What will it take to get you "off the fence"?

Most everyone reading this blog is reading it because they are looking to purchase a home. I am wondering what it will take for you to take the plunge.

There are some facts we know and some we don't. We know prices have fallen considerably in the last 2 years. We know that prices in most of the IE are still above historical norms. We know the economy is in bad shape. Interest rates are still low. Inventory is still high. Sales numbers have picked up but they are still some of the lowest in the last 20 years.

We don't know how much farther the prices will still fall. We don't know what the interest rates will do in the future. We don't know how bad this recession will be. Some of us are in industries that may be affected by job losses (like me in defense) and we could lose our jobs.

So what will it take to get you to buy?

The Bankers are SHOCKED!

From the LA Times

A record 10% of the nation's mortgage-burdened homeowners fell behind on their loan payments or were in foreclosure during the third quarter, according to a survey released Friday by the Mortgage Bankers Assn., which said California and Florida were the biggest contributors to the worsening picture.

The percentage of loans at least a month overdue or in foreclosure was up from 9.2% in the second quarter and 7.3% a year earlier, the trade group said. In Florida, 7.3% of home loans were in foreclosure at the end of September. The figure was 3.9% in California and just under 3% for the nation.

In a grim report Friday, the government said U.S. employers cut 533,000 jobs in November, the weakest performance in 34 years, sending the jobless rate to a 15-year high of 6.7%. California unemployment is now well over 8% (about 10% in the IE, we are fast approaching the levels of the early 90's).

Combined with a 40% decline in California's median home price, the faltering economy is resulting in the highest rate on record of troubled home loans actually going into foreclosure, said Jay Brinkmann, chief economist for the Mortgage Bankers Assn.

California represents 13% of the loans in the country, Brinkmann said, but is recording 19% of all new foreclosures.

"California has lost more than 100,000 jobs over the past year, compared to Michigan, the usual poster child for unemployment, which only lost 70,000," Brinkmann said.

"Things are going to get worse before they get better," said Thomas Lawler, a housing economist based in Virginia. (DUH!)

At first glance, California's troubles seem little different from those anywhere else, because just under 7% of borrowers in both California and the nation are behind on payments. But Brinkmann said a clearer picture emerges when you compare the number of newly delinquent loans in one quarter with the number of loans entering the foreclosure process the following quarter.

That foreclosure "roll rate" was about 10% to 12% nationally in the 1990s and ran from 12% to 15% for most of this decade, Brinkmann said. The percentage is now 30% nationally but has reached 79% in California and 65% in Florida, he said.

"This is nothing like anything we've ever seen before," Brinkmann said. "We were shocked when we saw the California roll rates."

location location location

That's been a real estate catch phrase for years. Once upon a time it was true. A nice location fetched a premium over a poor location. During the bubble years however the line between a premium location and a poor one got a little fuzzy. Take 303 Madera Privado in Ontario. This home was built in 2004. It sits in a small gated tract with community pool and spa. Sounds good so far right? During the bubble years that was all it took. This home sold new in 2004 for $476k. It sold again a year later for $640K.

But now that the bubble is over the location is coming back to bite this home. Taking a closer look you quickly see this small tract is surrounded by appartment complexes. There's no nice way to say it, but it's not in the best part of town. It's more like, in the best part of the barrio. Another huge problem is the fact that you can hit a golf ball from the house and reach Ontario Airport's runways. It's a perfect location for a deaf family, but for people with ears that function this has got to be a serious irritation. The only good thing I can think of about the location is there's an In n Out Burger close by.

If you are deaf and looking for a nice house in the barrio you may want to check this one out. It is currently listed at 52% off the last sale at $305k. (still too freaking high btw)

The IE is #1

First American Core Logic has placed the IE in the top spot for the highest risk market.

TOP 10 HIGHEST RISK AMONG LARGEST 100 MARKETS

Of the 100 largest U.S. MSAs (out of 381), the following ten markets are at highest risk:

1. Riverside-San Bernardino-Ontario,
2. Los Angeles-Long Beach-Glendale, CA
3. Phoenix-Mesa-Scottsdale, AZ
4. Sacramento--Arden-Arcade--Roseville, CA
5. Miami-Miami Beach-Kendall, FL
6. San Diego-Carlsbad-San Marcos, CA
7. Oakland-Fremont-Hayward, CA 7
8. Stockton, CA
9. Santa Ana-Anaheim-Irvine, CA
10. Bakersfield, CA 1

Houses and Tulip bulbs

2 years ago I was looked upon as a complete whacko when I told people I thought house prices would crash back to where they were in 2000. Last year they didn't laugh as hard but instead insisted that prices would only fall a little. This year I look like a freakin prophet and I take great pleasure when I read articles like the following. Unfortunately they are still few and far between but as the fog clears and people start to clearly see what happend over the last decade we should see many more articles like it.

