Sunday, August 31, 2008

Homeowner fraud exacerbates mortgage crisis

This timely article in the Press Enterprise speaks of an issue I wrote about as to why the market is doing so well right now. It's about the "buy and bail" and how those folks are both helping the sales numbers and adding to the foreclosure numbers. What I would like to know is HOW MANY of the current crop of sale are of this type. These are people who are obviously not scared to roll the dice and take a risk (After all this is clearly fraud) . Much like many of the buyers over the last few years. Those folks were not afraid of risk. They were not worried about taking on far more debt than they could possibly pay. So how much of the market is going to vanish when the new anti "buy and bail" rules take effect?

From the PE,

Some homeowners tempted to buy a more affordable house in a declining market have committed fraud to ditch the supersized mortgage they no longer want.

This month, Fannie Mae, the giant government-sponsored enterprise that buys and guarantee mortgages, began enforcing new guidelines that could help stop the practice, called "buy and bail.
The abusers are homeowners who could afford their (current) mortgage payments but didn't want to keep a house whose value had dropped below what was owed on it.

If they just walked away, their shattered credit would prevent them from buying again. Instead they continued making timely payments on the first home. On the loan application, they led the lender to believe they intended to put a tenant in the first house so they could afford the two mortgages. But once escrow closed on the new house's purchase, they stopped making payments on the first house, letting it go into foreclosure.

"This adds an element of fraud to a market that is already out of control," said Inland economist John Husing.

Phony 'Short Sales'

In another scam on lenders, homeowners have been lowering their mortgage payments by arranging fraudulent "short sales" at prices less than what they owe their lenders. The buyer whom the seller chooses, who may be a relative or friend or a "straw buyer" paid for his service, agrees to transfer ownership back to the seller, who winds up with a smaller mortgage on the same house and never has to move.

In such a short sale, the seller commits fraud by having a side arrangement with the buyer that he does not disclose to the lender. When lenders accept short sales, it is because they think the price is the best they can get. Mortgage industry officials say lenders would reject a sale in which there was a special relationship between seller and buyer on the grounds that the selling price most likely was not the best one available.

Putting License at Risk

But real estate agents and brokers can be held liable, said John Giardinelli, a lawyer who represents nine Southern California real estate associations.

"I am telling them, 'If you put your handprint on something deceptive or fraudulent, then you could lose your license or conceivably be brought up on criminal charges,' " he said.

Joe Cusamano, broker/owner of Pro-One Investments in Riverside and president-elect of the Inland Valley Association of Realtors, said he knows he has clients who have lied to lenders to "buy and bail" and done short sales between parents and children.

He said he tells them what the law requires but still works with them because he believes they are good people caught in a collapsing market who are not getting sufficient help from either lenders or the federal government.

Cusamano described one client as a young law enforcement officer and family man who was buying a bank-repossessed house next door to one he already owns in Moreno Valley.

The client could afford his current $1,900-a-month payment for his mortgage, taxes and insurance, but he saw "buy and bail" as a way to improve his family's lifestyle. He had bought his house in June 2005 with a $294,000 mortgage, and since then, its value had fallen to about $155,000.

He noticed that the bank-owned house next door was bigger and had more upgrades, and he put in a winning offer of $145,000.

The client's plan is to let his original house go to foreclosure, Cusamano said, and probably the only adverse consequence he will face is having bad credit for the next five years. Meanwhile, he will save $700 a month on his house payments.

7 Money Orders

A 55-year-old man said he let a house in southern Corona go to foreclosure and bought another in Lake Elsinore, lowering his monthly payments from $5,200 to $2,100. He wanted to remain anonymous because what he did "could be construed as fraud," he said.

He had seven money orders for $500 apiece made out to himself and asked a friend to sign a rental agreement so he could deceive the lender into believing he had rented out his first house and therefore could afford to buy a second one, he said.

His Christian beliefs told him lying was wrong, and his parents had taught him to pay his debts, he said.

"The only way I can justify it (lying to his lender) is that I think a lot of people made a lot of money selling bad mortgages to anyone who walked in the door," he said.

Sandra Gloshen said after her husband, an airline baggage screener, was transferred to Boise, Idaho, by his employer, they were unable to sell their house in Lake Elsinore, which was then worth less than they owed on it. But they had no trouble buying a home in Boise after they told the lender they would rent out the Lake Elsinore property, she said.

