Saturday, November 17, 2007

Sacramento Real Estate Market - November 2007 Water Cooler

Post off-topic links, observations, and stories about the Sacramento real estate market here. Please read the comment policy before posting.


wimpyVO2max said...

"Jumbo loans still scarce in high-cost areas"

"Home buyers with the very best credit are still having a difficult time getting mortgages in California, raising concerns that the real estate market in the nation's most populous state could fall much further, sending home values spiraling lower and toppling the state's economy into recession.

"In a recent research note, analysts at Goldman Sachs said they believed these loans pushed California home prices to levels 35% to 40% higher than justified by other fundamentals. "We expect home prices to return to normalized levels," wrote James Fotheringham and his colleagues at Goldman.
If Goldman is right, the typical home-owning household in California has about $200,000 less in home equity than it thought it had. Instead of living in a home that's worth $589,000, it's probably worth $380,000."


Sippn said...

Alexis McGee ( was on a RE radio show again yesterday and said a couple of items I didn't know:

Expected banks to hold onto the bulk of their REO inventory until the bottom is hit and starts coming back "like they did in the last bust".

Also noted that a solid 30% + of foreclosures were old loans WITH significant equity still - just payments couldn't be made or refinanced.

Last week I heard her note that the media was way overexagerating foreclosure numbers and also noted that some in congress were quoting numbers 2x actual - but I know some of you find that perfectly acceptable.

Regarding Goldman Sachs - they've done such a great job with stuff they understand - bonds, mortgage bonds, CDOs, etc, I certainly give them creed with stuff they don't know - real estate.

Wadin' In said...

I have changed my blogging name from Sittin' Out This One, to Wadin' In. I have put a house under contract and am wading into this market.

The mortgage payment is about equivalent to my rent, after taxes. While I believe the market may drop some more thru 2008-2009, I think this particular deal, at $125/sf makes sense for me. I now control my own destiny again (the house I currently rent is in foreclosure). And I want to buy more houses in 2008-09, so I will "dollar cost average" if the market drops more.

I hope people on this blog can respect my choice to jump into the market. I would hate to be flogged so hard that I feel compelled to join Sippn' for a beer or two and start defending his positions!! I don't believe Sippn is from the "dark side" and I have not heard Obewan's voice saying "Use the Force, Luke" when I read Sippn's posts.

I will fill you all in on some details as the deal unfolds, but it is a very similar deal to the one She Wrestles recently purchased.

lexi said...

Well, Greenspan just interviewed
admits the US has a large surplusof
unsold homes and that coupled with
the fact that affordability factors
are low, mean housing prices have
farther to fall in the next year
or two. So Alexis and her crew
might be holding on for a few years... Greenspan also admits now to knowing there was a huge
bubble but saying he and the
"experts" said there` is little
you can do to affect buyer mentality. That would most likely
be true on the way down the price
charts also. But hey, Alexis .. good try.

lexi said...

wadin in..
congrats! Everyone has to figure
out when their time is right.
Sounds like you got a good deal..
Enjoy your new home!

Cmyst said...

If the banks hold on to their REO, I don't see how that is going to work in their favor. They'll be losing money every month, with taxes and maintenance costs. Not to mention the fines that many areas are putting on nuisance properties now.
The only areas that I can recall where a lot of houses were empty and deteriorating in the last bust are Oak Park, Del Paso Heights, etc. So, sure. Let's applaud the notion that banks will hold onto their REO. With all the associated problems of vagrancy and decline that comes with that scenario, prices in even the trendiest areas should start to drop even faster.
Think it can't happen? Hey, I saw a panhandler at the intersection of EDH Blvd. and the road that goes into the Raley's shopping center a few days ago.

Sippn said...

Why not beg where there's $$. Did you hear about the prostitution bust up there this spring?

Professor Shays said...

The only rationale reason for any lender to hold on to an REO is they can't figure out how to get rid of it. I don't care what Alexis says. It is obvious from this statement (if this is in fact what she said) that she doesn't know what she is talking about.

When do lenders get rid of their REOs in mass? When regulators force them to get accurate valuations on the real property they hold and they are forced to post reserves for anticipated losses. That will come in time.

Buying Time said...

Congrats Wadin..I'm very jealous. I also want to thank you for setting the comps at a reasonable level for the rest of us!

Mike said...

Congrat's Wadin'in. I think if you can get a house in decent area/school district for $125/sq ft, it is a good deal. I too am currently looking and would pay up to $150/sq ft depending on the area.

I made an offer of $118/sq ft about month ago and was rejected. I think it ended selling for about $130/sq ft.

anon1137 said...

