Monday, June 01, 2009

Sacramento Real Estate Market - June 2009 Water Cooler

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

135 comments:

Diggin Deeper said...

30 year mortgage interest rates for the week have jumped to 5.25-5.5 range (plus a point) due to the rise in US T bond rates. It's serious enough that Geithner was sent to China to quell fears about our debt and their holdings.

Here's what Chineses students thought of Geithner's claim that the China's debt was safe.

Geithner tells China its dollar assets are safe

http://business.timesonline.co.uk/tol/business/economics/article6405027.ece

"Chinese assets are very safe,” Mr Geithner said, answering a question after his opening address at Peking University this morning.

His answer was greeted with laughter by the students, who question the wisdom of China spending huge amounts of money on US bonds instead of improving domestic living standards."

We may be seeing the last days of sub 5% 30 year mortgages...could change but the winds appear to be blowing in the other direction...

This rate pressure, along with rising energy and food costs, will make real estate price stabilization in Sacto that much tougher to acheive.

Seems like we're not getting the overall intended results that were hoped for...

blackwomanblogging said...

Everybody else's credit limits and availabiliy are being reduced, so why not the federal government's?

I always thought that students in China were reserved and overly polite . . . Dang . . . Geithner got laughed at. What does that tell you about the sorry state of our affairs?

Diggin Deeper said...

It's embarrasing. We send a US Treasury Secty, who's basically on his knees begging for more funds... We tried Hilliary last month but that didn't do any good.

What is it the rest of the world sees, that our leadership seems blinded by?

If I go to the bank to get a loan, and my debt to income ratios are through the roof, I'm walking out empty handed.

Deflationary Jane said...

An acquaintance who lives in a new development near me asked about how to tell if a house was going into default. I sat down with her and walked her through the county site. Then we got curious...

On her street in there are 21 houses all bought for 490k or more in 2005 and early 2006:
2 have a tax liens.
4 more are late on taxes since 12/08.
3 more are late since 4/09.
2 of the 9 are occupied.
1 of the 9 with a tax lien is for sale.
0 of the 9 appear on the sheriff's roles or any or the foreclosure tracking sites.

$68,569.83 lost since April. All of these houses incur annual taxes (property tax plus Mello Roos) 30% to 77% higher then what I pay in rent in a year with the average being 55%.

If you think about it, no wonder our state is about default.

What I don't get is why don't these people who defaulted on their taxes feel like hypocrites when they criticize the state?

husmanen said...

Here's an interesting house, 3025 Meadow Wood in EDH, that came out on the MLS this morning for $339k. Less than an hour later... PS. This one sounds like an insider deal, so called 'pocket' house.

sacramentia said...

I think you mean 3925 Meadow Wood. That thing has been for sale for a long long time. Maybe it was just re-listed. It has a really weird backyard with a sunken bbq pit next to the pool.

husmanen said...

Yes, 3925 meadow wood. I don't remember the price below $350k. Still very fast after relisting and much closer to rental parity, approx 2000/month.

sacramentia said...

You're right about the price - I remember the price being 429 to 399 over about the last year.

Diggin Deeper said...
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Diggin Deeper said...

DJ...as to the hypocrisy...two words, "moral hazard". Without financial or obligatory risks, decisions made to forego your taxes are easy to make..

Just a further follow up on rates

The Big Collapse Could Be Very Near

http://www.economicpolicyjournal.com/2009/05/big-collapse-could-be-very-near.html

"The Federal Reserve appears to be increasingly nervous about the long term bond market. This is serious. How panicked are they? After leaking a story on Friday, they are back at it on Sunday.

And further into the article...this one is quite revealing...

"But the Fed is not really sure what is driving the sharp rise in long-dated bond yields, and especially a widening gap between short and long term yields."

If they're not sure then heaven help us when they finally figure things out...

Diggin Deeper said...

My wife just came out of an office meeting that updated the market as of June 1.

