Sunday, November 30, 2008

They're still out there

Dellusional sellers, you'd think by now that no one would try for peak pricing with a new listing. But, you would be wrong! Those ridiculous listings are harder to find these days, but they still appear and far too often too.

1592 El Paso Dr in Norco Hills is one such listing that hit the market this weekend. The home is a 4430 sq/ft, 4 bedroom/3.5 bath mini mansion. It does have all the bells and whistles. It's got the rock pool, a basketball court, a built in bbq, fancy stone work, pergraniteel kitchen and a multitude of other nicities. Two years ago all those upgrades would have fetched top dollar. But today they really don't mean much. The fancy pool is now just added maintenace and the rest of the stuff is just fluff, lipstick on a pig. The home was built in 2001 and sold new for $503k. I remember looking at the models for these homes. The floorplans were a bit funky. But, I digress.... back to the post. So whether due to job loss or unaffordable payments the owner has placed his dream castle on the market for the laughable price of $1.1 Million!. Yes that's right, there are still people smoking the dream pipe. There are still agents so desperate for a listing that they will clutter up the MLS with garbage like this. I'm not a big fan of Zillow, but in this case I think Zillow has the price about right. The Zestimate is $570k.

1.1 million.....paaaa leaze

The realtard states that the pictures sadly understate the home. He's not kidding. Not a single one is in focus, even the outdoor shots are blurry. He probably laughed so hard when the told him the asking price that he got spit on the camera lens. Either that or he took them with his cell phone. How hard is taking a picture these days with all the point and shoot cameras on the market. It's almost idiot proof. Yet again though, we are supplied proof that idiots can find a way to screw up the unskrewupable (that's a new word I just made up!).

Friday, November 28, 2008

59% off peak pricing in Dol Lagos

If you think the Dos Lagos shopping center isn't going to turn into a cheap outdoor swap meet you may want to check out this listing.

4470 Cabot Drive
, this 4 bedroom 3.5 bath home with 2539 sq/ft just hit the market as a REO property. It looks like this thing sold new from the builder for $751K in early 2006. Of course it went back to the bank and it's currently listed for $310k. That is 59% off peak price! I did the calculation twice it really is 59% off peak. Off course this tract and "The Retreat" were probably the two most overpriced tracts in Corona. For $310k it's not a bad looking house. But look at those property taxes!. And who knows what is going to happen with the golf course and the shopping mall.

I's certainly not the most attractive home from the street. The realtard should be bitch slapped for the lame pictures. Nothing showing the kitchen or bathrooms but two pictures of random doors. This home should sell at that price, probably higher. But before you bid check the taxes!

Ohhhh, look at that door, it has glass in it. That clinches the deal for me!

Wednesday, November 26, 2008

Eastvale listings, new lows

The listing prices of REO properties in the Eastvale area of Corona is continuing to drop. Even as the number of REO properties decrease. Today I found a couple hitting the market at around $90 s/ft. There's a short sale that just listed at $81 s/f (although I don't use short sales as an indication of anything).

7207 Midnight Rose Cir
, This home is 4203 sq/ft and has 5 beds and 5 baths. Its the most expensive listing uner $100 s/f to hit the market this week. It's listd at $98 s/f or $410K. This home sold new in Feb 2007 for $688K. They didn't even manage to keep the home 2 years. In fact they barely made a year as they lost this thing way back in March. It took the bank 7 months to get this home on the market! I wonder how many payments they actaully made?

6457 Daffodil Ct is home of 3683 sq/ft and it has 5 bedrooms and 3 baths. This home is listed for $330K or $90 s/f! There is no sales data in Refin for this home so I don't know the history. It would appear that the original owner from 1999 lost this home. That would probably indicate they lost it due to equity withdrawal.

6522 Gold Dust St, This one is 4236 s/f and has 5 bedrooms and 3.5 baths. It hit the market $384k or $91 s/f. This home last sold in August of 2005 for $725k. It went back to the lender in August. They tried to get $405k on the courthouse steps but there were no takers. Think anyone will jump on it at $384k? Yea, me too (assuming it's not thrashed inside).

But if you want to dream big you can go after this Short Sale that listed at $74 s/f. 12782 Thornbury Ln is a big 4038 sq/ft monster with 5 berdrooms and 3.5 baths. The current owners are so far underwater they will need Alvin to rescue them. They bought this home new in Jan 2007 for $669k (probably thought they got a deal too!). Now it's listed as a short sale at $299k! Good luck with that one...... (That's probbly what this home will be worth in 2011 though).

Tuesday, November 25, 2008

30 year fixed rate falls nearly 3/4%

The 30 year fixed fell nearly a full .75% today. It dropped as far as 5.25% before ending the day at $5.5%. This happened after Paulson said the FED will buy up to 600 billion in debt. Lets hope the rate reduction sticks. Lower rates will allow more people to buy with affordable payments.

From Bloomberg

Nov. 25 (Bloomberg) -- U.S. mortgage rates fell more than three-quarters of a percentage point today after the Federal Reserve said it will buy as much as $600 billion of debt.

The average U.S. rate for a 30-year fixed mortgage ended the day at about 5.5 percent after falling to as low as 5.25 percent, according to Bankrate Inc. It was 6.38 percent this morning, North Palm Beach, Florida-based Bankrate said, based on a wider sampling than the so-called overnight rate published on its Web site.

The Fed said it will purchase mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, a government agency that insures bonds. Today’s lower rates indicate the central bankers may have achieved their goal of bringing liquidity to mortgage markets, said Neal Soss, chief economist at Credit Suisse Group in New York and a former aide to Fed chief Paul Volcker.

“These are not the assets that have caused all the trouble -- these are quality mortgages that have been orphaned because investors have been reluctant to part with cash,” Soss said in an interview. “The government stepping in to buy them up may hasten the day when we finally find a bottom in housing.”

