How's your housing market? (2 Viewers)

[tommyGunZ]

Quick tip315,000 at 6.4% = monthly payment of: $1970 (of which $290+ is principal)350,000 at 5.2% = monthly payment of: $1929 (of which $405+ is principal) So, over the life of your 30 year loan, you'll pay $341,879 on the 5.2% loan, and $394,323 on the 6.4% loan.See what I mean?Not only will you pay more for your house MONTHLY by waiting, but you'll also pay another $50k if you pay it off as per the mortgage.This money saving tip is brought to you by $cupper Enterprises™

Under this scenerio, which you categorize as "much worse off", here are the numbers if I were to sell in 5 years for 315k.$2460 in additional mortgage payments over the 5 years with the 315k purchase.~ $6900 LESS in principal paid off over the 5 years with the 315k purchase.At time of sale: initial purchase price of 315k, 17.5K in principle paid off, so 297.5k loan due on a 315k sale. At time of sale: initial purchase price of 350k, 24.3k in principle paid off, so 325.7k loan due on a 315k sale.

Jesus. I'm done with you. You haven't saved ####, it will cost you more per month to buy now, and you're out the 15k in rent.If you can't see this, you're a moron.

I'm a moron.

 

[RoarinSonoran]

Jesus. I'm done with you. You haven't saved ####, it will cost you more per month to buy now, and you're out the 15k in rent.If you can't see this, you're a moron.

I'm a moron.

Phew, glad we got that settled!

 

[tommyGunZ]

Jesus. I'm done with you. You haven't saved ####, it will cost you more per month to buy now, and you're out the 15k in rent.If you can't see this, you're a moron.

I'm a moron.

Phew, glad we got that settled!

That part was never in dispute.

 

[Ministry of Pain]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.

My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

 

[BassNBrew]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

 

[Redwes25]

Well it looks like the economy is doing just fine even with the downturn in the housing market with GDP growth at 3.5% for the 4th quarter.

Unless we get a real recession, I doubt we will have a doomsday scenerio.

 

[cstu]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

I'm thinking about doing the same thing since I'm in the same area and house prices are still tough to stomach. The main issues I have with doing what you described over buying a house are the capital gains taxes and having to deal with paying a management company to handle the property.

 

[Ministry of Pain]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

I'm thinking about doing the same thing since I'm in the same area and house prices are still tough to stomach. The main issues I have with doing what you described over buying a house are the capital gains taxes and having to deal with paying a management company to handle the property.

I work with a private investment group...it's me and 2-3 other individuals. The 2 top guys were from back East and I knew them for a year before we started working on this project. One of them routinely flys to Buffalo once a month as they both have multiple properties there. I did get lucky in working with them but we are all on the same page when it comes to these investments. I think we will want to expand in the next 6-12 months after we finish this project there will be another. We are always looking for people with capital...it means we can go after even bigger projects. I would love to work on soemthing in the 30-40 unit range but we are not there yet. Property management is always a concern but if you get plugged in with the right people it shouldn't be a problem. Out prop mgmt co takes 5-10% of the rents...it's just part of doing business.

 

[tommyGunZ]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

Good post MOP. My father has been in real estate for 30+ years in SW Virginia and feels the exact same way. While he's advised me to continue to wait until prices fall back in line with historical averages in the overheated San Diego market, he's continued to purchase properties in VA that he feels are wise investments.

 

[Bob Sacamano]

While you guys are kicking Gunz around, why don't you factor in the costs to purchase and sell. For someone in his age category, the odds of him not relocating or knocking up his chick are pretty slim. Probably should factor in the cost of repairs also.

I got no problem with him waiting. In fact, his paying off $35k+ in debt is setting him up for a much more stable financial life when he DOES pull the trigger.However:1) him not knowing the rates are up over a point from 18 months ago, coupled with his2) inability to see that he's going to make higher payments on a lower loan amountmakes me get sick of the"I've saved about $50,000 by not buying"

Just thought of another thing for the Gunz model that works against him. He's probably already itemizing deductions...gambling losses.

I'm sorry, but that was ####ing funny and deserves a little love.

 

[tommyGunZ]

While you guys are kicking Gunz around, why don't you factor in the costs to purchase and sell. For someone in his age category, the odds of him not relocating or knocking up his chick are pretty slim. Probably should factor in the cost of repairs also.

I got no problem with him waiting. In fact, his paying off $35k+ in debt is setting him up for a much more stable financial life when he DOES pull the trigger.However:1) him not knowing the rates are up over a point from 18 months ago, coupled with his2) inability to see that he's going to make higher payments on a lower loan amountmakes me get sick of the"I've saved about $50,000 by not buying"

Just thought of another thing for the Gunz model that works against him. He's probably already itemizing deductions...gambling losses.

I'm sorry, but that was ####ing funny and deserves a little love.

Agreed, except for the fact that I'm 1-0 vs. BassNBrew this year....

 

[BassNBrew]

While you guys are kicking Gunz around, why don't you factor in the costs to purchase and sell. For someone in his age category, the odds of him not relocating or knocking up his chick are pretty slim. Probably should factor in the cost of repairs also.

I got no problem with him waiting. In fact, his paying off $35k+ in debt is setting him up for a much more stable financial life when he DOES pull the trigger.However:1) him not knowing the rates are up over a point from 18 months ago, coupled with his2) inability to see that he's going to make higher payments on a lower loan amountmakes me get sick of the"I've saved about $50,000 by not buying"

Just thought of another thing for the Gunz model that works against him. He's probably already itemizing deductions...gambling losses.

