Friday, February 27, 2009

An investment opportunity

An investment opportunity brought to us by Jim the Realtor. Man I wish Jim was up in our area.

OT Finally got a smokin' deal!

Hopefully my luck is changing. After the start I've had this year I was beginning to think some realtor put a hex on me. As you know my PC packed it in, Our Dryer died, A sliced my hand open and a new one, the front window on my wifes car had to be replaced thanks to a rock on the fwy. Then I did my taxes :-( I dunno wtf happened by I owe uncle Obama a crap load a dough. I guess it's up to me to bail out the banks.

Well, I finally got a deal on something. When we bought the new washer and dryer we decided to see how they would be without the pedestals. Those tin cans cost $250 each! That's about 40% of the cost of the actual appliance for a tin box with a drawer. After a week my wife says she wants the pedestals, or at least one for the washer. Before heading to the store I thought I would check Ebay. I found a whole bunch but they were only about $40 cheaper than in the store and with shipping it was a wash. Then I ran across one with no minimum being sold by Best Buy. So I bid, I put a max bid of $50 and figured I'de get outbid. I was the first bid so it posted at 99c.

I got the notification I won the item tonight for the princely sum of ........ ONE DOLLAR AND THIRTY cents! Yea baby. So I will pray the hex is finally broken.

10.1% and climbing

Reporting from Sacramento -- More than 1 in 10 California workers were unemployed in January, the largest percentage in nearly 26 years, the state reported today.

The 10.1% jobless rate is the highest since June 1983 and not far below the 11% record set in November 1982 at the worst point of a severe recession, according to the governor's office. Job losses escalated in January, with the state's unemployment rate jumping by 1.4 percentage points from a revised 8.7% for December.

The grim California job numbers tracked closely with data released earlier in the day by the U.S. Commerce Department that showed that the national economy contracted by 6.2% in the last three months of 2008, the biggest slowdown in 26 years.

The Inland Empire employment report has been delayed a week. But we were already at 10% so chances are very good that we will be even higher now. Those numbers do not bode well for the housing market. Many of those people are future foreclosures.

Thursday, February 26, 2009

A $10k gamble

The state is talking about a $10k tax credit for buying a new home. I have to ask, is $10k enough of an incentive to gamble on a new home. Take a look at this article about a new development in Menifee

The builder goes belly up, the community clubhouse and pool gets locked up and drained and the homeowners are left pissed off and left wondering who pays for it now.

That $10k tax credit should come with a set of dice. Do ya feel lucky punk?

Wednesday, February 25, 2009

CBS say's "let em fall"

A housing report released Tuesday delivered this telling economic news: American home values in metro areas fell by 27 percent from their peak, according to the Standard & Poor's/Case-Shiller index.

As the U.S. economy contracts, any sensible forecast calls for this slide to accelerate. Yet the federal government seems intent on trying to halt the normalization process, even though it would offer more affordable housing to prospective homebuyers.

The reason for this forecast is that buy-vs-rent ratios in such areas remain far higher than historic norms, a sign that localized housing bubbles have yet to deflate. The buy-vs-rent ratio is the equivalent of the price-to-earnings ratio for stocks; the Federal Reserve Bank of San Francisco uses a variant in its own analysis and noted back as far as 2005 that the "ratio is about 40 percent higher than the normal level" for San Francisco and Los Angeles. (You may have seen its cousin, the price-rent ratio.)

But if it's a heck of a lot cheaper to rent, why buy? For the last decade, the reason was price appreciation. When prices are falling, that's no reason at all.

One way the buy-vs-rent ratio can return to normal is for rents to rise. But a recent New York Times article about falling rents in Manhattan, and similar reports in Crain's Chicago Business and the Los Angeles Times suggests that's not terribly likely.

It's starting to look like the main stream media has caught on. This is the 3rd or 4th article just this week preaching the gospel of "let the prices correct" Unfortunately our government is still hell bent on keeping house prices unaffordable for the majority of Americans. They don't seem to care that a whole generation will retire with nothing if that happens. This will put an even greater burden on the government when they retire. And the current generation of young buyers will have to overpay for their homes.

Sales may be humming in the lower priced areas of California, but else where in the US sales are still tanking.

Sales of existing homes sank unexpectedly last month to the lowest level in nearly 12 years as potential buyers worried about their jobs and awaited details of President Barack Obama's plans to stabilize the housing market.

But the banking industry's teetering fortunes and mounting job losses could stall any recovery. Falling prices and low mortgage rates don't make much of a difference for people who are out of work -- or fearful of losing their jobs.

"Buyers are sitting back," said real estate agent Sandra Lipmann of Prudential Centennial Realty in Westchester County, N.Y., home to the upscale properties of many Wall Street workers. "They don't have the full story of what's going to happen in this economy."

Sales of existing homes fell 5.3 percent to an annual rate of 4.49 million last month, from 4.74 million in December, the National Association of Realtors said Wednesday. It was the weakest showing since July 1997. And some analysts don't see sales bottoming out until later this year as prices sink further. Economists had expected sales to rise to an annual pace of 4.79 million homes.

Without adjusting for seasonal factors, sales nationwide fell 7.6 percent from a year earlier. The West was the only region to show increased sales.

"With supply overhang still huge and mortgage financing difficult to obtain, home prices are likely to decline considerably further in the quarters ahead," he wrote.

Prices have been falling as thousands of Americans lose their jobs every week. Employers took an especially large ax to their payrolls last month, the Labor Department said Wednesday, and the cuts are likely to get worse over the next few months.

Mass layoffs, or job cuts of 50 or more by a single employer, increased to 2,227 in January, up almost 50 percent from the same month last year. More than 235,000 workers were fired in last month's cuts.

Tuesday, February 24, 2009

Edjumacation not required

Do you ever wonder if there is a minimum education level for getting a Realtor's license? My guess is there is none. After looking at thousands of listings it's painfully obvious that more than a few of them cannot put a coherent sentence together much less be expected to spell the words correctly. Even if you cannot spell to save your life there is a thing called SPELL CHECKER. If you knew you were spelling challenged, wouldn't you use it?