1. Apparently there are 24,000 empty homes in the greater Sacto area.

2. The foreclosure moratorium has been extended through July. Once lifted, empty/foreclosed homes will add another 6,000 properties for a total of 30,000 empty homes.

3. In the metro area there are approximately 100 fraud cases on the books, predominantly against those who mis-stated income (liar loans) and then eventually foreclosed. The upper management team from her agency predicts this number will push into the thousands.

4. The $200,000 properties and under are fairly stable right now, but anything over is subject to further price declines.

5. The market can absorb about 4,000 sales per month so there's a minimum of 6 months backlogged and not on the market. This figure is growing as the moratorium delays properties from reaching the market.

6. Foreclosed sales were running 80% before the moratorium and have now fallen to 50%...

I guess there's good reason to believe the shadow inventory is real and growing....

husmanen said...

DD... thanks for sharing, patience will pay off.

Interesting about the $200k houses and above, eventually (if no hyper inflation) a $400k house will be a very nice home in a very nice neighborhood with a nice sized lot.

Like the use of nice over and over, very subjective :-)

Real Estate Raj said...

Sacramento is one of the areas in California where the real estate market is starting to define a bottom and there is a lot of activity from investors and first-time buyers competing for the same properties. Multiple and overbids are also occurring on those price points. Sacramento foreclosures are accounting for a good percentage of the sales.

At least this is causing an inventory reduction, puts a bottom on the sale prices, and gives the charts a turnaround characterization.

patient renter said...

Raj, We have a ways to go still.

http://tinyurl.com/pa8k85

Deflationary Jane said...

nahhh he's just cruising for clients. And what is with the damn photos? narcissists.

Jacob said...

Wow, a real live realtor on the blog. I thought you had all died out? lol

I will agree that the bottom of the market has found its bottom for now. Subject to change as more jobs are lossed and the better homes come down in price.

It is true that investors or speculators are buying up a lot to rent out or flip, and first time buyers can afford these homes.

As for inventory going down, there is a lot of info creeping out about the huge amount of shadow inventory in the pipeline so time will tell.

My question is this. How and when and where will the next segment of homes, say $250k up to the jumbo limit (whatever that is now), find its bottom?

1) Each forclosure in this area will cost a lot more $$ wise.

2) Investors don't want these homes because they can't rent for profit, though I am sure more than a few flippers and specuvestors will get bloody.

3) The average Joe cannot afford these homes. Never could, never will.

4) When you do get a sale setup it will fall through when it can't appraise for enough and the banks will be very tight with credit for these.

5) You will need 20% down likely as I don't see too many banks wanting to give a subordinate loan, so that is upwards of $100k. Many people don't have that just lying around (with the exception of some on this blog naturally).

6) The biggest source of buyers for this segment are move up buyers, and most of the sales of the lower end are to banks, so there are no move up buyers. If if there is a sellers it could be a short sale, or that person just wants out and will rent, either way there still is no move up buyer. So who will buy these?

7) Sac is very dependant on state jobs, and it isn't likely we will be expending in that area anytime soon. Nor will we be enticing any new businesses to the area.

8) For years builders built bigger and bigger homes to make more $$. And cut every corner imaginable doing so. Now you have way too many large homes for the area. Where are the new developments for 1500 ft2 homes that first time buyers could actually afford? Now you have a disproportionate amount of larger homes / McMansions that people just don't need and can't afford.

9) Bond market is set to blow up and shoot interest rates up sooner or later. Those few people that could afford and wanted to afford one of these better do so fast, cause if it is doable at 5%, it probably wont be at 8%.

Diggin Deeper said...

Raj, that's old news...when a market's being manipulated like this one is, the numbers are no good, and the analysis is even worse. When the banks are forced to hold back placing product on the market for what's now going on 4 months, two things will likely occur when the moratorium ends.

1. They'll dump as many homes on the market as they possibly can. They had months of inventory going into the moratorium, and they'll have added a 4-5 months fresh supply. Put 10 lb's of s**t in a 5 lb bag and you've got problems.