I'm sorry, but that was ####ing funny and deserves a little love.

Agreed, except for the fact that I'm 1-0 vs. BassNBrew this year....

Yeah...but you refused payment so your deductions are still clean.

 

[DA RAIDERS]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.

My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

Good post MOP. My father has been in real estate for 30+ years in SW Virginia and feels the exact same way. While he's advised me to continue to wait until prices fall back in line with historical averages in the overheated San Diego market, he's continued to purchase properties in VA that he feels are wise investments.

i'm all for historical averages....however, in southern california there is no more land. there will never be any more land. it's very similar to an island, when you have no more land & people still want to go to the island the price goes thru the ####### roof. this will hold true in socal forever

 

[Mr. Yuk]

How housing masked a weak economy

Since 2001, the nation's economic growth has been powered by the real estate industry, particularly mortgage-equity withdrawals. Without housing to prop it up, the economy is in trouble.

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By Bill Fleckenstein

"Housing mania will end in tears." That belief served as the headline of my column back on March 7, 2005. Now this scenario is slowly playing out as, directly or indirectly, the noose around the housing ATM continues to tighten.

Withdrawing equity from one's home was the economy, from essentially 2001 through sometime last year. A statistic from a recent report by John Mauldin says it all: Real GDP growth, excluding mortgage-equity withdrawals, averaged less than 1% over the past six years (it averaged a little more than 2.5% a year overall). During the thick of it, the real estate industry was responsible, directly or indirectly, for 40% of all jobs created.

That 40% contribution to job creation has, in the past 18 months or so, declined to about 13% of new jobs. It will soon be responsible for the bulk of job losses, in my opinion. In fact, my friend in the subprime business said that WMC Mortgage, a wholly owned subsidiary of General Electric (GE, news, msgs), is laying off 35% of its work force, taking a $100 million charge and cutting back on its writing of loans.

But what's even more important, he notes: "They (WMC folks) are going to get rid of all 100% financing on all borrowers below 700 FICO. Also, (there will be a) 95% cap on first-time homebuyers. All we talked about is coming to a head. Now watch the home builders suffer."

(Editor's note: A WMC spokeswoman declined to comment on what she called "speculation" about layoffs and said the company is currently adjusting the types of loans it makes and its guidelines for underwriting loans. As for the charge, she said there have been more requests than usual from WMC's investors asking that the company repurchase loans from those investors.)

This is a story with far greater ramifications than just for the subprime sector, and we need to keep that in mind, even as the lunatic fringe -- i.e., the banking industry -- once again lusts after last cycle's winners: the mortgage originators.

In 2000, banks were busy buying brokerage firms, particularly those of a tech bent, such as Montgomery Securities and Robertson Stephens. In past cycles, they wanted to lend to leveraged-buyout artists, and before that there were "oil patch" loans, etc. Banks have an uncanny ability to pour capital into the wrong place at the wrong time. Bottom line: Wherever they are busy making acquisitions will be the source of problems in the next two years.

Home lenders versus the House

I have repeatedly made the point that there are no adults at home in the home-lending business, which is why I found it interesting reading some comments by U.S. Rep. Barney Frank. Though I wouldn't necessarily have picked the Massachusetts Democrat as the voice of reason, in a recent edition of the San Jose Mercury News he shared this novel thought:

"You shouldn't lend (home buyers or re-financers) more than they can afford to pay back, and you don't lend them more than their house is worth. . . . You can't just make a loan and then sell it (to investors, forget about it and expect no legal liability for putting people into a mortgage that never made sense for their situation)."

(The parenthetical material is Frank being paraphrased by the writer.)

Though those comments make perfect sense, and one would think that any lender with a brain would refrain from that kind of risky behavior, we also know that it's exactly what lenders have done. As for the consequences on the other side, my guess is that we'll see an enormous amount of lawsuits brought by folks who say that they were unsuitable candidates for the loans in the first place. (To quote a Jan. 26 New York Times headline: "Tremors at the Door: More People with Weak Credit Are Defaulting on Mortgages.")

Given that Frank is the new chairman of the House Committee on Financial Services, it sounds to me like Congress will be receptive to their arguments -- though that doesn't mean the courts will be. In any case, it seems quite clear to me that new legislation will be enacted. Which, of course, is just another way to tighten lending standards that are already being tightened.

At some point, the amount of damage being done will rapidly accelerate. I am certain that one day, when we look back on this period -- which witnessed the incredible housing-stock rally that ran from summer 2006 through early 2007, before it collapsed -- and we describe it to folks who may not have seen it firsthand, they will shake their heads in disbelief, the same way that folks now look back at the Nifty 50, the stocks that propelled a doomed early-1970s bull market, and ask: How could anyone have been so naive to have believed that concept?

http://articles.moneycentral.msn.com/Inves...eakEconomy.aspx

 

[Judge Smails]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.

My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

Good post MOP. My father has been in real estate for 30+ years in SW Virginia and feels the exact same way. While he's advised me to continue to wait until prices fall back in line with historical averages in the overheated San Diego market, he's continued to purchase properties in VA that he feels are wise investments.

i'm all for historical averages....however, in southern california there is no more land. there will never be any more land. it's very similar to an island, when you have no more land & people still want to go to the island the price goes thru the ####### roof. this will hold true in socal forever

I agree with this, though you will have 10-15% corrections that may last 7-10 years.