Let Home Prices Fall

(CBS) This column, Other People's Money, is written by CNET's Declan McCullagh. It appears each Wednesday on CBSNews.com.

---

By now it should be clear that our economic woes have been caused in large part by an unsustainable increase in housing prices, which are now falling back to earth.

Some of the blame must go to politicians like Democratic Rep. Barney Frank, whose prognosticating abilities were evident five years ago when he fought reform of Fannie Mae and Freddie Mac by claiming they do not pose "a problem with a threat to the Treasury." Whoops.

Now these same Washington soothsayers are predicting that today's economic troubles can be ameliorated by propping up real estate prices. Reps. Frank and Nancy Pelosi said last week that it's "essential" to partially guarantee 1.5 million mortgages, and President-elect Barack Obama also wants "direct, immediate assistance for homeowners."

In reality, more government intervention will do more harm than good. The sooner prices are allowed to naturally fall to normal, post-bubble levels, and the sooner that houses become affordable, the sooner the economy can heal itself and start growing instead of contracting.

By way of analogy, imagine a reprise of the Dutch tulip mania of 1637. Say the price of tulip bulbs has grown handsomely in the last few years, and impressive fortunes were made by early speculators.

Bidding wars erupt, with the winners hoping to resell them the bulbs at a handsome profit months or years later. Cable TV hosts proclaim that a golden age of prosperity has dawned. Prized bulbs change hands for $1 million each, and skeptics are reviled as doomsayers.

Eventually this boom leads to a bust, as new buyers become scarce, and the price of tulip bulbs suffers a dizzying fall down to $10 each. Speculators complain to Congress. Politicians pledge to use tax dollars to purchase bulbs for $1,000 or $10,000, invoking phrases like "stability" and "liquidity crisis," or offering taxpayer-backed loan guarantees to speculators.

This would sound silly for tulips, but it's close to what's happening for houses. All this will do is slow -- and not arrest -- the process of prices falling. Not even the president of the United States can veto the laws of supply and demand.

By usual metrics, such as the ratio of prices to incomes, the ratio of rents to mortgages, and the ratio of current prices to expected ones, some areas of the country still look pretty bubbly.

In the decade ending August 2008, according to S&P Case-Shiller data, house prices in New York metropolitan area leaped by 2.2 times, though incomes grew only modestly. The Washington, D.C. area experienced a 2.1-fold jump -- while non-bubbly areas like Cleveland saw an increase of a mere 1.17 times, which is consistent with incomes and inflation.

The median family income in Allentown, Penn. is $46,400, and the median home price is $125,000, meaning houses tend to cost 2.7x the median income. Compare that to San Francisco, where homes consume a whopping 11.6x the median annual salary.

Robert Shiller, who teaches economics at Yale University, has calculated that housing prices have remained remarkably constant from 1890 through 1998, rising only 13 percent when adjusted for inflation -- through world wars, the automobile, and the rise of the two-income family. When the dot-com bubble burst, money flowed into real estate, encouraged by the Federal Reserve cutting interest rates more than prudence allowed.

Ass-Clown of the month

How can you buy a home in 2004 for $925K and then ask $1.9 million for in in 2008. And have it be a SHORT SALE! This clown cashed out a million dollars (at least).

700 E chase dr. Corona. Yes, it's a nice house in a nice area and it's on a large lot. It's a 5116 sq/ft home with 5 bedrooms and 3.5 baths. There are only a few picture but it looks decent although the exterior is quite dated. Very 80's looking. It does not say what this home sold for new in 1990. I'll take a wild guess and say $350k. This guy paid $925K for it in 2004 and has it listed as a short sale for $1.9 million. The asking price is not only laughable, it's bust a gut laughable in todays market. I seriously doubt he could get his original purchase price. There are far more impressive homes for sale close by for just over a million and those have no chance of selling.

This is another listing that makes you wonder about some realtors.

4.5% 30 year fixed?

The latest plan from the government to stop the slide in home prices sounds better than most of the others. The idea is to offer gov backed low interest loans for purchases. This is something I thought they would eventually come up with. I don't see how helping underwater homeowners stay in a house they can't really afford will fix the economy. But offering lower interest loans to people that can actually afford a home will. This is one plan I can actually support. Now we just need to see if the banks will play ball. I wonder if the news of this plan will slow the buying down? I would certainly wait a while to find out if this happens.