2. The debt service pressure, with 4-5 months added inventory, will now deliver twice the pain that banks were enduring before. They'll be more inclined to liquidate, move property at any price, in order to relieve the financial pressures this moratorium has caused.

This threatens any bottom that may have been forming up to this point, including the lower end which appeared to be firming. When you stop the orederly progession, you extend the problem...

See Jacob's points 7. and 9. for other good reasons why there's a good chance that we'll not bottom anytime soon...

You screw with markets and get a screwing in return...

sacramentia said...

Realtors are not to be trusted. Had one call me yesterday about listing my house, they told me that I should sell now because it will be worth 10% less next year. I asked them if that is what they told buyers? silence...

And then I said, I can sell now, pay 7% in transaction costs, another 1% in moving expenses, and then rent for a year and be worse off than just staying.

The 800k+ market is cooked, the data just hasn't really shown how bad it is yet. No bid on most stuff and real price discovery isn't even occurring.

By the gov't constricting supply enough on the <250k subprime reo's and buying all the rates down, the charts are starting to show a sign of a bottom.

Diggin Deeper said...

"By the gov't constricting supply enough on the <250k subprime reo's and buying all the rates down, the charts are starting to show a sign of a bottom."

Don't forget to check the Credit Suisse foreclosure charts...

The present supply doesn't go away...what subprime delivered up to this point is now being replaced by hybrid and conventional loan failures well into 2011. Hold a 6-7 supply at bay, while another 1500-2000 hit the books each month, and it's like a python trying to swallow a elephant.

With the results we've seen to date, it's hard to imagine that controlling the supply of homes will net anything positive...in light of the thought that our layoffs in this city are probably just beginning...

Jacob said...

I think if you could completely control the flow of homes then you could control the market. You would just ensure that there were 0 sales and nothing for sale...

The homes need to be sold. To get them off the banks books and to get some tax revenue for the states / counties.

The stock market is pricing in a V shaped recovery without a single shread of evidence to support it. Something will happen to break that delusion and there will be more losses.

And yes the layoffs are just getting started. We are still tracking above 600k losses every month with no signs of a meaningfull change. Sure we might have lost 20k less jobs MoM but we still lost a staggering amount.

RV6Flyer said...

"And yes the layoffs are just getting started. We are still tracking above 600k losses every month with no signs of a meaningfull change."

Did you not look at the news today? Only 345,000 and April was revised to 504,000 losses.
Factory orders and confidence are up. The rate of decline in most economic indicators is slowing at a pretty rapid pace. This is why the market is in rally mode.

When all this stimulus stops, well then the environment changes and we may fall again.

norcaljeff said...

I saw the single most amount of MLS listings emailed to me than I ever remember in one week from zip realty.

RE: RAj, sounds like he's got his beamer payment coming due soon, gotta pump up the real estate propaganda!!!

Jacob said...

345000 is a huge amount of jobs lossed. Though I certainly agree that the trend is going in the right direction. Will it continue? Will we start to gain jobs this year? We'll see.

skipintro said...

Maybe the plan is to extend the moratorium indefinitely.

The federal government has injected a lot of capital into the banks, and that capital makes a "trickle-out" (restricted-supply) strategy for foreclosures possible. This would artifically support home prices.

The long-term strategy may be a trickle-out that extends out 3 to 5 years, allowing the excess supply to be gradually absorbed. Whether or not that strategy is feasible is beyond me.

Sold in '05 said...

"Did you not look at the news today? Only 345,000..."

Did YOU not look at how the BLS came up with that number? Did you just close your eyes, click your heals together and hear what you want to hear? All is well, there's no place like home!

Well Dorothy... what was the contribution from the magical Birth/Death machine? Bloomberg reported it for about 15 minutes before they pulled the story, but it's still out there on the blogosphere.