Monday, November 24, 2008

Turns out.... prime isn't

In California, delinquencies on prime mortgages could increase for years, said Christopher Thornberg, founder of consulting firm Beacon Economics in Los Angeles.

One reason, he said, is that home lenders became so complacent during the housing boom that they did little to qualify borrowers besides having computers check a few facts.

" 'Prime' lost a lot of meaning in the insanity of the last few years," said Thornberg, who was one of the first experts to foresee the housing downturn.

To be sure, the damage has been greatest in subprime mortgages, the high-risk loans tapped heavily during the go-go years by borrowers with the worst credit, the heaviest debt loads or the lowest down payments (and sometimes all three of those).

In August, more than 43% of subprime loans nationally were in foreclosure or at least 60 days late in paying, a rate nearly double that of August 2007, according to First American CoreLogic's LoanPerformance unit, which tracks 82% of all U.S. loans.

But problems with prime loans are increasing as fast or faster. About 7.5% of prime jumbo mortgages -- high-quality home loans too large to be sold to government-backed Fannie Mae and Freddie Mac -- were at least 60 days late or in foreclosure, according to LoanPerformance. That was more than three times the level of a year earlier.

As a result, prime loans account for a larger proportion of foreclosures than they did in August 2007.

The Xmas gift from the banks

It seems more and more banks are jumping on the "no foreclosures for the holiday" bandwagon. While I agree with the sentiment it just makes for a big spike in the numbers come January and February. All these programs are not helping the prices anyway, because fundamentally prices need to return to sane levels. But they sure are putting the brakes on the correction. In my search's I am getting about 1/4 as many new listings per day than I did a few months ago. The prices are still coming down although probably more slowly now, but man the pickings are getting slim.

It seems like every day I read about another bank freezing foreclosures or hyping some workout program. Every bleeding heart liberal congressman/woman is putting forth some bill or another to thwart foreclosures. But foreclosures make up 70% of the sales in the IE. What is going to happen to the sales numbers if the inventory of foreclosures starts to dwindle? Do they really think people will start buying overprices resales again? Not a chance, even if they wanted to buy AND could qualify for the amount the appraisals will probably not support the price.

And what will happen to the market if all these foreclosure freezes drag on? It doesn't take a quantum physicist to see that if you remove the foreclosures you remove the market (at least in California anyway). The California Association of Realtors must be caught between and rock and the unemployment line. They want to do everything they can to prop up the prices yet the only things selling are foreclosures. When most of your members are making a living off these properties is it really in the organizations best interest to try and stop foreclosures? Do you want high prices and no sales? Maybe they should think back to when that was the situation. They don't have very far back to look, it was only last year. Remember 2007, high prices = no sales!

Re-Default rate running around 50%

Yes, you read that right. Indications are that 50% of those that get a loan modification are STILL defaulting. Check out the report from Diane Olick. The reasons are many. The booming unemployment rate is surely catching a few people. But more probably realized that they are signing up to be renters for 30 years with many of these new deals. And they are paying high rents as compared to actually renting a comparable home. I'm sure a few people were just using the rework process to buy more time in the home. Think about it, if you haven't been paying a mortgage for 9 months and then get a work out, you can then default again and get another 9 to 12 months of free rent. Sucha deal!

Also in the report, distressed sales (foreclosures and shorts) are now running 45% nationwide (although in the IE they are 70%).

Saturday, November 22, 2008

Dos Lagos center can't make it's payments

More trouble for the Dos Lagos Shopping Center

If the Promenade Shops at Dos Lagos mall falls into foreclosure, a change of ownership is likely. But that won't be as important to the future of the south Corona shopping center as the ability of the upscale stores to withstand the battering of a weak economy and growing competition, retail experts said Friday.

Landlords for the two-year-old, 351,000-square-foot retail center beside Interstate 15 have missed two months of interest payments on a $125 million mortgage. The mortgage is in "imminent default" and being handled by the lender's special servicing department, a Credit Suisse analyst report said this week.

Poag said in the event of foreclosure, it would be up to CW Capital to decide what to do with the center. CW Capital representatives could not be reached to comment.

Stoffel said the Corona center is too geographically isolated and suffers from a shortage of upper-income customers as well as competition from more successful centers with similar "lifestyle" tenants, including Victoria Gardens in Rancho Cucamonga, the new Shoppes at Chino Hills and an expansion planned at The Promenade mall in Temecula. "Even if the economy were still going well, that center would have some issues getting higher sales volumes," he said.

Kaplan said the poor economy accelerated the failure of the center that he had predicted. Not only were the demographics subpar when the center opened, he said, but it had a visibility problem because it is below eye level from the freeway.

So what happens to the home values when this center becomes the "Rio Dos Lagos Swap Meet and Discount Mall"

Friday, November 21, 2008

IE unemployment hits 9.5%

Unemployment increased to 9.5 percent in Inland Southern California in October from 9.1 percent the previous month and 6.3 percent a year ago, the state Employment Development Department reported today.

One in 10 workers in Riverside County are now unemployed, and there are 22,000 fewer payroll jobs (1.7 percent) in the two counties than there were a year ago. Unemployment in San Bernardino County is estimated at 9 percent.

Yes, that is sure to help the housing market.....not.

From the LA Times

Surge in unemployment puts California's Inland Empire in tailspin.

If the Inland Empire is one of the birthplaces of the current recession, it is also at the forefront of the nation's growing pain over joblessness -- with the highest unemployment rate of any large metropolitan area in the country.

State numbers released Friday show the Riverside, San Bernardino and Ontario area is now suffering from its highest unemployment rate in 13 years at 9.5% in October -- 3 percentage points higher than the national rate and 1.3 points higher than the state's rate of 8.2%.

