Oh $&it I caught a knife!

Here's a guy that bought a foreclosure a year too soon.

2822 Vandermolen in Norco hills. This house is 3738 sq/ft with 5 bedrooms and 4 baths was foreclosed on back in March of 08 for $674k. The previous sale was in Feb 07 for $1.2M, and that sale just reaks of fraud. It was purchased as and REO last August for $600k. The guy surely thought he got a steal. After all it was 50% off! But then homes around him start listing for closer to $400k than $600k and he probably starts thinking, "oh crap, I pulled the trigger too soon". What ever the reason he's already bailing out and hoping to get $550k for it. After fees this guys gonna lose close to $100k in 8 months if he gets his price (doubtful). We have to assume this guy put at least 20% down. A non-conforming loan was just about impossible to get without a hefty DP late last year. Does he have any hope of getting $550k? I doubt it. With a dirt yard and minimal landscaping in the front this house is a hard sell. The inside looks nice but there is a model match around the corner for $490k that hasn't sold in ages and there was another one down the street that must have gone pending, it was listed and $449k (for quite a while too).

A perfect example illustrating the dangers of jumping off the fence too early!

Feb numbers by City

Here's the DataQuick numbers for each city. I bolded anything with a year over year decline higher than 45%. Some of those are statistical flukes due to low sales numbers and the rest seem to be the less desirable areas of the IE. The interesting on is the city of Riverside. It had a healthy 407 sales and the median is down 46%. Check out the city of San Berdu's median, it's $83k!

Riverside County	3,331	$190,000	$323,500	-41.27%
AGUANGA	5	$219,500	n/a	n/a
ANZA	2	$205,000	n/a	n/a
BANNING	37	$90,000	$208,000	-56.73%
BEAUMONT	89	$210,000	$309,500	-32.15%
BLYTHE	4	$179,500	$218,500	-17.85%
CABAZON	3	$85,000	$195,000	-56.41%
CALIMESA	4	$175,000	$218,000	-19.72%
CATHEDRAL CITY	81	$170,000	$271,750	-37.44%
COACHELLA	55	$143,000	$234,500	-39.02%
CORONA	349	$309,000	$429,000	-27.97%
DESERT HOT SPRINGS	111	$84,000	$247,000	-65.99%
HEMET	173	$110,000	$233,750	-52.94%
HOMELAND	2	$88,750	n/a	n/a
IDYLLWILD	9	$220,000	$287,500	-23.48%
INDIAN WELLS	9	$340,000	$1,525,000	-77.70%
INDIO	149	$180,000	$305,000	-40.98%
LA QUINTA	91	$327,500	$470,000	-30.32%
LAKE ELSINORE	143	$185,000	$305,000	-39.34%
MECCA	3	$79,000	$225,000	-64.89%
MENIFEE	83	$200,000	$305,000	-34.43%
MIRA LOMA	21	$292,000	$344,250	-15.18%
MORENO VALLEY	362	$148,500	$250,000	-40.60%
MOUNTAIN CENTER	2	$144,000	$669,000	-78.48%
MURRIETA	227	$240,000	$330,000	-27.27%
NORCO	30	$334,000	$455,000	-26.59%
NUEVO	11	$185,000	$258,500	-28.43%
PALM DESERT	67	$295,000	$387,000	-23.77%
PALM SPRINGS	91	$250,000	$314,000	-20.38%
PERRIS	200	$144,500	$278,250	-48.07%
RANCHO MIRAGE	39	$345,000	$660,000	-47.73%
RIVERSIDE	407	$190,000	$350,000	-45.71%
SAN JACINTO	109	$140,000	$232,500	-39.78%
SUN CITY	89	$150,000	$269,000	-44.24%
TEMECULA	158	$270,000	$360,000	-25.00%
THOUSAND PALMS	14	$145,750	$285,000	-48.86%
WHITE WATER	6	$105,000	$266,000	-60.53%
WILDOMAR	44	$245,000	$358,750	-31.71%
WINCHESTER	51	$232,000	$325,000	-28.62%

