Happy New Year!

2 plus 2 equals....

The start of this video is priceless, and the rest ain't bad either.

Merry Christmas

Merry Christmas
from Golfer-X

Holy flip Batman

Remember this house? This one was trashed by the previous owners on the way out.



It was picked up by a flipper for $330k 4 weeks ago. They cleaned it up, fixed the broken stuff, filled the pool and now feel they are entitled to a $300k profit (less costs). They have it listed for $639k! This thing does have a spectacular back yard and the inside looks pretty nice now but geez come on a $300k markup in one month??? It looks like they just cleaned it up and added new wrought iron fencing. I know it needed windows and some other stuff but wow this guys is looking to make a killing. I don't think they will get that much though but he should be able to get mid $500s. That's still a healthy profit.

Realtor Cliche Award

The Realtor Cliche award gores to...... Dory Gray!

She gets it for her listing at 169 Wild Horse Ln in Norco. First there is the description written in all caps. Look realtors, every buyer out here hates that. It's hard to read and makes you look like an idiot. Please stop! Plain old English works for us. Of course it has a Gourmet kitchen. Although I'm not sure what part if it is gourmet, It looks like a run of the mill kitchen to me. $100k in landscaping including "special plants". What are special plants? So far the listing isn't too bad other than the all caps and the way it's written.

What sends her over the top are the tags on the pictures. We have "California Dreaming", "Forever View", "Cozy Formal Dining Area" (love the patio furniture dining set), "Rustic Horse Property", and "Location, Location, Location".

Now, the price on this house isn't too bad. $420k for a 3274 s/f pool home on a 1/2 acre in Norco Hills is a pretty good price. I might even be interested in this house if it had a 3 or 4 car garage. For some reason the last sale price is not showing up on Redfin. I would guess they are the original owners of the home. These sold new in 2004/2005 and this home would probably have gone for around $650k. They have actaully probably spent around $100k putting in that pool, and the concrete work and RV parking. So they are into this place for around $750k I would guess. Will the bank go for $420k? Who knows but the comps actually support the asking price.

What's in the news

A 55% increase in "shadow inventory"

Dec. 17 (Bloomberg) -- The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic.

The “shadow inventory” rose from 1.1 million a year earlier. Such properties include those taken over by banks and mortgage companies and those where the loans are at least 90 days delinquent, the Santa Ana, California-based research firm said in a report today. The number of unsold homes listed for sale was 3.8 million in September, down from 4.7 million a year earlier, First American said.

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Walking away, it's not a moral dilemma for banks! They tell homeowners to "do the right thing" but they themselves do what is most financially prudent.

Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.” Eh so you are walking away, right!

The Morgan Stanley buildings may have lost as much as 50 percent since the purchase, he estimated.

Commercial mortgage defaults more than doubled in the third quarter from a year earlier as occupancies fell, according to Real Estate Econometrics LLC. Office vacancies will reach a near-record 19 percent in the first quarter of 2011, broker CB Richard Ellis Group Inc. estimated.

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Is that all?

Eventual losses at mortgage giant Fannie Mae could exceed $200bn, posing a risk of receivership after year-end when limitations on the Treasury Department’s authority to support the agencies return, according to research Friday by Barclays Capital (BarCap).

Once the added authority expires, the Treasury will no longer be able to increase the size of the $200bn preferred backstops supporting Fannie and brother agency Freddie Mac without consulting Congress.

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Cramdown shotdown!

WASHINGTON (Reuters) – In a win for the banking industry, the U.S. House of Representatives voted on Friday to reject a measure that would have allowed bankruptcy judges to change the terms of mortgages for distressed homeowners.

Known as "mortgage cramdown," the measure was defeated in a 188-241 decision as a proposed amendment to a broader financial reform bill expected to win House passage later on Friday.

The House had approved a mortgage "cramdown" measure in March over the objections of Republicans and bank lobbyists, but it died in the Senate.

Cramdown would help stem the home foreclosure wave continuing across the United States, its advocates said. But opponents said it would raise costs for everyone and divert capital from the mortgage debt market.

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DQ November report

The November report is out. No surprises here. Sales were strong although 15% below an average November. The impending end for the home buyer tax credit spurred a lot of sales. The lack of low end inventory is also showing up in higher median prices. Similar to what happened in late 2006 and early 2007 when the median was rising because only the higher end homes were selling. Inventory continues to decline. Some of that is due to the holiday season. Many people pull their homes off the market this time of year.

Even though there are far fewer REO's on the market the amount of distressed properties is huge. Here's the latest numbers on that first.

(the numbers are the running totals for the last 120 days (through mid Dec))
Riverside,
NODs 12736
NOTs 14553
NOT sales 6755

San Berdu,
NODs 9834
NOTs 11771
NOT Sales 5558

Here's the DQ report,

Southern California’s housing market continued its step-by-step climb up from the January-February bottom as both sales and prices saw gains last month, a real estate information service reported.

A total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 13.3 percent from October’s 22,132, and up 14.7 percent from 16,720 for November 2008, according to MDA DataQuick of San Diego.

Sales almost always decline from October to November. The year-over-year increase was the 17th in a row. In DataQuick’s statistics, which go back to 1988, the average November had 22,312 sales.

Sales of newly built homes saw an unexpected jump last month. A total of 2,039 new homes were sold, the highest of any month so far this year, and 25.5 percent ahead of 1,625 for November 2008.

Sales have been stoked in recent months by several factors: A federal tax credit for first-time buyers, which had been set to expire last month before it was extended and expanded; robust investor activity, especially inland; super-low mortgage rates; the availability of government-insured, low-down-payment mortgages for first-time buyers; and the allure of a potential “deal” on a distressed property.