The Birth/Death Black Box added 220,000 "new" jobs to the economy all by itself. The miracle of modern technology will employ us all. That number included 7,000 brand new jobs in the banking financial sector... yea right, 43,000 in construction, and 77,000 in leisure and hospitality. This a joke. The real jobs loss number for May was somewhere around 560,000... Still feeling good about that number?

So the green shoots out there that all the cheerleaders are drooling over are just green paint on a dead lawn.

-CD

Sold in '05 said...

Also the Birth Death Model added 226,000 jobs in April. It looks to me like the whole unemployment report was spun to keep the stock market from reverting to trend on Friday.

Check out:

http://www.chrismartenson.com/blog/may-employment-report-not-believable/20102

Sold in '05 said...

At least one builder has seen the light and changed what they are building. This is a part of a letter from Centex explaining why two half finished neighborhoods will be completed using much smaller and lower standard content products. These neighborhoods are both in West Roseville and previously featured homes from 2100-3200 sq-ft, with solar power and all the granite bubble time options. The new ones are much smaller, solar optional and come with standard formica counters. One of the sales agents told us that "no one wants the bigger homes". Here is the letter:

Re: New home designs to be built in the communities of Carrington and Monument

Based on the current economic environment and changing needs of our buyers, Centex will be discontinuing the existing floor plans that are currently being built in your neighborhood. Centex is developing new home designs which will be available for sale by mid summer 2009. The purpose of this letter is to more fully describe the details of the new designs, timing and location of where these homes will be built.

As referenced in the Disclosure Statement Addendum of your Purchase and Sale Agreement, Centex has the right to change plans, terms and conditions of sales in current and future phases. Current market conditions require us to make adjustments in our existing home choices.

The new home designs will consist of five new floor plans ranging in size from 1445 sq. ft. to 2379sq.ft. These plans will be offered in both the Carrington and Monument communities. Four of the five plans are spacious single story homes ranging from 3-5 bedrooms and 2-3 baths. Elevation styles of all new designs will be consistent with the existing homes in your neighborhood.

Deflationary Jane said...

Yes but until those homes are priced between 100k to 175k, there is no market. All the right-sizing and cheerleading from the home builders is fruitless at this point.

Jacob said...
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Jacob said...

I agree. Those sizes should have been offered from the beggining and maybe we wouldn't be in such a mess if people didn't have to take on so much debt to own.

RV6Flyer said...

"Did you just close your eyes, click your heals together and hear what you want to hear? All is well, there's no place like home!"

Hey CD, why don't you tone down your responses a little.

The death model was no secret and both Bloomberg and CNBC were reporting on it all day. The market couldn't rally that the news and that is why I sold my oil futures and went short the s&p.

RV6Flyer said...

On a side note, I had three head hunters call me last week with multiple finance jobs.

Two months the phones were dead, now, openings all over the place.

norcaljeff said...

Central Valley still over valued: http://money.cnn.com/2009/06/04/real_estate/home_affordability_soaring/index.htm?postversion=2009060412

sacramentia said...

"On a side note, I had three head hunters call me last week with multiple finance jobs."

was just talking to a friend today and we're both seeing the same thing. I'm in information security and he's in patent law.

Deflationary Jane said...

The rich like to protect their own. No such luck for the average joe. And folks wonder why people are so mad.

Diggin Deeper said...

The Birth/Death model is ridiculous way of reporting anything. Just go to the BLS website and try to find it. It's there but its a deeply buried footnote that's takes some digging to find...You certainly won't find it in the base report.

With regard to jobs creation Obama has promised to create 600,000 new jobs in the next 100 days. That's all spin with no stretch when you consider that the US govt will need 1.2 million 2010 census takers in the next several months. It's a modern day version of WPA. This is beginning to skew the BLS numbers and will reinforce the "green shoot" optomists on appearance alone. At least they'll get a true count on the empty homes we have in America before they have to start looking for work again...

As of this morning, it looks like those stress tests for banks weren't quite satisfactory as some in Washington now want another stress test done immediately. Why?

When the real job creators begin to hire again, actually producing tangible goods and services, the all clear signal is near. ..you don't get economic growth with govt supplying the paychecks...