In actuality, she said, it would have been impossible to charge enough rent to cover the mortgage payment, which had ballooned when their interest-only loan reset. She said their original lender ultimately seized the Lake Elsinore home.

Friday, August 29, 2008

The million dollar club

Finding losses of $500k, $600k or even $700k is not that hard these days. But finding losses of a million or more on IE homes is a little unusual. Many of the high loss homes undoubtedly involve some kind of fraud. This home is probably one of those.

1062 Lowry Ranch Rd in Corona (I know the listing says it's in Riverside, it's not, it's in Corona). This is a big home in Crown Ranch. It sold new in feb 2006 for 1.255 million dollars. The next sale was very probably a fraudulent transaction. Even in the boom years tract homes did not double in price in a year. It sold again in mid 2007 for 2.2 Million bucks! Yes, you read that right, in the middle of the biggest real estate meltdown in history this guy flip a home in a year and nearly doubles his money.

I'd bet a bottle of scotch that no payments were made on that loan. The home went back to the bank a year later and now it's listed for $815K. That's a loss of $1.385 Million from the obviously fraudulent sale. However other homes in this tract were selling for about 1.5 million in that time frame. So the loss would still be impressive even if it sold at "market" price in mid 07.

Wednesday, August 27, 2008

This guys IS the biggest tool on the planet

Anyone remember the realtor/owner that was trying to sell the house with the fake grass for about twice the going comps?

he earned the Realtard of the Month award back in May of 2008 for listing his house for $875k to $925k. A price that was nearly 3 times what the nearby REO's were listed at.

Well, after a few months on the market and several price reductions that finally got his asking price down to $775k (still about double what it should be listed for), he has changed strategies. Price reductions are not working. Hey, lets try a big friggin increase. After all, the California Association of Realtors have just announced that sales in the IE are up 176%. Homes must be flying off the shelves, right?

So the Realtard of the month has RAISED his asking price to 1 MILLION dollars! HAHAHAHAHAHAHAHAHAHAHAHA. Oh man, I nearly messed up my monitor again when I saw it. This guy (or gal) is obviously off his meds.

And in the 3 months the home has been listed he still cannot quite find the time to take some pictures of a CLEAN house.

May 22, 2008 $875,000
Jun 10, 2008 $875,550
Jun 15, 2008 $850,000
Jul 07, 2008 $775,000
Aug 01, 2008 $1,000,000

Redfin, All better now

It looks like Redfin has fixed the glitch that was causing some of the newer tracts to drop off the map. I see that all those little green icons have reappeared. I also like the new feature where the tint of the icon changes once you have looked at the listing.

Tuesday, August 26, 2008

It's better now.......Or is it?

You would think that after the biggest financial boondoggle in history that the banks would be a little more careful. You'd be wrong! Check this out, Mortgage fraud is UP 42% in the first half of 2008"

The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.

Huh? how can this be......

Monday, August 25, 2008

CAR July report??

Did anyone else see the July CAR report. They have Riverside/San Berdu with a 176% increase in sales over last year?? Huh, what kind of math is that. DataQuick already posted the numbers and their numbers indicated a 38% increase. An increase is to be expected since last year there were very few sales. But 176%? come on now, the CAR better go check those numbers. Maybe they have taken to counting trustee sales going back to the bank.

I think their number is actually a total yearly sales estimate based on current sales pace. I don't think the number they post is an actual number based solely on July sales. This approach would make things seem much better and further confuse the poor unejumacated knife catchers.

Even though sales are up if you look at the average (statewide) sales over the last 21 years the sales are WAY below the 21 year average. The average July is over 47,756 and this year it was 39,507 (about 18% below average). The CAR can try to spin the numbers any way they want. But the cold hard reality is that that sales are still low and foreclosures are still rising.

Getting there.

How's that prediction of Corona homes under $100 s/f working out? Pretty good actually. Here's a fine example today from South Corona.

If you like em BIG, then 25111 Cliffrose St in So Corona may suit you. This home is 4187 s/f and has 5 bedrooms and 4.5 baths. It features all the trendy niceties like Granite, tile floor, crown molding etc. This REO property was purchased new in late 2004 for $625,500 (that was a lot in 2004!). It's gone back to the bank and now it's offered for $369,900. That works out to $88 s/f. That is a 41% loss from a 2004 purchase price! That is easily 2 years before the peak and it's still losing 41%.