 

[RoarinSonoran]

i'm all for historical averages....however, in southern california there is no more land. there will never be any more land. it's very similar to an island, when you have no more land & people still want to go to the island the price goes thru the ####### roof. this will hold true in socal forever

Well, at least until the big one hits.

 

[tommyGunZ]

TGunz and I are in similar situations. I live in LA county, TG is in SD county but both of us rent apartments...the difference is this. I back TG that homes here are way overpriced but I decided to go and buy some real estate in other parts of the country. I ended up going in on an 8 unit property in Buffalo, NY...and I live in Santa Monica so go figure. But we got the property way under value at around $200,000. We have poured in somewhere in the vicinity of $60,000 which is more than double what we anticipated...however we are getting the property appraised in a few weeks and we expect it to come in around $350,000...this has now been a 6 month project. The note with taxes and prop mgmt will be about $3,000 a month and we are taking in about $4,500-$5,000 in rents...so we are going to do alright.

My point here is that if the homes around you cost too much, then maybe it's time to get proactive in other markets where housing has fallen back to affordable prices and you can make money. The bottom line is making money. I might not own a SFR home but I plan on adding 1-2 buildings a year with multi units like the one I bought in Buffalo and 8-10 years down the road I can cash out and buy whatever home I want (within reason), for me and the Mrs and I won't care much what the rates are, what the inventory of hosues are where I want to live...it simply will not matter.

Good post MOP. My father has been in real estate for 30+ years in SW Virginia and feels the exact same way. While he's advised me to continue to wait until prices fall back in line with historical averages in the overheated San Diego market, he's continued to purchase properties in VA that he feels are wise investments.

i'm all for historical averages....however, in southern california there is no more land. there will never be any more land. it's very similar to an island, when you have no more land & people still want to go to the island the price goes thru the ####### roof. this will hold true in socal forever

Like Japan?

 

[The Z Machine]

There's a lot of places where land is scarce. Socal isn't as bas as some other places. If it gets to be too much of a problem, the density will increase. This is natural and a GOOD THING for Socal.

 

[t8knovr]

At S.D. conference, economist predicts 'another good year'

By Emmet Pierce

UNION-TRIBUNE STAFF WRITER

February 7, 2007

Despite recent setbacks in the nation's housing and automobile industries, the economy remains fundamentally strong, the chief economist of the Mortgage Bankers Association said yesterday at a conference in San Diego.

“It's going to be another good year,” economist Douglas G. Duncan said. “The American consumer is alive and well. Consumers still have greater net worth than they have ever had.”

While the decline in housing has been “the biggest drag on economic activity,” Duncan said he expects the market to bottom out by mid-to late 2007.

“The full effects of the housing slowdown will have passed” before the year ends, he said at the association's convention on real estate finance and multifamily housing.

Single-family home prices nationwide rose in November at the slowest rate in more than a decade, according to a housing index released recently by Standard and Poor's. Although Duncan expects housing to substantially regain its footing by the end of 2007, he cautioned that prices may continue to lag until early 2008.

DataQuick Information Systems reported that in December the median home price in San Diego County fell 6.4 percent to $483,000 from December 2005. The county's median home price hit a record $518,000 in November 2005 and has since declined by 6.8 percent. Analysts attribute that mainly to lower-priced condominium conversions.

The Commercial Real Estate Finance/Multifamily Housing Convention & Expo drew nearly 5,000 registrants and exhibitors from across the country, officials said. The four-day event ends tomorrow at the downtown Manchester Grand Hyatt.

During a media briefing before his presentation, Duncan said there is evidence of “the depth and strength of the U.S. economy.

“It has grown at about 3.5 percent for a long period of time,” he said. “We don't see changes in the fundamentals. Employment will remain strong. The economy is balanced and can survive downturns in housing and autos.”

The national unemployment rate reached a four-month high of 4.6 percent in January, Duncan noted. He called that level of joblessness “pretty healthy.”

“If you look at unemployment for people with a four-year degree or more, it's less than 2 percent,” he said.

In contrast, the rate of unemployment for workers without a college degree is about 7 percent, he said. In the year ahead, the overall unemployment rate will be slightly more than 4 percent, perhaps rising in midyear as “the full slowdown in housing” bottoms out, he predicted.

During his convention presentation, Duncan repeatedly stressed that manufacturing is on the decline as a major force in the U.S. economy. “We are a services-based economy,” he said.

Businesses in the service sector have a shortage of skilled workers and are looking to immigration to help bridge the gap, the economist said. There is greater competition among unskilled workers “at the bottom of the food chain.”

James Woodwell, the Mortgage Bankers Association's senior director for research and business development, said the U.S. condo market would probably continue to soften in the months ahead.

Condos “will certainly be the place where we see the most churn, not only in San Diego but other markets as well,” Woodwell said. Condos are more susceptible to sales and price fluctuations because they have a lower share of owners who use them as a primary residence, Duncan said.

 

[Mr. Yuk]

Housing woes slam big bank

 

[tommyGunZ]

Housing Construction plunges in Jan - biggest drop in 10 years

WASHINGTON - Construction of new homes and apartments plunged by 14.3 percent in January, the Commerce Department reported Friday.

The bigger-than-expected drop left construction at a seasonally adjusted annual rate of 1.408 million units, the lowest level in nearly 10 years.

On Thursday, a real estate trade group reported that the slump in housing deepened in the final three months of last year. The National Association of Realtors said that sales of existing homes fell in 40 states and home prices dropped in 49 percent of the metropolitan areas surveyed, the widest price decline in the history of the Realtors’ survey.

