DANA POINT

Radar Logic: Seven reasons home price gains are not sustainable

 DANA POINT, NEWS
Jun 142013
 
Radar Logic: Seven reasons home price gains are not sustainable

Rising house prices are supposed to be driven by robust growth of high paying jobs. This drives household formation, and the high wages allows buyers to borrow large sums to drive up prices. This demand creates a shortage in housing as households compete with one another for the available housing stock. This prompts homebuilders into action to provide more supply to meet the demand. Those are the conditions that drive sustained price increases. Obviously, that isn’t what’s happening today. Gains in Home Prices Driven by Unsustainable Forces Despite the Increase in Prices Over the Last Year, Weakness Persists in the [Read More...]

The next housing market deflation will be a long, slow grind

 DANA POINT, NEWS
Jun 102013
 
The next housing market deflation will be a long, slow grind

Prices in many housing markets around the country are rising at unsustainable rates. The last time this happened was 2004-2006, and the pundits at the time said that appreciation would moderate and resume its “normal” 5%+ yearly rates in the future. Gary Watts even assured us that “Fifteen percent is pretty much in the bag for Orange County in 2006,” he says. “It’s impossible for prices to go down this year.” It’s difficult to imagine a statement that was more wrong. The bust from 2007-2009 was characterized by steeply falling prices. It was a relatively quick and severe crash by [Read More...]

1.7 million borrowers are seriously delinquent on government-backed loans

 DANA POINT, NEWS
Jun 072013
 
1.7 million borrowers are seriously delinquent on government-backed loans

The US taxpayer (you) paid for the mess the bank’s made. Back in late 2008, the Department of Treasury took the GSEs under conservatorship and injected about $150 billion into them to make them solvent. And although the FHA has not officially requested a bailout yet, it’s no secret a bailout is coming. The only mystery so far is when the bailout will come and how large the ultimate price will be. Politicians have consistently lied to us about housing bailouts. The first batch of lies surrounded the GSEs: “There is no guarantee. There’s no explicit guarantee. There’s no implicit [Read More...]

No-doc loan modifications available now!

 DANA POINT, NEWS
Jun 032013
 
No-doc loan modifications available now!

When borrowers stop paying their mortgages, banks don’t want to foreclose because with so many so far underwater, the bank’s losses would be enormous; in fact, it would put most banks out of business. That simple truth drives every aspect of banking and government policy. Loanowners want to save their homes, but bankers and politicians really don’t care about them. Bankers and politicians want to save the banks. No matter how crazy many of the policy initiatives coming from Washington and Wall Street may seem, if you remember the basic dilemma that banks face, even the silliest disguised bailout makes [Read More...]

Lack of MLS inventory causing bidding wars despite tepid demand

 DANA POINT, NEWS
Apr 112013
 
Lack of MLS inventory causing bidding wars despite tepid demand

House prices are rising rapidly in Orange County and most of Coastal California. There are anecdotal reports of bidding wars, and many properties are selling for 5% to 10% above recent comparable sales. As I’ve documented, Orange County home resale volume is very weak by historic norms, and the only increase in housing demand is coming from investors, so the competition for housing is not coming from resurgent owner-occupant demand. So why are we having bidding wars? If any of you are old enough to remember the OPEC oil embargo of the 1970s, you’ve seen first hand what happens when normal [Read More...]

FHA = subprime, 12.4% interest cost of FHA insurance, 50% risk premium

 DANA POINT, NEWS
Nov 302012
 
FHA = subprime, 12.4% interest cost of FHA insurance, 50% risk premium

Yesterday I described How to game the system with FHA loans for maximum advantage. Today, I want to look at the cost of that financing. It’s up to you to determine whether you believe the benefits are worth the costs. Many have quipped that FHA has become the replacement for subprime. They have very low standards for qualification (a 580 FICO score), a very low down payment requirement (currently 3.5%), and as a result, they have become the loan-of-necessity for anyone who doesn’t have the credit requirements or the down payment necessary to obtain other financing. In other words, they have [Read More...]

Are low rates an adequate substitute for low prices?

 DANA POINT, NEWS
Oct 162012
 
Are low rates an adequate substitute for low prices?

For the last several years I have written in favor of low prices as the best option for putting the country back of firm economic footing. The argument is simple: Low prices make for a lower cost of ownership which translates to more disposable income for homeowners to use to purchase goods and services to drive the broader economy. Disposable monthly income is a superior economic stimulus because it’s sustainable. The savings each month are consistent and reliable. Contrast that to HELOC money that comes in a lump sum and once spent requires larger payments which reduces disposable income. Lower [Read More...]

Banks increase foreclosures 30%, notices plummet, REO pipeline stabilizes

 DANA POINT, NEWS
Sep 132012
 
Banks increase foreclosures 30%, notices plummet, REO pipeline stabilizes

Bank behavior determines home prices. They control the supply, and they control the money that drives demand. Whenever the banks change their policies, it shows up in the foreclosure statistics, and these changes determine the future of home prices. In August, three important developments happened in the foreclosure market: Banks greatly increased their REO acquisitions. Banks sharply curtailed new filings of notices of default. Banks stopped their internal liquidations of REO standing inventory. Each of these developments has implications for future home prices. The Foreclosure Report – August 2012 “We continue to see reports that there will be a wave [Read More...]