Also in Sycamore Creek there is 25205 Noble Canyon. This home is 4158 s/f and has 5 bedrooms and 3.5 baths. This one was purchased new in April 06 for 706K. It's now bank owned and is listed for $380K ($91 sq/ft). That is a loss of 46% assuming it sells at listing. They have already dropped the price once so it may sell for even less.

Not felling the love for South Corona? Well there is 14715 Rick Ln in Eastvale. This home is another big-un. It is 4148 sq/ft and also has 5 beds and 4.5 baths. This one is still in diapers at just over one year old. It was bought in Feb 2007 for $660k and it's already gone back to the bank. It's currently listed for $385k. Now don't get too excited the previous owners did take a few of the kitchen cabinets. Doesn't look that bad though, probably $5k to replace the missing cabinets.

There are plenty more like these and theres also a load of short sales listed sub $100 s/f.

Saturday, August 23, 2008

Delusional seller of the month award

This month our delusional seller award goes to KB Homes. Since sales have ground to a halt in The Retreat, KB Homes is now selling off the models. With all the REO sales to compete with it looks like they may be throwing in the towel for now.

The homes that are selling in The Retreat seem to be fetching in the $130 to $150 a sq/ft range currently. KB is trying to get about $170+ sq/ft for their last few new homes. That must be a hard sell with the REO's asking about 20% less than that.

So, on to the award. Me and the wife stopped in last week and asked for a price sheet. Ready for this? they are asking 1.2 million, 1.3 million and 1.4 million for the 3 models! I actually laughed out loud when I saw the prices and handed the price sheet back. Man did I get the stink eye!

The average home in the tract is selling for (let's be an optamist) about $150 sq/ft. Yet KB Homes thinks they can get over $300 sq/ft. Yes, they are very nice and fully upgraded. But to think they will sell those at that price is ludicrous. There's no way they will appraise anywhere near that. So that means KB must finance the loan or find a cash buyer stupid enough to plonk down 1.3 mill on a house that would probably only fetch $500k next year.

We salute you, KB Homes. Delusional seller of August 2008.

Thursday, August 21, 2008

A flip to a flop

8631 PINA CORTE, Corona, CA 92883

This home was featured on the BMIT website back in Sept 07. It was an attempted flip. Here's the text from the BMIT post,

House #3 is 8613 Pina Corte. This is also a 3,629 sqft model that was previously featured by BMIT back in July of '06. At the time, the home was on sale as a REO after the prior owner defaulted on his zero down, 100% financed $735,000 purchase. Perhaps inspired by the impressive sale price from 8650 Pina Corte, a flipper decided he couldn't pass up this home at the bargain basement price of $635,000 in March of '07 (afterall, $215,000 instant equity, right?). The flipper added front and back yard landscaping, a balcony, as well as bamboo flooring, new carpet, and a painted driveway. The flip has been on the MLS since July and after a single price drop it looks like the flipper is sticking to his $825,000 asking price.

So a flipper picked up this place for $635k last year. Dropped another wad of cash upgrading the place and tried to get $850k for it. As you can well imagine that didn't quite work out for our fliptard.

It listed this week (again) at a more reasonable price. It's now listed as a short sale at $399k! Now that is a FLOP!!

Wednesday, August 20, 2008

70% year over year decline

How low can prices go? Well I've said all along that most of the IE needed to fall about 50% to 65% from peak to get back to traditional values. It looks like some areas are proving me right. DataQuick has released the July Sales by zip code numbers and there are few zip codes already seeing declines of MORE than 50% and several are over 60%. And 92410 in San Bernardino is over 70%! (One Temecula zip was down 90% but it's just noise due to only 2 sales)

Ok, I will concede that most of those epic declines are in areas that are borderline ghetto. But some are in areas that are not that bad.

Here's the top 10 list (note I did not include areas with less than 10 sales).

San Berdu, 92410 down 70.20% Now if you are ready for a shock, that means the median price in this zip fell from $310K last July to $92K this July. And there were 39 sales, so it's not due to a very small data set.

San Berdu, 92411 Down 68.10% (22 sales)

Riverside, 92501 Down 60.90% (18 sales)

San Berdu, 92405 Down 56% (41 sales)

San Berdu, 92404 Down 52.3% (73 sales)

Rialto, 92376 Down 51.4% ( 89 sales!)

Moreno Valley, 92553 Down 51.3% (114 sales!)