Diggin Deeper said...
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Diggin Deeper said...

RV6Flyer...Knowing you've been out of work for awhile, good luck. Maybe you'll find a position that allows you to hire someone someday...it's got to start somewhere, and preferrably off tax payer payrolls...

This is probably why Congress panels are ordering banks to begin stress testing again..

Bank Profits From Accounting Rules Masking Looming Loan Losses

http://www.bloomberg.com/apps/news?pid=20601109&sid=alC3LxSjomZ8#

"‘Bogus’ Profit'

Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”

It might get a bit tougher to get a mortgage if banks are still bleeding cash. No jobs, no loans, no home sales....

patient renter said...

Anyone see the news about the Fed hiring a lobbyist (a former Enron lobbyist to boot).

This begs the question: Why is a government entity hiring a lobbyist?
Answer: The Fed is, for the most part, not a government entity.

Diggin Deeper said...

Here's what Robert Shiller had to say in a NY Times article.

Why Home Prices May Keep Falling

http://www.nytimes.com/2009/06/07/business/economy/07view.html?scp=1&sq=shiller&st=cse

"This dynamic helps to explain why, at a time of high unemployment, declines in home prices may be long-lasting and predictable.

Imagine a young couple now renting an apartment. A few years ago, they were toying with the idea of buying a house, but seeing unemployment all around them and the turmoil in the housing market, they have changed their thinking: they have decided to remain renters. They may not revisit that decision for some years. It is settled in their minds for now.

On the other hand, an elderly couple who during the boom were holding out against selling their home and moving to a continuing-care retirement community have decided that it’s finally the time to do so. It may take them a year or two to sort through a lifetime of belongings and prepare for the move, but they may never revisit their decision again.

As a result, we will have a seller and no buyer, and there will be that much less demand relative to supply — and one more reason that prices may continue to fall, or stagnate, in 2010 or 2011."

Greg Fielding said...

Here are some charts and the latest inventory data from the Easy Bay:

http://thehousingbottom.blogspot.com/2009/06/east-bay-housing-review-june-2009.html

Sold in '05 said...

"With regard to jobs creation Obama has promised to create 600,000 new jobs in the next 100 days."

You have to watch 'bama's mouth very carefully when he speaks so you can discern what he is really saying. He actually "promised to create OR SAVE 600,000 jobs". That means that 100 days from now we can expect him to announce "Unemployment increased by ONLY X hundred thousand and this is great because if I weren't so wonderful, we would have lost X+6 hundreds of thousands of jobs. For next month I will cure OR prevent 600,000 new cases of severe flatulence."

-CD

Diggin Deeper said...
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Diggin Deeper said...

CD by your earlier analysis, he's already down 460K if we throw out the B/D model over the last two months.

The save part is objective with little or no way to determine actual results. Obama is in a timely sweet spot and will create jobs by employing census workers fulltime up through end of the year. When they go away we'll pay another 6 months to a year in unemployment benefits...He collects political capital for for something the government has to do every 10 years, anyway.

It's a shell game with no pea...plus the BLS will support the next several months by creating phantom jobs to soften the blow for the actual job losses we'll see...Obama's in a no lose situation.

patient renter said...

Whether or not the stimulus is creating jobs and how many isn't important, at least not to me. A lot of money can create a lot of jobs, but at a lot of expense.

Every time anyone utters anything positive about stimulus spending such as we saved jobs, we built roads, we provided healthcare, we educated kids, etc., the response should always be, at what cost? Spending for the sake of "stimulating" is never likely to be the wisest way to invest capital. The net ROI will always be negative.

"Obama's in a no lose situation."

Any thoughts on how the potential Fed audit will change things? I'd like to think it can change things greatly, but like any David vs. Goliath task, it doesn't seem likely.

Deflationary Jane said...

I posted this on CR since Sac Landing is practically dead these days. But I hope there are enough of us still around to get some benefit from it.