San Bernardino County	2,265	$152,000	$290,000	-47.59%
ADELANTO	83	$86,000	$200,000	-57.00%
APPLE VALLEY	120	$125,000	$207,500	-39.76%
BARSTOW	15	$109,000	$142,000	-23.24%
BIG BEAR CITY	27	$250,000	$224,250	11.48%
BIG BEAR LAKE	17	$294,000	$392,500	-25.10%
BLOOMINGTON	24	$144,000	$225,000	-36.00%
CEDARPINES PARK	3	$80,000	$130,000	-38.46%
CHINO	59	$295,500	$388,000	-23.84%
CHINO HILLS	60	$421,500	$493,000	-14.50%
COLTON	49	$135,000	$270,000	-50.00%
CRESTLINE	13	$150,000	$190,000	-21.05%
FAWNSKIN	4	$218,250	n/a	n/a
FONTANA	328	$212,000	$350,000	-39.43%
GRAND TERRACE	5	$173,500	$305,000	-43.11%
GREEN VALLEY LAKE	2	$109,000	$320,000	-65.94%
HELENDALE	8	$133,750	$275,000	-51.36%
HESPERIA	186	$136,500	$227,000	-39.87%
HIGHLAND	48	$215,000	$332,500	-35.34%
JOSHUA TREE	13	$70,000	$157,550	-55.57%
LAKE ARROWHEAD	14	$369,250	$406,500	-9.16%
LANDERS	2	$56,500	$62,000	-8.87%
LOMA LINDA	8	$271,500	$339,500	-20.03%
LUCERNE VALLEY	5	$51,000	$187,500	-72.80%
LYTLE CREEK	2	$89,000	n/a	n/a
MENTONE	7	$72,000	$372,000	-80.65%
MONTCLAIR	20	$238,500	$315,000	-24.29%
MORONGO VALLEY	2	$112,500	$204,000	-44.85%
NEEDLES	3	$57,500	$55,000	4.55%
ONTARIO	106	$195,000	$320,000	-39.06%
PHELAN	19	$180,000	$302,500	-40.50%
PINON HILLS	5	$155,000	$362,500	-57.24%
RANCHO CUCAMONGA	125	$330,000	$396,000	-16.67%
REDLANDS	36	$250,000	$345,000	-27.54%
RIALTO	119	$150,000	$299,000	-49.83%
RUNNING SPRINGS	11	$132,500	$215,000	-38.37%
SAN BERNARDINO	270	$83,000	$210,000	-60.48%
SUGARLOAF	15	$110,000	$155,000	-29.03%
TWENTYNINE PALMS	13	$85,000	$115,000	-26.09%
TWIN PEAKS	3	$151,500	n/a	n/a
UPLAND	48	$302,000	$480,000	-37.08%
VICTORVILLE	277	$119,000	$220,000	-45.91%
WRIGHTWOOD	5	$184,000	$375,000	-50.93%
YUCAIPA	36	$187,500	$334,500	-43.95%
YUCCA VALLEY	44	$105,000	$190,000	-44.74%

Oh my, Flipper alert

It's rare these days but there are some guys still flipping. Granted most of them know what they are doing and can still make a buck buying the right home at the right price. Here's the opposite type of flipper.

8223 Sunset Rose, is in my favorite whipping post, The Retreat. This home went back to the lender in August 08 for $568k. It sold in Dec for $618k (too high in my opinion but obviously I don't know squat). So it lists today as a "rare regular sale" for $799k! Huh, this fliptard thinks he's going to make $180k in 4 months in today's market.....

There's not a lot for sale right now in there. They seem to have worked through a lot of the old inventory. But they worked through it because the prices came down. Houses this size have been listing for mid $500s not $800k. There are 3 slightly smaller homes listed one is $470k, one is $552k and the highest is $549k (and it has a bitchin pool). Lets all give a hand to the fliptard of the month!

California report

The CAR has published it's Feb report. Lot's of cheerleading about sales being up over last year. although they dropped a fraction from January. CAR's data shows Riverside/San Berdu's median price falling 1% from January (which conflicts with DataQuicks report showing the decline closer to 4%). The yearly decline was 39.8%. The CAR report shows the sales numbers fell 9.2% from January to Feb in the IE. That's a little surprising as we have been hearing about how well stuff is selling. A 10% monthly decline doesn't seem like a good indicator. Although I do see a lot of homes going pending, what I'm not seeing is homes actually closing in the areas I watch. In the last 4 months I bet 30% of the nice homes in the areas I track have dropped of the MLS. But very few have shown up as sold. Where have they all gone??? The pending file must be bursting at the seams.


California home prices dropped 41 percent last month from a year earlier, more than double the U.S. decline, as surging foreclosures drove down values, the state Association of Realtors said today.

