Wednesday, January 03, 2007

Is Sacramento Special or Just First in Line?

On Seeking Alpha, Tim Iacono looks back on his 2006 predictions:

In what was the first of what will surely be an annual tradition, 364 days ago predictions were offered up here at this blog. Appropriately titled, Predictions for 2006, it contained a host of prognostications for the year just ended. Let's see if they were any good.
1. The Housing Bubble Will Not Pop

Despite everything that bubble blog readers, writers, and commenters may feel in their loins, there are just too many willing lenders and too many dumb buyers out there. While 2006 homebuyers may hear something about a "housing bubble", it won't register until 2007, at which time, it might register in a very big way.
Sure, the speculators are going to squeal a little, and in some of the hottest areas, don't be surprised if by the end of 2006 you see year-over-year declines of maybe 10 percent or more, but nationally, prices should be about flat to up a little for the year.
Hit the nail on the head about the willing lenders and dumb buyers. As for price declines - see Sacramento and Sarasota for double-digit declines while nationally, prices are about flat (though it depends on which measure you look at). The housing bubble certainly did not pop in 2006, however it is that you define the word "pop" (unless of course you live in Sacramento or Sarasota).
Tim's 2007 housing predictions:
1. The Housing Bubble Will Pop

When the word "pop" is used here it refers to a 10 percent decline in the year-over-year national OFHEO resale price data - not refinancings, just resales. Others may define the word "pop" differently, but that's how it will be defined here. All the other measures are so squishy that you really don't know what your getting - misleading medians, incentives for new and existing home purchases, and many other factors make it difficult to really assess what has happened using NAR or Commerce Department data.

The popping will not result from the lack of dumb buyers, but rather a dearth of willing lenders. At some point in time, making sub-prime, option-ARM, interest only, 50-year loans no longer makes business sense, and that time will be 2007. There are far too many headwinds going into the mother of all ARM-resets in the months ahead. will not be able to save everyone.

In some areas there will be hell to pay in 2007 - after rising 200 percent or more since the late 1990s you wouldn't think that a price decline of 20 or 30 percent would hurt, but it will.
Speaking of "headwinds," Bakersfield Bubble has been doing a great job covering the subprime lender implosion. (See also: The Mortgage Lender Implode-O-Meter)


jeff said...

Looks like Oregon is back to reality. Their homes are reverting back to 2002 prices. It will spread to Cali in no time.

Anonymous said...

I have a feeling that the feared arm-reset cataclysm will resemble Y2K: namely, much ado about very little.

Perfect Storm said...

More pain ahead for the shaddy lenders
From this weeks Business Week Online:

Bankruptcy Boot Camp

How one man is training an army of lawyers to fight predatory lenders

Yeah all the cataclysm related to the arm-resets and the millions that are going into foreclosure won't be nothing. That is why one firm is going to train an army if lawyers to fight predatory lenders.

The housing market is getting worse daily now.

paranoid renter said...

Well, with Y2K there were millions (billions?) spent on actually fixing systems so the problem wouldn't happen.

This is different. It will hurt people unless interest rates drop and they get to refi. Which may well happen leaving all of us renters watching the party as outsiders. :)

Perfect Storm said...

Mortgage fraud crackdown begins across Cuyahoga County

Michael O'Mara
Created: 1/4/2007 5:50:50 PM
Updated:1/4/2007 7:01:57 PM

Group of local mortgage brokers, loan officers and appraisers accused of being a den of thieves.
The Ace Loan Company has a small fifth floor office on Euclid Avenue. But prosecutors say the company was a big player in a local mortgage fraud scam.

Six of the employees, business associates and agents of the company were busted in the Cleveland area. The president of the company, Neal Wolf, was arrested just after dawn. Detectives tracked down another mortgage broker, Corritha Wells, in Windermere, Florida.

County Prosecutor, Bill Mason, has teamed up with the County Treasurer's office and the Sheriff's Department to put the shady real estate companies out of business for good.

"Your days of preying on our community are over", said Bill Mason. "My staff is building cases today and will be bringing justice to your doorstep tomorrow."

Anybody know of a similar situiation in Sacramento? Now is the time to report. Mortgage fraud is destroying our Country.

Perfect Storm said...

Former Jackson County Executive Charged in Mortgage Fraud Case

Jan 4, 2007 07:50 PM PST
Associated Press Writer

KANSAS CITY, Mo. (AP) -- Former Jackson County Executive Katheryn Shields and her husband were indicted Thursday on federal charges of taking part in a mortgage fraud scheme.

A grand jury charged Shields, 60, and her husband, attorney Philip Cardarella, 59, and nine other people with one count each of conspiracy and 11 counts each of wire fraud.

Federal prosecutors allege that the couple were approached by a group of individuals last fall who offered to sell their home, which was listed at $699,950, for $1.2 million.

The couple was to receive $707,000 of that amount, the remainder being split among other co-defendants and explained to lenders as a "management fee." To get the mortgage approved, the defendants allegedly provided lenders with fraudulent financial information and inflated property appraisals.


Anonymous said...

The situiation noted on the above post is of paramount importance to on going investigation.

Anonymous said...

ANON 7:43

I have to disagree. Y2K was much preparation about something that didn't happen. Whereas the arm-reset IS going to happen and there is little to be done to be prepared for it.

All of my banking clients are experiencing foreclosures like never before and they only expect it to get worse.

Bakersfield Bubble said...

Thanks for the kind words!