Ignited by the collapse of the local housing market, which decimated the construction and lending industries, the wave of unemployment has trickled into almost every area, including retail, manufacturing and local government.

Meanwhile, the percentage of people unemployed in the Inland Empire has more than doubled from a year ago, and some experts predict the situation will worsen before it improves.

"It's a perfect storm," said Brad Kemp, director of regional research for Beacon Economics, which recently conducted the second annual Inland Empire Economic Forecast Conference.

"It was one of the fastest-growing places in America," he said. "And when you have that kind of growth, you have the potential for loss."

The downturn has all but erased the glow of optimism the Inland Empire enjoyed only two years ago, when newly minted mansions and an array of upscale retailers fashioned parts of the region into a more affordable Orange County in the making.

In many cases, those developments are now symbols of the decline, from the sparsely populated outdoor malls to the rows of repossessed homes -- victims of housing price plunges of 35% in Riverside and 37% in San Bernardino in the last year.

All over, there are signs of reversed prosperity.

Ontario International Airport went from setting growth records to losing about a third of its airline traffic in the last year. To curtail costs, buildings and a parking lot were closed. And at night, one of its unused runways shuts off its lights.

Riverside County animal control officers are reporting an alarming surge in abandoned horses, a consequence of home foreclosures and the rising cost of feeding the animals, they suspect.

And San Bernardino-based Stater Bros., the chief grocer in the Inland Empire with 91 supermarkets, opened only half the number of stores it planned to unveil this year because of the slowing economy.

"We were selling a lot more Haagen-Dazs" during the boom, Chief Executive Jack Brown said. "Frankly, people are now buying more [no-frills] private label."

John Husing, who heads Economics & Politics Inc., an economic research firm specializing in the Inland Empire, says 2008 will be the first year the region has failed to increase its job base in the 44 years he's studied the area.

Even during the mass aerospace industry layoffs in the early 1990s, the Inland Empire was able to grow, mainly because the coastal counties lacked available land, he said.

Despite gains in international trade, warehousing and office space in recent years, the Inland Empire will not bounce back until its primary asset -- housing -- returns in value, Husing said.

The question, of course, is when that will happen. But Husing said the one positive of the epic and swift devaluation of residential property is that it will reach the bottom quicker.

"This is an interruption in the economy caused by a housing market detached from reality," said Husing, who traced 95% of the Inland Empire's lost jobs to the residential construction industry, from building material manufacturers to escrow agents to furniture sellers.

Kemp of Beacon Economics expects the unemployment rate in the Inland Empire to grow as high as 12.4% before coming down in the later part of 2010, largely because he believes consumer confidence could improve, leading to an increase in demand for the region's available space.

"If you look beyond the short-term losses, the Inland Empire is poised to see not only normal growth but accelerated growth," Kemp said. "It's the path for expansion in California."

But with the immediate outlook crumbling, the whiplash of change has jarred residents and officials who worry their communities are teetering on despair.

"You see less people at the restaurants and carwashes," said Riverside Mayor Ronald Loveridge. "There is real pain almost everywhere you turn. My daughter is a counselor at Riverside Community College and she told me she met a [student] whose house was up for foreclosure. Her last resort would have been to move in with her parents, but their home is up for foreclosure. All over there are statements of personal tragedy."

Two local banks go tits up today

In case you haven't heard Downey Savings and PFF Bank (Pomona First Federal) were taken over by the FDIC today (and sold). Downey has been on the verge for quite a while. They were big into the exotic loans and sold gazillions of them. Concequently they lost gazillions. PFF is a much smaller local bank with offices throughout the IE. These guys were hurt more by loans to builders which went bad. This one was a bit of a surprise because I remember reading that the bank had been sold to National Bank a few months ago. It looks like that deal might have been held off until now. US Bank, National Association will be taking both of these local operations over. This will save the FDIC some cash.

From the FDIC

U.S. Bank, National Association, Minneapolis, MN, acquired the banking operations, including all the deposits, of Downey Savings and Loan Association, F.A., Newport Beach, CA, and PFF Bank & Trust, Pomona, CA, in a transaction facilitated by the Federal Deposit Insurance Corporation.

The combined 213 branches of the two organizations will reopen as branches of U.S. Bank under their normal business hours, including those with Saturday hours. Depositors will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Customers of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets. The FDIC will retain any remaining assets for later disposition.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close. The FDIC will then share in any further losses. Under the agreement, U.S. Bank will implement a loan modification program similar to the one the FDIC announced in August stemming from the failure of IndyMac Bank, F.S.B., Pasadena, CA.

The loss-sharing arrangement is expected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship.

U.S. Bank currently has 353 offices in California. Downey Savings and PFF Bank are not affiliated with each other. Downey Savings has 170 branches in California and five in Arizona, and PFF Bank has 38 branches in California.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Downey Savings will be $1.4 billion and $700 million for PFF Bank. U.S. Bank's acquisition of all the deposits of the two institutions was the "least costly" option for the FDIC's DIF compared to alternatives.

These were the twenty first and twenty second banks to fail in the nation this year, and the fourth and fifth banks to close in California. The last bank to be closed in the state was Security Pacific Bank, Los Angeles, on November 7, 2008.

Thursday, November 20, 2008

October sales by city

Here's October sales by city report from DataQuick.