The median price for an existing, single-family detached home in California sank to $247,590 in February from $418,260 a year earlier, the Los Angeles-based group said in a statement. The U.S. median price fell 16 percent during the same period, the second-biggest drop on record, according to the National Association of Realtors.

Home prices have been falling since their 2006 peak, pushed down by rising foreclosures blamed for the U.S. credit crisis. California, the most populous state, has one of the highest rates of foreclosure, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data. Lenders usually sell foreclosed properties at a discount, dragging down the median price, so it doesn’t necessarily reflect the value of most homes, the California Association of Realtors report said.

“The median, for all its imperfections, tells a really interesting tale right now,” Andrew LePage, an analyst at research firm MDA DataQuick, said in an interview. “It tells you what is and what is not selling. What’s selling right now is foreclosures.”

Foreclosures accounted for 58 percent of existing California home sales in February, compared with 33 percent a year earlier, according to San Diego-based MDA DataQuick. Inland California, where prices are lower than coastal areas, accounted for half the state’s mortgage defaults in the last three months of 2008, MDA DataQuick said.

How low can they go?

I honestly, never in my wildest dreams, thought that I would see nice new homes listing for under $50 a s/ft in the IE. But once again San Jacinto leads the way in surprising even me. And I'm not talking 1 house here. There are plenty to choose from. How does a a 3500 s/f house for $150k sound?

So lets look at a few of these. I believe these are all REO properties. Some short sales are listed even lower. I found one listed at $27 s/f. The listing price on these homes is so low that your electric bill is likely to be higher than your house payment in the summer.

At some point even San Jacinto must start to look good. I mean at these prices you can have a nice big house and not even have to worry about your job. Does it make more sense to buy one of these, pay it off in 10 years and then just kick back for the rest of your life. Or does in make more sense to spend double that to live in Corona and work for the next 20 or 30 years to pay it off. If you have a 20% down saved for a decent house in Corona you could nearly pay for one of these homes. Put $100k down and pay off the other $50k in 5 years. Then kick back with the rest of the rednecks and work on your monster truck. Yea haw....

295 Northwood ave. 3042 s/f, 4 bedroom, 3 bath home. Sold new for $366,500. Now listed for $149k, or $49 s/f.

2989 Crooked Branch. 3322 s/f, 5 bedroom 3 bath. Sold new for $390k. Now listed for $162k or $49 s/f



640 Drake St, 3148 s/f, 5 bedroom, 4 bath. Sold new for $423k. This one is now listed for $153K or $49 s/f. And this one has a pool!



Still too expensive for you, how about $41 s/f?

1374 Willowstone Ct is 3802 s/f and has 5 bedrooms and 3 baths. This one sold new for $410k. Its now listed for $155k or $41 s/f. And it's a nice looking house!



Just around the corner at 1429 Lynden Trails there is a model match listed for $170k or $45 s/ft

A castle with an indoor pool

From the over the top files we bring you 21605 Via Liago in Lake Mathews.

This "so called" Victorian estate has been on the market for an eternity. The listing says 170 days but it was listed long before that. The first listing date shows July 2006!

This home could be a real nice estate. But in it's current state it just an over wallpapered, over cluttered disaster. It's 5149 s/f and has 4 bedrooms and 3.5 baths. But the decor of the house is very dated and it needs a serious overhaul. And it needs one of those HGN tv hosts to stop by and declutter the place. It looks like an antique store in some of the pictures. But hey, it has probably the only INDOOR pool in the IE. That just seems kinda silly in SoCal. I can understand an indoor pool in Montana but it just seems wrong in Riverside, Ca.

It looks to be a custom house built in 1988 (and not updated since judging from the pics). The last listing price was $1.5M but I'm sure I remember this originally listing for much more. It's just dropped in price to $495k. How's that for a price drop. A 66% drop in the asking price. I don't know if that's a record for a price drop but it's by far the biggest one I've seen (although I do know a few others that need similar cuts to have a chance of selling).

Beautiful house, bad location

Here's a perfect example of the old "location, location, location" saying. 16701 Krameria is a large custom home that just hit the market as an REO. The home looks beautiful and if it were a block or two west of it's current location it would probably sell. I remember seeing these homes when they were built and wondering "what is this builder thinking". There were two homes built. Both large and both high end. Problem is that the houses surrounding them are small and old. There's also a school nearly right across the street from this house.