WASHINGTON -- The Treasury Department is considering a plan to revitalize the U.S. home market that would push down interest rates for loans to purchase a home, according to people familiar with the matter.

The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages.

Government officials are under pressure to address falling home prices and mounting foreclosures, which underpin the financial crisis. The Treasury has struggled for months to come up with a plan that would ease the strains on borrowers without appearing to bail out homeowners and lenders.

The plan remains in discussion and may not be made final before the Bush administration's term ends in January. President-elect Barack Obama has said repeatedly that his administration would do more than the current one to help struggling homeowners but he has not offered specifics.

Treasury views this plan as potentially halting the slide in home prices by enabling borrowers to afford bigger loans, thus increasing demand and pushing up home values. The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.

Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.

The Treasury and the Federal Reserve are already working to bring mortgage rates down through a program announced last week in which the Fed will buy up to $600 billion of debt issued or backed by Fannie and Freddie, along with Ginnie Mae and the Federal Home Loan Banks. That move helped push down rates on 30-year mortgages, and applications to refinance have jumped, the Mortgage Bankers Association said Wednesday.

If this rate cut happens it will probably slow the price correction. People are payment oriented and a lower interest rate will allow then to buy a more expensive home.

If you can afford a payment of $2k per month but the home you want is $400k you are out of luck currently. At 6% you can only spend $334K to get a $2000/mo payment. But drop that rate to 4.5% and now you can spend $400k for the same $2000/mo payment.

The sad reality is that most people do buy based on monthly payments. It's far easier to swallow overpaying for a house if the payment is the same. Of course, you are stuck with an extra $700 a year in property tax for as long as you own the house. This would ultimately lead to a much longer period of price stagnation. Which is fine if the rates remain low. But if after a few years the banks jump the rates back up then we might find ourselves in another real estate downturn. Prices would have to fall again in order for monthly payments to remain affordable.

I do think this is a good idea. However I feel it will only work if the prices correct to sane levels. If the government is using this plan in the hopes of keeping prices high I think it will ultimately lead to another downturn or just stretch this one out another 10 years.

The weekly tumble goes monthly

You might have noticed that I have not posted the weekly tumble lately. Unfortunately, HousingTracker.com, the site I got the data from has scaled back it's reports. It now only lists the median asking price and it only updates it once a month. It used to list 3 price points and also broke out the core areas of the IE versus the entire county. Well, no more, now we only get one number.

So here it is....

Trend	11/15/2008	1 month	3 month	6 month	12 month
Median Price	$214,900	-6.2%	-14.0%	-26.5%	-41.8%
Inventory	42,556	-1.8%	-5.6%	-10.2%	-21.2%

Date	Inventory (SFH + Condo)	25th Percentile	50th Percentile (Median)	75th Percentile
11/15/2008	42,556	-	$214,900	-
10/13/2008	43,356	$160,000	$229,000	$340,000

As you can see the median asking price has fallen considerably in the last month. Dropping all the way from $229K down to $215K. That's just about normal for the last year or so. It has been averaging between $3k and $5k per week.

Inventory remains steady, fluctuating only slightly. It had been hovering around 48,000 until AB1137 kicked in. After the foreclosure bill kicked in the numbers dropped to around 42,000 and they seem to be sticking right around there.

Glad I'm not selling cars!

Chrysler LLC today reported total November 2008 U.S. sales of 85,260 units, down 10% versus October 2008 (94,530 units), and down 47% from the same month last year.

Ford Motor Co. on Tuesday reported a 30.6% drop in November U.S. vehicle sales, which served as a timely reminder of the brutal sales climate with automakers returning to Capitol Hill in hopes of gaining access to $25 billion in loans.

Toyota posted an even steeper decline, down 33.9%.

General Motors Corp. said Tuesday that U.S. November light vehicle sales dropped 41.3% to 153,404 vehicles from 261,273 a year ago. Chevrolet was the least hit division with U.S. November sales down 36.9% to 95,756 vehicles, and Hummer sales dropped the most with sales down 63.9% to 1,454 vehicles from a year ago. Total U.S. November car sales at GM fell 44.1% to 58,786 units from last year.

Mortgage delinquencies set to soar

Severe delinquencies among mortgage holders increased more than 50 percent from year-ago levels during the third quarter, according to data released Tuesday morning by credit reporting agency TransUnion LLC. At the end of Q3, 3.96 percent of homeowners were 60+ days in arrears, compared to 2.56 percent one year earlier; historically, the severe delinquency rate has held the line at roughly 2 percent.