	Sales Volume			Median Price
All homes	Nov-08	Nov-09	%Chng	Nov-08	Nov-09	%Chng
Los Angeles	5,037	6,257	24.2%	$340,000	$329,000	-3.2%
Orange	2,177	2,528	16.1%	$400,000	$432,250	8.1%
Riverside	3,719	3,745	0.7%	$220,000	$200,000	-9.1%
San Bernardino	2,385	2,751	15.3%	$185,250	$160,000	-13.6%
San Diego	2,673	3,148	17.8%	$305,000	$325,000	6.6%
Ventura	729	752	3.2%	$355,000	$365,000	2.8%
SoCal	16,720	19,181	14.7%	$285,000	$285,000	0.0%

Realtor 101

This fella failed Realtor 101 for sure!

As most of you know by now, I really hate when a person puts ZERO effort into a listing. I mean, for pete's sake you are trying to sell a house and make a living. If he sells this house he will probably make around $7k after splitting with the broker. You'de think he would put just a few minutes of effort into the listing.

So here it is, 1796 Irving St, in Riverside. This is an average sized house on a huge orange grove or something. The trees look small so I doubt it is an income producing grove. It says the previous buyer paid $1.1M for it in 2006. That price seems nutz but then again what wasn't in 2006. Now it's listed for $495k and this is the best (and only) picture Realtor George Wong can come up with.....

Heck that could be my back yard, or a park or just about any thing. No house, really George ya couldn't snap just one picture of the house? And to top it off here is the complete description from the listing,
"8.1 acres - 352,836 square feet of fruit trees, water wells, 2348 sqft house with two car garage. Owner paid $1,100,000 on 5/2/06. Great opportunity. BUYER TO VARIFY ALL INFORMATION"

Oh, tell me more, your riviting description has me aching for more details!

I don't know if this qualifies for a Realtard of the month award but it's got to be a contender.

55% underwater

I found this chart at Dr Housingbubble. It looks like nearly 55% of the mortgages in the IE are underwater. Most of them WAY WAY underwater!

The thin months

Now that we have moved into the holiday season the new REO inventory will be really thin. Banks really don't like to kick folks out of their homes during the holidays. From a PR standpoint it's not a good thing to throw a families Xmas tree and presents onto the front lawn during an eviction. That sort of behavior will get you on the 6 o'clock news for sure.

So, if you are in the hunt for an REO property, don't expect too much until around Feb. Since the banks don't foreclose until after the holidays and there is another couple of weeks to get the home listed we are looking at sometime in Feb before there is any chance of a decent supply of REO's.

More on Mods

The HAMP mortgage mod fiasco is the single biggest reason there are few homes on the market right now. This is the king pin of the Obama save the home owners plan. So how is it working?

Not so good. Overall something like 25% are already behind. The longer they have been enrolled the higher the percentage of late pays. After 3 months it's closer to 50%. The delinquency rate show the epic failure of this plan. Yet the administration thinks the answer is to pressure the lender to offer more mods and make the mods more affordable.

An example of just how epic a failure this plan is comes from JP Morgan. They have initiated around 178,000 mods. Of that 178k, 22% of them didn't even make the first payment! Even the treasury expects the re-default rate to be 40%. Unfortunately that estimate is proving optimistic as the actual number is looking more like between 50% and 60% (after a year). According to one study, even with payments cut an average of 34%, 65% of borrowers fell back into delinquency. So if we are cutting payments 34% and people still can't pay.......where do you go from there. How about a 30 year loan, payments of $1 a month with a balloon for the balance at the end. I bet that one gets a 100% success rate!

It's fairly obvious people are using this plan to get more free time in the home. They get another 3 to 6 months under the mod, then the bank starts the foreclosure process again and that takes another 6 to 9 months. If they can initiate a short sale they might even be able to squeeze 3 or 4 additional months out if it. That could mean another year to 18 months of free living.

Hope springs eternal

Hope, how long would you hold out hoping of some rich foreign national snapping up your unbelievably overpriced house? Would you wait a year? two years? how about 846 days and still counting....

2902 Vandermolen is a 3 1/2 year old house that has NEVER been lived in. This was obviously an investment gone wrong. Purchased for $1.053 million right at the peak of the market this house will be a monumental loser (if they ever sell it). They have been trying to get $1.25M for a couple of years. After putting in the fancy front landscaping they are probably into it close to this amount (once selling costs are factored in). The back yard is still dirt though. The inside of the house is not what you would call upgraded. It has your standard stainless appliances, cheap carpet, cheap ceramic tile and rather ordinary fixtures. They have recently dropped the asking price to $1 million. The problem for the sellers is that the house is probably worth about $550k max based on the comps.

I seriously think I want to throw an offer for $450k at them just to piss them off!

Here's the median sales price by city for October from DataQuick. The county wide median has stayed about the same for 3 months now (it was $190k in August also). Some cities went up slightly and some went down. Prices just seem to be bouncing around right now from month to month.