Many economists are worried that the housing bust, which followed a five-year boom, could be a prolonged one as sellers struggle to reduce record levels of unsold homes.

Subprime loans defaulting higher than "anyone expected"

A Sinking Sensation for Subprime Loans

The default rate for borrowers in the sector has jumped faster than anyone was expecting, raising risks for housing and the overall economy

by Joe Niedzielski From Standard & Poor's Equity Research

Investing

The gathering storm clouds over the nation's housing and lending markets grow darker each day. Fueling the latest concerns is further fallout in the subprime mortgage loan market, where lenders offer financing to less-creditworthy buyers.

From a blog I frequent:

From Bubble Markets Tracking Inventory Blog we see San Diego had 1475 foreclosures in January. From the Sandicor MLS on resale homes, we see San Diego had 1768 sales of existing homes.

Looking back to foreclosures, we see Feb is rocking, 1719 foreclosures as of Tuesday the 13th. How high will it go?

So do the banks feel the critical pinch of volume? If January foreclosures hit the market in March and Feb in April, when will the banks reach critical mass? They had 1251 and 1304 foreclosures in December and November.

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

 

[MelvinTScupper]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

 

[tommyGunZ]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

 

[BassNBrew]

Housing Construction plunges in Jan - biggest drop in 10 years

WASHINGTON - Construction of new homes and apartments plunged by 14.3 percent in January, the Commerce Department reported Friday.

The bigger-than-expected drop left construction at a seasonally adjusted annual rate of 1.408 million units, the lowest level in nearly 10 years.

On Thursday, a real estate trade group reported that the slump in housing deepened in the final three months of last year. The National Association of Realtors said that sales of existing homes fell in 40 states and home prices dropped in 49 percent of the metropolitan areas surveyed, the widest price decline in the history of the Realtors’ survey.

Many economists are worried that the housing bust, which followed a five-year boom, could be a prolonged one as sellers struggle to reduce record levels of unsold homes.

Subprime loans defaulting higher than "anyone expected"

A Sinking Sensation for Subprime Loans

The default rate for borrowers in the sector has jumped faster than anyone was expecting, raising risks for housing and the overall economy

by Joe Niedzielski From Standard & Poor's Equity Research

Investing

The gathering storm clouds over the nation's housing and lending markets grow darker each day. Fueling the latest concerns is further fallout in the subprime mortgage loan market, where lenders offer financing to less-creditworthy buyers.

From a blog I frequent:

From Bubble Markets Tracking Inventory Blog we see San Diego had 1475 foreclosures in January. From the Sandicor MLS on resale homes, we see San Diego had 1768 sales of existing homes.

Looking back to foreclosures, we see Feb is rocking, 1719 foreclosures as of Tuesday the 13th. How high will it go?

So do the banks feel the critical pinch of volume? If January foreclosures hit the market in March and Feb in April, when will the banks reach critical mass? They had 1251 and 1304 foreclosures in December and November.

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Lucky dog...our foreclosure market has virtually dried up. The only people losing money around here are the west coast investors working with west coast investment groups that don't understand this market.

 

[tommyGunZ]

Housing Construction plunges in Jan - biggest drop in 10 years

WASHINGTON - Construction of new homes and apartments plunged by 14.3 percent in January, the Commerce Department reported Friday.

The bigger-than-expected drop left construction at a seasonally adjusted annual rate of 1.408 million units, the lowest level in nearly 10 years.

On Thursday, a real estate trade group reported that the slump in housing deepened in the final three months of last year. The National Association of Realtors said that sales of existing homes fell in 40 states and home prices dropped in 49 percent of the metropolitan areas surveyed, the widest price decline in the history of the Realtors’ survey.

Many economists are worried that the housing bust, which followed a five-year boom, could be a prolonged one as sellers struggle to reduce record levels of unsold homes.

Subprime loans defaulting higher than "anyone expected"

A Sinking Sensation for Subprime Loans

The default rate for borrowers in the sector has jumped faster than anyone was expecting, raising risks for housing and the overall economy

by Joe Niedzielski From Standard & Poor's Equity Research

Investing

The gathering storm clouds over the nation's housing and lending markets grow darker each day. Fueling the latest concerns is further fallout in the subprime mortgage loan market, where lenders offer financing to less-creditworthy buyers.

From a blog I frequent:

From Bubble Markets Tracking Inventory Blog we see San Diego had 1475 foreclosures in January. From the Sandicor MLS on resale homes, we see San Diego had 1768 sales of existing homes.

Looking back to foreclosures, we see Feb is rocking, 1719 foreclosures as of Tuesday the 13th. How high will it go?

So do the banks feel the critical pinch of volume? If January foreclosures hit the market in March and Feb in April, when will the banks reach critical mass? They had 1251 and 1304 foreclosures in December and November.

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Lucky dog...our foreclosure market has virtually dried up. The only people losing money around here are the west coast investors working with west coast investment groups that don't understand this market.

Being fairly new to the game - is it unusual to see foreclosures in the same vacinity as total resales on a per month basis?

 

[MelvinTScupper]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

It's worked against you so far. Good luck.

 

[Chadstroma]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model. I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007. As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

 

[BassNBrew]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model. I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007. As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

And landlords around the country rejoice!!!

 

[tommyGunZ]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?

2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model.

I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.

PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007.

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Tighter credit standards will shake out a lot of the irresponsible borrowers who were able to take out mortgages 10-15x times their incomes in recent years.In SoCal, without these buyers, the market is in for a rude awakening. If folks actually have to come with a down payment or have proof of income, hardly anyone can afford a median priced home.