No more. Not in the face of a housing and mortgage mess that, as of yet, shows little sign of slowing down. And with the nation’s recession already 12 months old — longer than the average length of most prior recessions — it might be time to ask if strategies employed thus far by government officials and lawmakers in the name of helping bolster the economy might be doing more harm than good.

“It’s nothing short of staggering,” Ezra Becker, principal consultant in TransUnion’s financial services group, told the Associated Press.

California, Nevada, Florida and Arizona accounted for 38.4 percent of all originations in 2006, according to HDMA data. North Dakota, South Dakota, Montana, Vermont and Wyoming totaled just 0.6 percent of the entire market for mortgages — in fact, four of the five states were the very bottom of the market share table, according to HDMA data.

It’s possible that TransUnion’s data could be understating the true amount of delinquent borrowers, as well. While the agency pulls its data from a sample of 27 million consumer records and assesses past-due payment histories, a growing number of servicers are waiting to report missed mortgage payments to credit reporting agencies, according to various HousingWire sources in the field

One month to go!

Allow me to ramble for a few minutes......

Wow, December 1st. This year positively flew by. Did anyone think we would be where we are? The economy is in shambles, the government is trying everything short of dropping a nuke to stop the collapse. Paulson, Bernanke and the rest of the financial "experts" are changing direction faster than a yo-yo. They're all a bunch of freaking retards.

It's official we are in a recession and have been since last Dec. Is that the biggest "no duh" in the lost sad history of economics. Really, did anyone not know this. Yet the stock market reacts like is taken by surprise, the shock of all shocks. And what's up with the stock market these days. Up 5% down 7%, that's fine for a year but geez this is happening daily.

Wamu is getting ready to axe 9200 workers after being taken over by JP Morgan.

Unemployment in going through the roof. Currently nearly 10% in the IE

We are nearly 11 TRILION dollars in debt as a nation. Much, much more if you count future obligations like Social Security, Medicare etc.

The banks are now stating that they plan to reduce the amount of credit card exposure they have by 2 Trillion over the next few months. That means they will be closing accounts, reducing account limits and increasing interest rates. That's great news except when the guy in front of you at McDonalds is trying his 4th card in an attempt to buy his Big Mac and Fries. Don't laugh that happened to me a few weeks ago.

What about those Car Companies? Now they want a bail out. Eh, NO! WHo cares if GM goes belly up. That just means that Nissan, Honda and Toyota will build more cars in the US to take up the slack. Let the profitable companies stay in business. Let the rest fail. As a taxpayer I don't want tax money going to car companies just because they are "American". Give me a break, 90% of the parts are made overseas and when I call Chrysler customer service I end up speaking to Rasneesh in Bangalor.

The real estate market has definately been ineresting this last year. It went from, stick a fork in it dead, to almost normal numbers in some areas. Of course the market is now foreclosures and not much else. With all the other problems I'm surprised that homes are selling at all.

We have 30 more days of 2008 and after the last 11 months I don't think anything can surprise me now.

They're still out there

Dellusional sellers, you'd think by now that no one would try for peak pricing with a new listing. But, you would be wrong! Those ridiculous listings are harder to find these days, but they still appear and far too often too.

1592 El Paso Dr in Norco Hills is one such listing that hit the market this weekend. The home is a 4430 sq/ft, 4 bedroom/3.5 bath mini mansion. It does have all the bells and whistles. It's got the rock pool, a basketball court, a built in bbq, fancy stone work, pergraniteel kitchen and a multitude of other nicities. Two years ago all those upgrades would have fetched top dollar. But today they really don't mean much. The fancy pool is now just added maintenace and the rest of the stuff is just fluff, lipstick on a pig. The home was built in 2001 and sold new for $503k. I remember looking at the models for these homes. The floorplans were a bit funky. But, I digress.... back to the post. So whether due to job loss or unaffordable payments the owner has placed his dream castle on the market for the laughable price of $1.1 Million!. Yes that's right, there are still people smoking the dream pipe. There are still agents so desperate for a listing that they will clutter up the MLS with garbage like this. I'm not a big fan of Zillow, but in this case I think Zillow has the price about right. The Zestimate is $570k.

1.1 million.....paaaa leaze

The realtard states that the pictures sadly understate the home. He's not kidding. Not a single one is in focus, even the outdoor shots are blurry. He probably laughed so hard when the told him the asking price that he got spit on the camera lens. Either that or he took them with his cell phone. How hard is taking a picture these days with all the point and shoot cameras on the market. It's almost idiot proof. Yet again though, we are supplied proof that idiots can find a way to screw up the unskrewupable (that's a new word I just made up!).