Real Estate Crash thread

[mock vomit]

So i did a search on walnut creek, orinda, lafayette, plesant hill, black hawk and san ramon. They totalled all together 500 sold houses the last 3 months. Pittsburg, antioch and oakley had over 1600 sold in the same timeframe. So im going to have to call BS on that theory. This search is in MLS, which doesnt lie. So im curious to where they are getting there numbers? Maybe in LA its like that, but out in the east bay its not. The houses that are selling are the affordable ones and they are selling alot of them.

Don't know that market... but assume the first group of communities is the more expensive ones, and the later group the cheaper ones?

For any research ^^^ like that, you'd need to run a series of control searches for several past similar intervals of time. Say, the same criteria but with totals for each of the last 8 quarters? Even if there are fewer sales in the expensive communities in a recent period, it still may be more than had sold at other less recent times in those same communities.

One thing that is somewhat surprising to many who don't run these type of statistical searches (including Realtors), is that because of historic shorter times on market for cheaper homes, and longer times for the most expensive ones... most communities have a way higher percentage of both more moderately priced homes -and- sales thereof... than you would estimate by reviewing the list of active (for sale now) properties in that same community.

While a search of MLS active listings in a hypothetical community "Ehhh" might show that half the listings are priced below $500K and half above $500K. When you do a search of the same community by either their percentage of total built residences therein -or- the market share of the totality of homes sold over some period (like a year)... you'd find that as many as 4 or 5 times as many homes exist/sell under that hypothetical "mid point" of $500K as sell above it. Said another way; because more expensive homes sell slower and tend to bunch up over time in MLS, it LOOKS like they make up a bigger percentage of the market in that community than they really do when judged by inventory in MLS.

[/real estate spew]

[Tin Woodsman]

So i did a search on walnut creek, orinda, lafayette, plesant hill, black hawk and san ramon. They totalled all together 500 sold houses the last 3 months. Pittsburg, antioch and oakley had over 1600 sold in the same timeframe. So im going to have to call BS on that theory. This search is in MLS, which doesnt lie. So im curious to where they are getting there numbers? Maybe in LA its like that, but out in the east bay its not. The houses that are selling are the affordable ones and they are selling alot of them.

Let's review this. California is experiencing record high unemployment. State workers are being furloughed by the tens of thousands. Lending standards have been tightened to a degree not seen in many decades. Jumbo mortgages are nearly impossible to get. We are just beginning to enter the next wave of mortgage resets with defaults and foreclosures now running at record highs, but you're calling bullshit on this report? Presumably, because you performed an MLS search in 5 towns in the Bay area, you are confident that prices are actually moving up and it's not a mix issue? Think about that for a second.

[Sea 2 Ski]

.....werd.

That's a pretty dumb question, if you think about it. Besides, I live in one of the most expensive markets in the country, and, as they say above, that is just now beginning to deflate.

Benny, you're getting to the bottom of the market in Fairfield County, take it from someone who bought a Yuppie family starter at the bottom of the Real Estate more due to luck than good management.

Average HH Income is $100K (Stamford)

Monthly Rent- 2BR-$2400

Last 2BR to close in my condo complex closed At $400,000 and this is down from listing prices at $450,000
Not too out of line when banks are requiring 20% down these days. My neighbours place has only been getting lowballed ($350,000)and she can easily rent it and make her money back.

[liv2ski]

Let's review this. California is experiencing record high unemployment. State workers are being furloughed by the tens of thousands. Lending standards have been tightened to a degree not seen in many decades. Jumbo mortgages are nearly impossible to get. We are just beginning to enter the next wave of mortgage resets with defaults and foreclosures now running at record highs, but you're calling bullshit on this report? Presumably, because you performed an MLS search in 5 towns in the Bay area, you are confident that prices are actually moving up and it's not a mix issue? Think about that for a second.

Yep, I have a few friends that are RE agents in San Diego and they are telling me there is significantly less inventory available in certain zip codes under $400k so prices are going up. Zillow has sent me an email alert for the last 2 months in a row that sales in my rentals area have gone up, so hence so has the estimated value on that duplex.

I always look at the MLS for Mammoth and it looks like anything selling is now at a 2002 level. Compare the prices there to other ski resort areas and they look really good (low). To bad my income is 25% of what it was 3 years ago. I would be buying something up there if I could swing it.

But to the above quote, I agree that there is a lot of down side risk to the market in light of those points. However, in my area (San Diego) it looks like a floor may be close on the cheaper homes. Rents received are now supporting values as investors can often positive cash flow with 20% down. First time buyers are jumping in on homes less than $400k. It is the expensive stuff taking the hit now as are the second homes in Mammoth.

[Benny Profane]

she can easily rent it and make her money back.