City................................ sales....2009.......2008...... yoy drop

Riverside County	4,055	$190,000	$230,000	-17.39
AGUANGA	4	$220,000	$304,500	-27.75%
ANZA	4	$146,750	$107,000	37.15%
BANNING	44	$123,500	$142,000	-13.03%
BEAUMONT	126	$205,000	$252,500	-18.81%
BLYTHE	4	$95,000	$280,000	-66.07%
CABAZON	7	$55,000	$75,500	-27.15%
CALIMESA	9	$145,000	$181,000	-19.89%
CATHEDRAL CITY	82	$155,000	$195,000	-20.51%
COACHELLA	49	$141,000	$196,000	-28.06%
CORONA	444	$330,000	$350,000	-5.71%
DESERT HOT SPRINGS	119	$95,000	$119,500	-20.50%
HEMET	198	$125,000	$154,000	-18.83%
HOMELAND	9	$129,000	$199,000	-35.18%
IDYLLWILD	10	$199,000	$180,000	10.56%
INDIAN WELLS	13	$450,000	$750,000	-40.00%
INDIO	147	$193,000	$230,000	-16.09%
LA QUINTA	117	$276,000	$305,000	-9.51%
LAKE ELSINORE	144	$170,000	$210,000	-19.05%
MECCA	3	$70,000	$110,750	-36.79%
MENIFEE	99	$195,000	$240,000	-18.75%
MIRA LOMA	38	$265,000	$302,818	-12.49%
MORENO VALLEY	368	$135,000	$170,500	-20.82%
MOUNTAIN CENTER	4	$301,000	$235,000	28.09%
MURRIETA	276	$235,000	$266,000	-11.65%
NORCO	27	$312,000	$390,000	-20.00%
NUEVO	12	$125,000	$194,000	-35.57%
PALM DESERT	120	$290,000	$350,000	-17.14%
PALM SPRINGS	181	$145,000	$267,500	-45.79%
PERRIS	208	$147,000	$169,000	-13.02%
RANCHO MIRAGE	44	$497,500	$435,500	14.24%
RIVERSIDE	511	$180,000	$225,000	-20.00%
SAN JACINTO	114	$146,000	$170,000	-14.12%
SUN CITY	145	$170,000	$210,500	-19.24%
TEMECULA	245	$262,000	$308,250	-15.00%
THOUSAND PALMS	4	$118,000	$130,000	-9.23%
WHITE WATER	2	$85,250	n/a	n/a
WILDOMAR	70	$235,500	$280,000	-15.89%
WINCHESTER	51	$250,000	$265,000	-5.66%

Bad bank!

Well, it looks like the government is rolling out ANOTHER plan to save troubled home owners. It's all to evident at this point that the mortgage modification plan (HAMP) isn't working all that well. Out of 500,000 trial modifications less than 2000 were made permanent.

What's the newest plan you ask? They are going to try and shame the banks into making more modifications permanent. Yup, they are gonna start calling the banks names! I can see it now as Obama says "Bank of America, you just suck. You only modified 500 loans".

I wonder how long this will back up the mythical Tsunami and what will they come up with next. This one is so lame it's almost an admission that they are out of ideas.

There's no place like 2006

Here's a delusional seller, clicking his heals together and chanting "there's no place like 2006, there's no place like 2006, there's no place like 2006". Unfortunately his fairy god mother isn't going to wave a wand and bring those prices back for him. I would think that by now every one has gotten the message that the real estate bubble has popped. You can't list tract houses in the IE for $300 s/f any more. Even more amazing is that there's still agents willing to clutter up the MLS with these garbage listings.

12710 Canyonwind is in the Orchard Estates area near La Sierra Blvd and Victoria (just below Victoria Groves). This house was built in 2001 and it says it sold for $208k. I don't think that's right because these sold for around $400k. The house is huge at nearly 4800 s/f. It has 6 bedrooms and 3.5 baths. It's also got all the fancy fluff that people were putting in with bubble equity, like a theater, a fancy pool, a pond, a fake golf green etc. It's a nice house and I'm sure the owner has dumped $200k at least into all these upgrades. But the sad reality is that most of them don't add much to the value of the home. I doubt very much this house will fetch anything higher than $600k and even that is reaching right now. I've seen a lot of houses easily as nice as this one but slightly smaller selling in the mid $400s.

Even the 3 High estimates on the Redfin page are in line with my estimation. Zillow has it at $585, Eppraisal has it at $650k and Cyberhomes has it at $480k. There's not much in the way of Comps in the same tract but the ones listed on the Redfin page are all between $390k and $535k. So the Comps are in the $400-$535K range, the estimates are in the $480k to $650K range, what would you think they list it at? NOPE! $1.4 MILLION!!

Congratulations you get the ASS CLOWN AWARD for November

Happy Turkey Day!

Sorry about not posting much this week. Been busy with other stuff......

Happy Thanksgiving everyone.


TFLG

Here's some numbers to digest

Banks increased their Bank Owned (REO) inventory slightly, by taking back 22.24 percent more properties than the preceding month, while REO resale’s declined. The decline in REO resale’s is not unexpected as REO inventories have declined to a point that is insufficient to meet market demand.

Riverside Co.
Notice of Defaults.........last 120 days...13296.......... in Oct. 3872
N.O.T. sales currently scheduled.........15578.......... in Oct. 4377
Actual Trustee Sales.... last 120 days...6600.............in Oct. 1997

(Of the 1997 Trustee sales about 75% went back to the beni, but nearly 500 were purchased by a 3rd party (mostly flippers/investors probably)

San Bernardino Co.
Notice of Defaults.........last 120 days....10282..........in Oct. 3167
N.O.T. sales currently scheduled...........12618..........in Oct. 3416
Actual Trustee Sale...... last 120 days.....5404..........in Oct. 1633

(of the 1633 about 82% went back to the beni, 300 were purchased by a 3rd party)

You can see that many more homes are being picked up at the trustee sales. A year ago nearly every home went back to the lenders. Now 20% to 25% are being purchased by 3rd parties. Many of those will show up later as flips or as rentals. Foreclosure numbers are finally picking up. However, traditionally banks don't foreclose on homes over the holidays. So, it is very likely to slow down again in December. That takes us out to the time frame I keep hearing, Feb/March before we start seeing a significant increase in the REOs.

It just keeps gettin' worse....

There was actually a lot of housing news this week. Nearly all of it is bad. The default rate is unbelievable, new housing starts are down, and even sales are down on a national level. Here's some of the highlights ( or lowlights....)

The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 4.47 percent, an increase of 17 basis points from the second quarter of 2009 and 150 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.42 percent, up six basis points from last quarter and up 35 basis points from one year ago.

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Brinkmann expects foreclosures to possibly peak in 2011 (last quarter he said late 2010). He changed the forecast for two reasons: he expects unemployment to stay fairly high, and he thinks the prime borrowers will hang on before defaulting, and all the foreclosure moratoria will delay foreclosures - a longer trailing effect than usual.