Perris, 92571 Down 49.6% (132 sales!)

Perris, 92570 Down 48.8% (34 sales)

Desert Hot Springs, 92240 Down 48.2% ( 71 sales)

SFR Price % chg $/Sq Ft
Countywide 3,251 $250 -37.00% $123
Aguanga 92536 2 $325 -9.70% $136
Banning 92220 32 $190 -32.10% $128
Beaumont 92223 70 $240 -26.20% $116
Blythe 92225 11 $173 -6.30% $137
Cabazon 92230 6 $125 -46.20% $77
Calimesa 92320 3 $202 -31.60% $226
Canyon Lake 92587 31 $260 -44.00% $145
Cathedral City 92234 63 $220 -36.70% $130
Coachella 92236 36 $184 -38.50% $104
Corona 92879 53 $305 -28.40% $169
Corona 92880 102 $390 -27.80% $132
Corona 92881 59 $358 -39.30% $166
Corona 92882 101 $341 -31.70% $164
Corona 92883 92 $340 -37.00% $150
Dsrt Hot Springs 92240 71 $128 -48.20% $86
Dsrt Hot Springs 92241 6 $170 -18.30% $96
Hemet 92543 29 $123 -41.00% $101
Hemet 92544 64 $168 -42.10% $105
Hemet 92545 55 $210 -28.50% $92
Idyllwild 92549 14 $324 -12.10% $223
Indio 92201 68 $213 -40.80% $127
Indio 92203 39 $256 -29.90% $114
La Quinta 92253 94 $347 -37.10% $176
Lake Elsinore 92530 96 $210 -38.20% $118
Lake Elsinore 92532 44 $262 -42.80% $103
Mecca 92254 1 $77 -55.00% $45
Menifee 92584 111 $250 -29.10% $111
Mira Loma 91752 26 $360 -27.90% $131
Moreno Valley 92551 69 $178 -43.10% $111
Moreno Valley 92553 114 $162 -51.30% $103
Moreno Valley 92555 85 $245 -45.60% $100
Moreno Valley 92557 113 $201 -40.00% $113
Mountain Center 92561 1 $200 -72.40% $397
Murrieta 92562 129 $301 -35.60% $114
Murrieta 92563 157 $280 -36.40% $104
Norco 92860 28 $490 -20.00% $172
Nuevo 92567 6 $268 -13.40% $136
Palm Desert 92211 30 $344 -27.70% $188
Palm Desert 92260 30 $397 -30.70% $205
Palm Springs 92262 38 $435 -2.40% $233
Palm Springs 92264 22 $535 -8.90% $250
Perris 92570 34 $213 -48.80% $101
Perris 92571 132 $175 -49.60% $97
Rancho Mirage 92270 28 $627 -27.20% $206
Riverside 92501 18 $215 -60.90% $148
Riverside 92503 110 $250 -41.30% $151
Riverside 92504 48 $212 -41.10% $152
Riverside 92505 36 $237 -40.40% $150
Riverside 92506 48 $293 -28.70% $181
Riverside 92507 24 $278 -28.80% $157
Riverside 92508 57 $340 -29.90% $136
Riverside 92509 61 $249 -33.50% $148
San Jacinto 92582 22 $210 -38.60% $90
San Jacinto 92583 70 $174 -38.90% $92
Sun City 92585 30 $215 -14.70% $111
Sun City 92586 38 $169 -17.70% $117
Temecula 92590 2 $105 -90.50% $93
Temecula 92591 54 $300 -31.80% $141
Temecula 92592 127 $330 -25.50% $134
Thousand Palms 92276 4 $154 -8.10% $105
Wildomar 92595 45 $275 -29.70% $116
Winchester 92596 54 $280 -26.30% $103

Tuesday, August 19, 2008

A cold hard dose of reality

You may remember a post from back in January about the "WTF award of the decade". This optimist listed his house for 1.25 Million when nearby model matches were listed in the high 500s. Well, low and behold I ran across it today relisting as a short sale for.......... $470K! Hmm checking my math that is a price cut of $780K. Of course his original price was about $700k too high at the time. And looking at the competition, his current price might be about $30K too high still. There are currently 2 other similar homes on the same street listed under $450K and one of those is an REO. Even as a short sale this guy still lists too high.

Here's the current pic. As you can see the lawn has died and the weeds are waist high. I guess we can assume the owner has bailed out already.

