Live Free

The term "live free" doesn't mean what it used to. It used to be a patriotic statement in fact it's the state motto for New Hampshire. Rebels, hippies, and even militia nut jobs use the term. Today however it's a way of live for those people who stopped paying the mortgage. They are literally living free. The New York Times has this article on this new breed of free loaders.

For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of. Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino. “Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
oreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages. The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

Huh, who writes this stuff?

There were some headlines this week that are making my head spin.

1) Sales of new one-family houses in April 2010 were at a seasonally adjusted annual rate of 504,000 ... This is 14.8 percent (±19.5%)* above the revised March rate of 439,000 and is 47.8 percent (±26.0%) above the April 2009 estimate of 341,000.

2) Purchase Mortgage Applications hit 13 year low. The seasonally adjusted Purchase Index decreased 3.3 percent from one week earlier and is the lowest Purchase Index observed in the survey since April 1997.

3) Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009.

Maybe I'm just bad at math, but how do new sales increase 14.8% (I love the +/- 19.5% margin of error), existing sales increased YET applications for a mortgage fell to a 13 year low??? Are we to believe more people are paying cash for homes. I doubt that's the case. Looks to me like another fine example of making up numbers to make the sheep feel better.

Wall street and your street

So the world stock markets seem to be in full retreat again. But on the plus side the 10 year treasury rate is tanking right along with them. This in turn is dropping the interest rates again. Just when everyone expected them to rise (and they did for a month or two), the stock markets throw some fuel on the real estate market. Rates on a 30 yr fixed are down to 4.625% and I've seen a few at 4.5% with no points. That's a mighty fine rate.

Bucking the trend (April's numbers)

The April market report from DataQuick came out today. While SoCal as a whole looked ok the IE had some interesting stats. Usually this time of year sales numbers and prices tend to creep upwards. This year should have been busier with buyers trying to get in before the tax credit expired. But the numbers don't show the normal upward movement. Prices were down slightly in both San Berdu and Riverside counties (down 1.5% in both counties from March). And sales numbers were also down from March and way down from last year.

From DQ
Southern California’s housing market leveled off last month as sales activity migrated ever-so-slightly from inland bargain areas toward entry- and mid-market neighborhoods closer to the coast. The overall median price was unchanged from the month before, but it jumped compared with April 2009’s low point, a real estate information service reported.

Sales of new and resale homes totaled 20,299 in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.9 percent from 20,476 in March, and down 1.0 percent from 20,514 for April 2009, according to MDA DataQuick of San Diego.

April’s year-over-year changes in sales volume ranged from a decline of 12.3 percent in San Bernardino County to an 11.6 percent increase in Orange County. Condo resales rose 16.9 percent. The Southland’s 1.0 percent decline in overall sales was the first year-over-year drop in almost two years.

All homes	Apr-09	Apr-10	%Chng	Apr-09	Apr-10	%Chng
Los Angeles	6,425	6,688	4.1%	$300,000	$329,500	9.8%
Orange	2,391	2,669	11.6%	$380,000	$430,000	13.20%
Riverside	4,469	4,117	-7.9%	$180,000	$195,000	8.3%
San Bernardino	3,130	2,744	-12.3%	$138,500	$150,000	8.3%
San Diego	3,375	3,292	-2.5%	$290,000	$325,250	12.20%
Ventura	724	789	9.0%	$340,000	$382,000	12.40%
SoCal	20,514	20,299	-1.0%	$247,000	$285,000	15.40%

June 1st, more new rules

Beginning June 1st Fannie will require another credit check just before closing to ensure that people are not going out and applying for additional credit. Which just seems silly because all they have to do is wait until they close......

If you're thinking about applying for a home mortgage this year, here's some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.

The last-minute credit report will be designed to find out whether you've obtained — or even shopped for — new debt between the date of your loan application and the closing. If you've made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card — the closing could be put on hold pending additional research by the lender.

If you've taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.

The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and frauds by borrowers. Fannie's so-called "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes.

"There's an almost irresistible urge" for many mortgage borrowers to spend, said Don Unger, chief executive of Advantage Credit Inc. of Evergreen, Colo. "The lender says, 'OK, you're approved for the loan,' and you immediately think about shopping for all the things you need for the house."

So I shouldn't go buy that Panerai watch I've had my eye on........