Time to buy? Depends on whom you ask

The National Association of Realtors, which has urged homebuyers to act for the past year, launched its latest newspaper advertising campaign Friday touting homeownership as a key to long-term wealth.

But Chris Thornberg, principal at Beacon Economics and a former UCLA professor, countered that buying now is folly.

"What's the point of buying today when you can buy it for 10 percent less in a year?" Thornberg said. "For the life of me, I can't figure out that logic."

norcaljeff said...

Prof, I believe there is also laws on the books which preclude banks from holding real estate, at least to some extent. They can't hold on to those forever.

PeonInChief said...

If you can remember the real estate market in 2003, you will recall that more than half of the mortgage activity was refinancing by existing homeowners. A lot of people apparently decided to cash out a bunch of equity for other purposes.

Some of these folks then became serial refinancers (not refinanciers, which indicates that you know what you're doing) and have now gotten themselves into big trouble. They may have significant equity, but they also borrowed an amount equal to what the house was worth in 2005, which is about 20% more than the house is worth now.

What amazes me is the number of people who are still trying to do this. A friend said to me just a couple of weeks ago, "I'm house rich and cash poor. I need to refinance to..."

Jacob said...

I have changed my blogging name from Sittin' Out This One, to Wadin' In. I have put a house under contract and am wading into this market.

Congrats. So long as you find the home you want and the price you can afford and don't plan on moving soon then go for it. $125 ft2 is pretty good, thats about what I am looking for.

Most homes I was looking at a while ago were $200+ ft2, but now I see a lot around $150 ft2. A few have been dipping to $110-$125, but just a few so far.

Maybe next year for me. Around fall/winter, I'm thinking if spring/summer are really back for sellers they might get more motivated. If not, then I have to wait until 09-10.

Perfect Storm said...


What bank's are holding onto their REO's? Banks for the majority did not loan money into this subprime fiasco and prime for that matter, it was Wall Street.

alba said...

The loans are leveraged by packaging them into securitized assets. The value of these assets are currently the main issue. Everyone knows they contain bad loans. But they're not bad until they're sold. Its not the value of these bad loans Wall Street is concerned about, nor any amount of inventory. It't the leverage used to sell assets worth many multiples times the actual value of the home loans. Once you start selling the home loans, then the true value of the paper asset becomes known. These are products that have no government regulation, nor ratings, unless they're purchased by holders of bond funds, or other funds that hold a rating...which many are about to crash/go away. Hedge funds, Bond Funds, Retirement funds, etc have started advertizing that their funds hold no subprime loans. Even Paulson has been asking how much is the paper assets worth, considering bad loans are allegedly wrapped in them. It seemed very odd to me that it seems the banks held onto REOs for many, many months. They just don't want to expose their debt just yet. The CEOs of Merrill and now Citi stepped down, because they can't explain the billions of dollars their firms have lost in their ponzi schemes. The leverage could be 50x of the dollars lost in a bad home loan.

anon1137 said...

I agree, alba. If the banks aren't selling their REO properties it has something to do with their own balance sheet, not that they think they're going to be worth more in 6 months or a year. I think Ms. McGee is simply trying to stimulate some interest in her foreclosure listings. She doesn't make any money unless investors or other buyers want this junk, right?

I think it's safe to say that the losses that these investment banks took last quarter are only the tip of the iceberg. Can't want for December and the next reporting period. Should be more hedge fund implosions on the horizon too.

paranoid renter said...

What do you folks think of the lofts in Sacramento? 2 bed/2.5 bath going for about $400K. I think it's a better deal than the 400K houses in the suburbs because it will probably rent for more.

Diggin Deeper said...

"Expected banks to hold onto the bulk of their REO inventory until the bottom is hit and starts coming back "like they did in the last bust"


Yup, not only will they hold the inventory, they'll take huge hits from the subprime fallout. Something has to give or there will be no cash left in the bank ATM.

As reported this morning, Citibank to take an additional $8-11 Billion in writedowns due to bad paper in the third qtr. Wachovia and BofA could hand in another $3-4 Billion. Hey at some point all these writedowns add up to real money.

If there wasn't a credit crunch and a liquidity crisis, most could get suckered into believing this garbage. All the more reason to dump the non-performing inventory in order to free up reserve capital.

To compare the 90's to where we are today is just plain uninformed BS.

Diggin Deeper said...
This comment has been removed by the author.
Cmyst said...