Below is a comparison of trustee listings from different dates. The older dates were just searches I either saved for other people or was interested in myself. In other words, almost completely random with my curiosity being the only constant.

date zip listings change
2/17/2009 95691 35
6/8/2009 95691 91 260%

7/22/2008 95817 34
6/8/2009 95817 24 71%

4/9/2008 Woodland 54
6/8/2009 Woodland 122 349%

4/11/2008 ED County 173
6/8/2009 ED County 386 223%

95691 is full of new development that was very expensive of the location.

95817 is a depressed area that experienced some of the worst of the speculators and flippers. It still has a problem with flippers but perhaps another time...

Woodland is a central valley ag town about 15 min from Sacramento that experienced pricing pressure from Davis and Sac. It currently is experiencing problems with migrant workers and rising crime rates.

El Dorado County is a high priced exurban county which suffered lots of speculative building and monetary inflows from the Bay Area.

We had a sharp spike in trustee sales last year which is why I'm sort of grateful that I saved those searches. Locally we hear that our MSA will bottom out and come out of the recession faster because we were on the forefront of the downturn. Judging by those trustee listings and the crisis in CA, I don't think Sacramento is going to be that lucky.

Diggin Deeper said...

"Locally we hear that our MSA will bottom out and come out of the recession faster because we were on the forefront of the downturn."

I agree. With city and state government employment running close to 30% of the city's economic base, how could one conceive a bottom just because we were first to fall?

What is beginning to get interesting is that the sub $250K market is really short of properties right now. You'll see short sales but very few quality foreclosures or owner occupieds.

An unintended consequence of holding back inventory might end up that without inventory, sales figures dry up, and prices would would then move lower to stimulate demand. Market controls often backfire and I wouldn't be surprised, with the state's fiscal health in dissaray, to see another leg down across the board...

Call it what you will, but few really had a fix on how bad our local economy has gotten up to this point...

sacramentia said...

"An unintended consequence of holding back inventory might end up that without inventory, sales figures dry up, and prices would would then move lower to stimulate demand."

Restricted supply would cause a reduction in Price too? I don't understand your point, a lack of supply should cause a pent-up demand, if there is any demand in the first place.

patient renter said...

"a lack of supply should cause a pent-up demand"

But when most of the sales are coming from investors, that's not true demand. They're not looking to buy a house to live in, they're looking for a good deal, and if they can't find one they won't buy. That sort of situation isn't likely to drive up prices.

Diggin Deeper said...
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Diggin Deeper said...
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Diggin Deeper said...

sacramentia, that was poorly stated on my part. You're correct, under normal market conditions, a diminished supply would tend to push prices higher. Imho, this is not a normal market. When you add in a severe recession, area job losses, a state that's having to downsize, interest rates rising, etc, it's not a given that demand will rise or remain pent up.

Market controls won't make the inventory go away, and if the banks are waiting for conditions to improve, they might be waiting a long time, while continuing add more homes to their books month after month.

Just an adder about interest rates. Today's 10 year T bond auction didn't do very well. Interest rates came in a 3.99% and have been steadily rising on the longer (10 yr and up). Rates could push closer to 6% soon if the Feds can't find a way to bring them down...

patient renter said...

Has anyone noticed a major uptick lately in the number of people complaining about getting loan workouts? The various bailout BS has sparked a sense of entitlement amongst many homeowners. Quite the slippery slope we're on.

sacramentia said...

"Interest rates came in a 3.99% and have been steadily rising on the longer (10 yr and up). Rates could push closer to 6% soon if the Feds can't find a way to bring them down..."

How long you think until Obama starts asking us to buy US bonds out of patriotic duty?

Diggin Deeper said...

Sacramentia...

No doubt. Better add "Save the Golden State" bonds to that portfolio....

California near "meltdown" as revenues fall: official

http://news.yahoo.com/s/nm/20090610/pl_nm/us_economy_california_revenues_2

"The state's revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report released by Chiang's office."