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The Market Composite Index, a measure of mortgage loan application volume decreased 2.5 percent on a seasonally adjusted basis from one week earlier.

The Refinance Index decreased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 4.7 percent from one week earlier. The seasonally adjusted Purchase Index has declined for six consecutive weeks and is at its lowest level since November 1997. (that's a 12 year low!)

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.83 percent from 4.90 percent, with points increasing to 1.17 from 1.03 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest contract rate observed by the survey since mid-May of this year.
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Criminal charges have finally been filed against James B. Duncan, Hendrix Moreno Montecastro and Maurice McLeod, three Riverside County businessmen who allegedly orchestrated a major securities and mortgage fraud that drove many investors to financial ruin in California and Arizona.

These two ass clowns bought hundreds of houses in Southern Riverside Co (corona, murietta and temecula mostly). They used investors to buy homes are grossly inflated prices. Scammed the investors and at the same time set crazy high comps that were then used to justify the prices of other sales. It's just amazing how a few fraudulent sales can set the comps and drive the market up. I guess it's easy when every one is high on bubble kool aid.

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Total housing starts were at 529 thousand (SAAR) in October, down 10.6% from the revised September rate, and up from the all time record low in April of 479 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959). Starts had rebounded to 590 thousand in June, and have move sideways (or down) for five months.

Single-family starts were at 476 thousand (SAAR) in October, down 6.8% from the revised September rate, and 33 percent above the record low in January and February (357 thousand). Just like for total starts, single-family starts have been at this level for five month.

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Not much "good" news. Dataquick did report the median in the IE rose slightly last month. But even they acknowledged that it's primarily due to fewer low end homes being available and the fact that there are currently few foreclosures on the market. Thus the sales mix is moving towards more expensive homes and bringing up the median.

Do want a little privacy?

If you don't like neighbors, but love a view, I've got a house for you. 20575 Stage Rd, this 3580 s/f house sits up in the hills just south of Lake Elsinore. The house has 5 bedroom, 3 baths and looks like it is pretty well upgraded and it looks like it has a pretty fancy pool. The lot is just over 21 acres! That's not a type I really did write "twenty one" acres. There is not data on what it sold for previously but it's bank owned now and you can have it for just over $450k! Hell that's just over 20K per acre and they throw in the house...... I wonder what's wrong with it?

Another crazy bailout plan

I guess the government is coming around to the realization that even loan mods will not help a lot of these people. There's just no way to get the payment on a $600k note down to 31% DTI when the people have to use their real income. And it's even harder when they are unemployed like 15% of the IE is. That only leaves a few options. The lenders can foreclose, do a short sale or hope the government pays off the loan.

The least expensive option is the short sale. So the gubment's new idea is to offer incentives to the banks in order to get them to streamline the short sale process. Under this plan they will get another check from the government for every short sale they do. Ain't it grand, our tax dollars thrown away again.

Now, Even The Treasury Is Pushing Short Sales
Treasury is set to announce a new program to help troubled borrowers whose mortgages are deemed ineligible for modification. Speaking at the Mortgage Bankers Association’s annual convention, Ms. Maggiano said Treasury would set out the parameters under which servicers can earn financial incentives if they offer borrowers the option of participating in a short sale and deed in lieu of foreclosure. “There’s really no magic. We haven’t reinvented the wheel,” Ms. Maggiano told industry executives in San Diego. To cut down on the paperwork, the program will provide a standardized set of forms. It will also cap the amount of money that can be paid to subordinate lien holders who agree to waive their interest in a property. The government expects that some second mortgage investors will “walk away” from the program because the compensation being offered will be too little. But Ms. Maggiano, who is director of policy in the preservation office, told a standing room only session that by setting a limit, the White House is hoping to eliminate time consuming back-and-forth negotiations between servicers, borrowers and investors. “We are hoping to set an industry standard so investors will know exactly what they can expect,” she said.

The only incentive I see is one where the banks don't do anything until this gets passed. Why foreclose or approve a short sale now. Wait a month or two and get paid for it!

I'll have a double dip please!

Meredith Whitney on the market. Another great video from this woman.

"A great sucking sound of liquidity" what a great line to describe the housing market. She certainly rips the housing market in this video.

I also liked her take on the government becoming a rental agency with the new program of renting foreclosed homes back to former owners. She says government programs have gone from the ridiculous to the sublime.

A picure is worth a thousand words.......

Here's a picture!


The IE median price is down 59.9% from peak! Fill in the other 990 words yourself.

From the "what were ya thinking" files

If you were even only slightly paying attention you should have been aware of the bubble popping sometime in early 07. By then the sales of homes had ground to a halt and prices were starting to fall. The had already been falling for a year or more in Sand Diego and up in the Bay area. The problem for some folks was they were listening to the propaganda that the NAR and CAR were putting out about the median price still rising. That's true, technically it was still rising but only because sales of low to mid priced homes had all but stopped.

What amazed me was that a few people were still paying near peak prices. They were still buying new homes in the IE for crazy prices. I remember looking at the homes back then, heck I still have some of the brochures. I figured they'd be collectors items some day. My grand kids will never believe me when I tell them houses in Riverside were a million dollars in 2006.

Here a perfect example of one of the folks that didn't take the time to open the paper or research the internet before making the most important purchase of their life. 827 Valleverde Way, Perris. This house is built RIGHT BELOW the Lake Perris dam. Yes the one they found to be flawed and may collapse in a 7.5 earthquake! These homes were built in 2007 and this particular one was turned over to our oblivious home owners in April 07. The 3461 s/f house has 5 bedrooms and 4 bathrooms. It sold new for $450k, quite a deal at the time as the homes in MoVal, jsut up the street were closer to $600k. Might had something to do with the risk of being swept away??? Anyway, the owners eventually get the message, or the loan reset or unelmployment etc... Whatever the reason it's now listed as a short sale for $235k. Nearly 1/2 off and probably priced around market value given the comps. By the way, what a crapping listing Mr, Dave Scott! 130 days on market and one picture is all you can manage. Not to mention there isn't a single word to describe the home. Nothing, zip, nada! (well at least he didn't misspell anything) Another realtor that gets an F for effort.