BTW, wadin', congrats on making a much better deal than most. There are so many factors to buying, and I think the problem most of us have had is that we saw the masses not factoring in ANYTHING and going over their heads to purchase.
I can't afford to buy until the market comes down and it's that simple. Plus, there is always the possibility that the Sig will accept a position somewhere else, and I'd like to be able to at least break even if I have to sell.
If any of the houses that I really like begin to drop into the 200K - 250K range, I'd buy, though. So far, the closest is a 281K in Elk Grove. But that house needs a lot of work, and the cost of that work would raise it up over 300K easily.

No, Sippn', I didn't hear about the prostitution ring in EDH! But since I've been here I think they've discovered a body and there have been 2 sheriff's shoot-outs.
From my casual research, panhandlers get more money in poorer neighborhoods. Every one I've seen near MLK blvd./12th Ave it seems like about 50% of the drivers hand bills to the person. I think in wealthier areas, people don't want to encourage begging. I didn't see anyone stopping to give this guy money in EDH.
It's sort of like Trick/Treating, back when I was a kid. We all thought the rich people would have the best loot, but that wasn't true. We made out much better in working class neighborhoods.

Diggin Deeper said...

"Regarding Goldman Sachs - they've done such a great job with stuff they understand - bonds, mortgage bonds, CDOs, etc, I certainly give them creed with stuff they don't know - real estate."

I wouldn't be so sure about that. I'd bet you dinner anywhere in town, that Goldman has further losses to report. Goldman doesn't know s**t! Neither does Citi, Bear Stearns, BofA, Wachovia, or any other bank subject to CDO's and SIV's. If they did, you'd see a bank step up and say "That's it, no more losses will occur due to bad mortgage paper." Balance sheets are in complete disarray as banks have no idea what losses are coming. Talk about the blind leading the blind. That's why we're seeing further writedowns, and more to come. Banks are scratching their heads trying to figure out what shoe is dropping next. Even the whiz kids who put these quantum notes together can't give their bosses any indication of what fails next. It's one thing to have an ever growing inventory of foreclosures. No big deal, just weather the storm and sell when the market turns. But when banks have to take $Billions in losses and cannot account the extent for unknown future losses, the problem compounds significantly.

I'll give Sachs credit on this... They packaged up and sold this crap to John Q Mainstreet, then turned around and shorted those very investments that were good enough for the public to buy. They protected their ass on the backs of their investors.

You really shouldn't try and compare these problems with those of the last downturn. They don't relate when one considers the underlying reasons these bear markets occurred. To make these comparisons is akin to predicting a bottom and we've all seen how "predictable" that's been. It will take years to get to bottom of the losses at our financial institutions.

Cmyst said...

I think Sippn' is being sarcastic about Goldman Sachs. GS is saying homes are about 40% over-valued, and will go down markedly in price.
So, you're both right: the "experts" have been stupendously wrong. In this particular case, I hope GS is right, though, or there will be no home ownership in Cali in my future.

Patient Renter said...

Congrats Wadin. Making a truly informed decision is more than most buyers could say.

Diggin Deeper said...

Watch for Merrill Lynch to follow suit with another round of write-offs. Seems their total exposure for their CDO and SIV have somehow gone from $40.9B to $20.9B almost overnight. Hmmmm... where did the money go? Rumor has it they offloaded $20B to hedge funds and agreed to buyback those securities at no risk to the hedge funds... Sounds a bit Enronesque to me.

G Spot1 said...

"Watch for Merrill Lynch to follow suit with another round of write-offs. Seems their total exposure for their CDO and SIV have somehow gone from $40.9B to $20.9B almost overnight. Hmmmm... where did the money go? Rumor has it they offloaded $20B to hedge funds and agreed to buyback those securities at no risk to the hedge funds... Sounds a bit Enronesque to me."

I think that's a good bet that ML is next. As said on another blog, a new broom sweeps clean. The new CEO is going to want to get all the dirty laundry out now so he can blame it on is predecessor and move on. Watch for Citigroup also.

Everything the Banks and Wall Street are doing right now is about the accounting. These losses are all on paper - marked to market - not cash out the door. They think that if they can delay long enough, things will get better and the assets will rise in value before they have to write them all the way down. Unless that happens, though, we are eventually in for some real bad news. It's the Enron house of cards all over again. Eventually you run out of time, people figure it out, and the whole thing collapses.

Gwynster said...

OK this is my Moment of Zen for the week:

Someone is very hungry

Anyone going to the next Huson and Marshall auction on the 12th? Quite a few west sac and woodland properties and I'm be curious as what they go for.

Diggin Deeper said...

This is typical damage control.

In September Citi's CEO of domestic consumer operations, Steven Freiberg, said,

"Where you think there would be a fire — in our subprime portfolio — it actually looks pretty good."