Check out this beauty I ran across tonight. It has all the usual realtor irritations such as the stuck cap lock, the multiple abbreviations, and of course the excessive use of exclamation points. But the spelling.... how many errors can you find in this listing?

5817 Royal Pl in Riverside.


This listing is just horrid. In addition to the horrible text, the pictures are awful. The house was purchased in July 07 for $965k. There's a buyer with his finger on the pulse of the market, eh? Well past the beginning of the bubble popping this clown pays nearly a million for a home that not only looks dated but is also a bit worn looking. A year later he comes to his senses and tries to escape for $900k. By then of course the market has sunk well past that level. He's been reducing the price ever since and is now down to $540k. At that price it's probably a short sale.

Monday, February 23, 2009

New conforming loan limits

I'm sure the realtors will love this news. The American Recovery and Reinvestment Act of 2009 has been approved and under this act the conforming loan limits are changing. Similar to what happened last year when they raised the limits. The question is will banks loan at the new limits. The last time they didn't and anything over $417k was still coming in at jumbo interest rates approx 2% higher than those loans under $417k.

Under the new guidelines the conforming loan limit for both Riverside and San Bernardino counties will be $500k. This will offer a glimmer of hope that the government can help to levitate prices. Best of luck with that!

It remains to be seen if lenders will actually offer loans of $500k at the lower conforming rates. I check this evening and I couldn't find any. Under $417k I could find 4.625% over $417k the rates jumped to 7%. That's a helluva spread!

BTW, one of the people I carpool with just refi'd at 4.25%!! (30 yr fixed).

And in other news the California state government passed another bill to try and slow the foreclosure process. California AB 7 adds another 90 days to the current 90 days after an NOD is filed before the lender can take the property back.

To me this seems like a non-issue since most lenders are already taking far longer than 6 months to auction the properties off. I don't think this will have any effect on the numbers for a year or more.

It does however show just how out of touch the government is. 70% of sales in Riverside and much of the state, are foreclosures. If they could eliminate or reduce that amount the sales numbers would more than likely tank again. Foreclosures are the only thing keeping realtors, mortgage brokers and construction workers from the unemployment line.

If anyone at the NAR or CAR had a functioning brain cell left in their head, they would be doing everything they could to speed up the foreclosure process. They are the only thing selling, you would think they would want more of them, not less.

Sunday, February 22, 2009

Is our mantra catching on?

I'm starting to see more and more articles spreading the gospel of "let the prices fall". Here's another,

The U.S. government should just get out of the way and allow the crash in U.S. housing; the market is too big, has too far to fall and Americans’ finances are too strained.

President Barack Obama’s measures, unveiled on Wednesday, are part of a $275 billion plan to try and stabilize the housing market and prevent foreclosures. It aims to encourage lenders and their agents to cut repayments for homeowners in difficulties to lower, more affordable levels as well as other steps.

The reasoning is that there is a largish group of borrowers within the U.S. real estate market who may slide into default because their loans are too big and expensive or because they have run into temporary cash flow issues.

Give them a cheaper loan and you break the circuit of foreclosures, more stock coming on to the housing market driving prices down further and giving other mortgage borrowers more incentive to simply walk away from their debts.

There may be some who are successfully modified out of their troubles, but they will be outnumbered by those who will only default again, or even worse in some ways, by those who keep paying on an asset that isn’t worth the underlying loan.

Prices of housing in the U.S. were driven too high by too much leverage even as supply increased. Let’s accept that, allow prices to fall, the banks to fail and start again on a new stable footing.

Amen brudda, makes sense to me!

Friday, February 20, 2009

Credit Crisis for dummies

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Thursday, February 19, 2009

January sales report, Riverside cracks $200k

Dataquick has posted the January sales report. Sales were down 22% from December. The number you want to look at here is the Median Price drop. It's TEN PERCENT in ONE MONTH! Statewide 60% of sales were foreclosures and I'm sure short sales made up nearly all the rest. Believe what you want, but this is one UGLY monthly report.

An estimated 29,458 new and resale houses and condos were sold in California last month. That was down 22.1 percent from 37,836 in December and up 53.9 percent from 19,145 in January 2008. Sales have increased on a year-over-year basis for the last seven months.

The median price paid for a home last month was $224,000, down 10 percent from $249,000 for the month before, and down 41.5 percent from $383,000 in January a year ago. Around half the drop in median is due to price depreciation, the other half due to shifts in the types of homes selling, and how those homes are financed. Last month's median was the lowest since it was $220,000 in May 2001.

Of the existing homes sold last month, 60.4 percent had been foreclosed on in the prior 12 months. A year ago it was 29.6 percent.

The typical mortgage payment that home buyers committed themselves to paying last month was $969. That was down from $1,110 in December, and down from $1,790 in January last year. Adjusted for inflation, mortgage payments are 54.5 percent below the spring 1989 peak of the prior real estate cycle. They are 62.0 percent below the current cycle's peak in June 2006.

Now for the local report, Riverside's median selling price finally cracked $200K! Riverside's median drop from $209k in Dec to $195k in Jan. That's a insane one month drop. San Berdu droped from $180k down to $162K.

A total of 15,227 new and resale houses and condos closed escrow in the six-county Southland last month. That was down 23.6 percent from 19,926 in December but up 52.5 percent from 9,983 in January 2008. A decline of 20 to 30 percent between December and January is normal.

Last month's sales were the highest for that month since January 2006, when 21,895 sold, and were 16 percent below the average January sales total since 1988, when DataQuick's statistics begin.

Sales of existing single-family houses reached record levels for a January in inland communities such as Chula Vista and Lemon Grove in San Diego County; Fontana and Victorville in San Bernardino County; Perris and Temecula in Riverside County; and Palmdale in Los Angeles County. Such areas have seen prices drop, and therefore affordability rise, more than most Southland communities.