The house is fabulous. It's all high end, with marble, granite, stainless steel and the all the whistles and bells. It's 4251 s/f with 4 bedrooms and 3.5 baths. It sold new for 1.35 million in late 06 (right at the peak). The bank took it back for 1.14 million in Sept of 08. It's listed for $565K. At $133 s/f this is still on the high end but if this house were a few blocks west I think it would probably sell. The question is, will it sell at this price given it's location? If it does sell at the asking price the loss will be a staggering 59% or $785k.

Personally, I can't see this selling at that price given the location. I think that's got to drag this house down below $500k. Even at $500k, I wouldn't buy the place. Let's see if there are any suckers out there that just look at the previous sales price and think they are getting the deal of a lifetime.

Price per Zip code

Here's the Feb report on the median prices per zip code. Also listed is the median price per sq/ft. I have highlighted the Zips where the median price was under $100k and the where the median price per sq/ft was under $100 s/f. The median price per square ft is now under $100 in nearly 50% of the Riverside zips. And it's getting close in many more.

RIVERSIDE Co		SFR	Price	% chg	$/Sq Ft
Countywide		2,911	$181	-41.00%	$94
Banning	92220	36	$89	-58.60%	$72
Beaumont	92223	55	$206	-29.00%	$94
Blythe	92225	3	$150	-28.60%	$98
Cabazon	92230	3	$85	-56.40%	$56
Calimesa	92320	5	$175	-19.70%	$115
Canyon Lake	92587	31	$181	-47.50%	$101
Cathedral City	92234	79	$172	-40.80%	$103
Coachella	92236	52	$143	-23.80%	$77
Corona	92879	58	$254	-35.70%	$131
Corona	92880	65	$353	-11.70%	$123
Corona	92881	29	$345	-12.70%	$149
Corona	92882	65	$265	-30.40%	$150
Corona	92883	70	$291	-36.00%	$127
Dsrt Hot Springs	92240	102	$80	-53.90%	$53
Dsrt Hot Springs	92241	7	$107	-50.20%	$68
Hemet	92543	40	$67	-41.50%	$59
Hemet	92544	58	$120	-39.00%	$70
Hemet	92545	65	$127	-47.10%	$73
Idyllwild	92549	10	$220	-23.50%	$211
Indian Wells	92210	2	$1,370	-20.60%	$522
Indio	92201	79	$145	-48.20%	$93
Indio	92203	45	$200	-39.30%	$91
La Quinta	92253	73	$275	-51.00%	$152
Lake Elsinore	92530	79	$135	-51.60%	$85
Lake Elsinore	92532	50	$205	-36.60%	$82
Mecca	92254	3	$72	-68.00%	$55
Menifee	92584	72	$190	-29.90%	$88
Mira Loma	91752	22	$280	-6.00%	$126
Moreno Valley	92551	76	$145	-39.30%	$80
Moreno Valley	92553	121	$104	-48.30%	$78
Moreno Valley	92555	78	$207	-31.90%	$82
Moreno Valley	92557	81	$157	-33.20%	$93
Mountain Center	92561	2	$144	-78.50%	$123
Murrieta	92562	107	$260	-27.90%	$101
Murrieta	92563	94	$240	-22.60%	$93
Norco	92860	31	$334	-26.60%	$147
Nuevo	92567	11	$185	-28.40%	$102
Palm Desert	92211	18	$325	-18.00%	$176
Palm Desert	92260	17	$209	-51.70%	$151
Palm Springs	92262	34	$278	-32.30%	$169
Palm Springs	92264	12	$480	-34.20%	$245
Perris	92570	50	$150	-48.30%	$76
Perris	92571	136	$135	-41.90%	$73
Rancho Mirage	92270	14	$385	-53.00%	$168
Riverside	92501	16	$195	-20.70%	$107
Riverside	92503	85	$181	-32.90%	$121
Riverside	92504	53	$150	-41.20%	$112
Riverside	92505	42	$191	-52.90%	$125
Riverside	92506	40	$225	-30.60%	$154
Riverside	92507	26	$173	-46.90%	$110
Riverside	92508	38	$308	-15.50%	$115
Riverside	92509	79	$141	-48.70%	$111
San Jacinto	92582	50	$156	-36.50%	$67
San Jacinto	92583	56	$112	-44.00%	$74
Sun City	92585	21	$189	-26.60%	$86
Sun City	92586	32	$117	-41.50%	$84
Temecula	92590	1	$600	n/a	$222
Temecula	92591	37	$258	-15.00%	$115
Temecula	92592	92	$295	-18.10%	$118
Thousand Palms	92276	14	$146	-48.90%	$85
White Water	92282	6	$105	-60.50%	$66
Wildomar	92595	30	$226	-26.70%	$97
Winchester	92596	44	$230	-27.00%	$86

Unemployment up again

Riverside County's unemployment was 12.6 percent, with San Bernardino County at 11.9 percent. Several heavily populated counties, including Fresno at 16.4 percent, were in worse shape, contributing to the statewide jobless rate of 10.5 percent.