I don't get it when people say this. Easy is buying a TIP. Hard, to me, is finding a reliable, clean, bother free tenant who will keep those checks coming every month. And, I'm always watching rents, and they haven't gone up much through all this turmoil the past few years. Going down big time in NYC.

[cramer]

but you're calling bullshit on this report?

yes im calling bullshit that its "high end" thats skewing the #'s. I'm saying the 200-250K houses are already sold. Its the 250-300K houses now going. I mean no shit the avg median is going to rise. All the bottom feeder houses are gone now.

[mitch_cumstein]

Nice to see there's no absence of hubris in this thread. I'm guessing there's no shortage or 'real estate professionals' here either.

[RootSkier]

Hard, to me, is finding a reliable, clean, bother free tenant who will keep those checks coming every month.

I've never had bad luck with tenants. In fact, I had to call one last night to let her know she has 30 days to vacate because the property is under contract and the first words out of her mouth were "Congratulations!"

She did bounce a check once but made it right within 3 days. No tenants have ever made me keep their whole deposit or fucked anything substantial up.

I should just keep this as a rental but the prospect of a bunch of cash right now is just too beautiful to pass up.

[Stu Gotz]

Benny, you're getting to the bottom of the market in Fairfield County, take it from someone who bought a Yuppie family starter at the bottom of the Real Estate more due to luck than good management.

I think the problem with Fairfield County are the expedited sales of the spec houses in the $3-$5 million range. Whether through foreclosure or the builders just giving up, when these homes come down, its going to push everything down below it. I don't think this has happened yet.

[Sea 2 Ski]

I think the problem with Fairfield County are the expedited sales of the spec houses in the $3-$5 million range. Whether through foreclosure or the builders just giving up, when these homes come down, its going to push everything down below it. I don't think this has happened yet.

The $3 to $5 Million are the ones getting hammered with re-evaluations on taxes in Stamford. Someone has to pay for the shortfall from the Rell and the rest of the state. I'm watching my parents to do the run from the taxman and establish residence in Colorado. That price range will be interesting in most cases since you're looking at someone's retirement fund.

[CravenurdotterII]

Real Estate can have a bear market rally just like the stock market. People jump in thinking this is just another normal recession and they will make a killing from the price increases coming. This IS NOT the same as before. Interest rates are going to pop up
with all the debt being taken on by the government. All of a sudden payments could double. Prices could decline another 25%......easy.

[liv2ski]

Well at least according to this article, there are plenty of neighborhoods that went down 50% in value from March 08 to March 09

Before the housing crash extended beyond foreclosure-ridden exurbs, the average homeowner used to (foolishly) believe that his neighborhood was immune. Today, even underwater homeowners merely take heart in knowing that other neighborhoods in the same city are worse off.

If you live in the leafy, mansion-filled Bel Air neighborhood of Los Angeles, where sales prices have declined 31% at the median to $1.5 million, you're probably comforted by the fact that you don't live in Glassell Park in East L.A. In that part of town, buyers counting on neighborhood improvement when they bought in the fringe area have seen median sale prices plummet 50% to $225,000 in the last year.

It's the same story to the south, in San Diego. Sales prices are down 25% in University Heights, but homeowners there can say, "Better here than Horton Plaza." In that downtown, marina neighborhood, median sale prices are off year-over-year by 56%, to $612,500.

Behind the numbers
Forbes looked at the 25 largest cities in America to determine which neighborhoods witnessed the biggest year-over-year price drops, according to data from Trulia.com, an online real-estate marketplace and data firm. A neighborhood had to be within the city limits, have at least 10 sales, and prices had to be above $150,000. Otherwise, our list would be a rundown of markets barely on life support, such as Briggs, Detroit, where prices over the last year are off 96% to a median price of $2,500.
http://realestate.msn.com/article.as...6644&gt1=35000

[cramer]

Zillow has sent me an email alert for the last 2 months in a row that sales in my rentals area have gone up, so hence so has the estimated value on that duplex.

I dont know how much stock id put in zillow. i just got an email saying my house went up 23K in value. i dont see any data that supports such a dramatic increase.

[Benny Profane]

WSJ

Study Finds Underwater Borrowers Drowned Themselves with Refinancings

By Nick Timiraos

Why are so many homeowners underwater on their mortgages?

In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.

A new study challenges this premise and finds that excessive borrowing may have played as great a role.

Michael LaCour-Little, a finance professor at California State University at Fullerton, looked at 4,000 foreclosures in Southern California from 2006-08. He found that, at least in Southern California, borrowers who defaulted on their mortgages didn’t purchase their homes at the top of the market. Instead, the average acquisition was made in 2002 and many homes lost to foreclosure were bought in the 1990s. More than half of all borrowers who lost their homes had already refinanced at least once, and four out of five had a second mortgage.