The median price paid for all homes combined last month was $250,000, down 10.1 percent from $278,000 in December and down a record 39.8 percent from $415,000 in January 2008. Last month's median was the lowest since it was $242,000 in February 2002. January's median was 50.5 percent below the peak $505,000 median reached in spring and summer of 2007.

Last month's foreclosure resales - homes resold in January that had been had been foreclosed on in the prior 12 months - represented 58.3 percent of all resales, up from 56.2 percent in December and 28.6 percent a year ago. At the county level, foreclosure resales ranged from 46.0 percent of January resales in Orange County to 71.2 percent in Riverside County. In Los Angeles foreclosure resales were 51.9 percent of resales; in San Diego 55 percent; San Bernardino 67.3 percent and in Ventura County 49.1 percent.

Sales Volume Median Price
All homes Jan-08 Jan-09
Jan-08 Jan-09 %Chng
Los Angeles 3,398 4,532
$458,000 $300,000 -34.50%
Orange 1,286 1,806
$520,000 $370,000 -28.80%
Riverside 1,939 3,320
$331,500 $195,000 -41.20%
San Bernardino 1,111 2,532
$298,500 $162,000 -45.70%
San Diego 1,826 2,459
$429,000 $280,000 -34.70%
Ventura 423 578
$477,750 $335,000 -29.90%
SoCal 9,983 15,227
$415,000 $250,000 -39.80%

Wednesday, February 18, 2009

At least one reporter has a clue

I read this in Time today. Finally there is at least one reporter that has it right.

The federal government is most likely to create a safety net for the falling housing market with a plan that will allow people to stay in their homes by reducing their monthly payments. The FDIC and some members of Congress assume that residential real estate prices will decline slower this way and eventually begin to increase in value if houses are kept out of foreclosure. That may be true, but the plan could be quickly flanked by rising unemployment and the realization by people who can stay in their homes with federal help that they will never have the equity to pay down their principle. The government will have pushed them into the equivalent of "interest only" loans.

Although it is counterintuitive, the best approach to reversing the falling prices of homes may be to push the housing market to a deep trough as quickly as possible. This would mean that the government would not provide any assistance for current homeowners and give no financial aid to people who might buy a residence using tax credits. The idea of a benefit of up to $15,000 for those purchasing a home has already been floated in the debates over the stimulus package. Bringing housing back to a period of "affordable" prices means the government needs to stay out the business of keeping homes from being sold or foreclosed and helping buyers buy homes.

It seems especially cruel to push foreclosures because no one wants people to lose their homes. But, at some point, the system must take into account the fact that many of these people cannot afford their houses. The irony of allowing current owners to stay where they are is that they will never really "own" a home. They will remain in houses where they are very unlikely to be able to pay off the principle. These residences will not be released into a market where prices continue to drop very rapidly because there are no government programs to keep the housing prices at or near current levels as people are pushed out of work. If enough people lose homes, some of them will at least have the opportunity to buy property that they can afford, property which has reached its economically "correct" level through the forces of the market and not through a system that manages prices.

Redfin finally comes to the IE

I don't know if anyone else noticed but you can now buy a home in the IE using Refin. They finally have agents in the IE. You don't save a ton going through Redfin but the rebate is enough on an average house to buy a nice flat screen TV or a washer and dryer. They are still RE agents though so you still need to watch out for number one, cause they sure are not going to.

Some shocking numbers

I pulled this from Bloomberg

This is the percentage of loans in trouble. nearly 1/4 of all loans are either delinquent, or in foreclosure. Nearly 40% of all subprime are in trouble. That's a shocking number of loans in trouble. Considering nearly all the late model loans in Southern California are either Alt-A or Subprime we are in a world of hurt.

                            01/31/09 12/31/08 11/30/08 01/31/08 01/31/07
Delinq. (30,60,90,REO&Fore) 24.13% 23.17% 21.69% 14.43% 7.28%
of which Prime 12.87% 12.08% 10.79% 5.27% 2.22%
of which Alt-A 23.51% 22.49% 20.25% 10.59% 4.45%
of which Subprime 38.88% 37.71% 35.99% 25.77% 12.88%

Delinquency (90+ days) 17.31% 16.42% 15.77% 9.07% 3.54%
of which Prime 8.77% 8.02% 7.43% 2.70% 0.70%
of which Alt-A 15.81% 14.54% 13.46% 5.59% 1.24%
of which Subprime 28.96% 28.05% 27.28% 17.55% 7.13%

Details of bailout V 4.0

Obama announced the details of his new bailout plan. It's supposedly going to help 4 to 6 million folks avoid foreclosure. The last time we heard that was from the hope for homeowners bailout. That one ended up helping....lets see what was that number again....oh yea, ZERO the last time I checked.

BO's plan has 3 main parts.

Part one is to make refinancing into low interest loans easier. The catch here is you have to have a Fannie or Freddie loan. It allows those lenders to refi the loans with LTVs of up to 105%. If you are more that 5% underwater you're still screwed. I suppose other lenders could do this if they wanted but it would be at their own risk. With the LTV max at 105% this isn't going to help many people in California.

Part two is a bit more confusing. This one is trying to make payments more affordable by getting banks to lower payments down to max 38% of income. This is to be done by lowering interest rates. Then the government would throw in some money to bring those payments down to 31%. It also allows the lenders to reduce pricipal amounts with the treasury sharing some of those losses. This does not apply to speculators or those that maybe fudged the numbers on the loan docs. This one is long and complicated and has a very high likely hood of becoming a total cluster &@*%. I'm not sure how they will tell a speculator investor/flipper from the regular joe that just bought way more than he could afford because he was hoping to cash in 2 years later. Those people are speculators too. Getting the payments to 38% isn't going to be easy in Cali unless those rates go back to 1.5% in many cases. This one just reaks. It still leaves people in homes with mortgages far higher than the value of the home. All this will do is push those foreclosures a few years down the road. This one is going to be a nightmare both for taxpayers and for those homeowners that actually fall for this scheme.