Mostly through short sales, banks met 40% of settlement requirement

 DANA POINT, NEWS
Aug 302012
 
Mostly through short sales, banks met 40% of settlement requirement

The settlement with the major banks dramatically altered their incentives. As part of the settlement, banks can count short sale losses toward their settlement amount. Foreclosures don’t count. So how did banks respond? They dramatically reduced their REO processing and focused on approving short sales. This had two impacts on MLS inventory. First, the lingering short sales that polluted the MLS for months were cleared out. And second, far fewer REO were processed to replace the REO the banks were selling. By clearing out the backlog and not replacing with fresh supply, the number of properties available for sale on [Read More...]

Housing bubble creates no-win political situation for either presidential candidate

 DANA POINT, NEWS
Aug 272012
 
Housing bubble creates no-win political situation for either presidential candidate

President Obama’s housing policies have been as successful as the circumstances would allow. Back in June I quipped, Obama’s housing policy succeeded wildly by failing spectacularly. Personally, I would have preferred he let the banks go bankrupt, nationalize them, fire management, recapitalize the banking system, and sell them off the bank’s stock when the economy recovered. Unfortunately, the flash-point of the crisis occurred while Bush was still in office, and these institutions were deemed too big to fail. Obama continued Bush’s flawed policies and looked for solutions that did not bankrupt the banks. This left few good options. Once bank bankruptcy [Read More...]

California realtors buy politicians to lobby against lost commissions from bulk sales

 DANA POINT, NEWS
May 252012
 
California realtors buy politicians to lobby against lost commissions from bulk sales

NAr couldn’t care less about the greater good. They lobby for their own narrow interests, irrespective of the impact it will have on the housing market, the rental market, or the broader US economy. Their latest self-serving battle is against bulk REO sales. Obviously, they don’t want to lose MLS commission sales to bulk transactions which generate no commissions to them. There is no other reason to oppose these bulk sales. Bill would stop bulk REO sales in California NAR backing sponsor Gary Miller’s reelection bid By Inman News, Friday, May 18, 2012. California Rep. Gary Miller — who’s getting [Read More...]

Dana Point HELOC abuse bargain property

 DANA POINT
Apr 022012
 
Dana Point HELOC abuse bargain property

HELOC abuse creates distressed properties Many distressed properties are a result of people who overborrowed at the peak. Many others come from people who borrowed themselves into oblivion. The owner of today’s featured property paid $335,000 on 10/30/1989. I don’t have their original loan data, but they likely put 20% down ($67,000) and borrowed $268,000. On 8/27/1998 they borrowed $287,500 and $35,000 on new first and second mortgages. On 8/11/1999 they borrowed $53,465 on a new stand-alone second. On 10/16/2001 they refinanced with a $359,000 first mortgage. On 1/8/2002 they obtained a $45,000 stand-alone second. On 9/11/2002 they refinanced with [Read More...]

Another view of what’s “normal” in housing

 DANA POINT, NEWS
Mar 312012
 
Another view of what's "normal" in housing

One thing most real estate market observers do agree on is that our current market conditions are not normal or healthy. But what is a “normal” market anyway? Real Estate Recovery: Are We There Yet? March 28, 2012 The first few months of 2012 have seen some pretty encouraging stats, but after years of nothing but bad news about the housing market, it can be hard to gauge what “normal” is anymore. According to new measure from real estate website Trulia, we’re about a third of the way back to a normal housing market. The bad news? We’ve got a [Read More...]

Are the Ponzis taking over?

 DANA POINT, NEWS
Feb 252012
 
Are the Ponzis taking over?

When I was young and much more liberal than today, people told me I would become conservative when I got older. I didn’t think it would happen. But when I look at how far the pendulum has swung to the bailout-and-take-care-of-me side, I wonder if we haven’t lost our way. Consumers outnumber producers, and everyone wants a free ride. Enough already. The ‘Take Care of Me’ Society is Wrecking the USA By MAUREEN MACKEY, The Fiscal Times January 28, 2012 You’ve played by the rules. Worked hard to put yourself through school. You’ve gotten a decent job and you pay [Read More...]

Hottest Listings in Orange County 2-18-2012

 CYPRESS, DANA POINT, FOUNTAIN VALLEY, FULLERTON, LAKE FOREST, WESTMINSTER
Feb 182012
 
Hottest Listings in Orange County 2-18-2012

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 most viewed property listings in Orange County. Check them out. 9291 PARLIAMENT Ave Westminster, CA 92683 — $389,900 Competing Listings $419,500 15932 COMMONWEALTH Pl 0.11 miles 3 bd / 1.75 ba 1,291 Sq. Ft. $457,000 9281 JASMINE Ave 0.31 miles 4 bd / 1 ba 1,390 Sq. Ft. $385,000 16351 JODY Cir 0.92 miles 4 bd / 2 ba 1,327 Sq. Ft. $419,900 10131 BEVERLY Ln 0.97 miles 4 [Read More...]

Strategic default is the banker’s stigma of convenience

 DANA POINT, NEWS
Dec 232011
 
Strategic default is the banker's stigma of convenience

Bankers foster the idea that strategic default on a primary residence is immoral. Bankers want borrowers to continue to repay loans even when it is not in the borrower’s best financial interest to do so. I and many others have argued borrowers have a greater moral duty to do what’s in the best financial interest of their family. Obviously, bankers disagree. In reality, this isn’t a moral issue at all. It’s all about money. Bankers want to make money, and making moral arguments is a stigma of convenience. If they were on the other side of the transaction, they would [Read More...]

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