The home is at 8763 Gentile Wind Dr, Corona. It was purchased in May 07 for $720K. At the time this was cheap for this area. The market had already ground to a halt but back then the prices were still sky high in this tract. This guy may have thought he was getting a steal. But as it turns out he was in the first wave of knife catchers and this guy caught a Samurai sword. Probably losing both hands in the process. Unfortunately for him, his short sale price appears to be set too high. With nearby model match homes priced $30K less and still not selling he has no chance. His realtor should price it at $400k, generate some interest and some offers and pray the banks play ball.

Monday, August 18, 2008

July numbers from DQ

Here's the meat of the July report from DataQuick.

The number of Southern California homes sold last month edged up to its highest level in more than a year as bargain hunters swept up foreclosure properties in affordable neighborhoods, a real estate information service reported.

A total of 20,329 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 16.7 percent from 17,424 the previous month and up 13.8 percent from 17,867 for July a year ago, according to San Diego-based MDA DataQuick.

The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year.
Foreclosure resales continue to be a dominant factor in today's Southern California market, accounting for 43.6 percent of all resales. That was up from a revised 41.8 percent in June, and up from 7.9 percent in July 2007. Foreclosure resales -- where a foreclosure had occurred at some point in the prior 12 months -- ranged from 22.2 percent of all resales in Orange County last month to 64.4 percent in Riverside County.
X's comments,
The sales numbers are way up this month in nearly every area. This is not surprising because last year the sales numbers were incredibly bad. To put in it perspective last June in Riverside there were 3359 sales but in July that number plummeted to 2769 and it continued to plummet all last fall. So don't let those "big increases" in sales numbers fool you. It's only because last year's market was at a dead stop.
As you can see the market IS foreclosures. 65% of the resales were foreclosures. I wonder what percentage were short sales?? New homes are also included in these numbers.
The prices continue to drop at an olympian pace. The median for Riverside dropped from $275k to $260k in the last month. That's a 5.5% drop in ONE MONTH! San Berdu wasn't too far behind with a 4.2% monthly drop in median price.
There are going to be some big headlines in the next week about those big sales increases. Don't be fooled though. The data does not lie. Sales are up but only because of last years sales drought. Prices are down and still falling and that's really all you need to know. As long as prices are still falling, it's NOT a great time to buy!

And for anyone thinking, "now that sales seem to have bottomed out, a price bottom can't be far behind" I saw an interesting tidbit on the LA Times blog. In the last real estate downturn, sales bottomed out 4 years before prices did. Prices fell an additional 27% in that 4 years after the sales bottomed out.

Sunday, August 17, 2008

We're number 3

According to the National association of Realtors, Riverside/San Bernardino was number 3 in the biggest year over year price decline in the US for the second quarter of 2008. According to their data Riv/SB saw the median price fall 32.7% to $265K. We were beat out by Sacramento, number 1 with a decline of 35.6%, and Fort Meyers Florida, #2 with a decline of 33.1%. It's hard to believe those two areas declined that much. They started tanking at least a year before we did here in SoCal.

So what can we look forward to in SoCal. I think the year over year sales numbers will continue to improve but the prices will continue to decline (Only because last years numbers in the fall were so pathetic). Short of a nuclear winter I don't see how they could get any worse than last year. So look for the headlines talking about increases in sales. The prices are still higher than the traditional "normal" levels by at least 20%. In most bubbles prices undershoot the mean line. So they very probably will fall farther than the normal levels.

Foreclosures will keep increasing. As the Alt-A wave hits we will see even more foreclosures. Last month was a record. The state is seeing over 1300 foreclosures a day and the number is climbing. The unemployment numbers are getting worse. Th IE lost 22,000 jobs LAST MONTH! I don't know if you saw the news about the number of applicants for the new retails stores like Target and WalMart. They are getting THOUSANDS of applications for a few hundred menial wage jobs.
The spring/summer selling season is winding down. As the sales numbers drop off and the foreclosures keep mounting the inventory levels will probably start to climb again. They have held steady through most of this year so far. There is news that Fannie is considering bulk sales of their REO properties to investment groups. Investment groups don't pay market rate. I don't know what those groups will pay but it's not going to be anywhere near the current market. They will only buy if they have a decent cushion against further price declines. Sounds like the banks are getting desperate.

It should be an interesting winter!