That is one ugly report. I will give the press brownie point for trying to put a positive spin on it though. Check out the title of the article.

"Inland-area unemployment rate climbs to near-record figure, but at less severe pace"

And on the banking scene, the FDIC seized three more banks AND two credit unions were seized by the National Credit Union Association today. That brings the total failed banks to 20 this year and now 2 credit unions too.

Praying for the Spring Bounce

I'm starting to see a lot of the overpriced listings from last summer coming back to the market. Problem is, the prices are still just as unlikely to result in a sale. It looks like the "I'm not going to give it away" crowd are coming back to the market. In the last few weeks I've been watching as more and more of these listings come back. That's probably what's driving housing trackers median listing price to stabilize or even rise slightly while the sales data still shows the prices declining.

Anyone remember this clown? He's asking $930k for his house when nearby REOs are selling in the mid to high $300s. At least he's not asking 1.4 million anymore!

Or how about the fake grass house? Yes, it's back. Another total nutjob asking three times what he should be asking. This genius actually raised his asking price by $50K. Same crappy pictures as last year.

Oh yea, hope springs eternal....

Lower rates ahead?

I don't know if you saw the stock market rally again today. The reason for this one was the Fed's announcement of the latest and greatest from Bernanke and friends. The newest plan is to buy a bunch of long term treasuries (300 billion worth) and to purchase 3/4 trillion worth of mortgage backed securities (MBS's) from Fannie and Freddie. Why? They are attempting to lower the rates on mortgages and credit cards. The theory being, if they can get the rates down people will begin to spend again. So they are printing another trillion dollars to throw at the problem.

This latest hail Mary by the Fed is required because they are out of ammunition for their interest rate canon. The Fed rate is already basically at zero percent. So they can't stimulate the economy be lowering rates. Printing money is the next best thing. I've read that they are targeting mortgage rates of 4 to 4.5%. That's a good 1.5% to 2.5% lower than the average rates from last year. This would have significant impact on the housing market, but even more so in the Refi market. Who's not going to refi if rates go down to 4%?

A probably side effect though is that we are likely to see higher inflation from these tactics. I think the only thing saving us right now is the price of oil. If that shoots back up then inflation will probably take off. If I were a member of OPEC, I would be doing everything I could to keep the price of oil at affordable levels right now. If oil prices were to shoot back up it could very well be the straw that broke the back of the US and world economies. Let's all pray for cheap oil!

February report from DataQuick

The February numbers were released by DataQuick today. The report is about as expected. Sales are still humming along at the low end but the numbers are still well below average years. They are well up from last year, but that was the worst year on record. Prices are down again but the declines are slowing a bit as expected.

So here's the report,

Southland home sales stayed above year-ago levels for the eighth consecutive month in February as the median price halted its month-to-month decline for the first time in ten months. Market activity was dominated by bargain-hunting in affordable neighborhoods while buying and selling in more expensive established areas remained largely on hold, a real estate information service reported.

A total of 15,231 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was essentially unchanged from 15,227 for January, and up 41.3 percent from 10,777 for February 2008, according to MDA DataQuick of San Diego.

Sales have increased on a year-to-year basis since last July. February a year ago was the slowest February in DataQuick's statistics, which go back to 1988. The February average is 18,120.

egionwide, foreclosure resales accounted for 56.4 percent of February’s resales activity, which was the same as the revised January figure and up from 36.2 percent in February 2008.

The median price paid for a Southland home was $250,000 last month, the same as in January. That was down 38.7 percent from $408,000 for February a year ago. The median peaked at $505,000 in mid 2007.

In today's market, the drop in the median overstates the decline in home values. The more affordable inland markets with most of the discounted foreclosures account for a large share of today's sales, while homes in the upper half of the market are not selling well, and are under-represented in the statistics. ( Funny how they assume the low end is "underpricing the median", maybe its the high end that's still priced too high. Sooner or later they will submit and lower the prices too).