Part three is geared at ensuring low interest rates on new mortages. They are basically allowing Fannie and Freddie to buy more loans in the hopes this encourages lenders to lend, and lend at low rates. I don't see this having much effect. Lenders will lend and they will charge what they want regardless of what Fannie and Freddie buy.

This plan is weak, just like the last ones. It has little hope of working beacuse it does nothing to address the root problem. Housing prices are still too high. No plan will fix that. And what I mean is that to fix it we need NO PLAN. Let the market fix itself.

The plan did have one effect, it stopped the market from tanking today. Although Wall st obviously didn't think that much of it with the market ending up flat.

Tuesday, February 17, 2009

Oh no....looks like the bailout needs a bailout

According to the Washington Post Geithner's anticipated bailout is already in trouble.

Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.

According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.

You can read the entire story by following the link.

I wonder how long it will take for the geniuses in Washington to realize bailouts are not the answer. They may already know it. But since the government is actually run by lobbyists and special interest groups, many of them working for the banks and Wall st it doesn't matter if they know or not. All the legislation is getting passed is geared at keeping those banks and wall st firms from going belly up. All these plans will do is stretch this mess out over years if not decades.

The quick fix is to let the companies book the losses. If some banks fail so be it. If the large banks fail let the government take them over until they are solvent again. Then they can sell them and recoup some of the money. Let the foreclosures happen. Get people out of homes they cannot afford. Get people into homes they can afford by letting the prices of the homes correct to normal levels. If people have home mortgages at normal DTI levels they will have disposable income with which to spend and drive the rest of the economy.

What good does it do the economy when a bank sprinkles some magic mortgage pixy dust on an upside down homeowner and makes him a debt slave for 20 years. Sure they get to keep the house with a payment that will be the absolute max they can swing. Assuming they can sell at a profit down the line that then goes to pay off some hold back amount. Great, in 20 years you now have a middle aged or older family with zero savings and zero equity. Yea, that sounds like a plan to save America. How about they let the house go, rent for 5 years and buy another one that they can afford. In 15 years they should have some savings and some equity. Which plan sounds better?

But then again, I'm not an economist. But I could probably play one on TV....

Monday, February 16, 2009

The joys of home ownership

So.....I come home Thursday night and my wife says "honey, the dryer's not working". Great last week the PC, this week the dryer. Well, Mr. fixit has fixed it before, I'll fix it again, says I. I have a pretty good idea what the problem is. I begin to take the old beast apart the next evening. Half way through I pull my hand out and scrape it along one of the sheet metal panels. Sharp as a freakin razor blade they are, cutting the back of my hand right down to the tendons. I'm talking a huge, deep, nasty ass cut. Now, I hate needles, but I know this baby needs stitches. I wrap it up, and call the wife. I tell her "get home quick and bring a suture kit". I quickly find out my place in the priority list isn't as high as I'd like. "Sorry, put a band aid on it, I have patients" was not what I wanted to hear. But Being a "dude" I handle the situation with grace and improvisation. I broke open a bottle of super glue and glue my hand back together. Works like a charm by the way! And don't think it's the first time I've done it.

Saturday, I finish tearing the dryer apart, give it a thorough cleaning and lubricate all the bearings and rollers. I was sure that was the problem. After re-assembling it I hit the button and presto, it fires right up. Feeling smug, I announce my success and relax to nurse my torn appendage.

Sunday morning dawns to the dreaded "honey, the dryers not working again". God $#&$*$%^$^ wtf now. 10 minutes later I go out and hit the button and it fires up fine........ for like 5 minutes. At this point I wave the white flag. Get in the car, we're going to the store. We look and anything even 1/2 way decent is $500. Nice ones are closer to $1000. Then she spots a sale on a washer dryer combo. One of them fancy front loading "trendy" jobs. Ok fine, at this point I'm a beaten man and we buy the pair. The Durango only holds one, so this means two trips to get them home. But that goes off without a hitch (making it about the only thing all weekend).

Now in the past hooking up a new washer and dryer has been a snap. Do you think it was this time? Ohhhh nooooooo. First, the gas line on the new dryer has a different thread (why after 100 years do they decide to change threads size???). Off to Lowes for a "universal gas line". I get home and install that to the dryer only to find it's only "universal" on one end. Back to Lowes for another fitting. That goes on just fine and finally the dryer is done. On to the washer. I don't foresee any problems here. After all it's only 2 water lines. I turn off the valves and go to unhook the lines from the washer. No problem with the cold but as soon as I loosen the hot I get a shower. The valve is shot. Great, back to friggin Lowes for a valve. I get the new valve installed, hook up the lines and FINALLY think everything is done. All I have to do is turn on the gas and the water.

After turning on the gas and water I needed to relight the pilot light on the water heater. Anyone think that went smoothly? Nope I fiddled with that for 30 minutes before getting it lit. Done finally! Not so fast, "Honey......the heater isn't working". Another 30 minutes of playing with that gets me no where. Now the furnace is new, so I'm pretty sure it's not broken. I finally get the bright idea to "re-boot" it. I unplug the furnace and plug it back in. This does the trick, and I can finally relax.

Now, how was your weekend...... can you top that?

Saturday, February 14, 2009

The new bailout plan

The new bailout...

I have not read any "official" details on this new mortgage workout plan the Obama administration is touting. But there are some blogs reporting the supposed workings of it. This plan is the reason for the newest foreclosure freeze. The adminsitration has asked the banks to hold off until this new plan is announced. BTW this plan is not part of the stimulus package. That's more money the taxpayers will have to pay off.