We're about to get real in state politics, too...Unfortunately it will be hard for Sacramento to sidestep the fire works that about to go off at the Capitol.

Wishing for a bottom in the real estate market seems a bit premature...

norcaljeff said...

Fans of Economist Chris Thornberg can find him in CNBC's Fast Money. He's been appearing 1-2 times per week lately. He was one of the first economists to pull the fire alarm on the housing bubble. Lander posted a video of him lecturing at CSU Humboldt about 3 years ago. Interesting guy.

robert said...

Hey Deflationary Jane,

What's CR?

Jacob said...

CR = www.calculatedrisk.blogspot.com

As for CA, all the cuts they planned are so much political BS. Say on the news last night how they are cutting a long standing program that is a school for disabled people, blind people, maybe other disabilities. This school is being cut.

Or we are cutting teachers, or food for poor children or police...

All scare tackticks, don't want to cut these, better raise taxes...

There is plenty of fluff they can cut and people would support but they go straight for programs people really need and want and offer to cut that.

we will always have a problem until we put the politics and BS behind and work from both sides to come up with a solution. Which is not likely to happen so we are screwed.

patient renter said...

"There is plenty of fluff they can cut"

I saw one comment at the SacBee recently where the commenter, a State worker, was asked to help pick a fabric for new office furniture, the same week he/she was furloughed. The commenter said they declined to participate.

Diggin Deeper said...

Here's some fluff that was on the local news last night...

Governor: Waste Management Board Is Waste

Former Legislators Paid Six-Figure Salaries For Serving On Board

http://www.kcra.com/politics/19718556/detail.html

"Three of the appointed members are ex-lawmakers, Carole Migden, John Laird and Sheila Kuehl. They make $132,00 a year and meet once a month.

Both Kuehl and Laird, who are termed out, were known as thoughtful, effective legislators.

Migden, who was tossed out by voters, had a reputation for erratic behavior, including smashing up her state-leased car two years ago.

Kuehl said her job is a lot of work and that taxpayers are getting their money's worth, considering the board is funded by fees from recyclers and trash companies."

Kuel's rationale is laughable and shows just how out of touch a "retired legislator" can be....

Most people work over 20 days a month. Here we're paying (oops companies are paying) $132,000 for 12 days work per year times 3...times every other committee that has perks like these.

patient renter said...

I've heard a bit about those board jobs that typically go to retired legislators, but I didn't realize the work schedule was that lax. Ridiculous.

Diggin Deeper said...
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Diggin Deeper said...

May Foreclosure 3rd Highest on Record...

http://news.yahoo.com/s/nm/20090611/ts_nm/us_usa_housing_foreclosures_5

"There were almost one million foreclosure filings in a three-month period, and that's simply unprecedented," Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview."

"RealtyTrac forecasts about 4 million foreclosure filings will be made this year on about 3.1 million households with loans. Last year, there was a record 3.1 million filings on about 2.4 million households"

You wouldn't believe it looking at today's MLS...this year worse than last? The way it gets spun is that foreclosures are down 6% YOY....Big deal!

mopar777 said...

I have a vacant 3/2 duplex unit open right now. I would've had the former tennant forever, but he lost his longtime job as a painter and had to move into a dump.

From what I can see society is going through a great restructuring and realignment right now. The prospective tennants I see coming through are in the process of downsizing and they aren't happy about it. Most are being foreclosed on or being kicked out of a place where the landlord is being foreclosed on. One lady is moving out of her home of 30 years because she drank too much kool-aid and is now being strangled by the payments.

They seem like they are in denial over having to live "in a place like this."

Harold said...

There is an agent I follow on Twitter that is starting to track the increasing number of short sale listings in different Sacramento areas. This comes on the heels of Jim Wasserman's Bee article about how these are outnumbering the repos in many areas now:

http://tinyurl.com/ltm6mu

husmanen said...

Short sale buyers today will, most probably, be tomorrow's underwater home owners.

There are many examples of short sales taking a long time, that when completed the house is worth much less.