So where the hell are they?

I guess the good news is they took 20% more homes back in October than they did in Sept. Not a Tsunai for sure, more like a knee slapper or a big ripple.

......

Foreclosure repossessions in California increased 22.24% from September to October, according to data released by ForeclosureRadar.com.

Last month’s foreclosures increased 20.95% from October 2008. October’s foreclosures were 42.56% below California’s peak month of July 2008, but since then, the inventory of real estate owned (REO) properties has grown 131.36% in California.

“While we continue to see a steady stream of properties entering foreclosure, relatively few are completing the process and being sold at auction despite the increase this month,” said Foreclosureradar.com CEO Sean O’Toole.

“The bigger picture is that more and more homeowners are finding themselves upside down in foreclosure limbo,” O’Toole added, “some hoping for a loan modification or short sale, while others are just waiting for a knock on the door.”

The number of foreclosures initiated in October remained level with September levels. But, the company said, this is due in large part to recent legislation enacted in California that will temporarily slow the foreclosure process.

Investors are continuing the purchase REO properties from lenders, and courthouse auctions are becoming more competitive, as noted by increases in sales volume and prices paid, Foreclosureradar.com said.

“Many auction investors are gaining confidence that they can make money reselling homes purchased on the court house steps, given the limited supply of homes available on the MLS and continued demand stimulus in the form of tax credits and low interest rates,” the firm said.

The discount investors paid for REO properties bought at auction decreased from 20.5% in September to 17.9% in October. The majority of properties foreclosed on in October were originally purchased with mortgage originated between January 2005 and December 2007.

Ready set, don't go....

Well, I fell for the propaganda about the coming foreclosure wave. I did expect a bunch more inventory once we got past Sept. My buddy at the bank told me, my agent friend told me and I kept reading about it. So I got all my paperwork together, got my a new pre-approval and was anticipating looking at some houses. But Nooooooo, there is nothing but trash and a few numbskulls trying to get bubble prices on the market these days.

Now I am hearing that the government is actually asking the lenders to keep the inventory thin and now we have Fannie renting homes back to people. The Mortgage mod plan is still putting a kink in the inventory by letting these people live in the houses a little longer. The latest news on the mortgage modification scheme isn't good (as we expected). Very few of the people are actually qualifying or even applying for a permanent mod. Most of them seem to be using this as a way of getting a few more months out of their house.

It just sucks right now. The government has got this market screwed up worse than ever. I can't imagine what they are going to do to healthcare after this fiasco. The really sad part is that there are a lot of buyers out there. If the inventory was there (and the prices right) they would probably sell a lot more houses. Those sales would drive the economy as those people bought furniture and other trinkets for their new homes.

Tax credit sails through

The extension of the tax credit sailed through both houses and is expected to be signed by Obama in the morning. This extends the credit to houses purchased by April 30th and you must close by the end of June. $8k for new buyers and $6500 for people that have owned for at least 5 years. The income limits for the credit were also increased to $125k single, $250k joint. I think that covers most of us, and if you don't fall into those limits count your lucky stars.
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In other news, Fannie lost nearly 19 BILLION last quarter! They are running back to the Fed for more cash. They are asking for another $15 Billion. Now my math might be fuzzy but if you are losing nearly 19 billion a quarter what good is asking for $15 billion unless you plan of asking for more 2 months from now.

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Mortgage rates have just dipped below 5% again. That's good news for those folks that are looking to buy or refi. Don't get too excited though it's only just under 5% (4.98% average 30 yr)

................

And Redfin is all honked up....I don;t know if anyone else noticed. They are trying to do some upgrades but it just seems to have screwed it up. Half the time it loads and the other half it times out.

Is Geithner the anti christ?

Just kidding but good grief he's certainly not working for the US taxpayers. Found this little gem that exposes him for the shill he is.






And this video is even better at exposing him.

$84 s/f in the retreat

Ok, so technically this is a short sale and the chances it will actually sell for this price are slim. But I think the fact that it listed at this price shows that the mid to high end is still falling. I'm certainly seeing the listing prices int he areas I watch continue to drop (I just wish there were more listings). There have been other sub $400k listings and sales in The Retreat. But those were in the smaller KB homes down near the back gate. This is the first one I've seen up in the central area.

8133 Tender way is a big home in The Retreat. It listed today for $399k. The house is 4767 s/f and has 4 bedrooms. It sold new back in April 2006 for just under a million ($996k). So this one is listed nearly $600k less than it's 2006 sales price or down about 60%. That price seems about right to me!

Biggest problem with this place is still the taxes. Even if you could pick it up for $400k, you are looking at nearly $10k per year in taxes AND nearly another $300/mo for the HOA (listing says $185/mo, I know it's way more than that).

Your paycheck is going down!

Did you know that as of Nov 1st the state will be taking an additional 10% out of your pay check?

Welcome to Kalifornia!