Here's what I have read so far. The new plan is geared towards people on the edge of affordability. People that have been making payments but due to hardship are now having trouble. The plan is to have the lenders refi the people into low interest fix loans of 4 to 4.5%. If the home is worth less than the mortgage the excess amount will be held back from the loan. That money will be paid back when they sell the house. For example, if you have a house worth $200k and you loan is $300k. They will get you into a new loan for $200k at 4.5%. When you sell the house you pay that $100k back. Obviously there are a lot of details missing here. What happens if the house only sells for $200k in 5 years. Are they still on the hook for the hold back amount.

If the 4% interest thing happens it's really gonna piss off any new buyers. Why do these people get 4% and new buyers are getting stuck with 6%.

Compared to most of the bailout plans this one seems slightly more reasonable. Most people that bought after 2004 are still not likely to qualify for this (assuming it is structured this way). It's probably not going to be very effective in the super bubble areas like SoCal. It's obviously not going to help people that are losing homes due to unelmployment. Unfortunately that's the fastest growing reason people are losing homes.

The one sure effect that this will have is to slow the decine. It will slow the flood of foreclosed homes and slow the price declines. Obviuosly, it has already slowed the foreclosures since banks have frozen them until the details of this plan are announced.

Capitulation in "The Retreat"

Do ya like em BIG?

Here's s shorty in "The Retreat" that has everything you could ever want. 8128 Tender Way, is 5307 sq/ft and has 5 bedrooms and 5.5 baths. It's upgraded to the hills and it has a bitchin back yard complete with pool, putting green, sunken bbq pit, fireplace and who knows what else. This home was purchased from the builder for $1.32 million. It was listed as a short sale a few months ago for $800k. It's back this time listed as a short sale for $550k. That is 58% less than the selling price. And probably close to what this house should sell for in a normal market.

Sorry folks, this one does not include a rubber duck!

Friday, February 13, 2009

Walk away mortgage calculator

This is kinda cool. It's a calculator that gives homeowners some idea as to whether to pack up and walk away from an upside down house or maybe stick it out.

They're killing me

Fannie and Freddie have anounced another freaking foreclosure freeze. WTF..... This time they are freezing foreclosures until March 6th. They want to provide servicers with more time to help troubled borrowers find an alternative to foreclosure. JP Morgan, B of A and Citi have also jumped on the band wagon. Don't these idiots realize the solution to the housing crisis IS foreclosure. Freezing foreclosures makes thing worse. It stops people who can afford a home from buying one. And if keeps people who cannot afford one in one. How does that help the economy? The only thing this will accomplish is to keep the inventory of homes from going vertical.

What they fail to realize is that the fstest growing portion of the foreclosures are now the result of job losses. I don't care how creative you get with your bailouts. An unelmployed person cannot afford it. The job losses will only stop when homes are affordable and home owners have disposable income to spend, there by driving the economy. Modifying a loan to make a person a debt slave is not going to help either. The fastest way out of this fiasco is to foreclose, sell the homes at a reasonable price to people that can easily afford them. That way the new crop of homeowners will start spending that extra money they will have at the end of the month. Flat screens will fly off the shelves, a new car in every driveway...... wait, that's what got us in this mess. FORECLOSE ALREADY!

Thursday, February 12, 2009

New homes $78 sq/ft

It's not hard to find repos at $60, $70 or $80 a sq/ft in the IE. Its a little harder to find new homes in this price range. Most builders are into the land for far too much to sell homes for that price. It's easier for them to pack up and leave the dirt.

Standard Pacific has listed some in the high $70s sq/ft. Location, you ask. As expected it's out in the boonies. It's in Beaumont on the new golf courses (the ex-SCPGA course). These homes were selling in the $400 to $500k range a couple of years ago. The area is littered with REOs and Short Sales. Most of these are also in the $60 to $80 sq/ft range. So the builder had little choice if he actually wanted to get rid of these homes.

Since I talking about this tract, I should mention one of the most delusional listings in the IE is here. 35820 Stockton St. This home is a full on amusement park (in a tacky kinda way). The guy has the waterfall, the brook, the fake grass putting green, you name it, it's in his back yard. This poor sucker paid a whopping $705k for this place in mid 2006. Yes, you read that right $705k for a tract home in BEAUMONT! That's like paying a million for a vacation home in Chernobyl.
He's obviously under heavy sedation because he has listed it for $829K! Everthing around him is going for $70 sq/ft he's going for $240 sq/ft!

Check out the rubber ducky!

January foreclosure report

Foreclosures dipped slightly in Jan. They were down 8% in the IE versus December but they were up 40% from last January. Here is the meat of the article from the Press Enterprise

There were 17,629 foreclosure-related actions in Riverside and San Bernardino counties in January, according to a report released Wednesday by RealtyTrac, an Irvine-based firm that markets properties online. That is 8 percent less than December in the two Inland counties but about 40 percent more than January 2008.

Nationally, notices of default, auction sale notices and repossessions were down 10 percent, mostly because of government intervention, James Saccacio, RealtyTrac's chief executive officer, said in a statement.

The Riverside-San Bernardino area had the fourth-highest foreclosure rate in the country last month, with one in 84 homes having received some sort of notice about delinquent mortgages. The region trailed only Merced, Las Vegas and Cape Coral-Fort Myers, Fla.

January's braking action on foreclosures could be temporary because of the moratorium ending, but the mortgage industry may be waiting for Washington's next move.

"Lenders are so confused right now with the stimulus package that it's a wait-and-see-what-happens-next situation," said John Marcell, president of Upland-based Better Mortgage Brokers. "If I were a wholesale lender, I might have started (foreclosure) proceedings, but I'm thinking maybe the next few months will determine what will happen."

Adibi said he doesn't expect the number of foreclosures to continue to slide, and may revert to the levels of late 2008. Adjustable mortgages, which were sold to thousands of Inland home buyers as recently as 2006, usually reset at higher rates after three years.

That means homeowners with that type of loan will see their rates reset and their mortgage payments climb sharply in 2009 and will probably lead to more foreclosures.