 

[Chadstroma]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?

2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model.

I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.

PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007.

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Tighter credit standards will shake out a lot of the irresponsible borrowers who were able to take out mortgages 10-15x times their incomes in recent years.In SoCal, without these buyers, the market is in for a rude awakening. If folks actually have to come with a down payment or have proof of income, hardly anyone can afford a median priced home.

I recently bought with no down and using stated income. Then again, I had a 799 FICO at time of application. Point being- those behaviors are not Sub-Prime lending.

 

[tommyGunZ]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?

2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model.

I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.

PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007.

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Tighter credit standards will shake out a lot of the irresponsible borrowers who were able to take out mortgages 10-15x times their incomes in recent years.In SoCal, without these buyers, the market is in for a rude awakening. If folks actually have to come with a down payment or have proof of income, hardly anyone can afford a median priced home.

I recently bought with no down and using stated income. Then again, I had a 799 FICO at time of application. Point being- those behaviors are not Sub-Prime lending.

Point taken.

 

[Chadstroma]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?

2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model.

I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.

PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007.

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

Tighter credit standards will shake out a lot of the irresponsible borrowers who were able to take out mortgages 10-15x times their incomes in recent years.In SoCal, without these buyers, the market is in for a rude awakening. If folks actually have to come with a down payment or have proof of income, hardly anyone can afford a median priced home.

I recently bought with no down and using stated income. Then again, I had a 799 FICO at time of application. Point being- those behaviors are not Sub-Prime lending.

Point taken.

But with faulty underwriting the no down and stated income features can be huge risk factors. This could be an issue for diversified lender's if their under writing was too loose in the mad dash to get market share over the boom years. However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

That being said- it is interesting to hear of Countrywide possibly seeking an alliance or possible buyout in connection with BofA. If this rumor has teeth then that might say alot about the overall mortgage industry beyond Sub-Prime.

 

[LHUCKS]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

 

[Chadstroma]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

Simple fact: People will default on their credit cards, education loans, car loans, etc before they even think of defaulting on their home loan. For most people- this means they need to end up unemployed before they reach that point. Then again, the significant % increase of use of ARM's does throw in a question mark since there is no real historical data to show one way or the other. However, with the 30 year fixed still being in 'historically' low rates- a person with decent credit and still has a job should be able to re-fi out of trouble. Some may not. This goes back to the fact we are treading un-explored territory here. There are market forces pushing in opposite directions right now. As of now, nothing is showing a tendancy to drive the market in either direction. This may change but I am fairly confident that the overall national market will be mediocre or average from historical performance. Neither the bears nor bulls will be 100% right in this year. IMO

 

[tommyGunZ]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

And I still disagree. We're seeing a serious slump in Cali right now, with unemployment and the economy in good shape. Why the slump?

 

[Chadstroma]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

And I still disagree. We're seeing a serious slump in Cali right now, with unemployment and the economy in good shape. Why the slump?

An overheated housing market over the last few years. It is simply a market correction. Speculators are exiting the market since it is harder to make the easy/fast money on a flip. Condo market in SD has collasped which impacts those who buy and hold for rent- because rent can be had cheaply in such conditions. SD is not the norm for the country right now. Nor is it the end of the real estate market in SD. SD will have it's market correction and then housing will appreciate again.

 

[tommyGunZ]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

Simple fact: People will default on their credit cards, education loans, car loans, etc before they even think of defaulting on their home loan. For most people- this means they need to end up unemployed before they reach that point. Then again, the significant % increase of use of ARM's does throw in a question mark since there is no real historical data to show one way or the other. However, with the 30 year fixed still being in 'historically' low rates- a person with decent credit and still has a job should be able to re-fi out of trouble. Some may not. This goes back to the fact we are treading un-explored territory here.

There are market forces pushing in opposite directions right now. As of now, nothing is showing a tendancy to drive the market in either direction. This may change but I am fairly confident that the overall national market will be mediocre or average from historical performance. Neither the bears nor bulls will be 100% right in this year.

IMO

This is the shock to the market that I think will have a significant impact on home prices in previously hot markets. These "must sell" homes are already beginning to pile up, as inventories are high and foreclosures are exploding. REOs in San Diego are still not being deeply discounted, but I believe that will change when the number of homes owned by lenders doubles and triples over the next few months. Banks are in the business of lending, not selling vacant homes.Another important factor is the prevelance of piggyback loans. In past downturns, short sales were an emergency exit for many screwed borrowers to avoid foreclosure. Today, there's no reason for 2nds to work with borrowers and agree to short sales, because they'd be shut out of the proceeds. So I think we'll see the percentage of NODs that eventually become trustees deeds increase in a big way.

 

[Chadstroma]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

Simple fact: People will default on their credit cards, education loans, car loans, etc before they even think of defaulting on their home loan. For most people- this means they need to end up unemployed before they reach that point. Then again, the significant % increase of use of ARM's does throw in a question mark since there is no real historical data to show one way or the other. However, with the 30 year fixed still being in 'historically' low rates- a person with decent credit and still has a job should be able to re-fi out of trouble. Some may not. This goes back to the fact we are treading un-explored territory here.

There are market forces pushing in opposite directions right now. As of now, nothing is showing a tendancy to drive the market in either direction. This may change but I am fairly confident that the overall national market will be mediocre or average from historical performance. Neither the bears nor bulls will be 100% right in this year.