The original loan-to-value ratio for these borrowers stood at a reasonable 84%, but second and third liens left homeowners with a combined loan-to-value ratio of about 150% by the time of the foreclosure sale date.

Borrowers, meanwhile, took out around $2 billion in equity from their homes, or nearly eight times the $262 million that they put into their homes. Lenders lost around four times as much as borrowers, seeing $1 billion in losses.

“[W]hile house price declines were important in explaining the incidence of negative equity, its magnitude was more strongly influenced by increased debt usage,” writes Mr. LaCour-Little. “Hence, borrower behavior, rather than housing market forces, is the predominant factor affecting outcomes.”

If other housing markets across the country offer similar findings, then the study argues that current “policies aimed at protecting homeowners from foreclosure are misguided” because lenders, and not borrowers, have born the lion’s share of economic losses.

Borrowers that bought homes without ever putting any or little equity in their homes could have seen huge returns on investment simply by extracting cash through refinancing. “Why such borrowers should enjoy any special government benefits such as waiver of the income taxation on debt forgiveness or subsidized loan modifications to reduce their borrowing costs is at best unclear,” the authors write.

http://blogs.wsj.com/developments/20...-refinancings/

[cramer]

no news there benny. Unless all of my friends were making a half mil a year, there was no other way for them to afford their toys.

in other news...

US home prices rise first time in 3 years..

http://ca.news.yahoo.com/s/reuters/0...my_homes_index

[meatdrink9]

Good article Benny. One thing I always look at when purchasing homes is what the last person paid. It's amazing that on probably 90% of the short sales I see the buyers paid quite a bit less than the current asking, but are somehow underwater and asking for a short sale. Again, HELOCS to buy shit. I don't think the banks can blame the borrowers alone. Every bank here in UT had ads asking people how they wanted to spend their equity? boats, TVs, RV etc... Zions bank even had an illustration of the home dissected and those chunks paying for other things.

[Benny Profane]

"Cash Out". A phrase I probably heard a thousand times on TV and the radio for a long time, but, no more.

[Toadman]

WSJ

Study Finds Underwater Borrowers Drowned Themselves with Refinancings

By Nick Timiraos

Why are so many homeowners underwater on their mortgages?

In crafting programs to prevent foreclosures, policymakers have assumed that the primary reason homeowners owe more on their home than it is worth is that they bought at the top of the market. In other words, they’ve lost equity primarily through forces beyond their control.

A new study challenges this premise and finds that excessive borrowing may have played as great a role.


http://blogs.wsj.com/developments/20...-refinancings/

Read an article in Kiplingers that said the same thing. They profiled a couple fm Lynwood, WA that took out a $75K HELOC, turned around and made a $26K down payment on a vacation home and another $25k for home improvements etc. Now they can't make the payments on the vacation home, Countrywide (BofA) pulled the remainder of the HELOC, which they were using to make the payments on the vacation home, because the rent they are getting on the vacation home doesn't cover the mortgage. So what do they do? They refi the vacation home to an interest only mortgage for the first 3 years. Unbelievable.

[cramer]

Read an article in Kiplingers that said the same thing. They profiled a couple fm Lynwood, WA that took out a $75K HELOC, turned around and made a $26K down payment on a vacation home and another $25k for home improvements etc. Now they can't make the payments on the vacation home, Countrywide (BofA) pulled the remainder of the HELOC, which they were using to make the payments on the vacation home, because the rent they are getting on the vacation home doesn't cover the mortgage. So what do they do? They refi the vacation home to an interest only mortgage for the first 3 years. Unbelievable.

wow...I'm not sure if i am in awe that they went interest only or that you can still get an interest only loan.

[Benny Profane]

Yup, sometimes I think, where the fuck did I go wrong. I heard about a simple Manhattan deal recently. Bought for a million, tapped out another million somehow, and just walked away with the cash, essentially. Where did it go? There's hundreds of billions of dollars that just, essentially, got made up and printed, and carted away somewhere. The smart and lucky ones have it productively invested.
Second time in a decade. All those startups in the late 90's of fake companies made a lot of people very very rich, and we have no trace of it anymore. It may have been a crash for us, and, it was a crash for many participants, but, I'm guessing, a LOT of people made obscene riches off the thing, and are sitting on a beach or perfecting their short game today.

[Benny Profane]

I think the problem with Fairfield County are the expedited sales of the spec houses in the $3-$5 million range. Whether through foreclosure or the builders just giving up, when these homes come down, its going to push everything down below it. I don't think this has happened yet.

This is why it hasn't happened yet, and, who knows, may never. This may very well be the most expensive place to live in America, soon.


July 31, 2009
Big Banks Paid Billions in Bonuses Amid Wall St. Crisis

By ERIC DASH
Wall Street's million dollar club had nearly 5,000 members in 2008.