Riverside County 4,446 $230,000
$351,500 -34.57%

AGUANGA 3 $304,500
$222,500 36.85%
BANNING 56 $142,000
$264,500 -46.31%
BEAUMONT 146 $252,500
$322,500 -21.71%
BLYTHE 9 $280,000
$222,000 26.13%
CABAZON 3 $75,500
n/a n/a
CALIMESA 2 $181,000
$265,000 -31.70%
CATHEDRAL CITY 84 $195,000
$330,000 -40.91%
COACHELLA 68 $196,000
$235,750 -16.86%
CORONA 508 $350,000
$470,000 -25.53%
$234,500 -49.04%
HEMET 208 $154,000
$266,000 -42.11%
HOMELAND 5 $199,000
n/a n/a
IDYLLWILD 9 $180,000
$320,000 -43.75%
INDIAN WELLS 14 $750,000
$1,217,500 -38.40%
INDIO 190 $230,000
$329,750 -30.25%
LA QUINTA 101 $305,000
$511,500 -40.37%
LAKE ELSINORE 170 $210,000
$320,500 -34.48%
MECCA 2 $110,750
$59,000 87.71%
MENIFEE 118 $242,000
$355,750 -31.97%
MIRA LOMA 48 $302,818
$475,000 -36.25%
MORENO VALLEY 529 $171,000
$341,500 -49.93%
$427,500 -45.03%
MURRIETA 326 $266,000
$395,000 -32.66%
NORCO 39 $390,000
$635,000 -38.58%
$170,200 -75.62%
NUEVO 6 $187,000
$529,000 -64.65%
PALM DESERT 90 $350,000
$386,500 -9.44%
PALM SPRINGS 113 $267,500
$330,000 -18.94%
PERRIS 231 $168,500
$325,750 -48.27%
RANCHO MIRAGE 51 $435,500
$558,500 -22.02%
RIVERSIDE 512 $225,000
$395,000 -43.04%
SAN JACINTO 111 $170,000
$280,500 -39.39%
SUN CITY 146 $210,500
$314,500 -33.07%
TEMECULA 268 $309,500
$418,000 -25.96%
THERMAL 5 $180,000
$95,500 88.48%
n/a n/a
WILDOMAR 81 $280,000
$379,500 -26.22%
WINCHESTER 69 $265,450
$391,500 -32.20%

San Bernardino County 2,872 $200,000 $330,000 -39.39%

ADELANTO 90 $122,250 $260,000 -52.98%
APPLE VALLEY 125 $150,000 $260,000 -42.31%
BARSTOW 29 $95,000 $129,000 -26.36%
BIG BEAR CITY 36 $210,000 $259,000 -18.92%
BIG BEAR LAKE 43 $335,000 $365,000 -8.22%
BLOOMINGTON 35 $150,000 $490,000 -69.39%
CEDAR GLEN 5 $153,000 n/a n/a
CHINO 91 $320,500 $464,000 -30.93%
CHINO HILLS 80 $462,500 $595,000 -22.27%
COLTON 68 $159,000 $303,000 -47.52%
CRESTLINE 24 $122,500 $250,000 -51.00%
FAWNSKIN 3 $390,000 n/a n/a
FONTANA 402 $248,750 $415,000 -40.06%
FOREST FALLS 3 $235,000 $167,500 40.30%
GRAND TERRACE 12 $241,250 $322,000 -25.08%
GREEN VALLEY LAKE 2 $157,500 $222,500 -29.21%
HELENDALE 14 $158,000 $305,000 -48.20%
HESPERIA 190 $165,000 $275,000 -40.00%
HIGHLAND 74 $222,000 $370,000 -40.00%
HINKLEY 2 $71,250 $152,500 -53.28%
JOSHUA TREE 16 $139,500 $181,250 -23.03%
LAKE ARROWHEAD 34 $310,000 $395,000 -21.52%
LOMA LINDA 23 $335,500 $425,000 -21.06%
LUCERNE VALLEY 9 $150,000 $170,000 -11.76%
LYTLE CREEK 2 $172,500 $175,000 -1.43%
MENTONE 17 $315,000 $370,000 -14.86%
MONTCLAIR 49 $241,000 $355,000 -32.11%
MORONGO VALLEY 5 $124,500 $130,000 -4.23%
NEWBERRY SPRINGS 2 $95,000 $135,000 -29.63%
ONTARIO 165 $233,000 $367,500 -36.60%
PHELAN 21 $200,000 $370,000 -45.95%
PINON HILLS 5 $272,000 $242,500 12.16%
RANCHO CUCAMONGA 190 $350,000 $450,000 -22.22%
REDLANDS 59 $253,500 $402,500 -37.02%
RIALTO 135 $190,000 $319,500 -40.53%
RUNNING SPRINGS 8 $171,000 $349,000 -51.00%
SAN BERNARDINO 285 $120,000 $260,000 -53.85%
SUGARLOAF 14 $139,000 $215,500 -35.50%
TWENTYNINE PALMS 25 $115,000 $140,000 -17.86%
TWIN PEAKS 3 $180,000 $242,500 -25.77%
UPLAND 55 $393,000 $504,500 -22.10%
VICTORVILLE 305 $158,000 $275,000 -42.55%
WRIGHTWOOD 7 $200,000 $276,500 -27.67%
YUCAIPA 61 $260,000 $364,500 -28.67%
YUCCA VALLEY 39 $122,000 $210,000 -41.90%

Tuesday, November 18, 2008

Oh so close

Here's the latest numbers from Dataquick. Last month San Berdu's median price was $205K and Riverside was $237,500. That puts the monthly decline at 2.5% for San Berdu and just over 3% for Riverside. Foreclosures made up 68% of the Riverside sales and over 65% or the SB sales. That kinda makes you wonder whats going to happen to the sales numbers if the number of availible foreclosed properties continues to diminish due to AB1137. I doubt that will be an issue. Once banks get caught up I expect the foreclosure numbers will climb right back up again.

Once again the report makes headlines about how much better than last year sales were. Well yes they were, but last year was the worst year since the great flood in 2000 BC (They did mention is was the second worst october since 96 though).

San Berdu's median is oh so close to breaking $200k! Riverside's median peaked at around $420K in late 2006 so we are close to 46% off peak. I think we have another30K to 50K still to go before we level off in Riverside, maybe slightly less in San Berdoo.

