Monday, August 30, 2010

The most delusion developer in California

From the press enterprise,

After two months of marketing his 141 luxury condos with not one sale, Mark Rubin said he has given up wooing buyers to the Raincross Promenade project in downtown Riverside that cost him $40 million to build.

Although late last week the sign fronting Market Street said the homes were for sale, Rubin said the truth is they now are for lease and the sign soon would be changed.

Lots of people admired the tony project with its lush landscaping and fountains and the upscale appointments of the condos, including granite counters and stainless steel appliances, the Beverly Hills developer said.

But he said prospective buyers kept trying to beat down his prices, even after he shaved $30,000 off the initial list prices ranging from $240,000 for a one-bedroom, one-bath condominium to $475,000 for a two bedroom, two-and-a-half-bath townhouse. (By the way, that's $240k for a 680 s/f shoebox!! That's $352 s/f or about 4 times the average price per sq/ft)

"There were no sales," Rubin said. "Everyone wants a bargain. They read about foreclosures and think they can buy for distress prices." (No, but no one wants ass raped on price)

Because he paid cash to develop the property, Rubin said he is under no threat of foreclosure from a bank and under no pressure to drop his prices. (hmm where have we heard this before? "I'm not giving them away")

He said he had promised the city council he would attempt to sell the units but that none of the councilmen had expected the condos would sell in the current economy and nothing legally prevents him from converting the project to apartments.

Also he said he discovered that most of the 500 people who had signed an interest list when the project was under construction had assumed that it would be an apartment complex.

So Rubin said he decided about a week ago to convert Raincross Promenade's sales staff to a leasing staff.

"I didn't want to fight windmills," he said. "If after a year the market changes, I will start selling them. If not, I will keep renting them."

Rubin said he and his wife still intend to move into the development. He said they probably will occupy a one-bedroom unit in the next few weeks.

Some real estate experts familiar with the Riverside market said it is no wonder the condos did not find buyers since condos are the weakest part of what is a very weak housing market.

Leasing out 141 condos also could be a challenge, the experts said, especially at the monthly rents that Rubin says he wants for the one- to three-bedroom units, which range from $1,250 to $1,925.

"He will have to test the market," and lower the rents if necessary, said John Kalmikov, a senior vice president and apartment specialist with Lee & Associates in Riverside. Kalmikov said the $1,850 monthly rent Rubin plans to charge for a two- bedroom unit is $200 to $300 higher than the average rent of newer two-bedroom apartments in Riverside. Also he said the typical one-bedroom apartment in the city rents for under $1,000.

But Kalmikov said there is demand for larger two- and three bedroom apartments with laundry hookups as renters seek to double up to lower their housing costs. Also he said those who work in downtown Riverside and want to avoid the costs of commuting might pay a premium.

In any case, Kalmikov said, Rubin has a history as a savvy developer and he will get a far better return on the money he invested in Raincross Promenade from the rental receipts than from putting the same money in a bank at today's rock bottom interest rates.

"I would do the same if I were in his shoes," Kalmikov said. "I would wait it out."

Thursday, August 26, 2010

Ramping up

From calculated risk,

Servicers are not initiating or processing foreclosures at the pace they could be.

By postponing the date at which they lock in losses, banks and other investors positioned themselves to benefit from the slow mending of the real estate market. But now industry executives are questioning whether delaying foreclosures — a strategy contrary to the industry adage that "the first loss is the best loss" — is about to backfire. With home prices expected to fall as much as 10% further, the refusal to foreclose quickly on and sell distressed homes at inventory-clearing prices may be contributing to the stall of the overall market seen in July sales data.
Banks have filed fewer notices of default so far this year in California ... than they did 2009 or 2008, according to data gathered by [RadarLogic]. Foreclosure default notices are now at their lowest level since the second quarter of 2007, when the percentage of seriously delinquent loans in the state was one-sixth what it is now.

New data from LPS Applied Analytics in Jacksonville, Fla., suggests that the backlog is no longer worsening nationally — but foreclosures are not at the levels needed to clear existing inventory.
"The industry as a whole got into a panic mode and was worried about all these loans going into foreclosure and driving prices down, so they got all these programs, started Hamp and internal mods and short sales," said John Marecki, vice president of East Coast foreclosure operations for Prommis Solutions ... "Now they're looking at this, how they held off and they're getting to the point where maybe they made a mistake in that realm."
"The math doesn't bode well for what is ultimately going to occur on the real estate market," said Herb Blecher, a vice president at LPS. "You start asking yourself the question when you look at these numbers whether we are fixing the problem or delaying the inevitable."
There is much more in the article.