Also, many people who have had no trouble meeting monthly mortgage obligations are now facing the possibility that their incomes may vanish through a layoff.

"We are still having job losses," Adibi said. "I think this foreclosure downtick could be deceiving."

Also in the new, Bloomberg reports the 4th quarter price declines are the worst on record.

Feb. 12 (Bloomberg) -- Home prices dropped the most on record in the fourth quarter as foreclosures dragged down values and the recession pushed buyers out of the market.

The median price of a U.S. home declined 12 percent to $180,100 from a year earlier and sales of properties with mortgages in default accounted for 45 percent of all transactions, the Chicago-based National Association of Realtors said today. Prices declined in almost nine out of every 10 cities.

The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and the economic recession worsens. The number of Americans collecting unemployment benefits rose to a record 4.81 million in the last week of January as companies such as Caterpillar Inc. and Home Depot Inc. slashed jobs. The U.S. lost 2.6 million jobs last year in the biggest workforce reduction since 1945.

The steepest price decline was in Florida’s Ft. Myers metropolitan area, down 51 percent, according to the Realtors’ report. Saginaw, Michigan, was second, with a 41 percent drop. The next five biggest decreases were all in California: Riverside, 41 percent; San Jose, 38 percent; San Francisco and Sacramento, 37 percent; and San Diego, 36 percent.

U.S. foreclosure filings exceeded 250,000 for the 10th straight month in January as falling prices trapped owners in homes worth less than the mortgage, RealtyTrac Inc. said in a report today.

Wednesday, February 11, 2009

Sycamore creek post a new low

Here's the first decent listing I've seen under $80 sq/ft in Corona. 25285 Noble Canyon, this 5 bedroom, 3.5 bath home is 4158 sq/ft in size. From the pics it looks nicely upgraded and in very good shape. This one sold new, Feb 2006 for $716k. The bank now owns it and thinks that a listing price of $327,500 aught to git-r-done. That is about 54% off the new price, or a loss of about $388k. All in all this one looks like a reasonable deal. I'll give this one a green light if you can get it at that price.

If 4000 sq/ft is a bit much for you, you might want to look at 25215 Coral Canyon. It's just around the corner and at 3268 it a little more "cozy". Actually its still quite large but this one is listed as an REO for $285k. That puts it at $87 sq/ft.

Easy come, easy go

Well after a few days of bickering, it looks like that $15,000 home buyer credit is TOAST!

From what I've read the have modified the old first time home buyer $7,500 tax loan to a tax credit. So it does not have to be repaid. That looks like main change.

Monday, February 9, 2009

Everything but the location

Here's exactly what I'm looking for. It has everything but the location. 15881 Rawhide Ln is a custom home up near Lake Mathews. This was on the market as a spec home for very long time. They started off asking around a million and slowly came down to about $800k. Looks like the bank took this one off their hands. The bank's asking price is quite fair at $359k. In fact I might even go so far as to say this one is a great deal (assuming it's finished and not thrashed inside).

The home is a custom build. It sits on just over 2 acres of dirt. It has 4 beds and 4 baths spread out over 3615 sq/ft. Best of all it has a 4 car garage. It's hard to tell from the pictures if there is flooring installed. Some might consider this a positive since you can pick your own. But if there is no flooring you need to factor in at least 20k for decent flooring. Even so the price is still very good, if only the location was.

The only drawback to this house is the location. It's off the beaten path on a dirt road and it looks like it's surrounded by commercial lots (a nursery and who knows what else). I guess that's why the price is so low. I will be checking this one out though!

So close.......

Sunday, February 8, 2009

Is it really "a great time to buy"?

According to every realtor out there it is. But what's the deal, is it a good time to buy?

My short answer is....NO, here's 5 reasons why

1. Prices are still falling. Unless you can find a deal where you are picking up the property for significantly less than the comps you will probably find yourself underwater. That's not a good place to be. It limits your options if something comes up and you need to sell.

2. There's no rush. Even if prices were to stop falling there is nothing to indicate that they will start to rise again. The economy sucks, employment sucks and there is a glut of homes in distress. So there is no reason to rush into the market. You are not "going to be priced out" anymore.

3. In most better areas it's still cheaper to rent. Granted this may no longer be the case in Perris or San Jacinto but in Corona or nearby areas it's still cheaper to rent.

4. The foreclosure wave is still coming. Unless Obama and crew can pull some miracle from their hats, the ALT-A wave is due to hit over the next year and a half. Then there is the prime wave, also still to come.

5. Low interest rates seem like a great thing but they can also trap you. If the rates suddenly rise back to the normal 8% range, it will put tremendous pressure on prices. A person that could afford a $250k at 6% can only afford a $180k home at 8%.

So, if it's a crappy time to buy why are sales up? First sales are up because last year they were practically non-existent. It would be nearly impossible not to be up. If you look at the majority of what's selling though you will find it's low end stuff. Much of it is being sold to investors for use as rentals. There are even still flippers around, believe it or not.

There are still reasons to buy though. If you can get a deal that limits your downside risk then it might be worthwhile. Lets face it, renting sucks. It may be worth a 10% equity loss just not having to deal with a landlord. And if you stay in the house long enough you will eventually surface from being underwater. If you can easily afford the payments you tend not to dwell on what the house is worth. That only becomes a factor if you want to refi or get a home equity loan. Buying now will definitely limit your options in that respect. You're not going to be able to "pull out" $40k to put a pool in a few years from now.

Currently the median is falling at about 5% per month. Don't kid yourself though, that does not mean prices are falling at 5% per month. Prices are falling at probably 1/2 that. The rest of that decline is due to the shift in sales to the low end of the market. There is practically nothing over $500k selling these days in the IE and there's not much over $350 selling. Most of the sales these days are between $100k and $300k.

In the end, whether to buy or not is a personal decision we all must make on our own. We should gather as much info as we can and decide whats best for our families. As with most financial decisions there is a certain amout of risk in buying a home. But sometimes you have to roll the dice.