At least 4,793 bankers and traders were paid more than $1 million in bonuses last year even as profits at the biggest banks dwindled and they accepted tens of billions of dollars of taxpayer money, according to a report released on Thursday by the New York attorney general’s office.

Wall Street bonuses have come under intense scrutiny from lawmakers and regulators who say they believe that freewheeling pay practices contributed to the financial crisis. Banks have long paid their executives bonuses to supplement smaller salaries, but governance experts say that the nine-figure payouts during Wall Street’s worst year in decades shows the link between pay and performance has been frayed.

The House of Representatives is scheduled to vote on Friday, ahead of its August recess, on a compensation reform bill. The new rules call for a “say-on-pay” vote for all public companies and additional requirements that compensation committees be made up of independent directors, and would order regulators to restrict "inappropriate or imprudently risky" pay packages at larger banks.

Ever since public furor erupted last spring over bonuses at the troubled insurance giant American International Group, lawmakers have paid close attention to Wall Street pay. Both Congress and the Obama administration introduced tough pay guidelines for financial executives, and the Treasury Department created a position of a federal compensation czar to review pay packages at companies that received multiple bailouts.

Kenneth Feinberg, who reviewed the payouts to victims of the terrorist attacks on Sept. 11, 2001, has recently been meeting with several Wall Street firms. The pay for the top 100 highest-compensated employees at the General Motors, Chrysler and five of the most deeply troubled financial companies must win his approval.

The figures released on Thursday by the New York attorney general, Andrew M. Cuomo, provided the most detailed accounting yet of Wall Street’s millionaire ranks. In the report, Mr. Cuomo said that 738 bankers and traders at Citigroup took home bonuses of $1 million or more in 2008 even as the bank posted a $27.7 billion loss. In all, Citigroup paid $5.33 billion in bonuses; it received $45 billion in bailout funds.

Bank of America and Merrill Lynch, whose merger brought the combined company to the brink of collapse, paid 868 employees bonuses worth at least $1 million. Both banks, whose compensation packages are being reviewed by a federal pay czar, turned to the government twice for bailouts, receiving a total of $45 billion.

Merrill’s bonuses totaled $3.6 billion in a year that it lost $27.6 billion, the report said, while Bank of America paid $3.3 billion in bonuses on $4 billion in earnings.

Wall Street’s more profitable firms were more generous, even though they also received government support. At Goldman Sachs, 953 bankers and traders took home bonuses worth at least $1 million last year, including 212 employees who received more than $3 million. The investment bank paid a total of $4.8 billion in bonuses last year, the report said, more than twice its earnings of $2.3 billion. The bank got $10 billion in bailout funds.

Morgan Stanley paid nearly 428 employees bonuses of at least $1 million, including 290 who received more than $2 million. Morgan Stanley, which earned $1.7 billion last year and received $10 billion in federal aid, paid $4.5 billion in bonuses.

JPMorgan Chase paid 1,626 employees bonuses of more than $1 million in 2008 and received $25 billion in federal assistance. The bank earned $5.6 billion, while its bonuses totaled $8.69 billion.

[4matic]

House (dump) next to mine is for sale a/c 94580 for $329K. Went on the market Saturday and has had upwards of 100 visitors. It's already bid at $350k in the first hour and the realtors phone is "ringing off the hook".

[Benny Profane]

http://www.bloomberg.com/apps/news?p...d=ac9y1xr7yNhQ

‘Underwater’ Mortgages to Hit 48%, Deutsche Bank Says (Update1)


By Jody Shenn


Aug. 5 (Bloomberg) -- Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.

The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.

As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.

“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.

Seven markets in states with the fastest appreciation during the five-year housing boom -- including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas -- may find 90 percent of borrowers underwater, according to the report.

The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen.

Home prices will decline another 14 percent on average, the analysts wrote.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

[skier666]

54 days on the market and my 2bd/2ba SF condo is still for sale. Averaging around 20 groups every Sunday for the Open House, and still the most popular of our agent's listings but no offers as of yet.

From Socketsite.com:

Inventory of Active listed single-family homes, condos, and TICs in San Francisco declined 6.4% over the past two weeks (versus an average drop of 1.3% for the same two week period over the previous three years) and is now running just 1.3% higher on a year-over-year basis (down 12.6% for single-family homes, up 11.7% for condos/TICs) and 5.3% higher than at the same point in 2006.

Roughly 37% of active listings in San Francisco having undergone at least once price reduction with the percentage of active listings that are currently either already bank owned or seeking a short sale hovering around 12%. Expect listed inventory to continue to decline through the rest of summer and then spike in late September.

[meatdrink9]

Just bought a new place today. 2 bed, 1 bath 1200 sq ft. for $34,000. I'm stoked. First purchase in 4 months or so. Already rented at $500 to the guy doing the remodel. Rent goes up to $650 once it's complete (roughly 1-2 months).