IMO

This is the shock to the market that I think will have a significant impact on home prices in previously hot markets. These "must sell" homes are already beginning to pile up, as inventories are high and foreclosures are exploding. REOs in San Diego are still not being deeply discounted, but I believe that will change when the number of homes owned by lenders doubles and triples over the next few months. Banks are in the business of lending, not selling vacant homes.Another important factor is the prevelance of piggyback loans. In past downturns, short sales were an emergency exit for many screwed borrowers to avoid foreclosure. Today, there's no reason for 2nds to work with borrowers and agree to short sales, because they'd be shut out of the proceeds. So I think we'll see the percentage of NODs that eventually become trustees deeds increase in a big way.

I think you are expecting more than what will materialize. But I may be wrong. If I knew it all I would be a millionaire and typing this from Hawaii, Barcelona, or my yacht off a Greek island. Since I am typing this from work in butt freaking cold Chicago- take what I say with a grain of salt.

 

[tommyGunZ]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

Simple fact: People will default on their credit cards, education loans, car loans, etc before they even think of defaulting on their home loan. For most people- this means they need to end up unemployed before they reach that point. Then again, the significant % increase of use of ARM's does throw in a question mark since there is no real historical data to show one way or the other. However, with the 30 year fixed still being in 'historically' low rates- a person with decent credit and still has a job should be able to re-fi out of trouble. Some may not. This goes back to the fact we are treading un-explored territory here.

There are market forces pushing in opposite directions right now. As of now, nothing is showing a tendancy to drive the market in either direction. This may change but I am fairly confident that the overall national market will be mediocre or average from historical performance. Neither the bears nor bulls will be 100% right in this year.

IMO

This is the shock to the market that I think will have a significant impact on home prices in previously hot markets. These "must sell" homes are already beginning to pile up, as inventories are high and foreclosures are exploding. REOs in San Diego are still not being deeply discounted, but I believe that will change when the number of homes owned by lenders doubles and triples over the next few months. Banks are in the business of lending, not selling vacant homes.Another important factor is the prevelance of piggyback loans. In past downturns, short sales were an emergency exit for many screwed borrowers to avoid foreclosure. Today, there's no reason for 2nds to work with borrowers and agree to short sales, because they'd be shut out of the proceeds. So I think we'll see the percentage of NODs that eventually become trustees deeds increase in a big way.

I think you are expecting more than what will materialize. But I may be wrong. If I knew it all I would be a millionaire and typing this from Hawaii, Barcelona, or my yacht off a Greek island. Since I am typing this from work in butt freaking cold Chicago- take what I say with a grain of salt.

I hear ya - I am aware that I'm far more bearish than most. But the boom we recently experienced was a much higher upturn than any fundamentals suggest is realistic, so I'm expecting the downturn to be longer and more painful than what many analysts are predicting.Regardless, it's been very fun to follow and extremely educational. I'm obviously not the guy to listen too - if I was smart I would have taken out a $1M mortgage in '02 and sold in '05 and retired.

 

[tommyGunZ]

Feb foreclosures at 1700 at mid month, up from 1200-1300 foreclosures a month in Dec and Nov of last year?

2007 is gonna get ugly in San Diego.

Have you locked in on a rate, or are you happy getting one higher?

nope - i'm betting prices fall faster than rates rise.

I can't speak to SD prices falling, but rates don't look like they're going to see major changes anytime soon. Bernanke even came out today and said inflationary concerns are easing.The subprime loan market is crazy right now. Guidelines are changing daily, we've seen 3 or 4 companies go out of business in the last few months and a couple of them completely switch their business model.

I've turned away two loans in the last week that I could have done two months ago. Guidelines are tightening very quickly, especially for 100% financing.

PS - Buyer activity is really starting to heat up in Seattle, and 2007 is looking much better than it was a couple months ago.

The Sub-Prime market is nearly imploding right now. HSBC recently announced a huge reserve allowance for defaults they expect. Literally dozens of Sub-Prime lenders are either up for sale, been sold, closed for business or have recently filed for bankruptcy. Another large Sub-Prime lender... the name escapes me right now.... just re-stated earnings and watched it's stock plummet. A number of diversified lenders are either looking to sale their Sub-Prime arm, sold it, or have tightened the underwriting. The Sub-Prime lending will be a very bumpy ride in 2007.

As for real estate in general, I think this will be a 'average' year. Not average over the last 5 years but average for the last 30 years.

FYI - a site that is documenting the Sub Prime Implosion: ML-Implode

 

[Ministry of Pain]

Hey all and TG,

Thought I would share what has happened in just the past few days. TG did a great job of linking to a lot of stories but there are some you will not see in print all over the place.

1. Majority if not all of the SubPrime lenders have disolved the programs for 1st time home buyers going stated 100%. What does this mean? It means that Joe Smith the gardener making $8,000 a month(wink wink nudge nudge know what I mean)...those types of home buyers are now shut out of the market. There is going to be a huge backlash from hippie tree huggers and those that have a soft spot for guests that do not sign the guestbook on the way into this country. This will have a Reaganomics trickle down because inventory will be up. A friend of mine just put an offer on a home that was reduced from $600,000 where several homes like it sold to a now ready to deal asking price of $545,000...that's just one small example.

2. Housing inventory shoots up coupled with foreclosures will start to drive the prices of homes down...I'm not telling you anything you don't already know...I get it. But that drive down of homes means that people that bought homes at 100% in the past 6-18 months will have no equity and actually be upside down on a home...this will create more foreclosures and a further drive down of Real Estate(That's the part no one is talking about).