It's been a while

It's been a while since I gave out the Ass-Clown award, then I ran across this listing and I just couldn't help but break it back out.

1505 Vanigraff in Corona was purchased in late 08 for $615k. The previous owner paid $1.062m for it. The current owner has only been in the home 18 months but somehow thinks it has increased in value some $370k in that time! He has listed it for $985K. I don't even have words for how silly that asking price is.

The home right behind this one (identical floor plan, nice house with awesome pool) sold two months ago for $600k. So this guy will be very lucky if he can get out for what he paid. After costs he's still looking at a healthy loss though (based on that comp next door).

Gov REO's up 22% in the first quarter

The combined REO (Real Estate Owned) inventory for Fannie, Freddie and the FHA increased by 22% in Q1 2010 from Q4 2009. The REO inventory (foreclosed homes) increased 59% compared to Q1 2009 (year-over-year comparison).

Even with all the delays in foreclosure, the REO inventory has increased sharply over the last three quarters, from 135,868 at the end of Q2 2009, to 153,007 in Q3 2009, 172,357 at the end of Q4 2009 and now 209,500 at the end of Q4 2010.

These are new records for all three agencies.................................

This does not count REO inventory from private lenders. I'm still not seeing much of an increase around here. The total inventory has been climbing slowly but it's sure not as high as I would have thought. Of course it does take a few weeks to a few months for the lenders to get those REO properties on the market. I was looking at one home that got foreclose on in early Feb and it just hit the market last week. That's nearly a 3 month gap from the foreclosure to the home hitting the market.

Now here's a bit from 60 minutes on mortgage walk aways.


Watch CBS News Videos Online


Watch CBS News Videos Online

Bubble street

A few weeks ago I went to look at a house and noticed nearly every single home on this particular cul-de-sac had a sign in the lawn. I forgot about it until this weekend when I was in the area again. I checked redfin to see how many of the homes were for sale and how many had sold since the bubble popped. There are twenty homes on this street 12 of them are for sale or have sold recently.

This tract is the Bridle Creek development by Lyon Homes in Woodcrest. Here's the details of the 12 homes that are for sale or have sold. I wonder if the remaining 8 homes will stick it out. Some could have been cash buyers so they may stick it out.

17892 Glen Hollow, Bought new for $773k, sold for $410K
17864 Glen Hollow, Bought new for $699k, sold for $480k
17808 Glen Hollow, Bought new for $1.1M, sold for $422k
17780 Glen Hollow, Bought new for $720k, pending at $415k
17724, bought for $787k, sold for $446k and is now pending again
17696, bought for $750k, pending at $429k
17619, bought for $698k, sold for $398k
17647, bought for $866k, sold for $430k
17675, bought for $647k, sold for $325k (this was probably another pocket listing)
17703, Bought for $734, pending at $415k
17815, Bought for $791, sold for $430k
17843, bought for $813, sold for $415k

Now for the "mathy" bit.... The average sales price for the new homes was $781K, total for the 12 was $9,378M. The homes are now averaging $417k with the 12 adding up to $5,015M. That is a loss of $4.363M on just these 12 homes (the average loss is 47%).

The better deals were the more recent ones, the higher sales prices are from at least a year ago. These are big homes on big lots so don't think these sales prices are high for Riverside. These are not you average tract homes. But none the less you can see what the effect of the bubble is on the newer tracts. Tracts built near the peak are going to see most of the homes turn over. The good news is that once they homes turn over they should turn into nice communities again.

Oh yea, this is a bubble poster child

Some of the biggest losers in this bust are coming out of The Retreat in So Corona. It looks to me that there were quite a few scam sales in this tract at the end of the bubble. 22197 Silerpointe looks to be one of these. I don't know if the current occupant were in on the scam but the last seller and probably the agent and appraiser were. The house sold for $780k new from the builder in Dec 2005. 14 months later is sells for $920k. Now here's the scam part. ONLY 5 months later the house sells for $1.345 Million! This house still has a dirt back yard so they didn't drop a dime on upgrades in those 5 months. Yea, this one just screams FRAUD.

Now it's listed as a short sale for $525k. And that's probably $40k too high based on the comps of this floorplan.

More on interest rates

Reading the blogosphere tonight I ran across this very good article on interest rates (and other stuff). It's a good read, check it out.