Friday, August 15, 2008

Redfin Hanky Panky

Hmmm, it seems Redfin is now hiding the homes in certain tracts or they cannot find em for some reason. The homes in the Retreat and Lake Hills disappeared this week. I doubt this is something Redfin did on it's own. So, what's going on? Did those neighborhoods send Redfin a nasty gram? Is it a "conspiracy" by the agents to hide those listings? Did Housing Kaboom hit a nerve by picking on those areas? And don't they know that they still show up on Movoto and ZipRealty?

The listings are still there. You just don't see them when you do a search. They do show up down in the bar at the bottom of the map as "unmapped" listings.

Here's an example

This home is in the retreat but the address is not listed

Or this one,

Also in the Retreat. This one has been on the market for months, and now Redfin does not know where it's located?

Monkey business I tell ya!

Update, Looks like it may be a software bug. Redfin is investigating!

Sunday, August 10, 2008

Da weekly Tumble

Here's the latest numbers for Housing Tracker.

Riverside, California

Including Arlington, Bloomington, Box Springs, Canyon Crest, Casa Blanca, Colton, Corona, Crestmore, Fontana, Grand Terrace, Jurupa, La Sierra, Mira Loma, Moreno Valley, Norco, Perris, Rubidoux, Woodcrest

Trend08/07/20081 month3 month6 month12 month
Median Price$250,000-6.0%-16.4%-28.6%-41.7%

Historical Data

DateInventory25th Percentile50th Percentile
75th Percentile

And here's the county wide numbers

Trend08/04/20081 month3 month6 month12 month
Median Price$250,000-5.6%-16.4%-26.3%-36.7%

(SFH + Condo)
25th Percentile50th Percentile
75th Percentile

Wednesday, August 6, 2008

I'm outta here

I'm heading out to La Quinta tomorrow for a long overdue golf trip. I'll be back Sunday eve. Feel free to discuss whatever nonsense you like while I try not to die from heat stroke. I'l be at the La Quinta Hotel if anyone wants to come out and buy me a drink!

Tuesday, August 5, 2008

Knife Catcher Alert

Don't let this be YOU!

1474 Harness Ln in Norco was a leader. It was a leader in the foreclosure wave! Purchased in late 2004 for $600k by a Mr. Isidro Silva. This home is 3895 sq/ft with 4 bedrooms and 3.5 baths. It sits on a 1/2 acre horse lot. Poor Isidro lost the home to foreclosure in June of 2007. It looks like the bank got her back for $755k. I might be wrong but I bet Isidro has a new Denali and a a few other cool toys with that extra $150K. I suppose it could also be a Option ARM gone bad but those were not so popular in 2004 so it's more likely a HELOC or Cash out Refi that got the loan balance up.

Anyway back to the story. After the Trustee sale the home sells to a "bargain hunter" or possibly a shrewd investor back in Feb 2008 for $620k. Hmm fast forward 4 months and reality has set in, the fog has cleared, the light bulb has been turned on. Our buyer has realized he screwed the pooch and wants out. He has listed the home for $620k. The same as he paid. If this sells, after fees and holding costs he is looking at a loss of at least $50k (38K commision plus 5 months holding costs). in addition he probably paid 10k in closing costs when he bought the thing. OUCH!

But is he going to get his $620K? I doubt it. Why, well there are several model match homes in the same tract for sale for far less. There is 1211 Thouroughbred Ln. Same home listed for $532k. Interestingly enough, this home was also listed when our knife catcher bought 1474 Harness. But it was listed for $785K. I'm sure that helped convince the knife catcher he was snapping up a bargain. And if that's not bad enough there is 1504 Harness Ln. A mere 2 houses away this model match REO property hit the market only 3 short months after he closed, it is currently listed for $540k.

Being a knife catcher SUCKS!

Sunday, August 3, 2008

The weekly tumble

The numbers came out early in fact only 4 days after the last posting due to the end of the month. As you can see the prices are still falling and the inventory remains in the 14000 range (plus or minus 1000) where it has been since Jan.

Riverside (core cities)

Including Arlington, Bloomington, Box Springs, Canyon Crest, Casa Blanca, Colton, Corona, Crestmore, Fontana, Grand Terrace, Jurupa, La Sierra, Mira Loma, Moreno Valley, Norco, Perris, Rubidoux, Woodcrest

Trend08/01/20081 month3 month6 month12 month
Median Price$255,000-5.5%-15.0%-27.1%-40.7%

Historical Data

DateInventory25th Percentile50th Percentile
75th Percentile

Realtors on a graph

Ran across this little gem this evening.

