Archive for April, 2012

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 a productive use. On the other hand, if they liquidate too quickly, house prices go down which reduces the amount of capital they recover. Taken in the context of all their holdings, declining asset values wipes the equity from their…[READ MORE]

Each month I publish the OC Housing Market Newsletter below and send it to subscribers. A few weeks later, I publish in on the blog. To get the most timely data, please sign up below. The data in this report will help you identify which cities, zip codes or communities with the best pricing. You can explore prevailing rent levels, resale pricing and trends in both. It's a valuable resource for anyone looking to buy a home in today's volatile and unpredictable real estate market. [gview file="" height="675" width="550" save="1"] [raw_html_snippet id="closing"][READ MORE]

Stonegate is an Irvine Company Village located northeast of Woodbury bounded by Sand Canyon Avenue, Portola Parkway, Jeffrey Road, and Irvine Boulevard. Stonegate has easy access to Highway 133 which provides speedy access to I-5 and I-405. The entire Village is far enough from the major freeways to be very quiet, particularly locations distal from the bounding arterial streets. The only problems with traffic or noise comes from the steady stream to garbage trucks driving up Sand Canyon and down Portola heading to the Bee Canyon landfill. The landfill itself is over the mountain nearly two miles from the housing development. Odor or groundwater contaminants should never be a problem. The Irvine Company developed Woodbury as the premium community in…[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 to fail. Calculated Risk famously described the problem facing homebuilders in the wake of the housing collapse in his analysis of the "distressing gap." Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The…[READ MORE]

For the last four years the health of the American banking system has been an illusion. In 2008 our insolvent banks were deemed too-big-to-fail, and regulators began allowing banks to market their assets to a fantasy valuation rather than fair-market value. Once insulated from loss recognition, lenders embarked on a policy of amend-extend-pretend with delinquent borrowers. Never before have so many been allowed to squat in luxury for so long. The policy of mark-to-fantasy bank accounting was necessary to make our banks look solvent. The hope was that banks would earn their way back to health as the federal reserve took the interest it used to pay retirees and instead diverted it to its member banks. The ongoing bailout of…[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 of REOs at the auctions, and in March they took back fewer than in February. CA - Foreclosure Outcomes This has left many, me included, groping for an answer. Why Are We Seeing Fewer Foreclosures? Rick Sharga APR 16, 2012…[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 increased loan modifications, foreclosure remediation, principal reduction, and other misguided policies to prevent those who defaulted on their mortgages from enduring the consequences for their actions. The latest attempt to generate sympathy for loan owners comes from the Brookings Institute.…[READ MORE]

Modern American culture can trace its roots on the North American continent to pioneering English settlers. Life on the frontier is harsh, and each family unit is self-reliant. In a frontier society, if people didn't work, and if they didn't produce their own food and shelter, then they died. Fear of death from starvation or exposure was very real, and anyone who wasn't motivated to produce something of value to themselves or others faced the near certainty of painful death. In a frontier society, there are no bailouts. We have made much progress over the last four centuries, and the fear of death from lack of food has been largely eliminated. Private and public shelters have lessened the fear of…[READ MORE]

Lenders have been slowing their acquisition of new REO since February. In fact, the decline in REO going back to the bank has been rather dramatic. CA - Foreclosure Outcomes Banks are also dramatically slowing the rate at which they put REO on the MLS. As a result inventories all over California have been declining. Banks are obviously planning to withhold inventory until the market bottoms. Expect to see a low-volume rally as the few qualified buyers are forced to pay higher prices. As a result, the kool aid is flowing again.... One thing notably absent from the few foreclosures that are occurring is anything over the conforming limit. Of the 196 REOs listed on the Orange County MLS over…[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 agents, so the net may be the same. And since lenders are recovering their capital more quickly, the benefits outweigh the discounts required. Another advantage of the REO to rental program is that lenders don’t have to dispose of those…[READ MORE]

In Memoriam: Tony Bliss 1966-2012