody Wants This One

Gotta Be Somebody — Nickelback

Cause nobody wants to be the last one there

It must be very difficult to sell a really undesirable property. It must be very difficult to admit to yourself that you are the bagholder. You were the greater fool. You were the one who paid a King’s Ransom for a piece of crap nobody else wants. This is even more difficult when it is a short sale, and the lender is not willing to lower the price enough for you to sell it. The reality of your folly must be hard to ignore when you can’t get rid of it.

Today’s featured property is a large home on a big lot in Irvine. One would think this combination would be an easy sell. Apparently it is not.

You have to love this realtor comment: “Needs some TLC such as carpet, paint (inside & out),remodeling, landscaping, etc., but very nice neighborhood.”

Translation, “OMG, this is a POS. Well, it is in Irvine…”

Asking Price: $599,900

Income Requirement: $149,975

Downpayment Needed: $119,980

Monthly Equity Burn: $5,000

Purchase Price: $760,000

Purchase Date: 5/13/2005

Address: 3671 Claremont St., Irvine, CA 92614

Beds:	5
Baths:	3
Sq. Ft.:	2,533
$/Sq. Ft.:	$237
Lot Size:	5,100 Sq. Ft.
Property Type:	Single Family Residence
Style:	Contemporary
Year Built:	1969
Stories:	2
Area:	Westpark
County:	Orange
MLS#:	S528724
Source:	SoCalMLS
Status:	Active
On Redfin:	277 days
Unsold in 90+ days Fixer-upper

Westpark Home in nice neighborhood. Needs some TLC such as carpet,
paint (inside & out),remodeling, landscaping, etc., but very nice
neighborhood.

So let me get this straight: This house is a trashed and needs to be completely done over inside and out. Before I can even begin, I have to spend $600,000. I will need a $120,000 downpayment, plus cash reserves, plus another $100,000 to fix the place up. When I am done, I will be out-of-pocket over $220,000 cash, I will have a $480,000 mortgage, and I will have a 40-year old property in Irvine that will be worth less than my mortgage in two years.

WHAT A DEAL!!!

The property records on this house are incomplete. There are a number of people listed as buyers who never took possession. It is difficult to ascertain what is going on or how much is owed. There is a recorded mortgage for $608,000 which may explain why the $600,000 price threshold has been so sticky with this seller. Check out this listing history:

Date	Event	Price	Appreciation	Source
Jan 14, 2009	Price Changed	$599,900	—	SoCalMLS #S528724
Jan 07, 2009	Price Changed	$625,000	—	SoCalMLS #S528724
Jan 07, 2009	Relisted	—	—	SoCalMLS #S528724
Jan 07, 2009	Off Redfin	—	—	SoCalMLS #S528724
Oct 26, 2008	Price Changed	$599,900	—	SoCalMLS #S528724
Oct 22, 2008	Relisted	—	—	SoCalMLS #S528724
Sep 23, 2008	Price Changed	$597,500	—	SoCalMLS #S528724
Aug 05, 2008	Price Changed	$610,000	—	SoCalMLS #S528724
Jul 01, 2008	Price Changed	$629,900	—	SoCalMLS #S528724
Jul 01, 2008	Relisted	—	—	SoCalMLS #S528724
Jun 09, 2008	Off Redfin	—	—	SoCalMLS #S528724
Jun 03, 2008	Relisted	—	—	SoCalMLS #S528724
Apr 21, 2008	Off Redfin	—	—	SoCalMLS #S528724
Apr 13, 2008	Listed	$670,000	—	SoCalMLS #S528724
May 13, 2005	Sold	$760,000	—	Public Records

It is not clear whether or not this is a short sale. It may be that the $600,000 price is necessary to prevent a short sale. It appears as if the market is saying this isn’t low enough. Given this property’s state of repair, further price reductions are going to be necessary to sell it.

So let me hear some creative solutions to this problem: You have an undesirable property you need to sell, but you can’t reduce your price. If anyone can solve this dilemma, there are several million sellers out there waiting to hear from you…

I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book}

This time, I wonder what it feels like
To find the one in this life, the one we all dream of
But dreams just aren’t enough
So I’ll be waiting for the real thing, I’ll know it by the feeling
The moment when we’re meeting, will play out like a scene
Straight off the silver screen
So I’ll be holding my own breath, right up ’til the end
Until that moment when, I find the one that I’ll spend forever with
Nickelback
Cause nobody wants to be the last one there
Cause everyone wants to feel like someone cares
Someone to love with my life in their hands
There’s gotta be somebody for me like that
Cause nobody wants to do it on their own
And everyone wants to know they’re not alone
There’s somebody else that feels the same somewhere
There’s gotta be somebody for me out there

Tonight, out on the street, out in the moonlight
And dammit this feels too right, it’s just like deja vu
Me standing here with you
So I’ll be holding my own breath, could this be the end
Is it that moment when, I find the one that I’ll spend forever with