This tax increase does come back to you in April (or whenever you do your taxes). On a yearly basis you end up paying the same. They will refund you (if they have any money) or you can fight this one off my changing you withholding (claiming more dependents etc). They sorta slid this one in when we weren't looking.

super crappy listings

I'm not a perfectionist but I do expect a level of competence from people in their chosen profession. I don't think it's too much to ask of a CPA to have math skills or a doctor to have medical skills or even a realtor to have basic sales skills. So when I run across listings that I swear my 11 year old could do better with it really torques my nutz. Like this one for instance;

8037 Armagosa Dr, Riverside. This listing is PATHETIC! The pictures are ridiculous and my guess is that they were taken with a cell phone. It's the only way I can think of that would produce such crappy pics. But even a good camera would have had a hard time with the angles and locations of the pics. Then there is the fact that they didn't even clean up the place. It's not horrid dirty or anything but is it too much work to move the dirty towel from the bath, or the roll of toilet paper from the tank or the laptop and water bottle from the kitchen island. The pics are so bad I'm not even going to post them here.

The written description is bad, English is obviously not his native tongue. Get it proof read! The broker should be bitch slapped for letting this listing post.

Now, the price of this thing isn't bad at all. This is one of the nicer tracts in the area. If you could pick it up for $300k you would really piss off the nieghbors that have been paying closer to $400k in this tract.

Home buyer tax credit

As of a few days ago the home buyer tax credit seemed doomed. It would appear that the NAR and the home builders have done some serious lobbying because now it looks like it is going to be extended AND expanded.

Snagged from Calculated Risk

From Bloomberg: Senate Close to Deal Replacing Homebuyer Tax Credit

The details:

Income eligibility for first-time home buyers stays at $75,000 for individuals and $150,000 for couples.

For move-up buyers, income eligibility is $125,000 for individuals and $250,000 for couples.

There is a minimum 5 year residency requirement in their current home for move-up home buyers.

The tax credit is the lesser of $7,290 or 10% of the purchase price.

The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)

Expect bill to be signed by Friday.

I guess I should be happy (since I will qualify for a credit under these terms), but I don't. It makes me feel all dirty like I just had sex with a cheap hooker..... (not that I've ever had sex with a cheap hooker btw).

Insanely high taxes

I pretty much took the summer off from seriously looking for a house. Now that the summer rush is over I have started looking again. I have not gotten too serious yet but lately I've been checking Redfin more and crunching some numbers on homes I might like. The payments are not too bad. Even though prices will probably fall a little more, with the low interest rates the payments are reasonable at the homes I'm looking at. The taxes however are insane on most of them. And on top of that many of them have HOA fees of $200 to $300 a month. I looked at a house in Norco Hills listed for $380k. It was a nice house with a pool although smaller than I want the price was good. But when I looked up the taxes it had nearly $5k per year in CFDs. That's over $400/mo! I could buy a pretty nice car for $400/mo. Another house I looked at had even higher taxes and had a $260 HOA. That one was the equivilent of a payment on a BMW 5 series or an E-class. I'm not talking total property tax, this is just the CFD (Mello Roos). And that Norco Hills CFD went to 2033, another 24 years.

This isn't news to me, I crunched the numbers last year too. But for some reason it didn't bother me nearly as much last year. Probably because I was more excited then about the prices finally falling. Now that I have snapped out of my state of euphoria, I am a little more unwilling to throw $500+ a month away. The problem is, there's not many tracts without mello roos or CFD's. And the few that don't have the taxes just don't excite me much (with the exception of Stellan Ridge, but those are still priced crazy high). So it's bite the bullet, settle for another area or find an older house or one without mello roos. The more I think about it the less I want to bite the bullet and pay those taxes. Over 20 or 30 years that is a shit load of money (or vacations or cars or nice whisky etc....)

The differnce in the price of the house you can buy is phenominal when you back out a $500/mo cost. That means you can buy a $500k home vs a $400k home and have the same monthly nut after taxes. Even using a less extreme home where the tax differnce is only say $300/mo, you could buy a $460k house vs a $400k one.

Taxes suck!

Uncle Sam propping up prices

This isn't news to anyone that has been following the bust closely. The government has been doing everything it can to keep the prices from collapsing too fast. Now Goldman Sachs has quantified the results of the governments meddling in the housing market....

Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.

The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates. As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common.

But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.”

Federal government policies encouraging loan mods have reduced the supply of homes on the market temporarily because it takes months for loan servicers (the firms that collect mortgage payments) to figure out which borrowers qualify. Some states have added their own restrictions on foreclosures that drag out the process further. In many cases, borrowers who get loan mods will default again within a year or so, meaning the problem has been delayed rather than solved. That means there is a large but impossible-to-measure “shadow” inventory of homes that eventually will hit the market.

Goldman estimates the tax credit has boosted sales by 200,000 units. Congress is debating whether to extend that credit beyond Nov. 30. Goldman says it “appears likely to be extended for at least a few months but probably no longer than through the first half of 2010.”

Mammoth purchases of mortgage securities by the Federal Reserve appear to have held home mortgage rates about 0.30 percentage point lower than they would have been, Goldman says. Those purchases are due to be phased out in next year’s first quarter.

The outlook for further government policy is “cloudy,” Goldman notes. But it is safe to assume that many politicians will remain loath to let the market run free and wild. Goldman points to legislation introduced by Sen. Jack Reed (D, R.I.) that would require mediation between borrowers and lenders before any foreclosures and mandate loan mods in some cases.

“At a minimum, the Reed proposal would slow the foreclosure process considerably,” helping to prevent price declines in the near term, Goldman says. It adds: “The tradeoff would come later, when many of the properties eventually make their way back onto the market through foreclosure.”

How to make millions in real estate

First you need to start will millions so you can pick up homes at the trustee sale like this guy.

11892 Silverloop in Mira Loma was purchased new in 2004 for $479k. a year and a half later it was sold for $619k. That didn't work out for the buyer for whatever reason and they lost it to the bank. The bank took $270k for it at the trustee sale. I have no idea what the house looked like so it's hard to say what the investor/flipper spent. It says new carpet, paint and appliances. It obviously had a new lawn too. If that's all they did I doubt they have much more than $10k to $15k into the house. Now it's listed for $345k. That's a pretty healthy profit. Even after fees they are looking at a profit of $40k to $50k. Not too shabby for a couple of months.