Note: The LPS delinquency data for July will be released tomorrow. Here are some of the findings (no link):
• July showed an astounding 24.5% month-over-month increase in foreclosure starts, which dovetails with Treasury's latest report on HAMP cancellations (approx. 50% according to Treasury's numbers)
• Abysmal foreclosure rates in NV, FL and CA have led to much higher level equity loss for homeowners in those states as compared to the rest of the country.
• Cure rates remain steady, but seriously delinquent (6 mos.+) cures have declined significantly, by approximately 25%
• Origination remains depressed due to much stricter underwriting guidelines and low purchase activity, but what is being originated is of good quality.
• Until the deterioration ratio improves from its steady two deteriorations for every one improvement, it's hard to see how we're going to get out of the hole.

Wednesday, August 25, 2010

fliptard alert

The fliptards are still at it. Most price the stuff reasonable close to comps. But not all of them.

18771 Oak Park Dr.
Nice big house in Woodcrest picked up on the courthouse steps for $473K back in April. It must have needed some serious work for it to take this long to get back on the market. But the listing price of $749k is about $150k higher than this thing has a hope of selling for. There have been a couple of really nice similar sized homes in this tract sell for under $500k. Those both had nice pools but slightly less "fluff". That leads me to think the market price of this will be in the $550k range and if the inside is really nice maybe up to $600k. $749k however is completely delusional.

Now lets rag on the realtard! Ok, first of all why the price? Getting past that what the hell is up with the all caps? Then we have all the normal misspellings, punctuations or lack there of and a few misplaced words, like the use of "state" instead of Estate. At first I thought it was a spelling error but she used it twice and spelled it the same way both times.

And where the heck are the pics of the inside?

Tuesday, August 24, 2010

Sales worst ever on record

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.

Am I the only one not surprised by those headlines. This was the biggest no brainer since car sales tanked after the cash for clunkers program. Really, are we to think they expected sales to stay the same after the government give away ended.

I have started to notice the inventory climbing in the nicer areas. A few months ago there was hardly anything in some of the areas I keep an eye on. Not any more. The inventory is definitely climbing with the slow down in sales.

Monday, August 23, 2010

Ron Paul gets it!

Let the Housing Market Normalize!

Recently there have been some encouraging signs that Congress is finally willing to admit what should have been evident two years ago. Even after a $150 billion bailout, Fannie Mae and Freddie Mac are still bankrupt and should be abolished. Indeed Rep. Barney Frank, a longtime champion of Fannie and Freddie has made a few statements alluding to this and I have signed on to a letter asking him to clarify his remarks and hold hearings on this topic. There seems to be a growing consensus in favor of abolishing Fannie and Freddie. This is the good news.

The bad news is that instead of simply returning to the free market, Fannie and Freddie will probably be replaced with something equally damaging, and at this point we can only guess what that will be. One possibility is that instead of these two giant Government Sponsored Enterprises (GSEs) the government will deputize thousands of smaller banks to do the same thing – that is to securitize mortgages with taxpayer guarantees to encourage lending that otherwise would not happen. In other words, there will be a myriad of smaller Fannies and Freddies, and government involvement will reach even deeper into the financial sector.

Fannie and Freddie, and thus the taxpayer, has an alarming $5 trillion exposure to the mortgage market. To some, spreading out this risk might seem tempting, and a smart thing to do. But the fact remains that if a bank expects to lose money on a loan, so will the taxpayers. Playing around with structures and definitions will still not deal with the root problem – government meddling in the housing market, playing fast and loose with our tax dollars, and central planning by the Federal Reserve.

Banks have complex risk assessment strategies in place that help them forecast if a particular loan will make them any money or not. If they expect to make money, they will approve the loan. If they have doubts, sometimes they will ask for a co-signer to improve their odds. You might do this willingly for a friend or a relative if you didn’t mind losing some money on their behalf, but current government policies essentially force taxpayers to become cosigners for risky borrowers that are complete strangers, who the banks have already determined to be bad risks. Taxpayers have no choice in the matter because politicians decided a few decades ago that dangling homeownership in front of more people seemed like a good way to garner votes.

That was sold to voters as a compassionate gesture to the poor and beneficial to society as a whole. After all, how could giving more Americans an ownership stake in society be bad? The combined policies of loose credit and government backing increased the demand for housing and drove prices sky high. When the housing market heated up to the breaking point everything came crashing down. Those suddenly facing foreclosure saw the reality of government compassion. Truly, when government offers you a gift, you should eye it with great suspicion.