3. People can no longer simply declare BK when they get under form CC debt and the like. It is further compounded when they tap into their equity only to find it isn't all there like before and the rates have gone up from that 4.75% 3 year Arm they had a couple years ago. Panic sets in at this point.

4. Finally and this is important. SubPrime Companies are going bankrupt. ResMae which has declared BK is being bought by First Suisse/Boston Bank...but essentiually ResMae is going away. Not the biggest of lenders but a top10-15 SubPrime Company. You might have heard of New Century...they got involved in RE Investment Trading and a lot of the paper they have is going to go South on them. I am not predicting they go under, but they are in for a rude awakening. Most of this stuff I know simply because I am a Loan Officer so please don't ask for links on everything.

Cheers!

 

[Chadstroma]

However, the economy needs to take a downturn and unemployment rise before there will be significant impact on most 'real' lenders or the real estate market in general.

I've been trying to explain this to Tommy for years.

Simple fact: People will default on their credit cards, education loans, car loans, etc before they even think of defaulting on their home loan. For most people- this means they need to end up unemployed before they reach that point. Then again, the significant % increase of use of ARM's does throw in a question mark since there is no real historical data to show one way or the other. However, with the 30 year fixed still being in 'historically' low rates- a person with decent credit and still has a job should be able to re-fi out of trouble. Some may not. This goes back to the fact we are treading un-explored territory here.

There are market forces pushing in opposite directions right now. As of now, nothing is showing a tendancy to drive the market in either direction. This may change but I am fairly confident that the overall national market will be mediocre or average from historical performance. Neither the bears nor bulls will be 100% right in this year.

IMO

This is the shock to the market that I think will have a significant impact on home prices in previously hot markets. These "must sell" homes are already beginning to pile up, as inventories are high and foreclosures are exploding. REOs in San Diego are still not being deeply discounted, but I believe that will change when the number of homes owned by lenders doubles and triples over the next few months. Banks are in the business of lending, not selling vacant homes.Another important factor is the prevelance of piggyback loans. In past downturns, short sales were an emergency exit for many screwed borrowers to avoid foreclosure. Today, there's no reason for 2nds to work with borrowers and agree to short sales, because they'd be shut out of the proceeds. So I think we'll see the percentage of NODs that eventually become trustees deeds increase in a big way.

I think you are expecting more than what will materialize. But I may be wrong. If I knew it all I would be a millionaire and typing this from Hawaii, Barcelona, or my yacht off a Greek island. Since I am typing this from work in butt freaking cold Chicago- take what I say with a grain of salt.

I hear ya - I am aware that I'm far more bearish than most. But the boom we recently experienced was a much higher upturn than any fundamentals suggest is realistic, so I'm expecting the downturn to be longer and more painful than what many analysts are predicting.Regardless, it's been very fun to follow and extremely educational. I'm obviously not the guy to listen too - if I was smart I would have taken out a $1M mortgage in '02 and sold in '05 and retired.

I am originally from L.A. and the SD and L.A. markets are not too disimiliar. One thing that I am struck by is the enourmous demand. People that have been on the sidelines for years because they felt they could not afford to buy at the prices the housing was going for.

I believe this is a strong element in the L.A. market that will bouy the market correction- likewise, I will make an educated guess the same will happen in the SD market. Again, I think there will be a continued market correction and yes I think SD is going to be hit harder than a lot of other markets nationally but there is no 'bubble' to burst and unless the economy dives and unemployment jumps up- there will be no overly dramatic decline in the real estate market. Be it SD or nationally.

Again- this is my opinion. Check my earlier post on how much that means.

 

[Gr00vus]

I hear ya - I am aware that I'm far more bearish than most.

I'm with you TGZ. Every real estate agent I know around here (Los Angeles area) is getting ready (if they're not already) to handle a flood of foreclosures and I'm seeing properties stay on the market for much much longer than they would have even two years ago. Demand is drying up at these prices. When it does all those folks who took interest only loans to "buy" houses they couldn't afford that are coming due in the next year or so (and there are tons of them) are going to set off quite the correction.Vultures in arms unite!

 

[tommyGunZ]

Hey all and TG, Thought I would share what has happened in just the past few days. TG did a great job of linking to a lot of stories but there are some you will not see in print all over the place.1. Majority if not all of the SubPrime lenders have disolved the programs for 1st time home buyers going stated 100%. What does this mean? It means that Joe Smith the gardener making $8,000 a month(wink wink nudge nudge know what I mean)...those types of home buyers are now shut out of the market. There is going to be a huge backlash from hippie tree huggers and those that have a soft spot for guests that do not sign the guestbook on the way into this country. This will have a Reaganomics trickle down because inventory will be up. A friend of mine just put an offer on a home that was reduced from $600,000 where several homes like it sold to a now ready to deal asking price of $545,000...that's just one small example. 2. Housing inventory shoots up coupled with foreclosures will start to drive the prices of homes down...I'm not telling you anything you don't already know...I get it. But that drive down of homes means that people that bought homes at 100% in the past 6-18 months will have no equity and actually be upside down on a home...this will create more foreclosures and a further drive down of Real Estate(That's the part no one is talking about).3. People can no longer simply declare BK when they get under form CC debt and the like. It is further compounded when they tap into their equity only to find it isn't all there like before and the rates have gone up from that 4.75% 3 year Arm they had a couple years ago. Panic sets in at this point.4. Finally and this is important. SubPrime Companies are going bankrupt. ResMae which has declared BK is being bought by First Suisse/Boston Bank...but essentiually ResMae is going away. Not the biggest of lenders but a top10-15 SubPrime Company. You might have heard of New Century...they got involved in RE Investment Trading and a lot of the paper they have is going to go South on them. I am not predicting they go under, but they are in for a rude awakening. Most of this stuff I know simply because I am a Loan Officer so please don't ask for links on everything.Cheers!