Sales Volume Median Price
All homes

Oct-07 Oct-08 %Chng
Los Angeles

$500,000 $355,000 -29.00%

$573,750 $420,000 -26.80%

$356,300 $230,000 -35.40%
San Bernardino

$330,000 $200,000 -39.40%
San Diego

$460,000 $323,500 -29.70%

$535,000 $375,000 -29.90%

$445,000 $300,000 -32.60%

Monday, November 17, 2008

The WTF award of the week

Most agents have long ago come to the realization that Perris has tanked. It's pretty rare these days to come across a listing in Perris over $300K, hell most should be under $200k. I'm fairly sure the median of Perris is now under $200k. So it was a surprise to run across this listing today.

922 Hereford Way, Perris. This home is over in/near the Villages of Avalon, below the dam at Lake Perris. This is a large ranch style home that's just over 3000 sq/ft on a 1/2 acre lot. It has 3 bedrooms and 2.5 baths. This home sold in Oct 2006 for $635K!! Yes, you read that right $635K in freakin Perris. It looks like the bank too it back in July for $345k. It's now listed for $399K or $133 a sq/ft. That is an insane price for the area. The average listing in that area is about $80 s/f with many down in the $60s. It might be worth a little more because of the large lot but WTF is the listing agent thinking pricing this turd at $400k.

Now check out the picture. You'd think the agent could have cropped the picture in order to not show the Graffitti on the garage door. Is the other door missing? Probably the listing does say it's a fixer. A $400k fixer in Perris..........

Sunday, November 16, 2008

Hope for Homeowners....not so much

Remember the October bailout "Hope for Homeowners". This is the one the offered FHA backed loans to struggling homeowners. The banks were to write down the principal balance to 90% of current value and the FHA would then insure the loan. When the borrowers sold the FHA was to get 50% of the profit. It was hyped that this would help 400,000 people stay in their homes.

Now for the reality part
by Diana Olick

I’ve just seen the latest numbers on the recently launched government Hope for Homeowners program, and I’d call them laughable if the whole thing weren’t so blatantly sad.

Hope for Homeowners was launched Oct. 1 as part of the Housing and Economic Recovery Act signed into law on July 30,2008. Proponents used a Congressional Budget Office estimate of 400,000 homeowners that could be helped over three years. The latest projection was that 19,000 applications would be received in the first year.

The program works like this. A borrower in trouble contacts the lender, and the lender agrees to write down the principal to 90 percent of the current value of the property. They then get a new FHA insured loan. In return, when the borrower eventually sells the house, the government gets half the equity that is created after the new loan begins: in other words any appreciation. FHA will insure up to $300 billion in new loans.

Well I doubt we’re all going to have to worry about that $300 billion. Here’s the reality: In the last two weeks, FHA received exactly 69 applications to the H4H program. Since the start of the program, a little over a month ago, it has received 111. Now I’m no mathematician, but that doesn’t exactly extrapolate out to 400,000 over three years or even 19,000 over one year or even over a few months. In fact, HUD took the projections out of the release.

Saturday, November 15, 2008

How far out of whack did prices get?

How far out of whack did prices get? And how far do they still need to fall?

I've posted many charts and graphs in the last year showing how far out of whack prices got. Those charts all show the median priced home was between 2.3 and 3.2 times the median income over the last 40 year. Today I did a little number crunching using the NAR's median price numbers and the California franchise tax boards numbers.

In 2001 the median family income in the IE was $51,036 according to the tax man. The NAR data shows the median priced home in the IE was $135,940 in 2001. That gives a ratio of 2.66x the median income. That's right in the middle of the average long term range. If only it had stayed there!.

2002 was when things became unhinged and 2003/2004 was when it really went off the charts. By 2006 the median priced home in the IE was $415k but the median income had only risen to $53,508. Bringing the ratio to 7.75x the median income. Riverside was actually higher than that. Our median peaked at about $465k putting Riverside closer to 9x the median income.

Currently the median priced home is around $225k for the IE. The median income is probably less now than it was in 2007 due to all the job losses. But using the 2007 number we still get a ratio of 4.20x the median income. That's still about 36% higher than in 2001.

You can see why I believe homes will come down to 2001 prices. That's where we fall back into the traditional ratios. Prices are very likely to overshoot on the way down. They may fall back to 1999 prices. Who knows for sure. When it comes to the future we are all just guessing.

Thursday, November 13, 2008

1/2 off in Elsinore

Like most of Southern Riverside, Lake Elsinore is racing back to pre-bubble pricing levels. If you don't mind driving a few miles down the 15 fwy there are some very nice homes at reasonable prices in this area. Elsinore is not the very best of cities but it's better than some of the other areas where prices have fallen a similar amount (like Perris or Hemet).

Here's a few that hit the market today that seem to be reasonably well priced.

First up is 51 Plaza Avila in Tuscany Hills. This home was built in late 2004 and sold new for $566k. That's at least a year and a half before the peak. So Peak value of this home was probably nearer to $650k. It's a 4 bedroom, 2.5 bath home, 3235 sq/ft. It's listed as an REO for $265K. That's $82 sq/ft. that is a 53% drop from the original purchase price and closer to 60% from peak value.

In the same area is 46 Via De La Valle. This home is a 4 bedroom, 4.5 bath home, 3404 sq/ft. It sold new in late 2004 for $535k and it sold again in late 2006 for $670k. This one is also hitting the market as an REO. Priced at 55% off the last sales price its listed for $299,900.

47 Plaza Avila is in the same tract just down the road from home #1. It's a 5 bedroom, 4 bath, 3493 sq/ft. It was purchased new in late 2004 for $572k. That guy was lucky enough to unload this to some poor schmuck in early 2007 for $587k (the buyer obviously didn't do his research).Of course, it's owned by the bank now and listed for $285k, also $82 sq/ft. That is a loss of 51% from the last sale. This is a nice looking house from the pics!