Cause nobody wants to be the last one there
Cause everyone wants to feel like someone cares
Someone to love with my life in their hands
There’s gotta be somebody for me like that
Cause nobody wants to do it on their own
And everyone wants to know they’re not alone
There’s somebody else that feels the same somewhere
There’s gotta be somebody for me out there

Gotta Be Somebody — Nickelback

We've Only Just Begun

We’ve Only Just Begun — The Carpenters

{book}

The truth about real estate is that most people will buy and sell due to life’s circumstances. If a family wants to own a home for stability and security because they have small children or if a baby is on the way, they are not concerned with whether or not they are properly timing the real estate cycle. Unfortunately, the real estate cycle moves independantly of our life cycle.

We’ve only just begun to live,
White lace and promises
A kiss for luck and we’re on our way.

The innocent people who got caught up in the housing bubble — and there are many buyers who were not motivated by greed — are paying an hefty price for their own bad timing. Look at what a difference a few years makes.

Let’s say you graduated college in 1994. You were probably a bit bummed because the California economy was not doing that well, but if you found a job, you could begin your life. People in that circumstance might have been ready for marriage shortly thereafter, and they probably bought a house between 1997 and 2000. These people, assuming they did not abuse their HELOCs, are not going to lose their homes in foreclosure.

Now look at the circumstances of someone who graduated in 2001. They should not have been ready to buy until perhaps 2008, but with innovations in home mortgage finance, they were able to enter the real estate market early. They were “pulled forward” into 2004, 2005 or 2006. These are not real estate experts (although some probably thought they were), they are just 20-somethings who were given an opportunity to own a home with little sacrifice or saving on their part. Why would they have turned this opportunity down?

Well, the people who were graduating in 1994 are doing OK whereas those who graduated in 2001 or later are totally screwed.

Is this right? Should the real estate cycle really be allowed to have such a capricious impact on people’s lives? Does anyone think this system works?

The housing bubble is having an enormous impact on the health of individuals, families and entire
communities. As
with any mass delusion, it is difficult to see beyond the comforting
fallacies to understand the deeper truth; however, it is essential to
do so because the cost in emotional and financial terms of getting
caught up in the mania is very high. Foreclosure and bankruptcy are bad
for individuals, bad for families, and bad for society.

So much of life ahead
We’ll find a place where there’s room to grow,

When I saw the listing photos for today’s featured property, I couldn’t help but feel compassion for the innocent. (Do you think this means I have emptied my Reservoir of Schadenfreude?) When you see the first photo, your eye cannot help but be draw to the wedding photo on the wall over the fireplace (followed by the bottle on the counter…) Then when you see the kitchen photo, you see all the pictures on the refrigerator. There is another photo with a picture of the happy couple near the TV. (This is horrible staging, BTW).

This couple, this family, is watching their future get destroyed by the housing bubble.

Now before we break out the violins, this was a 100% financing deal, and they owners are not losing any of their money, but their dreams of climbing the property ladder are gone, their credit score will plummet, and they will be shut out of the housing market for the foreseeable future. All because their life cycle lead them to buy at the worst possible time in the housing cycle.

2206 Apricot Dr Living Room 2206 Apricot Dr Kitchen

Asking Price: $274,999

Income Requirement: $68,750

Downpayment Needed: $55,000

Monthly Equity Burn: $2,291

Purchase Price: $389,000

Purchase Date: 6/21/2006

Address: 2206 Apricot Dr #206, Irvine, CA 92618

Beds:	2
Baths:	2
Sq. Ft.:	910
$/Sq. Ft.:	$302
Lot Size:	–
Property Type:	Condominium
Style:	Contemporary/Modern
Year Built:	1979
Stories:	1
Floor:	1
View:	Mountain, Pool
Area:	Orangetree
County:	Orange
MLS#:	S559747
Source:	SoCalMLS
Status:	Active
On Redfin:	1 day
New Listing (24 hours)

Single level condo on 2nd floor with elevator access. 2 Bedroom and 2
Bath condo with Patio/Balcony out Master and Dining Area. Open floor
plan. Fireplace in Living area. Close to shopping and Freeway. Secured
building. Elevator and intercom. Handicap access. HOA provides water,
gas, trash, maintenance, pool spa, lit tennis courts, basketball court
and tot lot.

This property was purchased on 6/21/2006, right at the peak of the bubble. The owner used a $311,200 first mortgage, a $77,800 second mortgage, and a $0 downpayment. If this property sells for its asking price, the lender stands to lose $130,500 after a 6% commission. BTW, most of this loss was a second mortgage insured by the GSEs. In other words, you and I will be paying for this loss with tax dollars.

So how do you feel about this now? Are these people predatory borrowers betting on appreciation? Were they innocent victims just trying to live their lives? Are they something in between?