What a difference a couple of months makes...

Freewheeling risk management over the last several years has created an invisible investment vehicle that strikes without warning and takes $Billions down when it implodes.

SheWrestles said...

Hillwood Loop is a speculator's worst nightmare and the nightmare continues.

I checked out one of those homes - there are several on that street that no one ever moved into - and it was gorgeous. Even at $200,000 less than the original sale price, it's still a bad value, I'm afraid, and they're still overpriced for the buyers in the marketplace right now.

MLS #70034958

This one is a rooming house in Twelve Bridges. Back in the early part of the year, it was priced at around $609-615K. They pulled it from the market then relisted it in April for $585,000. I almost made a move on it when it came down to $515,000 but had a difficult time communicating with the listing agent. Even after we moved to Lincoln, it was impossible to get in to see the property (my wife had seen one with the same floor plan and loved it, though), so I've just kept watching the price go lower and lower.

The agent posted an ad for an open house this past Sunday, but I drove by twice and he wasn't there. I phoned him and left a voice mail that has not been returned.

That particular home backs up to the main road, but all the ones with that floor plan originally sold for $600-700K in 2006. *yikes*

SheWrestles said...

In BofA's favor, I will say that they are not currently offering any stated income loans and even their 'low doc' programs seemed like FULL documentation to me - 2 most recent tax returns, 6 months' of bank statements, and a letter from my tax preparer. In addition to the sit-down interview, I also received two follow-up phone interviews before the approval came in from Wells Fargo.

Gwynster said...

OK what flavor of a bait ans switch is this?

bubblemachine said...

A friend who works with foreclosures told me that the current wave of ARM resets is only the beginning. He says the real crunch will come in 2009 when a ton of ARMs with 5-year resets hit the market. If that is true, it will be years before we hit bottom. Discuss.

SheWrestles said...

You're right.

There are 2 new foreclosures available on Southcreek, right next to one another.

But somehow, D.R. Horton has sold almost every home in their current building phase. I saw that they'd put their models up for sale, which surprised me, but that's all that's left for this cycle.

I can't believe people paid $450-500K+ for that junk.

I'm not sure when they'll start construction on their next neighborhood here in TB.

alba said...

"In total, over 2 million subprime mortgages are expected to reset in the next 18 months, but not all will end in foreclosure. Some homeowners will be able to afford their new payments without trouble and many others will qualify for refinanced, fixed-rate mortgages on their own. Others, however, have stretched too far beyond their means, and unfortunately, foreclosure is inevitable; in fact, many loans enter into foreclosure before ever reaching the reset date. A third group of homeowners facing resets fall somewhere in the middle. The challenge is for lenders to identify the homeowners in this middle group, who with a bit of assistance can stay in their homes."
Under Secretary for Domestic Finance Robert K. Steel
Testimony before the House Committee on Financial Services
November 2, 2007

The amount of money in home loans the various banks currently hold is staggering...

Diggin Deeper said...

"The amount of money in home loans the various banks currently hold is staggering..."

And losses will mount as we head into '08. A rumor has that Goldman Sachs is hiding $Billions in losses and will have to come clean soon.

Pimco's Bill Gross says that we've got a $250B problem and the Fed needs to drop rates to 3.5% in order to stave off what's headed our way.

Banks are in a "throw in the kitchen sink" mode and yet have really no idea how much they're going to lose over the next couple of quarters. Subprime has permeated highly leveraged (up to 20 times)notes accross the world. It's one thing to default on a $300,000 note. But if that note sits in an a $5 Miilion debt instrument and causes it to fail, that's a different ballgame.

This one plays out over time, and the longer it takes, the better. If massive losses hit all at once, I'm afraid the the jolt will really affect our overall financial system.

Wadin' In said...

She Wrestles

(BTW, what is the origin of the name? Are you wrestling with the market or working with Hulk Hogan?)

Here is a Lincoln deal for you. The first home to break under $100/sf at $95!

MLS # 70087540

SheWrestles said...

I wasn't able to locate that one (not coming up on Zip for me) - what's the address?

Here's the morning shocker for me, though: 70075401. 1409 Alder Creek Ct

I don't know what the story is on that family, but they wanted a high price for a very long time. Even after they came down to $475,000 they were still in a spot of trouble because the others on that court - all foreclosures - were priced so much lower.

I'll call to get a verification on the price, though. A $110,000 drop overnight is a bit extreme, even for a distressed seller.

I don't like that court personally, but to save $100,000 I might've been able to endure it.

SheWrestles said...

Email me and I'll tell you about the name - I don't want to spam the board. ;) (

Wadin' In said...