This tract is getting pummeled. Plaza Avila at one end has 5 of the first 6 homes on the street for sale. The mid $80 sq/ft range seems to be where most are priced.

Wednesday, November 12, 2008

Wow, finally someone gets it!

From Businessweek

Modifying mortgages is just a band-aid

The flurry of announcements by the government and major banks that they are engaging in a massive campaign to modify mortgages that are in or are hurtling toward default and foreclosure will certainly give rise to predictions that the housing market has been stabilized and disaster averted. If only it were so.

But anyone hoping that this synchronized effort to modify millions mortgages that are in trouble is likely to be disappointed. Because behind the splashy headlines, there are limits to what the government and banks can hope to achieve. And trying to slow the free-fall in housing markets is akin to the government trying to put its finger in the dike.

The fact is that despite the double-digit declines in housing values in most cities, housing remains significantly overvalued in many markets by all of the traditional benchmarks: One key ratio – the median cost of a new home vs. median income – suggests that home prices nationwide still need to drop another 15% to 20% on average, as you can see in this chart compiled by money manager Barry Ritholtz. And the equilibrium price is far more than that in bubble markets like southern California and Florida. According to this “fair value” calculator, one suburban neighborhood outside Washington, D.C. that I checked (Alexandria, Va., where I lived in the mid-1990s) is now 47% overvalued. Ditto for a few communities in Los Angeles that I surveyed.

A second measure – home prices to average rent –also remains out of whack, and would require another 20% to 25% plunge in home prices to make it more advantageous for the average apartment dweller to buy a home instead, particularly now that few homeowners have any illusion that their house is an “investment” that’s going to soar in value in coming years.

Providing relief to current homeowners who are in trouble is a politically expedient move, but at the end of the day, prices are still far too high for the next generation of buyers – particularly now that lenders have reverted back to demanding hefty down payments and using more conservative underwriting standards. Which means that the current imbalance in supply and demand will remain a problem and help push prices down for years to come.

$89 sq/ft REO in Eastvale

Before you jump all over my butt, I know this will probably sell for more. But, the mere fact that it has listed for $89 sq/ft as an REO will encourage more and more listings to go low.

12492 Feather Dr. This home is actually on the East side of Hamner ave putting it in Mira Loma but it is still in the Eastvale area. It's a big one at 4220 sq/ft and it has 5 bedrooms and 4 baths. It has just listed as an REO for $375k or $89 sq/ft. There's also another REO that listed today at $93 sq/ft in the same tract (12245 Ashcroft). It says that ones a fixer so it may have some damage inside.

Over in the Corona side of Eastvale we have one hitting the market today at $98 sq/ft. 13840 Peach grove is the adress if anyone wants to run over. This one is listed nearly 50% off it's previous sale of $750K. Also an REO.

Tuesday, November 11, 2008

Hearthside Lane in Corona in default

Potential buyers beware

One of the new communities in Eastvale is in trouble. Irvine builder California Coastal Communities is in default on a loan that is secured by several properties. One of those is Hearthside Lane in Corona. They are currently negotiating with the lender to turn over these properties to them. So it you are currently looking at a Hearthside home you might want to hold off. There's no telling what will happen once the lender takes the project.

Here's part of the press release

Impairment charges of $29.1 million recorded during the third quarter of 2008 primarily reflect fair value write-downs for the Hearthside Lane project in Corona and Las Colinas project in Lancaster of $24.1 million and $1.5 million, respectively, and a $3.4 million charge related to our Woodhaven project in Beaumont. Subsidiaries of Hearthside Homes, Inc. are currently in default on the loans secured by the Hearthside Lane and Las Colinas projects and they are attempting to negotiate a consensual resolution of the loans which is likely to involve turnover of the properties securing these loans to the lender. Therefore, under GAAP the Company was required to reduce the carrying value of the Hearthside Lane and Las Colinas projects to their estimated fair values during the quarter ended September 30, 2008. After these impairment charges, the related debt exceeds the carrying value of these assets by approximately $18.5 million. If the Hearthside Lane property is transferred to the lender in full settlement of that loan, the Company will recognize a substantial gain as a result of debt cancellation. If the gain is equal to the amount that the recorded debt exceeds the carrying value of the assets, the $18.5 million pretax gain would result in a gain of $10.9 million after tax, or $1.00 per share. Both of these loans are guaranteed by Hearthside Homes, Inc.; however, they are not guaranteed by and do not otherwise constitute obligations of California Coastal Communities, Inc. There can be no assurance that the lender will agree to a consensual resolution of these loans.

More bailout talk

The housing news seems to be about nothing but bailouts these days. The latest round of bailout news has been hitting the wire for the last couple of days. The more I look at these bailout ideas the more I believe the bankers and politicians are living in a fantasy world. They seem to believe that people want to stay in homes worth 1/2 what they paid for them. They think people will take on 40 year mortgages with little hope of making any money when they do sell. These bailouts might be of some help in Texas or Kansas. Places where the bubble was not so large and people were actually buying homes to LIVE in. In those locations there is a reasonable chance that prices ay recover before the turn of the next century. In bubble locations like California, Florida, Nevada and Arizona the prices were so inflated that prices may not recover for many decades. In addition many of the buyers were only buying houses because there was a chance of making a large profit. With the profit possibility gone does anyone think these people care to stay in these homes? Would you take on a 40 year loan with a balloon payment at the end just to stay in a house? Financially most would be far better of to default, take the credit hit, rent and buy again in 5 to 7 years. Prices will probably be about where they are today in 5 years. So they can buy low as opposed to taking some crazy low interest 40 year loan on a home worth 1/2 of the loan amount.