Thanks for passing these thoughts along MOP. Do I sense a more bearish attitude coming from you now as opposed to your views 6 months or a year ago?

 

[tommyGunZ]

I hear ya - I am aware that I'm far more bearish than most.

I'm with you TGZ. Every real estate agent I know around here (Los Angeles area) is getting ready (if they're not already) to handle a flood of foreclosures and I'm seeing properties stay on the market for much much longer than they would have even two years ago. Demand is drying up at these prices. When it does all those folks who took interest only loans to "buy" houses they couldn't afford that are coming due in the next year or so (and there are tons of them) are going to set off quite the correction.Vultures in arms unite!

 

[tommyGunZ]

One thing that I am struck by is the enourmous demand. People that have been on the sidelines for years because they felt they could not afford to buy at the prices the housing was going for.

There is definitely a pool of people out there who have been waiting for prices to decline for a couple of years - I'm one of them. But that pool of people pale in comparison to the people who went ahead and bought in hopes of catching a spot on the real estate ride to retirement.Last I checked, the homeownership rate was a record 69%. With subprime money drying up, demand is only going to decrease, IMO.

 

[Chadstroma]

One thing that I am struck by is the enourmous demand. People that have been on the sidelines for years because they felt they could not afford to buy at the prices the housing was going for.

There is definitely a pool of people out there who have been waiting for prices to decline for a couple of years - I'm one of them. But that pool of people pale in comparison to the people who went ahead and bought in hopes of catching a spot on the real estate ride to retirement.Last I checked, the homeownership rate was a record 69%. With subprime money drying up, demand is only going to decrease, IMO.

Keep in mind, as long as there is demand there will be a 'soft' landing.

 

[tommyGunZ]

One thing that I am struck by is the enourmous demand. People that have been on the sidelines for years because they felt they could not afford to buy at the prices the housing was going for.

There is definitely a pool of people out there who have been waiting for prices to decline for a couple of years - I'm one of them. But that pool of people pale in comparison to the people who went ahead and bought in hopes of catching a spot on the real estate ride to retirement.Last I checked, the homeownership rate was a record 69%. With subprime money drying up, demand is only going to decrease, IMO.

Keep in mind, as long as there is demand there will be a 'soft' landing.

Depends on your definition of "soft landing". I know the NAR and the SoCal Association of Realtors definition of "soft landing" has changed every few months - from "slowing appreciation" to "prices will go sideways" to "slight correction" to "correction".

 

[Chadstroma]

One thing that I am struck by is the enourmous demand. People that have been on the sidelines for years because they felt they could not afford to buy at the prices the housing was going for.

There is definitely a pool of people out there who have been waiting for prices to decline for a couple of years - I'm one of them. But that pool of people pale in comparison to the people who went ahead and bought in hopes of catching a spot on the real estate ride to retirement.Last I checked, the homeownership rate was a record 69%. With subprime money drying up, demand is only going to decrease, IMO.

Keep in mind, as long as there is demand there will be a 'soft' landing.

Depends on your definition of "soft landing". I know the NAR and the SoCal Association of Realtors definition of "soft landing" has changed every few months - from "slowing appreciation" to "prices will go sideways" to "slight correction" to "correction".

Soft landing equals not the end of the real estate market for the foreseeable future.

 

[Ministry of Pain]

Hey all and TG, Thought I would share what has happened in just the past few days. TG did a great job of linking to a lot of stories but there are some you will not see in print all over the place.1. Majority if not all of the SubPrime lenders have disolved the programs for 1st time home buyers going stated 100%. What does this mean? It means that Joe Smith the gardener making $8,000 a month(wink wink nudge nudge know what I mean)...those types of home buyers are now shut out of the market. There is going to be a huge backlash from hippie tree huggers and those that have a soft spot for guests that do not sign the guestbook on the way into this country. This will have a Reaganomics trickle down because inventory will be up. A friend of mine just put an offer on a home that was reduced from $600,000 where several homes like it sold to a now ready to deal asking price of $545,000...that's just one small example. 2. Housing inventory shoots up coupled with foreclosures will start to drive the prices of homes down...I'm not telling you anything you don't already know...I get it. But that drive down of homes means that people that bought homes at 100% in the past 6-18 months will have no equity and actually be upside down on a home...this will create more foreclosures and a further drive down of Real Estate(That's the part no one is talking about).3. People can no longer simply declare BK when they get under form CC debt and the like. It is further compounded when they tap into their equity only to find it isn't all there like before and the rates have gone up from that 4.75% 3 year Arm they had a couple years ago. Panic sets in at this point.4. Finally and this is important. SubPrime Companies are going bankrupt. ResMae which has declared BK is being bought by First Suisse/Boston Bank...but essentiually ResMae is going away. Not the biggest of lenders but a top10-15 SubPrime Company. You might have heard of New Century...they got involved in RE Investment Trading and a lot of the paper they have is going to go South on them. I am not predicting they go under, but they are in for a rude awakening. Most of this stuff I know simply because I am a Loan Officer so please don't ask for links on everything.Cheers!

Thanks for passing these thoughts along MOP. Do I sense a more bearish attitude coming from you now as opposed to your views 6 months or a year ago?

In San Diego, yes!In Los Angeles...probably not lucky enough. Will be some rollback though.