Ghost towns

Has anyone else seen the empty new homes seemingly abandoned littered across Riverside. I was up in Orangecrest last weekend looking at a house when I saw a whole street of empty houses. This was a small tract of 24 homes called Nandina. It looks like they only built about 12 homes. The sales office is now gone and all but one of the homes are sitting empty. These were built early last year and the asking prices started close to a million. The last time I stopped at the sales office they were down to the high 700s. Now they appear to have given up.

Another tract in the same area is the Gallery homes tract. This tract also has a bunch of empty homes. The sales trailer is also gone.

Riverwalk Vista looks to have given up. The last couple of times I drove past the gate was closed. It's hard to sell houses if the gates are closed.

Bridle Creek has packed it in. They have sold everything as near as I can tell but they are far from built out. The last time I was in the sales guy told me they had another 40 lots. I doubt they built more than 10 homes since that conversation.

I see Pulte is still putting up homes at Stellan Ridge. And still asking sky high prices for them. I whole bunch just hit the MLS this week. There's a few that have been built for some months now that haven't sold and they have another half dozen under construction. They are super nice houses but they are still priced a good $200k too high in my opinion. $800k is loopy for a tract house in Riverside.

What will become of these tracts. I suppose they may go to auction. Would you want to live in a half built tract? If anyone has info on these please post a comment.

Saturday, February 7, 2009

Computer problems no more!

You may have read that I was having some PC issues. Right after I got back from my cruise my PC had a MI during a windows update. After that it would not boot up. I ended up re-installing windows and did manage to get it operational. But the poor old box was on it's last legs after 4 or 5 years of hard abuse the drives were full and it was running like a slug. So today I broke down and replaced the old girl with a new, young sexy machine. What a difference. Lemme tell ya, a 24" HD monitor is the bomb-diddly! A smoking fast, 64 bit box with 4G of RAM ain't too shabby either. However, vista is gonna take some getting used too.

Thursday, February 5, 2009

More on the $15k tax credit

First of all, lets not get to excited as this is not a done deal yet. I don't like much of anything about these bailouts. But if they are going to give away $15k, I'll be happy to take it my serving.

Here's the whole thing if you want to read it.

It looks like this modifies the old $7500 tax loan program. This one is a tax credit though and NOT a loan. The qualifying max income caps have been changed from $75k as a single to $125K and the joint max income went from $150k to $250k (yippee). This makes just about every "normal" family eligible for this credit. You have to be WAY up there in the income brackets before you lose out on this one.

Any purchase made after Dec 31, 2008 will qualify. It looks like this is a $15k credit that can be used as part of your down payment if I read the thing right.

(g) Transfer of Credit-
      `(1) IN GENERAL- A taxpayer may transfer all or a portion of the credit allowable under subsection (a) to 1 or more persons as payment of any liability of the taxpayer arising out of--
        `(A) the downpayment of any portion of the purchase price of the principal residence,
        `(B) mortgage, flood, and hazard insurance premiums in connection with the purchase and paid at or before closing,
        `(C) interest on any debt incurred to purchase the residence,
        `(D) State and local real property taxes paid in connection with the purchase, and
        `(E) funding fees paid to the Department of Veterans Affairs in connection with the purchase.

Dellusional seller of the month

I can't believe there are still people out there that try for peak prices in today's market. Then there are sellers like this tool that try for even more than that. You can tell by the incredibly bad listing that even the agent doesn't want to waste time on this pointless exercise. What kind of thought process must you have to list a home for triple the price of the nearby homes. I just don't get it.

5963 Pingrove Pl, Corona, it's over in Eastvale aka foreclosure central. This dreamer buys his place in late 2006 for $683k. Yup, that's about as peak as it gets! His 2 years are up, and now he wants his $200k paycheck. That's the same plan most of the other buyers in 2006 had. Damn the foreclosures, his house is different and the dreamer has listed it for $899k!. That's only about triple what the other places in the area are going for....

I will ask again, "why do agents take these listings?"

Wednesday, February 4, 2009

Affordability index

We are getting there but we still have some air left in the bubble.


Rank Metropolitan Area Median Multiple
1 Indianapolis 2.2
2 Cleveland 2.3
2 Detroit 2.3
4 Rochester 2.4
5 Buffalo 2.5
5 Cincinnati 2.5
7 Atlanta 2.6
7 Pittsburgh 2.6
7 St. Louis 2.6
10 Columbus 2.7
10 Dallas-Fort Worth 2.7
10 Kansas City 2.7
10 Mem[hios 2.7
14 Oklahoma City 2.8
15 Houston 2.9
15 Louisville 2.9
15 Nashville 2.9
18 Minneapolis-St. Paul 3.1
18 New Orleans 3.1
20 Birmingham 3.2
20 San Antonio 3.2
22 Austin 3.3
22 Jacksonville 3.3
24 Phoenix 3.4
25 Sacramento 3.5
26 Tampa-St. Petersburg 3.6
27 Denver 3.7
27 Hartford 3.7
27 Las Vegas 3.7
27 Raleigh 3.7
27 Richmond 3.7
32 Salt Lake City 3.8
33 Charlotte 3.9
33 Riverside-San Bernardino 3.9
33 Washington (DC) 3.9
36 Milwaukee 4.0
36 Philadelphia 4.0
38 Chicago 4.1
38 Orlando 4.1
40 Baltimore 4.2
41 Virginia Beach-Norfolk 4.3
42 Providence 4.4
43 Portland (OR) 4.9
44 Seattle 5.2
45 Boston 5.3
46 Miami-West Palm Beach 5.6
47 San Diego 5.9
48 New York 7.0
49 Los Angeles 7.2
50 San Jose 7.4
51 San Francisco 8.0

Are you stimulated

Congress just passed a $15k tax break (or 10% of the value) on a purchase of a new or existing home as part of the new "stimulation package". This will cost the government about 19 billion in lost tax revenue. I'm not sure how much it will stimulate the economy. Buying a new home will help by creating or at least helping maintain employment. Buying existing homes will not. It will help with home sales though.

