Lenders hope they can solve all their problems by making the housing market hit bottom. If prices bottom, people who bought at the bottom gain equity with rising prices, and they in turn reignite the move-up market which will allow the banks to sell their high-end shadow inventory. Further, rising prices makes for fewer short sales and fewer foreclosures and distressed sellers become equity sales. Rising prices would be a panacea for lenders, which is why the full weight of [Read More...]
People read this blog for a variety of reasons. Some like the in-depth coverage of housing issues unfettered by bias and bullshit. Some like the entertaining cartoons and HELOC abuse stories of woe. Some like the market information and cogent analysis of current trends in the OC market. This last group usually has one question in mind: is it a good time to buy a house? The answer to that question is an unequivocal maybe. There is no perfect time [Read More...]
For those planning on a long term of ownership, interest rates below 4% have made payment affordability the best its been in years, perhaps ever. The prices still seem ridiculously inflated, but record low interest rates make borrowing such large sums possible. Those low rates even drive the cost of ownership below the cost of comparable rentals, in some markets substantially below. It should be no surprise that many of the bubble-era communities and the less desirable older communities have [Read More...]
I have enjoyed being a renter over the last five years. I moved several times being a renter, and I never felt anchored or chained to any housing situation. I rarely stressed about paying my rent, and I never once fretted about the decline in the value of my property. Further, I never worried about my prosperity being hindered by some bank refusing to extend me a Ponzi loan. Being a renter has caused me to pass many of my [Read More...]
One of the more esoteric debates on the fundamental value of houses centers on whether or not houses appreciate faster than the overall rate of inflation. Nobody who isn’t kool aid intoxicated believes house prices rise much more than the level of inflation because intelligent people understand trees cannot grow to the sky. If house prices consistently went up in value faster than price or wage inflation, over time, people would lose their ability to afford to buy houses because [Read More...]
Through a combination of falling prices and low down payment mortgages, many buyers of the bear rally of 2009 find themselves underwater. When you figure in the transaction costs of selling a home, the numbers are really grim. Despite the negative circumstances, few of this buyer cohort will strategically default. Most are only slightly underwater, and since most also have a cost of ownership at or below rental parity, it’s more costly for them to rent, so most will stay [Read More...]
Lenders are withholding inventory across the Southwestern United States in hopes of creating a shortage of supply to reverse the downward spiral in home prices. Lenders constantly try to balance two competing forces. First, lenders need to get their money back. Dead money tied up in non-performing assets does not contribute positively to their bottom line. Further, this money also cannot be used to fund ongoing operations. This puts enormous pressure on lenders to liquidate and put their capital toward [Read More...]
Anyone who watches the market carefully knows that lenders are withholding supply to cause prices to bottom. This is in the best interest of the members of the banking cartel. It’s surprising to me they managed to pull it off. Cartels are inherently unstable, most often because each member has a strong incentive to cheat by increase supply to take advantage of the improved pricing. In my opinion, that is what will likely cause the engineered spring rally of 2012 [Read More...]
Last fall B of A and other major banks increased their filings of Notices of Default. Since then I have been predicting a spring surge of REO that would snuff out the spring rally. Right on schedule in January, Notices of Trustee Sale and the number of REO acquired increased, and it looked like the REO would hit the market in time for the spring selling season. Then lenders changed their collective minds. In February, lenders abruptly curtailed their acquisition [Read More...]
As the crash in house prices continues the number of families displaced from their homes increases due to foreclosure, short sales, and strategic default. Since the foreclosures generally lead to an involuntary property eviction, many former loan owners are upset by the consequences for defaulting on their mortgage. Rather than accept the consequences for their mistakes, many who involuntarily vacated their houses portray themselves as victims deserving of special dispensation. Pandering politicians, mostly from the political left, have lobbied for [Read More...]
A couple days ago, I postulated that lenders would utilize REO to rental programs to the extent feasible: … First, it gives them immediate capital. They don’t have to wait as they slowly liquidate on the MLS. Opponents of these programs — mostly realtors who fear loss of commissions — postulate lenders will recover less when selling in bulk. Lenders will have to discount the properties more to liquidate in bulk, but they also eliminate a 6% commission to listing [Read More...]