{book}

We’ve only just begun to live,
White lace and promises
A kiss for luck and we’re on our way.
And yes, We’ve just begun.

Before the rising sun we fly,
So many roads to choose
We start our walking and learn to run.
And yes, We’ve just begun.

Sharing horizons that are new to us,
Watching the signs along the way,
Talking it over just the two of us,
Working together day to day
Together.

And when the evening comes we smile,
So much of life ahead
We’ll find a place where there’s room to grow,
And yes, We’ve just begun.

We’ve Only Just Begun — The Carpenter

You Must Flip It

Whip It — Devo

When a prop'ty comes along You must flip it

Before the home sits out too long You must flip it

When somethings going wrong You must flip it

When you buy as a flipper, you are a fool. Your task is to find someone more foolish than yourself to buy you out before prices crash. There are bagholders for every price crash. Someone has to own the asset while it declines in value. The trick to flipping is not to be that someone.

Speculative flipping only works when prices are rising. There are a few people who manage to make a few bucks buying at foreclosure auctions and quickly selling before the declining prices take them underwater, but these people are the exception rather than the rule. Most people who made money flipping during the bubble simply bought property, waited for a while, then sold it to some greater fool. That method does not work when prices are falling.

Despite the total collapse of pricing at the bottom of the market and the obvious signs of an impending market implosion, some people chose to buy real estate as speculative flips in recent years. I have already profiled a couple who have changed their minds and are trying to get out, but it is the ones who actually price the property to make a profit I find most interesting. They really believe there is someone out there who is even more stupid than they are.

Today's featured property is one such flipper. I know the penthouse is supposed to be nice, but is the premium really $900,000 or worse yet $1,575,000? Should people really pay $1,000/SF when properties in the same building are selling for less than $400/SF?

8153 Scholarship view 8153 Scholarship kitchen

Asking Price: $1,950,000

Income Requirement: $487,500

Downpayment Needed: $390,000

Monthly Equity Burn: $16,250

Purchase Price: $1,823,000

Purchase Date: 8/3/2007

Address: 8153 Scholarship, Irvine, CA 92612

Beds:	2
Baths:	3
Sq. Ft.:	1,950
$/Sq. Ft.:	$1,000
Lot Size:	–
Property Type:	Condominium
Style:	Contemporary/Modern
Year Built:	2007
Stories:	2
Floor:	15
View:	Canyon, City Lights, City, Golf Course, Hills, Lake, Mountain, Panoramic, Resevoir, Trees/Woods, Has View
Area:	Airport Area
County:	Orange
MLS#:	S558863
Source:	SoCalMLS
Status:	Active
On Redfin:	5 days

Expansive views of the nature preserve, mountains and twinkling city lights from this highly upgraded penthouse (1). Two bedrooms plus den/office, 2.5 baths poised on the 15th and 16th floors of the magnificent Plaza Irvine. Live and entertain in grand style from the gourmet kitchen with Viking appliances, custom countertop with backsplash. Enjoy the custom hardwood flooring, handsome fireplaces both in the master suite and living room, surround sound and PLasma TV in HD. First class service and top of the line amenities. Experience an urban lifestyle that is second to none!

An urban lifestyle second to none? LOL! This is Irvine, not New York.

How does one upgrade a penthouse? Do they have a downscale version of a penthouse?

Perhaps the high end is immune. Perhaps that is a $2,000,000 view and a $2,000,000 kitchen. Perhaps this seller will find that unique buyer who recognizes the special attributes of this property. Perhaps some savvy foreign investor will come in and pay cash for the place. Perhaps the buyer at $2,000,000 will find someone willing to pay $2,500,000 in a couple of years.

When does it end?

It may end right now with this bagholder.

Crack that whip

Give the past the slip

Step on a crack

Break your mommas back

When a problem comes along

You must whip it

Before the cream sits out too long

You must whip it

When somethings going wrong

You must whip it

Now whip it

Into shape

Shape it up

Get straight

Go forward

Move ahead

Try to detect it

Its not too late

To whip it

Whip it good

Whip It — Devo

Unlocking the Housing Market Recovery

King of Pain — Alanis Morisette (The Police)

Here at the blog we joke about the “analysis” put out there by some of the local realtors. Most of this is thinly-veiled, self-serving bull$hit, or utterly incompetent nonsense. In either case, the purveyors of this information are not widely respected in the world of land development where those with deep pockets often pay large fees for good information. However, there are a number of very good market forecasters who are respected in big-money land development, and these consultants are well paid for the analyses they provide.

There are four main market consulting firms in Southern California that provide detailed market studies for residential land development projects. These are Market Profiles, Real Estate Economics, The Concord Group, and John Burns Consulting. I have met with the principals of all four of these firms at one time or another. They are all highly reputed in the industry.