SW, the address is 1090 Montague. 2875 SF for $275,000. $95/sf. Looks brand new, never been occupied. DR Horton sold it and financed it in August 2006. $495,000 with 80/20 100% financing.

It could be a fraud deal where the borrower lets the bank eat a short sale and he walks away with the $100,000 cash back. Of course the IRS will come after the borrower now for taxes on $220,000 of "ordinary income" in the year he sells it! Ouch.

Gwynster said...

I am having such a fun time watching Davis bust. This is classic!

So you're banking on finding 2 families to carry $2000 each in rent or having 4 students cough up $1000 each? Or Maybe 3 to a bedroom at $330 each.

Your neighbors are going to loooooove you. Kiss that flatscreen goodbye!

"$3950 / 4br - Luxury Home in Lake Alhambra Estates
Reply to:
Date: 2007-11-06, 1:31AM PST

Luxury house in Lake Alhambra Estates (Davis) for rent. Elegantly furnished. 4,150 square feet. 4 bedrooms plus study. 20 foot ceilings in family room. High-def plasma tv in family room.

Gourmet kitchen with granite slab counters. Hardwood floors, gas fireplaces, gas barbeque.
Beautiful neighborhood in charming Northern California town.
Walking distance to elementary school, junior high school.
Close to parks and biking/jogging greenbelt.

Owned by academic couple on leave. Available at end of December.
If interested, please send email.
Arena Dr. at Merced

SheWrestles said...

Oh yeah, I remember 1090 Montague - it's on this page (8th one down):

I called and got the scoop on 1409 Alder Creek. It's a short sale and the $365,000 has not been approved by the bank. They apparently wanted to get some bites, so they decided to throw out a low number to see whether that would generate any interest.

It's got renters in it currently who like the house and have considered purchasing, but thought the $475,000 price tag was too high. I'm not sure what they're paying in rent, but I assume it's somewhere in the $1800-2100 range.

Some will disagree, I know, but *if* that house could be had for $365,000 it would be a really good value. With 10% down, you'd be looking at a payment of about $2026/month.

Gwynster said...

She, that $2026 is coming up short.

Assunming 365000 at 10% down and an even 6% interest.
Principal & Interest 1963.52
Property Taxes 380.41
Homeowners Insurance 83.33
Total PITI Payment 2427.27

now add any HOA and Mello Roos or other sneaky bonds.

But nice spin. Thank for playing and we have some lovely parting gives for you.

SheWrestles said...

I was only talking principle & interest.

I'm sure you knew that.

Gwynster said...

Nope, most people here look at PITI plus carrying costs.

But I'm sure you knew that

Wadin' In said...

Let's see, 1409 Alder Creek.

Owned by Mikhail Likhtar. Such a beautiful Russian name.

It appears to be a Richmond American home which sold for $655,000 ($215/sf for 3,025 sf) and the 90% financing of $588,000 was provided by Home American Mortgage. You don't suppose that could be owned by Richmond American Homes do you? Would Wall Street let the Fox guard the Hen House?

And Likhtar appears to have used owner occupied financing, since his listed mailing address is this very house. Why would it be rented? Could this be some fraud? Does Likhtar have his green card? He may be lickting the Gestopo's boots soon when he gets sent home.

The Mello Roos payment is approximately $227/month. Evidently the developer put in paved streets, but wants the homeowner to pay for it over the next 30 years.

So $2650/mon, plus HOA if any. And She Wrestles says the rental value is $1900? I guess the market is correcting, since that is only 70% of the house payment....after $40,000 in closing dollars.

anon1137 said...

When Trust in an Expert Is Unwise

But when a situation is too complex for an amateur to grasp — and when it involves shades of gray — you probably shouldn’t expect to get a purely objective diagnosis from someone who has a financial incentive to give you something else.

This is sort of related to a point I was trying to make earlier, that we should all be questioning the biases of so-called experts who are making predictions about the economy. But the advice works for life in general too.

smf said...

"I was only talking principle & interest."

Why? You explicitly take out a good chunk of the cost.



In my house, the PITI is $2000. PI alone are only $1500.

So you willingly understated the cost by 25%.

You know full well that it is misleading, and this type of s**t was used during the bubble years.

Cmyst said...

One of my kids has an in-law (well, actually a couple of them...) who works in the REIC. She told me yesterday with the caution that "this is really hush-hush and no one is supposed to know this" that Dunsmore had sold a bunch of stuff dirt cheap to whoever had the cash in hand to buy it. I told her that they had declared bankruptcy, and also that about a month ago someone was scheduled to buy them out, so I wasn't sure how "hush hush" it actually was. Since she doesn't really understand all the particulars, it's hard to ferret out what inside info she was privy to. But her impression was that a certain very few and select people with cash were able to buy homes and property for pennies on the dollar.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

Foreign buyers to save the US real estate market?