Sales Volume			Median Price
All homes	Feb-08	Feb-09	%Chng	Feb-08	Feb-09	%Chng
Los Angeles	3,468	4,590	32.4%	$460,000	$299,000	-35.0%
Orange	1,471	1,879	27.7%	$520,000	$375,000	-27.9%
Riverside	2,147	3,420	59.3%	$325,000	$190,000	-41.5%
San Berdu	1,242	2,324	87.1%	$290,000	$153,000	-47.2%
San Diego	1,954	2,473	26.6%	$415,000	$285,000	-31.3%
Ventura	495	545	10.1%	$445,000	$327,000	-26.5%
SoCal	10,777	15,231	41.3%	$408,000	$250,000	-38.7%

The median for Riverside dropped 2.5% last month from $195k down to $190k

The median for San Berdu dropped 5.5% from $162k down to $153k!

Borrowing from your 401K to buy a house

I've received several (actually dozens) of emails asking about whether buyers should borrow money from their 401K accounts to help buy a house. [disclaimer] I'm not a financial expert so don't listen to anything I say! But, here's my opinion anyway.

I looked into this because I'm a little short in my down payment account. Yes, I know if I'd taken a few less vacations last year, I'd be in better shape. I came to the conclusion that this was a bad plan for me. Having a smaller DP and putting up with mortgage insurance for a few years seems like a better way to go. With decent credit you can still get a loan with 10% down as long as you can fully document your income and your DTI is reasonable. You will get stuck with mortgage insurance if your DP is less than 20%. The insurance usually runs around .05%($200/mo on a $400k loan).

I was looking at borrowing $40k for the additional 10% on the down payment. That would lower payments by about $200/mo and save me the $200/mo insurance for a net savings of about $400/mo. However I have to repay the loan. If I choose to repay that $40k over 5 years the monthly payment is $800/mo. So it's costs me an additional $400/mo for the first 5 years. After crunching all the numbers it did not make sense for me to borrow from my 401k.

There are risks and costs involved with Borrowing from your 401K. First off you have to pay it back with interest (which is often credited to your account, so you are paying interest to yourself). You pay it back using after tax dollars though. It does not get paid back using your usual 401k deduction. Then when you pull out that money later you are taxed again. Basically you get taxed twice on that "loan". So it does end up costing you a lot more than a regular loan. If you lose your job, normally you are required to pay the loan off in full. If you cannot that is then treated as a withdrawal and you get taxed on it AND penalized for an early withdrawal. This can be very costly.

Not all companies will allow you to Borrow from your 401K. If yours does not then you have to make a hardship withdrawal. Those are subject to full income taxes on your next years taxes. So you will want to put some of the amount you withdraw into the bank to pay next years taxes.

We are all in different situations and you should probably talk with your 401k administrator and a financial adviser (not some blogger) before pulling cash from your 401K. For me. it did not make sense to consider this path. The costs were too high as were the risks in order to save $200/mo.

Now, let the real financial experts chime in!

Even the bank bailout is a failure

Leave it up to government to screw up another bailout. This one seemed like a slam dunk. "loan" 700 billion to banks to stop them from failing. Seems pretty straight forward. Now banks that were almost forced to take some bailout money are scrambling to give it back as quickly as possible.

From the LA times

A growing number of healthy bank chains across the country are bailing out of the $700-billion federal banking bailout program, saying it has tarnished the reputation of banks that took the money and tangled them in unwieldy regulations.

When the program began last fall, it was billed by then-Treasury Secretary Henry M. Paulson as an investment in strong banks to make them even stronger.

Traditionally conservative local banks around the country began applying for the program, accepting Paulson's explanation that participation would be a sign of financial strength.

But not long after the program began, it became clear that the bulk of early funding was going to a handful of financially crippled giants such as Bank of America Corp., Merrill Lynch & Co., American International Group Inc. and Citigroup Corp.

"It was supposed to be a badge of honor if you were able to get this money, but now it's a badge of honor if you didn't take it, with all the bad publicity it has attracted," said Alan Rothenberg, chairman of 1st Century Bank in Century City.

Rothenberg's bank took a look at the Treasury program and decided to avoid it.
But a growing number of banks that have received the money now want to give it back.