I just get more angry every time I hear of another bailout. When do the rest of us get our bailout? Why are current home buyers getting stuck with 6%, 7% or higher loans while those that bought more than they could afford get 0% bailouts. It's not the people that are being foreclosed on that should be screaming. It's the rest of us that should be in the news protesting about these unfair bailouts. It's BS I tell ya!

Monday, November 10, 2008

Viva Las Vegas

I spent the last weekend in Vegas. As you can see from the picture the hooker hawkers are not just handing out cards anymore. Now they walk around with lit billboads strapped to their backs! Freaking amazing. I don't quite understand why the city allows these guys on the street. Most of their handouts end up littering the streets. I took this picture out in front of the Paris Hotel.

On a housing note I went and took a look at some homes. I was a little surprised to see that there are still plenty of new housing tracts trying to sell homes. I stopped in at a half dozen to see what the prices were. I was a little surprised to see what they were trying to get. The prices still seemed high to me. I'm not sure what they would actually take but they were still asking well over $100 s/f on everything I saw.

I didn't see another soul looking when I was there. I was the only person at looking at all the tracts I stopped at. Not a good sign considering I was out between noon and 2 on a nice Saturday afternoon. One thing I noticed at the tracts I looked at. All of them had 4 or 5 cars parked out in front. One was the sales person, but who's driving the other cars? I thought that they might be parking cars out front to make it look like people were looking.

On an economy note, even though Vegas was quite busy it was noticeably quieter in the casinos. Also the restaurants were much quieter than usual. On Saturday evening we walked into a nice place, were immediately seated and found the place to be 2/3 empty. It sure made for great service from the waiter (the lobster bisque was awesome!). I wish I could remember the name of the place but after a bottle of wine I don't remember much. Obviously I didn't hit any jackpots because I'm still here typing.

Thursday, November 6, 2008

Hawarden Hills, under $500k

You don't often see a Hawarden Hills home for under $500k. This is the best area in Riverside. Most of the homes are large and many of them are mini castles. In Riverside, this is where the real rich folk live.

2114 Westminster Dr is in the older section of the hills. It's still a very nice area but the homes are smaller than those farther up the hill. This particular home was built way back in '65. It says it got a complete remodel in 2006. The house is 3200 sq/ft with 3 bedrooms and 2.5 baths siting on over 3/4 of an acre. The biggest drawback about this home is it has no garage, only a carport. Makes me think that at at some point the garage was converted to living space. Purchased in 2006 for $725k and then remodeled, the owner is into this home for a chunk of change. I imagine this was attempt at a remodel and flip. Bad timing though. It listed way back in May for $789k. After several price reductions it's now sitting at $449k. This could be a short sale, although it does not indicate this in the listing. If you want to live in Hawarden hills this might be worth looking at.

When dove's cry

14324 Dove Canyon is a 2802 sq/ft 3 bed, 2.5 bath home with a pool, sitting on nearly an acre. The home is located in the Mockingbird Canyon area of Riverside. The home last sold in Nov 2005 for a whopping $670k. Today it's owned by some unfortunate bank. It's currently listed for $285k. That is a fall of 58%! A loss of $385K.

$285k sounds like a decent price for this home and it would be if there were some decent roads into it. I'm not sure how many people reading this have been in that tract. It's an absolute maze. You need GPS, a guide dog and a sherpa to find your way in and out of there. Still for a newer home (built in 2002) with a pool, on nearly an acre it looks like a decent price.

(please forgive the Price reference, it just popped into my head when I say the address)

Wednesday, November 5, 2008


Anyone remember the delusional seller in Riverside that listed his "professionally decorated" home for 1.4 million when the comps were around $500k? That thread was memorable because the seller or friends of them found it and posted.

Tonight I checked that tract again. It's a nice gated tract off Victoria Ave just below Lake hills. My wife has a doctor friend that lives in there. It's a nice area, but how are the prices holding up. Well, they're not. There are currently 6 homes in the tract listed on Redfin and 5 of those are under $400k! The lowest, and it's an REO is $324k or $89 sq/ft. Unless the house is gutted, that's probably a decent price.

It looks like the dellusional seller asking $1.4 million (he later reduced it to 1 million) is really in a world of hurt now.

The price leader in the tract is 17027 First Light Ln. It is a 3655 sq/ft home with 4 bedrooms and 2.5 baths. It was built in 2003 and last sold in Sept 2006 for $750K. It's currently listed for $324k and has been on the market for 117 days with 3 weeks of that at the current price. At $324k this sure seems like a pretty good deal. If they get asking price that's a loss of 57% or $425k from the last sale.

The next lowest price is 16398 Hidden Pk. This home is larger at just under 4000 sq/ft and has 4 bedrooms and 3.5 baths (same floor plan as Mr. 1.4 mil). This one is also an REO. It last sold in May of 2007 for $715k. Wow and it's already an REO! It's been listed for a month and has already had 1 price reduction. It's currently listed for $398K or $102 sq/ft. Also not a bad deal in my opinion (currently). If it sells at asking the loss on this one is "only" 45% or 317K.

Another one is 17243 Bluff Vista Dr. This is the same floorplan as the first house. It sold last in Aug 2005 for $668k. It's now listed as an REO for $385k or $105 sq/ft. Again, this is a decent price currently for this home. This one has only been on the market 2 weeks.

Housing Crisis, what housing crisis

I finally had enough with our government and it's bailouts when I read the latest "idea" that they are kicking around. I wrote a letter and fired it off to Feinstein and Boxer (a lot of good that will do). This is a more editorialized (blog worthy) version of what I sent.

Housing Crisis, what housing crisis?

Hello…..Congress…we don’t have a housing crisis. Why is it so hard for our elected leaders to comprehend this mind numbingly obvious fact. The housing crisis was between 2002 and 2006. When regulations and lending standards were thrown out the window, allowing houses to become ATM machines instead of “homes”. What we have now is a consequence crisis, brought about by doing nothing during the real housing crisis.