Don't bet on it...

I guess one benefit to the low dollar is that others in the world can now afford to buy real estate in this country (provided their currency doesn't peg to the dollar.} Hell, if there are too many unoccupied homes, then a temporary visitor to the US will at least fill-in for a short time each year. Plus they pay the taxes, insurance, and upkeep. Not a bad a deal but it looks like it might affect only the higher end as the article suggests.

Diggin Deeper said... appears you've never owned a home before. Just upkeep and maintenance costs will run an additional $150-250 per month ie. security systems, pools, landscaping, trash, "fixit" items, etc.

SheWrestles said...

Why? You explicitly take out a good chunk of the cost.



In my house, the PITI is $2000. PI alone are only $1500.

So you willingly understated the cost by 25%.

You know full well that it is misleading, and this type of s**t was used during the bubble years.

Nothing misleading about it - you can read whatever you want into it. This portion of the conversation began because Real mentioned purchasing some rentals.

In years, what's the expected peak-to-peak cycle in this region?

Tax payments can be deferred, right? Isn't that something a lot of short-term investors would do?

For prospective landlords looking to buy in before the 'bottom', they know they're going to have to carry the tax themselves for years until the market recovers.

Note: I don't count insurance - it's such a small number that I don't see the need to include that in the discussion.

SheWrestles said...'s hard to ferret out what inside info she was privy to. But her impression was that a certain very few and select people with cash were able to buy homes and property for pennies on the dollar.

Were the homes completed or were these pay me now and I'll finish building it later deals?

SheWrestles said... appears you've never owned a home before. Just upkeep and maintenance costs will run an additional $150-250 per month ie. security systems, pools, landscaping, trash, "fixit" items, etc.

Handled my own maintenance the past several years, but this is my first time being responsible for property tax.

One benefit of running a business from home is that a significant portion of the costs can be apportioned to the business.

smf said...

"Isn't that something a lot of short-term investors would do?"

Short term investors should not be on the RE market. Is that not the latest mantra? That you hold on to in for the long term?

"until the market recovers"

The market IS recovering right now! Those who are expecting the prices to hit their 2005 high any time soon will be waiting for decades before they get there again.

If I bought Microsoft at the top of the .com bubble, my investment would only have 1/2 its high value, 7 years after the crash. With no hope of 'recovering' that 'lost' value anytime soon.

The same will happen with housing. Repeat: We will NEVER see the same level of housing prices (10X income) in our lifetime.

And as noted in other places, even now, the market is still FLOODED with 'investors' snapping up foreclosed properties, hoping to flip them when the market comes back.

Gwynster said...

Shrew, peddle the Carlton Sheets BS some place else. These folks are smarter then to fall for that crap.

norcaljeff said...

Shew, you're late to the game on the Hillwood Loop issue. We've talked alot of that, I've posted numerous times about that ghost town. At least 20 emtpy homes never lived in. It's a wasteland. I sent Lander pictures of some of those homes. The front doors would have 30+ pizza fliers stuck on them and brown weeded lawns. No one wants those overpriced homes. Someone forgot to tell JTS that they were building those in Lincoln.

hubie2222 said...

70116342 - did anyone notice that property went into escrow after only 3 DOM?

bubblemachine said...

Signs of the times...

Drove by Washington Park Village (17th and D) this morning. Almost all of these brand new condos appear to be unoccupied. Work has stopped on the last two buildings in the complex with nothing but the concrete pads hidden behind a stylish green fence.

The smallest unit is listed at $370,000.

That's only $300/sf. LOL

Cmyst said...

The housing bubble is impacting popular game virtual economies??

Gwynster said...

Sure it is!

Once people being cutting back, they cut back on everything and those chinese plat farmers will feel the pinch like everyone else. Couldn't happen to nicer people >; )

Cow_tipping said...

Banks can hold the REO's forever for all I care, the dead wood will be cleared out by builders at what ever they can get for them. The empty lots will then be built out to barebones spec and sold at dirt cheap prices by builders. Remember, they dont make any $$ if they're not working. The banks holding on to RE will have to hike up rates on all loans to compensate for their dead wood inventory and to compensate for the dropping dollar. That will make the houses even harder to sell. BTW 2-3 large banks will fail, and dead wood REO's will be blamed. That will begin the banks rush to the exits. OK will never happen, but that's cos they will start to sell them into the dropping market.
$100 a sqft may be the bottom for a small house, like 2,000 sqft. Larger houses should sell for less per sqft. I'd anticipate 4000 sqft to be ~75 a sqft.