Another tragedy is that many job seekers are now tethered to their locations because of upside down loan obligations. It takes a lot of effort with their bank and damage to their credit scores to figure out how to get out and move to a place where there are jobs. Will the government now be seeking ways to subsidize renters in some way because of this lack of mobility? Some think so.

My hope is that for the long term stability and health of the economy, the government will extricate itself from the market altogether and let it normalize. My fear is that in its usual misguided efforts at solving one crisis, it will create a thousand others.

And in other news, here's an blurb that confirms the governments intentions for HAMP and other plans was indeed to save the financial system and not the screwed homeowners.

"On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those."

Tuesday, August 17, 2010

Holy Smokes Batman!

Here's your first real month of data after the government intervention ended. And it's shockingly bad. Sales from June to July were down 25% in Riverside and 28% on San Berdu. On top of that the median price also fell, with riverside seeing a 5% drop. .

La Jolla, CA---Southland home sales saw their biggest year-over-year drop in more than two years last month as the market lost most of the boost from the federal home buyer tax credits. The median sale price dipped for the second month in a row, the result of a shaky economic recovery, continued uncertainty about jobs, and the expiring tax breaks, a real estate information service reported.
A total of 18,946 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July. That was down 20.6 percent from 23,871 in June, and down 21.4 percent from 24,104 for July 2009, according to MDA DataQuick of San Diego.
This was the slowest July since 2007, when 17,867 homes were sold, and the second-slowest since July 1995, when 16,225 sold. Last month’s sales were 27.4 percent lower than the July average of 26,085 sales since 1988, when DataQuick’s statistics begin. The average change in sales between June and July is a 6.7 percent decline – about one-third the drop seen this year.
Last month’s 21.4 percent sales drop from a year ago marked the steepest year-over-year decline for Southland sales since March 2008, when sales fell 41.4 percent.
“It appears some of the sales that normally would have occurred in July were instead tugged into June or even May as buyers tried to take advantage of the expiring tax credits. Some of last month’s underlying technical numbers were largely flat, indicating that the market is treading water,” said John Walsh, MDA DataQuick president.
The median price paid for a Southland home was $295,000 last month. That was down 1.7 percent from $300,000 in June, and up 10.1 percent from $268,000 for July 2009. The low point of the current cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,204 last month, down from $1,251 in June, and up from $1,180 in July 2009. Adjusted for inflation, current payments are 46.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 56.1 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

Monday, August 16, 2010

delusion isn't dead

It's nice to see that delusional sellers are still out there. Check out this guy that bought a new home from a builder just a few months ago. It looks to me he hasn't done anything and now puts the home on the market for $145k more that he paid in March. The letters WTF come to mind! The freaking builder tried for two years to dump this thing before he found this sucker. Now a few months after buying this dog the guy thinks he can make $145K. Oh my.....

Here's the home, 16773 Ponderosa. It's a big home in Woodcrest but the area is kinda funky. It's surrounded by small older homes and a whole bunch of empty lots that the builder (Gallery Homes) has given up on for now. These houses didn't even come with fences and from the pics the buyer still has not put one in. The house is nice enough, I actually looked at it when it was for sale from the builder, but the area isn't and the fact there are no fences makes it really strange. At his $158 s/f asking price he is about $50 s/f higher than the nearby comps.

I'm actually seeing quite a lot of these recent buys hitting the market again. I don't think these are flip attempts just buyers that are trying to get out without losing any cash (which means selling for about 10% more than they paid). Good luck on that!

Monday, August 9, 2010

Whats up?

Been a few weeks since I posted. Contrary to the wishes of the local realtards I am still alive. I've just been busy golfing and chilling out.

So what did I miss? I see the California home buyers tax credit is basically out of cash for the resale half. There is still a little cash left for the new home buyers. They state says they will fund between 17,000 and 20,000 credits for resale sales and they have over 30,000 applications. So that probably means a lot of people that have requested the credit probably won't be getting it.

On the positive side, interest rates have fallen to record lows. Currently you can get a 30yr fixed for 4.25% with no points. Makes buying very appealing if you plan on staying put for a while.

Inventory is basically holding steady. But there are more delusion-ally priced homes cluttering up the MLS and fewer reasonably priced homes. That means there is still a fair amount of competition for homes. On that note I did a little research on one street in Riverside (92504). I put an offer in on a home on this street about a year ago so I chose it for my un-scientific poll. I looked at all the sold homes and checked who the listing and buying agents were. There were 9 homes sold on this street in the last year. Of those 9 homes, 6 of them were dual agency sales (same agent working for the buyer and seller). That's a pretty good indication of what it takes to buy a home these days!