The tax credit would give buyers 10 percent of the price of a primary residence bought within one year, up to $15,000. I have not seen the details of this provision yet. I don't know if there are income caps attached to it or not. This brings Obama's stimulation package over the 900 Billion mark.

They've also added a tax break for the purchase of new cars. You now can write off the tax and interest for purchases made this year.

It seems our new government is using this crisis as an excuse to go on a spending spree. Keeping the masses appeased by throwing a few bones our way such as these temporary tax breaks. Obama's been in office 3 weeks and he's already spending over 900 Billion AND cutting revenue.

Hmmmm isn't that the exact same behavior as the consumers that created this mess?

BTW, is it just me or does anyone else want to scratch there eyes out when watching Nancy Pelosi on TV.

Tuesday, February 3, 2009

Can I interest you in a castle at 63% off

Ok, so it's not really a castle but this is still a cool looking house.

2881 Rumsey Dr in Riverside is in the Victoria Woods area just south of Victoria Ave. This house was built in 1926 and from the few pictures it's a very cool property. I really wish they had included more than 7 pictures. The estate is covers nearly an acre and the home is just under 5000 sq/ft. It last sold in 2006 for $1,475M. It's currently listed as an REO for $550K. If my math is right that's about 63% off the bubble price. It's currently listed for less than it sold for in 1998!

Nice stained glass and check out that ceiling!

More details, check out the doors. And look at the detail in that ceiling.

Monday, February 2, 2009

What went wrong?

After 6 months 50% of modified loans are once again in default..... Wow, who here is surprised?

More than half of loans modified in the first quarter of 2008 fell delinquent within six months, according to recent data from a top bank regulator. Redefault figures reached 58 percent after eight months, according to U.S. Comptroller John Dugan.

The trend has left officials investigating: Are the modified mortgages badly written? Or have cash-strapped, unemployed homeowners accumulated too much increased credit card debt to afford even reduced payments?


I feel sorry for you "officials so X will give you a hint! The mortgage amounts are STILL too high relative to incomes. You can modify all you want, but when the principal amount is 5x the persons income they will likely default. There is just no margin for any unexpected cost when you are working with those ratios. Don't mod a loan unless the person can really afford it using the old tried and proven 28/36 ratios.


More good news from the Press Enterprise...

It was only a few years ago that economists were talking about how the housing bubble was costing Inland Southern California its advantage as the affordable place for buyers.

The area was at close to full employment, but home prices were going up too fast. It meant that even though there were abundant jobs in San Bernardino and Riverside counties, the typical worker could not afford the typical mortgage.

Now more than 186,000 Inland workers are unemployed, many more are underemployed, and almost everyone is nervous about the state of the economy. It means that, despite a huge decline in home prices, there won't be enough buyers in 2009, Chapman University economists said in their annual forecast.

The Inland Empire stands to lose 14,000 jobs in 2009, a drop of 1.1 percent, Chapman's economists predict, but the decline will ease by the fourth quarter. The two-county area lost about 38,000 jobs in 2008, according to a recent state report, and federal statistics indicate the job loss could have actually been much steeper. (no duh!)

Unemployment, currently at a 13-year high of 10.1 percent, could go more than a full point higher. Most job sectors, except for health care and education, will see diminished payrolls. The job losses will likely hinder any housing recovery.

By the end of the year we should see better housing numbers, or at least numbers that are less bad, Adibi said in an interview.

In early 2005, when the median home price in Inland Southern California was about $340,000, only one in five people made enough to qualify for a typical 30-year fixed mortgage with 20 percent down. (what about 2006 and 2007 when only 1 in 10 could afford it?)

The median single-family home price has dropped to about $209,000 in Riverside County, and $180,000 in San Bernardino County, according to a recent report by DataQuick Information Systems.

Adibi, who presented his forecast Wednesday in Riverside in front of an audience of mostly builders and developers, said there won't be enough demand for housing to bring the bulldozers back to the Inland area. He is forecasting a decline in Inland construction jobs for the third straight year. (wow, that's a stretch...not)


Meanwhile back at the ranch, foreclosures are ready to soar as Fannie and Freddie's foreclosure freeze expires.

Home foreclosures, bottled up for the last few months, could soon explode.

A moratorium that Fannie Mae and Freddie Mac put on foreclosure sales and evictions by their servicers in late November is scheduled to expire next week. Freddie had 5,000 to 6,000 loans headed for foreclosure before the freeze, though some might receive streamlined modifications. Fannie said it had contacted more than 10,000 borrowers and renters before the freeze about the possibility of a property heading for foreclosure.

"There probably will be two more waves of foreclosures coming," said Mark Carrington, the director of analytical sales and support at the unit of First American Corp. of Santa Ana, Calif.

"When the foreclosure moratoriums end, we'll see one wave of foreclosures," he said, and "2009 is going to be the start of the ramp-up of the option ARM loans facing foreclosure."

"Virtually everywhere we've seen moratoriums, there is a run-up in foreclosure activity, then a huge drop-off, and a spike back up when the moratorium is over," said Rick Sharga, a senior vice president at RealtyTrac Inc. in Irvine, Calif.

As of June 30, Fannie and Freddie owned or guaranteed 373,000 delinquent loans. Freddie had 151,515 "seriously delinquent" mortgages — meaning they were 90 days or more past due — as of Sept. 30.

"Right now, between moratoriums that were enacted last year and the pure volume of foreclosures, time lines could be double the standard of a year ago," said John Anderson, an executive vice president at Clayton Services Inc. in Shelton, Conn., which owns Quantum, a servicer of delinquent loans.

So. let me get this straight. Unemployment is high and getting worse by the day. Values are falling. Defaults are rising. Re-defaults are running 50%+. Holy smokes, there's never been a better time to buy! (sarcasm off)