Cow_tipping said...

BTW there is a house that is in my street, that was held by JP Morgan for over a year. I know, cos I was HOA president and they totally shafted us by sending us a format letter saying they expect the HOA dues to be reset to 0 when the sale is made. It wasn't a request, it wasn't a suggestion, it was a statement of fact type. Banks hold a good bit of RE, how much and under what circumstances - no idea. They may have wrapped and sold the underlying mortgage and whatever to a fund, but they prolly hold on the servicing rights and the title deed.

Gwynster said...


Does this mean the property will no longer be part of the HOA?

Cow_tipping said...

Nope, not that easy. They wont pay the dues, they wont answer to our calls of "maintaining the property", they do respond when the city writes them up, which is over 3-4 months later IMHO, they will essentially do what they please and say the HOA cannot lein them or nullify the lein if we do. However they sell it to some poor sucker and that sucker will now have to play by our rules and pay dues and maintain stuff, else we fine them, at which point, they can simply lose the house back to the lender via foreclosure, and the whole process starts again. Primary lein holders can do whatever they want with junior leins. The only leverage HOA has is to prevent sale of the house without satisfaction of the HOA leins because the new primary lein holder would like to get the lein without any further encumberences. If its foreclosed on, all junior leins can be made to disappear by the primary. Clean title dees are what they like to sell to the next leinholder. The HOA loses, the home debtor wins (other than the fact that they lost the house to foreclosure) and the lein holder is the referee who is trying to eat both the cakes and hold on to their cake too.

Gwynster said...


There are two houses (REOs) that I'd put offers on but the fact they are in HOAs makes them no-gos for us. I was hoping that what you were saying was that the bank could make it so those homes were "outside" of the covenants after the sale.

I knew it was a long shot- double rats

Cow_tipping said...

Do not ever buy in a HOA. Its a total pain in the ass to get rid of it. If its got a community pool or some other BS you're dean in the water (literally). Builders do sheite like designate some dead space behind each person's house in one stretch as common area. Now they need to have 10% common un built area by regulations. They put the common areas in the worst locations in the subdivision. And where it will make them sell it easiest. Like backing up to a road, they'd put it there, a huge 40 ft deep trench, is common area, worthless sheite is common area. So maintaining it falls on the HOA, and its brutally expensive. They also have the utility company put up lights so you have to pay for electricity forever or buy the lights, and buying is ~4X the yearly bill, but you never get into the position of having 60-70K sitting around, so you pay for it forever.
Then here is the kicker. Delinquents, REO's, other worthless people who wont pay etc etc etc all drive up your bills. If the neighbor hood costs 100K (management fees will be 25K in that 100K) and 10% dont pay, you'd have to hike up the rest by 11% to cover it. That will slowly snowball into over 30-50% delinquents shafting the HOA ~30-50K. I have heard of 1 case where 1 guy was 30K+ over due, and he still didn't pay. We have had one case where 3K was due and got wiped off by lender. Year over year these all add up. BTW monuments with the name and lighting and sheite require that you have them insures, usually they will fall apart by themsleves cos they're made of styrofam. You cannot imagine the crap that can happen and cost you.
There is waaaay more. And I lived in a working class new neighborhood where average house was 2,100 sqft and average cost was 130-140K all 02-04 built. The newer richer neighborhoods were worse. Evidently the stretching into house phenomenon is rampant in the higher $$ ranges. They can tack on 20K in fees on a 400K loan and give it to a guy who makes 40K and tell him I/O option payments are 2,000 a month and you can do it buddy, you can pay less, $1500 is fine, more than add 20K fees on a 140K house. I know, cos that happened to someone I know. their 130K loan app was just ignored, and rejected in 05 for no reason, till a friend of his said he'd get it done and explained why it was rejected.
Sac is going to drop to the 997 or 98 prices not adjusted for inflation. That is where it belongs. Sac was CA's best kept secret. I dont see how that secret is going to become a secret again but it has to. Commuting from there to BA or high $$ jobs comming in from BA is never going to happen. Moving out of BA, they can simply move to Austin TX or Raleigh NC. SFO is SFO cos its SFO. Just like NYC is NYC cos its NYC. Boston, while charming is never going to be NYC.
Anyway, HOA's are sheiete, the crash will eliminate them too when the delinquents and REO's out number the people paying for it, they will simply toss the HOA's on their ass.

Cow_tipping said...