The Housing Bill, Will it help?

I've had at least 20 emails asking about the Housing Bill. I was going to ignore them but they keep coming. I'm not 100% clear on the bill and judging by what I read many other people are just as unclear. The bill that was passed had some major differences from earlier versions. Some of these changes might help some might not and one will eventually cost us, the taxpayer a boat load of money. That would be the one that increases the limit on the national debt. But I guess when your 9 trillion in the hole, what's another trillion.....

Ok on to the bill, what does it do ( from the AP) with my comments in bold.

— Give the Treasury Department the power to extend Fannie Mae and Freddie Mac an unspecified line of credit and to buy their stock, if necessary, to prop up the mortgage companies. The two companies back or own $5 trillion in U.S. mortgages — nearly half the nation's total.

So Fannie and Freddie can buy as much JUNK mortgages as they want...gee great, and just think we get to pay for them.

— Allow qualified homeowners facing foreclosure to apply for lower fixed-rate, 30-year mortgages backed by loan guarantees from the Federal Housing Administration. The original lenders would have to agree to take a loss on their loans.

This is the one all the screwed homeowners are hoping will save them. It will undoubtedly save quite a lot of people but not everyone. Your mortgage must have been originated between Jan 2005 and July 2007 to qualify. Your bank has to agree to take a loss, you get a new mortgage for 90 of the current appraised value backed by the FHA. You still have to actually qualify for this new mortgage (full doc). There is one good part to this bailout. When you sell, you don't get to keep all the profits. You have to give back at least 50% of any profit you make to the FHA. If you sell the first year you give them all profit (like there will be any). You give back 10% less per year until it caps out at 50%. Even 30 years from now, you must give 50% of any profit back. There are also restrictions on this regarding your DTI, it has to be over a certain amount. In other words if you can afford the payments you don't get to cash in on this bailout. I'm still not 100% clear on how this all works. The gov thinks they will do 400,000 of these. With up to 2.5 million foreclosures expected over the next 3 years it may not have much effect. Another article I read said they expect up to 25% of the new loans to go bad (that seems way high to me). This starts Oct 1st so if you are set to lose your house in the next month or two you are still screwed.

Also unclear to me at this point is what will happen when there are multiple banks involved., Refi's, seconds etc. What about HELOC's? Are they going to be required to give back the Hummer or the Denali?

This will certainly lengthen the price correction, by how much is anyones guess. I would also like to know if these refinances will be posted as sales. If they are not included in the comps for an area it could also create a real mess when trying to calculate a home value.

— Create an independent regulator to oversee Fannie Mae and Freddie Mac. The regulator could establish minimum capital requirements for the two companies and limits on their portfolios. It would also have approval power over the pay packages of Fannie Mae and Freddie Mac executives.

blah, blah, blah

— Provide $3.9 billion in grants to communities with the highest foreclosure rates to buy foreclosed and abandoned properties.

Gee great, my tax money goes to buy a million shacks in a Detroit ghetto. Or about 5000 homes in California

— Give about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time homebuyers who bought homes between April 9, 2008, and July 1, 2009.

This seems like a good idea. But they have to pay that $7500 back at $500 a year, or in full if they sell the home. This is a tax break though and not actual cash to the buyer. If you don't pay $7500 in taxes your not going to get that much back. And on the flip side, this bill did eliminate down payment assistance programs for first time buyers. They eliminated free money down payment assistance programs and gave a loan against your tax bill.

— Put a cap of $625,500 on the loans Fannie Mae and Freddie Mac can buy in certain high-priced areas, and a cap in other areas of up to 15 percent above the median home price.

STUPID, STUPID, STUPID, Another attempt to keep home prices artificially inflated.

— Count any federal infusion for the mortgage giants under the debt limit, essentially capping how much the government could spend to stabilize the companies without further approval from Congress. As of Tuesday, the national debt that counts toward the limit stood at about $9.5 trillion, roughly $360 billion below the statutory ceiling.

This is the increase of the National Debt Limit. Another STUPID idea.

It's amazing to me that even with 70% of the population against this bill it sill passed by a landslide. I fully understand that something has to be done to ensure a total collapse of the banking system and the economy doesn't happen. But this bill is not the way to do it.