"The TARP money is tainted and we don't want it," said Jason Korstange, a spokesman for Minnesota-based TCF Financial Corp., which received $361 million and announced this month that it wanted to pay it back. "The perception is that any bank that took this money is weak. Well, that isn't our case. We were asked to take this money."

The bank issued a toughly worded statement earlier this year, saying that the money had put the financially strong banking chain at a "competitive disadvantage" and that the bank now believed it was "in the best interest of shareholders" to return it.

"It was sold as something good for the economy and something showing that the participating banks are strong, but that isn't how it played out," he said.

After the initial program was enacted, Congress went back and added provisions that covered executive compensation, financial disclosure requirements and conditions on acquisitions and mergers, Abernathy said.

"It was not popular when it was born and it didn't get any more popular as time went by," he said. "They added so many strings to it that it is pretty much unworkable." ( that sounds like a government program).

Free Money!

Did you know that the city of Corona offers a buyer assistance program that will loan you up to $75k at ZERO percent interest! It's a no interest 2nd. They also offer up to $5k in closing costs. A sweet deal if you can get it.

I don't think many people are aware of this perk. There are of course restrictions but overall the program is pretty straight forward. The thing that may exclude most people are the income restrictions. They are pretty low. For a family of 4 you must make between $53k and $74k per year. It does not say if that's gross, net, adjusted or what (i'd guess that's gross pay).

If you would like to read more you can get the pdf file here

700k!

700k, that's not a price. That's the estimate of how many foreclosed homes lenders own and don't have on the market yet, the so called "phantom inventory" we keep hearing about. That's a crap load of homes. I'd bet at least 40% of those are in California.

Lots of foreclosure news this week, none of it good. Yesterday I posted that Riverside was up a little from Jan to Feb. LA county has us beat like a drum. Up nearly 70% from Jan to Feb.

A total of 3,921 foreclosures were reported in February, up from 2,314 the previous month, the real estate information provider reported. In February, 9,228 notices of default were issued, a 47 percent increase over the 6,286 issued the previous month.

This came from a Bloomberg story on foreclosures.

Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property, RealtyTrac Inc. said.

A total of 290,631 homes received a default or auction notice or were seized by the lender, the Irvine, California-based seller of default data said in a statement today. Properties that got a foreclosure filing for the first time totaled 161,976, the highest in RealtyTrac records dating to January 2005.

Some of the top U.S. lenders own as many as 700,000 foreclosed homes they have yet to offer for sale, said Rick Sharga, executive vice president for marketing for RealtyTrac.

The banks may be waiting to see how U.S. government plans develop before selling the properties, Sharga said. The lenders and government-owned Fannie Mae and Freddie Mac, the two biggest U.S. mortgage financing companies, have already extended temporary foreclosure moratoriums.

One in 440 U.S. housing units received a foreclosure filing last month, and Nevada, Arizona and California had the highest foreclosure rates, RealtyTrac said. The February total was the third-highest on record. Filings rose 6 percent from January. New foreclosures rose 8 percent from 150,432 in January.

California had the highest total with 80,775 foreclosure filings in February, a 51 percent increase from a year earlier. Auction sale notices almost tripled to 18,831.

Foreclosures still on the rise

From the PE

After a January slowdown in foreclosure activity in Inland Southern California, last month it increased 6 percent in San Bernardino County and clung to an historically high level in Riverside County.

Riverside/San Bernardino in February ranked sixth among the nation's metropolitan areas in rate of foreclosure activity, with one foreclosure related filing for every 80 homes. The two counties combined had 18,040 filings, up 63 percent from 11,066 filings in February, 2008.

In Riverside County the number of default notices rose from 4,399 in January to 5,059 in February while from month-to-month in San Bernardino County the number of defaults increased from 3,963 to 4,445.

With unemployment growing and adjustable mortgages continuing to become less affordable, an increasing number of homeowners in Riverside and San Bernardino counties received notices of default last month, the first step in the foreclosure process.

Repossessions, the final step in a foreclosure, also were on the rise, possibly because modifications did not work for those too financially under water to be helped. In Riverside County, banks repossessed 2,490 homes last month, 241 more than in January. In San Bernardino County, 2,063 homes were repossessed, 397 more than the month befor. That's about 100 homes a day!

The Lone Ranger

How would you like to be the sole occupant in a new tract of homes? Gotta suck, huh!