I love it when people think "I have bought it now, and the market is now all going to go up up and away" ...
In a non bubble market in charlotte NC, I bought in end 2002 (well before bubble ever was a whiff in the subprime air on wall st) and I still wonder if I'd lose $$$ and if it makes sense to walk away. I dont believe there is anyway to tell, espcially since charlotte had dropping RE from 96 to 02. I know of someone who bought in 02, for exactly what the previous owners paid in 96. We dont have a fall back reference.

Gwynster said...


My husband owned a condo in Chicago back before we met. The building needed a new roof and 1/3 of units wouldn't pay (vacant units) so guess who had to fork over the missing share? Yep, the tenants who still lived there. It came as a _special assessment_ which you either had to have saving for or they'd go after your house (which is what they were already doing with that 1/3).

He will never have anything to do HOA ever again. People think that flat fee is all you ever have to worry about, talk about an expensive lesson coming.

Cmyst said...

Yes. My condo had a "special assessment" to basically cover what should have been routine maintenance.
When I moved out, the HOA was beginning to make noise about ANOTHER special assessment to get the parking lot re-surfaced and the carports repaired.
Many of my former co-tenants and I used to try to figure out where our $250/mo. was going, if it wasn't going to a fund for upkeep. We got a budget every year, and what we found was that the board never even tried to get competing bids, etc. One of us managed to push through a much cheaper and more reliable yard/pool service, and I suspect that we could have found cheaper insurance and property management, as well. (The property managers didn't do jack squat, the most uncaring and unresponsive idiots I've ever tried to work with, had to be reminded kind of forcefully quite a few times that I was a OWNER and their employer.)
I will never again buy property that is subject to HOA dues.

Buying Time said...

Not that I like extra fees any more than the next person...but my experience wasn't so bad....probably cause it wasn't a condo.

We had a townhouse in the D.C. suburbs. Our 67$ a month HOA paid for trash, snow removal, yard work, leaf removal, and street/light maintanence. Compared to what we have found here in now seems like a steal.

Cmyst said...

Please, someone, rent this house!
Otherwise, I'm going to want to move.
This rental has everything, including the RV space for my ugly van. A pool, a spa, a Strengatrium.

I don't want to move, it's the holiday season, but so help me I'll do it if one of you doesn't beat me to it!

Gwynster said...

I'll rent it but only if I can move it to Yolo co.

Cmyst said...

More news may follow on this rental house in the coming week.
I'm not ready to levitate it to Yolo Co. yet after all.

HOUSE2008 said...

Ok all don't cricify me as this is just an idea.
What if the banks were to take these many homes that are now vacant & find very credit worthy people to buy them with an offer like zero % with all your payments going towards principle for 5-10 years then a conventional 6% at the end of the zero term. This way a person has equity built up in the home while the bank still makes a nice profit from the remaning 20 year mortgage on the balance that's left. Dumb idea?

Gwynster said...


If someone offered me 0% for 10 yrs, I'd buy. But then I'm the same person who will only put something on credit that I could buy outright and then pay it off before the 0% expires.

In a nutshell, I'd bite. But I'd only consider a house that I could pay off completely in 10 yrs.

RW said...

I'm thinking of buying my first place and have been reading this blog for months. Tentatively, I wasn't going to start looking until fall 2008 or later. Something I read in Sunday's Sac Bee in the business section made me wonder, though -- do you guys know what the chances are of a large interest rate hike (in light of the falling dollar against the euro and some other currencies)? It wouldn't make sense for me to wait for lower prices if the interest rate leaps up. TIA.

sacramentia said...

RW - Here is my opinion:

Don't buy because you are afraid that rates will go up, or inflation, or afraid of whatever...

However, if you've found a house that you really want to own in a location that you can see yourself living for a long time, and you can comfortably afford it*, go for it. The benefit of buying in a down market is that you get much more selection on location. It's not all about money - there are many intangible benefits to owning a home too.

*this is a personal one, generally much less than the bank will loan you.

norcaljeff said...

Does anyone else have issues with posting a comment on the first time? I seem to have to enter those stupid letters more than once to post.

Cmyst said...

norcaljeff- yes, for the past 2 years I have to enter the letters in 2 or 3 times before a comment is printed.

rw-for me, if I can save 50 to 100K by waiting, that makes sense. Even if the interest rate on a loan is high, you can refinance when the rates come down again. You can't re-negotiate the price you pay for your house, though. I'm probably older than you. I don't have a lot of time left to save up another 50 to 100K, and every bit helps.

sacramentia said...

yep - half the time i can't post right.. glad to hear it is happening to someone else.