Does this piss you off? I know Sara doesnt like it judging by her responses in a previous post. But is there anything wrong with it. The current asking price is in line with what the other homes in the tract are listed for. This one is turn key. Had the bank took it back they probably would have listed it for a similar price without fixing it. Sure I would prefer the banks eliminate this extra level of middle men that are making a killing. But that's the system we have. And like with most things those with money are the ones making money. Man it sucks to be po'

Another forecast for next year

One says prices up (NAR, what a surprise) this one says prices down.

If you thought home prices were bottoming out, you may be wrong. They're expected to head a lot lower. Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.

Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%. In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years -- though it underestimated the scope.

Mark Zandi, chief economist with Moody's Economy.com, agreed with Fiserv's current assessments. "I think more price declines are coming because the foreclosure crisis is not over," he said.

In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June -- after having already fallen a whopping 48% during the past three years.

If Fiserv's forecast holds, Miami real median home price will tumble to $142,000 by June 2011. In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they're expected to fall 26.8% and then flatten out.

Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%.

The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%.

Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however. "I'm afraid Case-Shiller may be just a temporary reprieve," he said.

Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

Home values in the nation's second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. (I'm not sure I agree with them about prices going up in 2011)...............................................

I would not put too much faith in any of these forecasts. But I'm inclined to agree with this one. With the economy in shambles, the banking industry on government life support and 1/6th of the IE out of work it's hard to beleive things are going to get much better soon.

$8k tax credit fraud.....really

I read some interesting developments with the $8k home buyers credit over on Calculated Risk. I'll summarize and add some sarcasm of my own.

The internal watchdog for the U.S. Internal Revenue Service is expected to warn the agency for the fourth time about fraud in the multibillion dollar homebuyer tax credit program ... The inspector general found at least 70,000 tax credit claims, totaling $489 million, were granted to individuals who do not appear to qualify for it. ... The agency has opened 107,000 civil cases related to the credit and identified 167 criminal schemes

The government is giving away $8k and it seems some people are shocked to find there may be a lot of fraudulent applications for this money. Did they learn nothing from the Katrina relief? Every lowlife in America applied for that money. Who knew there were 60 million people living in New Orleans! The IRS is starting to audit the $8k tax credit, they are examining 100,000 suspicious credits. Heck that's only 800 million, why worry about chump change. How many crack heads from Detroit (or Hemet for that matter) will apply for this money? Probably more than a few. Heck in Detroit you can buy a house for less than the credit. Lets see, we have Welfare Fraud, FIMA Fraud, Tax Fraud, Medicare Fraud, etc, etc, etc. Get the government involved and you can pretty much guarantee a fraud free for all.

On of the caveats of the credit is that you must live in the house for 36 months. How many of those low end first time buyers will find themselves having to repay ALL of that $8k credit should they lose the house. I wonder if they all know about that little stipulation.

It looks like the $8k credit is losing it's shine fast. A couple of months ago it looked like a slam dunk for extending the tax credit. But lately there is growing opposition to extending the credit. It's looking like it really might actually expire come Dec 1st. The real estate propaganda machine must be working day and night on this latest development.

Where the F is the tsunami?

Ok it's been a few weeks since the supposed tsunami of foreclosures was supposed to start rolling ashore. Where the hell is it. I saw a minor uptick in the amount of listings hitting the market early in the month (But last week was dismal). Record foreclosures is all I see in the headlines. Yet the inventory level is squat and what is out there is either trash or priced so ridiculous it's not worth looking at. I was planning on starting up my hunt again come the end of the month. So lets go banks, foreclose already and lets get those homes on the market.

'Worst three months of all time'

Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

That deluge contributed significantly to the quarter's record 237,052 repossessions, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes.

"REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan-modification efforts and high volumes of distressed properties," James Saccacio, RealtyTrac's CEO, said in a statement.

Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. Not only has the Obama administration's Making Home Affordable foreclosure prevention program taken a bite out of REOs but lenders themselves have scaled back repossessions over the past few months to give the program time to work.

And in some low-price markets, lenders simply aren't following through on foreclosures, according to Jim Rokakis, treasurer for Cuyahoga County, Ohio, which includes Cleveland.

"They'll even set the date for the sheriff's sale, but they don't file the final papers," he said. "They hold it in abeyance and let the residents stay in the house."

In ever more frequent cases, delinquent borrowers want out of the mortgage worse than the lenders. There are no firm statistics for it, but many industry watchers claim the percentage of REOs caused by borrowers voluntarily walking away from their homes is skyrocketing.

A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.
No end in sight

The foreclosure crisis may not diminish anytime soon. "The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers," Sharga said. "It's going to be a lingering problem."

Plus, the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies. That means the crisis may not end quickly.

And because there are so many delinquent borrowers, Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market.

"It's hard to envision [the banks] putting millions on properties up for sale and cratering prices," he said. "Recovery will be slow and gradual. I don't see home prices getting much better until 2013."

Sept sales report

DataQuick got this one out a little early. Riverside's median fell back down to $185k giving back the $5k it gained last month and San Berdu managed a gain of $5k. Sales numbers followed sales price with Riverside seeing a decline from 08 and San Berdu seeing an increase.

Here's the report.

Southland home sales edged higher last month, bolstered by late-closing summer transactions, low mortgage rates and buyers hoping to take advantage of a soon-to-expire tax credit. The region’s median sale price remained lower than in September 2008 but, for the first time in years, several counties logged year-over-year gains in the median price paid for resale houses, a real estate information service reported.

Last month 21,539 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was up 0.2 percent from 21,502 in August and up 5.1 percent from 20,497 a year earlier, according to MDA DataQuick of San Diego.