Long-term homeowner went Ponzi The owner of today’s featured property bought back in 1993 for $250,000. The owner refinanced a few times but paid down his mortgage up through 2005 when he went Ponzi. On 4/6/2005 he refinanced with a $402,500 first mortgage and a $172,500 stand-alone second. The first notice of default was issued on 1/28/2008 which means the latest he made a payment was September of 2007. The house was finally auctioned on 10/6/2011 more than four years [Read More...]
Tustin Overview Median home price is $391,000. Based on a rental parity value of $485,000, this market is under valued. Monthly payment affordability has been worsening over the last 2 month(s). Momentum suggests worsening affordability. Resale prices on a $/SF basis increased to $246/SF to $257/SF. Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months. Median rental rates declined $166 last month from $2,216 to $2,050. Rents have been rising for [Read More...]
Have you ever come across some really in-depth writing on involved topics on the internet? It’s pretty rare. I try my best at the OCHN to give a greater level of depth than what people find in the mainstream media, but there are others out there who take it to another level entirely. Last weekend, I introduced you to the Strategic Deals Law Blog. In their own words, “Strategic Deals Law Blog offers insights into the complicated world of business transactions, [Read More...]
California and Great Britain have much in common with regards to its real estate. California has witnessed three catastrophic bubbles over the last forty years as has Great Britain. Each bubble had different causes, but the timing was similar. California has strict land-use controls which creates artificial shortages of housing, and so does Great Britain. California’s economy has become dependent upon rampant HELOC abuse to fuel unsustainable booms and heart-wrenching busts. Great Britain endures the same real estate borrowing cycles [Read More...]
Orange Overview Median home price is $397,000. Based on a rental parity value of $485,000, this market is fairly valued. Monthly payment affordability has been improving over the last 1 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased to $237/SF to $238/SF. Resale prices have been weak for 12 month(s). Price momentum suggests weak prices over the next three months. Median rental rates increased $1 last month from $$2,048 to $$2,050. Rents have been slowly rising [Read More...]
I have two strongly held views on foreclosure and principal reduction that are completely at odds with the drivel in the mainstream media. First, foreclosures are not a problem. In fact, foreclosures are essential to the economic recovery. All efforts to avoid or delay foreclosures are counterproductive. Second, principal forgiveness is the worst policy option. The clamor from the left to give away my tax dollars to loan owners is getting louder and louder. It’s simply bad public policy, and [Read More...]
The OC Housing News profiles properties for sale each day and presents current market data on each city in Orange County. If you really want to know what’s happening in the OC Housing market, you need to read the OC Housing news and subscribe to the our monthly newsletter. Redfin is the most popular real estate search site in Southern California. They track the most popular listings based on the number of views each receives. Below are some of the [Read More...]
Pending sales are up, and economists who use pending sales in their calculations are proclaiming a price rally is in the works. There is one inconvenient fact holding back the bulls: record cancellations. Borrowers are unable to close the deal, and properties are falling out of escrow at increasing rates. Snags leading to more real estate contract cancellations April 01, 2012|By Kenneth R. Harney WASHINGTON — What’s behind the unusually high rate of contract cancellations and settlement delays in the [Read More...]
A Garden Grove Ponzi An ordinary house in an ordinary neighborhood with an extraordinary amount of mortgage equity withdrawal. This house was purchased on 6/28/1999 for $260,000 with a $195,000 first mortgage, a $39,000 second mortgage, and a $26,000 down payment. On 6/13/2001 they refinanced with a $282,000 first mortgage. On 8/30/2005 they opened a $200,000 HELOC. On 9/8/2006 they refinanced with a $462,000 first mortgage and a $66,000 HELOC. Total property debt was $528,000. Total mortgage equity withdrawal was [Read More...]
Extraordinary HELOC abuse If you had put $2,550 in a savings account in 1996, you would have less than $4,000 today. There was no investment in 1996 that could have turned $2,550 into $423,050 — that is except California real estate. Today’s featured property cost $152,500 on 10/18/1996. The owner used a $149,950 first mortgage and a $2,550 down payment. On 3/31/1998 he refinanced with a $148,978 first mortgage. On 8/1/2002 he refinanced with a $254,600 first mortgage. On 7/23/2003 [Read More...]
Astute Observations