I recently had a meeting with John Burns just to network and find out what he is seeing in our industry. We ended up sitting and talking for almost 2 hours. He shared with me his proposal for Unlocking the Housing Market Recovery (PDF warning). It is a great report. Over the course of several posts, I intend to revisit many of his proposals to see what the IHB community thinks about it.

The core of his proposal is as follows (from the executive summary):

The U.S. is undoubtedly in the worst financial and economic crisis since the 1930s. Home prices are falling rapidly across the nation, which has resulted in more than $2 trillion in losses in the last two years. The declining stock market has wiped out trillions more. These tremendous losses have created a vicious downward spiral that requires government intervention to avoid a 1930s-style economic collapse. This problem is affecting both Wall Street and Main Street.

There has been a lot of rhetoric and not a lot of facts about the current economic and financial crisis. In this report, we use facts to assess the current situation and provide our recommendations to save the U.S. economy from collapse.

To stabilize home prices, we believe Congress needs to do four things in conjunction with the Federal Reserve and US Treasury Department. Some of our recommendations have already been accomplished, but many of them have not.

1. Stabilize The Banking System – Save local businesses by saving the local employers’ bank.

Continuing insuring deposits up to $250,000 and unlimited amounts in payroll accounts

Close all poorly managed and undercapitalized banks ASAP

Keep lending money to stabilize the best and largest banks

Properly dispose of bad loans, RTC-style, instead of the way it is currently being done

Finance new banks to create competition for good loans

Continue supporting commercial paper liquidity

Continue liquidity guarantees on new bank debt

2. Stimulate Job Growth – Bring more jobs to the economy with short-term stimulus and smart government spending.

Fund infrastructure projects to create jobs

Stimulate short-term spending while recognizing that long-term saving is also needed

Allow companies to utilize their current losses to recapture taxes paid over the last 4 years so they can keep enough cash in the bank to meet payroll

Create government–backed initiatives to help banks lend

3. Stimulate Responsible Home Buying – Stop home price declines by stimulating home buying by responsible individuals, to bring demand and supply back into balance.

Keep mortgage rates low

Keep Fannie and Freddie lending and FHA insuring

Temporarily provide a down payment match to all home buyers

Temporarily double the mortgage interest rate deductions for all homeowners

4. Support responsible loan modifications – Stop home price declines by helping keep responsible people in their homes.

Provide financial incentives for loan servicing firms to modify loans

Create a vehicle to buy loans that have been responsibly modified

There you have it. There is much more detail in the report: Unlocking the Housing Market Recovery (PDF warning). I am not going to bias the comments with any of my own commentary at this time. As I mentioned previously, I intend to revisit some of these proposals.

Just for giggles, lets look at a property offered for sale at 37% off its peak purchase price.

I guess Im always hoping that youll end this reign
But its my destiny to be the king of pain

2321 Scholarship bathroom 2321 Scholarship kitchen

Asking Price: $359,000

Income Requirement: $71,800

Downpayment Needed: $89,750

Monthly Equity Burn: $2,991

Purchase Price: $567,500

Purchase Date: 1/25/2006

Address: 2321 Scholarship, Irvine, CA 92612

{book}

Beds:	2
Baths:	2
Sq. Ft.:	1,037
$/Sq. Ft.:	$346
Lot Size:	–
Property Type:	Attached, Condominium
Style:	Other (See Remarks)
Year Built:	2006
Stories:	1
View:	Pool
Area:	Airport Area
County:	Orange
MLS#:	H09004177
Source:	MRMLS
Status:	Active
On Redfin:	1 day
New Listing (24 hours)

ONE OF THE BEST AREA IN IRVINE , 2 BEDROOMS 2 FULL BATH LOCATED 3RD
FLOOR NICE POOL VIEW WITH GRANITE COUNTER TOPS NEWER APPLIANCES CLOSE
TO 2 CAR PARKING. EVERYTHINGS LIKE NEW !!SEE AGENT REMARKS

Agent Remarks: “The seller doesn’t care if this sells. He is planning to stay in the unit through foreclosure. I don’t care either because I will never see a commission on this property.”

Do you like how the agent got in the picture of the bathroom? At least he put something in the picture so we couldn’t see inside the toilet bowl. Did you notice the abundance of counter space in the kitchen? Great staging…

I don’t have any loan information on this property, but we know it is a short sale, and it is most likely a 100% financing deal (weren’t they all?) If this sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $230,040. That is a quarter million dollar loss on a tiny condo. Ouch!

{book}

Theres a little black spot on the sun today
Its the same old thing as yesterday
Theres a black hat caught in a high tree top
Theres a flag-pole rag and the wind wont stop

I have stood here before inside the pouring rain
With the world turning circles running round my brain
I guess Im always hoping that youll end this reign
But its my destiny to be the king of pain

King of Pain — Alanis Morisette (The Police)