September marked the 15th month in a row with a year-over-year sales gain, although last month’s was the smallest of those increases. Sales for the month of September have averaged 24,873, ranging from a low of 12,455 in September 2007 to a high of 37,771 in 2003, based on DataQuick’s statistics, which go back to 1988. Last month’s sales were the highest for a September since 2006, when 24,195 sold.

The small uptick in September sales from August was atypical. On average, sales have fallen 9.5 percent between those two months.(of course it went down last month which isn't normal either).

“There were more than just normal, seasonal forces at work in these September sales numbers. More attempts at short sales, which typically take longer, and new appraisal rules no doubt delayed some deals this summer, causing them to close in September rather than August. September probably also got a boost from people opting to buy sooner rather than later to take advantage of the federal tax credit for first-time buyers, which is set to expire next month,” said John Walsh, MDA DataQuick president.

The median price paid for a Southland home was $275,000 last month, the same as in August but down 10.9 percent from $308,500 in September 2008. It was the median’s smallest year-over-year decline for any month since November 2007, when it dipped 10.3 percent from a year earlier.

	Sales Volume			Median Price
All homes	Sep-08	Sep-09	%Chng	Sep-08	Sep-09	%Chng
Los Angeles	6,274	7,138	13.8%	$360k	$330k	-8.3%
Orange	2,667	2,828	6.0%	$425k	$429k	0.9%
Riverside	4,551	4,312	-5.3%	$237k	$185k	-22.1%
San Bernardino	2,831	3,023	6.8%	$205k	$150k	-26.8%
San Diego	3,366	3,454	2.6%	$328k	$325k	-0.9%
Ventura	808	784	-3.0%	$385k	$371k	-3.4%
SoCal	20,497	21,539	5.1%	$308k	$275k	-10.9%

I noticed a glimmer of hope for the buyers out there. In the last vew weeks the inventory has been creeping up. It's still 10K below where it was a few months ago but in the last 3 weeks it's gone up 2500. Median asking price is falling again. It had been bouncing up and down all summer but in the last couple of weeks its really dropped especially at the high end. I wouldn't make too much of that thought as it has fluctuated quite a bit in the last few months. But for the last 3 or 4 weeks the price is trending down and the inventory is trending up!

Another foreclosure avoidance plan

Another foreclosure avoidance plan is in the works by the Dept of the Treasury. Details are expected to be released next week. From the rumors I've read so far this one actually might help.

This is the report from Housingwire.

The United States Department of the Treasury is launching, with an official announcement expected next week, a new program to help ailing borrowers escape foreclosure.

The Chief of the Homeowner Preservation Office at the Treasury, Laurie Maggiano, released information on the Home Affordable Foreclosure Alternatives (HAFA) while speaking at the MBA’s 96th Annual Convention going on in San Diego. The official launch is expected in the next week or so.

HAFA already holds the support of Fannie, according to a VP at the agency, Eric Schuppenhauer, who believes the new program allows borrowers in imminent default to “make a graceful exit” from their home. HAFA will keep the stigma associated with foreclosure away from the borrowers, he added, and help keep communities intact.

Maggiano adds that HAFA will offer financial incentives to both servicers and borrowers, and associated secondary investors, in order to facilitate a short sale or deed in lieu of the property.

Borrowers will need to be Home Affordable Modification Program (HAMP) eligible and Maggiano released some stats for the crowd’s consumption. 2,484,783 homeowners have requested information on HAMP. 757,955 HAMP plans were offered. 487,081 trials are underway.

Other additional incentives to the short sale industry are nearly developed. The IRS will soon offer a 4506EZ form that will enable servicers to pre-fill out the information so that it only requires a borrower’s signature. It also will include softer language so as not put potential participants off.

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This is technically a foreclosure avoidance plan but this one is not meant to keep people in homes that they cannot afford (makes sense so far). This one actually addresses the losses the banks are taking when they foreclose. By streamlining the short sale process the homeowners will escape the credit hit and the bank losses should be tempered some what. If the plan actually does work like this it should be a win/win for everyone.

Shadow inventory

Here's a long and boring read about shadow inventory. This is a report put together by the Amherst Securities Group for their investors. There report starts off with...

With the apparent stabilization of home prices and the increase in new and existing home sales, many investors believe the housing market has bottomed, and is beginning to recover. We believe this optimism is premature. We acknowledge that there are a lot of positives in the market—prices have fallen significantly and housing is more affordable than at any point over the past 2 decades. The tax credit for first time home buyers has helped spur purchase activity. However, investors are overlooking one critical factor—the size of the “housing overhang”; i.e., the # of loans in delinquent status or in foreclosure. We estimate the housing overhang at 7 million units – these loans are destined to liquidate, and are creating a huge shadow inventory.

Interestingly, they used the city of Riverside as an one example.

The break out is as follows:
For Sale = 1,372 Units
Banked Owned (but not yet listed) = 1,362 Units
Auction Date Announced = 1,916 Units
Notice of Default Issued = 2,360 Units
Total Probable Inventory = 7,010 (1,372 + 1,362 +1,916 + 2,360)

As of 2007, City-Data.com reports that the city of Riverside, CA had 34,854 mortgaged residential units. It is one of the cities in the San Bernadino/Riverside County areas that experienced rapid home price appreciation during the bubble, with median home prices escalating from $136,000 in 2000 to a 2007 median price of $423,400 (for a 17+%/year price appreciation). Using Loan Performance data, we estimate that almost 50% of the mortgaged properties in the city were financed with Alt-A, Pay Option, or subprime loan product. Recent median sales data indicate that home prices have fallen nearly 60% from the peak.

Thus, the Trulia numbers imply a staggering 7,010 potential properties for sale in Riverside, out of only 34,800 units (thus 20% of all properties!). Stated differently, total inventory (actual listings + REO + Auction Date Announced + Notice of Default issued) are actually more than 5X the number of units listed “for sale.” And this doesn’t take account of homes backed by loans where a Notice of Default has not yet been filed.