The real housing crisis went like this. Strawberry pickers making $14k a year bought $720k homes. People bought new homes and sold them for $100k profit weeks if not hours after taking ownership. Foreign college students were buying half-million dollar homes with no income and no job, and getting paid to do it. Banks looked the other way as real estate agents, mortgage brokers and appraisers conspired to inflate prices, fabricate documentation and do what ever was required to close a deal. All of them making a healthy profit along the way.

That was the real housing crisis. Our leaders did nothing to stem the tide back then. There was no one listening as young families complained about not being able to afford housing. Home ownership had never been higher, Hummers were flying off the lots and governments were raking in record property and sales taxes. Life was good!

Did our leaders think that all was well with the world when my neighbor, the Taco Bell counter girl was driving a $50k Denali? Did they think the entire country had hit the lotto? None of them thought to ask who was going to pay for all this consumption. They know now!

Congress is running around trying to solve a problem that has long since been solved. The financial markets, banks and hedge funds that created this train wreck have already imploded. Like a pyramid scheme those that stayed in too long or bought in too late are losing everything. Those people that bought a bigger house than they could afford are losing it. Problem solved!

If congress wants to help they should enact legislation to hurry this process along. They should enact legislation that speeds up the foreclosure process, not slows it down. They could offer low interest loans to responsible people that would like to purchase “affordable” homes. Possibly even using down payments (I know, a novel concept. But I’m a “maverick”). There are millions of responsible families out there that would love an affordable home. Why are they being punished with interest rates of 7%, 8% or higher. The government is giving the banks billions of dollars to bail them out. Surely they can put some conditions on that money to ensure low interest loans are available to responsible Americans.

Our bleeding heart leaders seem hell bend on saving the financially inept at the expense of the rest of us. Those that over spent and possibly (probably) lied or cheated in order to purchase that grand house are being rewarded with a multitude of government bail-outs. People the used their homes as ATM machines and lived like rock stars are now being rewarded. They get to keep the Escalade running on 24” spinners, the big screen TV, the boat. The rest of us, well, we get to pay for it. Is that the American dream?

Monday, November 3, 2008

A cool website for you potential RE investors

I ran across this website several months ago and then forgot about it. Tonight while searching an address I ran across it again. It's called and it analyzes properties based on rental value. Basically you type in an address and it tells you what you need to pay for it based on average rents of comparable homes in the area. It's pretty cool although it uses only numbers to calculate the data. It doesn't know if a home is up in a glitzy area on a hill or in a ghetto behind a sewage treatment plant. So your results may vary depending on what you are looking at.

I typed in that house in "The Retreat" from the last post and got this.

Investment Summary

This investment summary assumes a 30-year fixed loan, 20% down, 7% APR. It uses operating assumptions of 10% management fees, 9% vacancy allotment, 3% repairs. This investment summary assumes that rents increase each year by 5%. This property would need to be purchased for $267,520 in order to generate a break-even cashflow based on prevaliing market rents.

1 Year 2 Year 3 Year 4 Year 5 Year
Break-even Purchase Price $267,520
Cashflow Before Taxes
Cash-on-Cash Return

The above purchase amount is based on a rent of $2095/mo. That is the average for homes it used as comparables. I think this home would rent higher. The high rental value in the comparables was $2900/mo. I'm not sure if you could get that or not but if you could fetch that kind of rent then this home would be priced about right. Using the asking price, the numbers come out similar to those above when the rent is $2900/mo and the purchase price is $380k.


1 Year 2 Year 3 Year 4 Year 5 Year
Net Operating Income
Debt Service

Cashflow Before Taxes

I don't totally agree with their assumption that rents will increase 5% per year however. I think rents are more likely to go the other direction in the near future. Those numbers look great but only if the rents go up. If they go down or stay flat then you start to bleed red ink.

The site is cool and offers a wealth of information. Some of it good and some fairly useless. But it does offer a glimse into the probable future of prices. Chances are they will fall to, or close to comparable rental values.

Sunday, November 2, 2008

The Retreat goes Sub-400K

My favorite bubble whipping post has gone Sub-$400k.

Last week before hitting the high seas I saw this listing. I honestly figured it would have sold by the time I got back. But it hadn't and there was an open house on it this weekend. I drove over to take a look with my wife. I expected a stripped home or another thrasher where the owners trashed it on the way out. But no, the home was actually quite nice. The fixtures and flooring were all basic stuff. No upgrades here folks. But the house was in good shape. The only bad thing was the back yard was tiny and I do mean tiny. I think you could stand in the door and touch the back wall with a broom.

The home is 8775 Gentile Wind drive. An address my wife found strangley amusing. Gentile Wind she said with a snicker.... "that's a perfect address for you". The home is a 4 bedroom 3 bath with 3333 sq/ft of living space. This is a KB home built in 2005 and selling new for $718K. They tried to get $390k for it on the courthouse steps but there were no takers so the bank now owns it. There asking price is $380K. A couple of months ago I would have said this will sell in a heart beat. But there are several other homes in this tract listed very close to $400k. If those are upgraded or have larger lots then this home may still have trouble at this price. Another huge problem for this tract is the ungodly high property tax. On top of the normal CA property tax you have about another $4500. If that's not bad enough the HOA is currently running about $120 a month ( I was quoted $230 by another agent at another open house). All together that adds another $500 to $600 a month to the monthly nut. (the picture above is the home next door but they look alike and are the same basic floorplan. This one is listed at $417k as a short sale).

I've received a few nasty-grams over the months about me being a poor, bitter, jealous renter who can't afford "The Retreat". They said sales were picking up and prices would soon recover, etc, etc. Funny stuff really, obviously from homeowners in "the retreat". Please if you feel the need to send me another one, just go get a stiff drink and skip it.