The Nandina tract in Riverside was a small 22 home development built right in the middle of the William Lyon's Bridle Creek tract. The homes were nice but they opened about two years too late. Subsequently they didn't sell many, ok, they only sold ONE to be exact. One poor fella now finds himself the only homeowner in the tract. The builder has packed it it and the tract sits half built. There are 3 beautiful models, 8 partially built homes (they only need flooring, countertops and appliances) and the rest are just graded lots. How would you like to be the poor sap that got stuck in this tract......

The entire tract is up for sale. You can place an offer today if you have dreams of a real estate empire. It looks like they owe 12 million, whadda ya say, lets offer them 10 cents on the dollar.

Investors beware

I've not read anything that indicates what percentage of sales are going to investors. I know in the low priced areas its a fairly high percentage. But are these "investors' factoring in rent declines? I remember in the early 90's a few so called investors I knew got caught by falling rents. They bought foreclosed homes as rentals but factored their numbers on 1990 rents. Unfortunately 1993 rents were quite a bit lower and those guys ended up losing quite a bit of money.

I've watched a few homes near me sell to investors. All of them have "for rent" signs in the yards (well, one did get rented). The rents they are asking are delusional in my opinion. They might have gotten those numbers 3 or 4 years ago but in today's flooded rental market they have no hope. The one house that did rent sold for about 40% less than I would have expected it to. That guy is golden (and I'd love to know how he got that house for the price he did!). But the others are in a world of hurt if they need those rents to cover the monthly nut. The house next door I a assume went to investors. They closed in mid January and have not moved in yet. They have been in it painting for months. I think they must be painting it with artists brushes or maybe a Q-tip. The house was is in good shape when it sold. All in needed as a cleaning and a stove and it could have rented. Now I know what it closed for and I have a good idea of what it can rent for. Unless they put a helluva down payment there's no way that property will generate any profit.

In Orange county rents have fallen nearly 7% in the last year. I fully expect to see at least a 20% decline in the price of rentals in the IE over the next couple of years . I would not at all be surprised to see that number hit 30% or more. How many of these new "investors" have factored that into their P&L equations?

New loans are going bad faster than ever

Check this out, it seems the FHA is getting more first payment defaults than ever.


"In the past year alone, the number of borrowers who failed to make more than a single payment before defaulting on FHA-backed mortgages has nearly tripled, far outpacing the agency's overall growth in new loans, according to a Washington Post analysis of federal data."

Many industry experts attribute the jump in these instant defaults to factors that include the weak economy, lax scrutiny of prospective borrowers and most notably, foul play among unscrupulous lenders looking to make a quick buck.

If a loan "is going into default immediately, it clearly suggests impropriety and fraudulent activity," said Kenneth Donohue, the inspector general of the Department of Housing and Urban Development, which includes the FHA. (no schitt Sherlock!)

Once again, thousands of borrowers are getting loans they do not stand a chance of repaying. Only now, unlike in the subprime meltdown, Congress would have to bail out the lenders if the FHA cannot make good on guarantees from its existing reserves. And those once-robust reserves are showing signs of stress, raising the possibility that taxpayers may have to pick up the tab for the first time since the agency was established in 1934.(gee swell, more money the taxpayers are on the hook for. Looks like those down payment assistance programs are working out great! Thanks Barney Frank and friends)

The overall default rate on FHA loans is accelerating rapidly as well but not as dramatically as that of instant defaults.

The agency's share of the mortgage market is up from 2 percent three years ago to nearly a third of the mortgages now made, its highest level in at least two decades, according to Inside Mortgage Finance, an industry trade publication. The FHA does not lend money directly. It provides mortgage insurance for borrowers working with FHA-approved lenders and uses the premiums to cover its losses. If the premiums are not enough, taxpayers could be on the hook.

And we all thought that the lending standards were getting tougher......

IE employment numbers are out

The jobs data for the IE was released this week. As expected it's not good.

Inland Southern California lost a staggering 76,500 jobs last year, by far the most ever, as its unemployment rate climbed to almost 12 percent, the state reported Thursday.

There were 6.1 percent fewer payroll jobs in Riverside and San Bernardino counties in January than there were in January 2008, the state Employment Development Department reported. The losses were mainly centered in blue-collar jobs.

The job losses, reported after the state updated its monthly statistics by applying data collected by federal agencies, were more than 10 times worse than the worst year on record.

Riverside is getting close to it's record high of 12.4% set in 1993. Currently Riverside is sitting at 12.2% (as of January, we are probably higher now).