Maybe the banks are trying to push them through fast because they know the market will NEGATIVELY surpass their asking price if they wait a day, week, month or months.

I found the SacBee article regarding short sales to be another push of 'you got to get it now or BE PRICED OUT FOREVER'.

Deflationary Jane said...

Harold trolling for Erin? ugh

Diggin Deeper said...

"From what I can see society is going through a great restructuring and realignment right now."

We're probably getting warmed up. The Sacramento area has the distinction of sitting on top of 3"ground zeroes". The subprime problem dealt the first blow, state's fiscal failure will deal the second, producing another wave of foreclosures supplying the 3rd. If we don't break the cycle, we're in for long slog...

The Feds can and probably will bail out the state, but then the state has to attract investment capital to finance the future. Not an easy task when it's clear our leadership spends more than it takes in...

Changes? You can bet on it....

patient renter said...

"Harold trolling for Erin? ugh"

Yea that's pretty lame. How bout those interest rates, eh?

husmanen said...

Yeah, we should do a poll of when we think the interest rates will surpass 6%. Monday, Tuesday, of next week or Monday, Tuesday of the week thereafter.

This will absolutely kill the spring bounce.

The more expensive homes will be in a world of hurt.

Looking to Autumn (as opposed to the Fall which may be construed as the housing fall), we might bounce around with interest rates and be back at the same place we are today.

Interesting times ... again!

Diggin Deeper said...

Husmanen,

Could happen, but there's a lot of govt. financing that's needs to get done over the next 12 months...and with commodity prices moving up, its likely to give prospective home buyers some tough choices to make...

husmanen said...

Great article on Dr. Housing Bubble regarding foreclosures and "the bottom".

http://www.doctorhousingbubble.com/

One of my favorite references he refers to regarding the old line that prices won't fall.

"..First the argument was, “housing will go down but not in California.” Next it was, “housing will go down but not in mid to upper range areas.” Now the argument is, “housing will not go down in prime areas.” The bottom line which people fail over and over to examine is local area incomes do not support prices even today."

That sums up a number of previous participants on this blog, btw, we don't see much of them anymore.

David said...

Regarding short sales, we made a bid on one almost two months ago and have not heard squat. I warned our agent (who is also the seller's agent but not the bank's agent) that the house's value would decline by 2 percent each month we wait for an answer and that the chances of us going into contract at the bid price were nil. I also warned her that rising interest rates could force us to withdraw. I told her this so she would light a fire under the bank's arse, but the banks don't seem to have learned a thing in the last two years -- they keep pretending that price stability is right around the corner, and it has cost them trillions collectively because they are slow to unload their rapidly depreciating assets. The agent told us not to worry, that the deal will go through as long as we are patient. If the bank won't deal, I'll walk and wait for them to foreclose. The house may go to an investor in a pocket sale, but I refuse to be ripped off or treated like I'm stupid. I'll keep you posted.

patient renter said...

David - I'm in agreeance with your line of thinking. Good luck.

norcaljeff said...

Industry analysts say half the for-sale signs in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties that aren't bank repos are short sales. They're especially prevalent in newer suburbs built during the housing boom. According to Sacramento-based Metrolist Services Inc.:

• 56 percent of Lincoln homes priced between $200,000 and $250,000 are short sales.

• 55 percent of Rancho Cordova homes priced between $200,000 and $300,000 are short sales. In Folsom, 46 percent of homes in that price range are short sales.

• 44 percent of Elk Grove houses priced from $300,000 to $325,000 are short sales.

http://www.sacbee.com/business/story/1933643.html

patient renter said...

I hear we're getting some new CA foreclosure rules on Monday. Anyone want to wager on whether or not this latest intervention will turn out any better than any other in history?

Deflationary Jane said...

Another I told you so...

Golden State losing folks as old Dust Bowl beckons
http://www.sacbee.com/topstories/story/1944947.html

paranoid renter said...

Just back from dinner with a friend. She told me that in her condo complex several folks are not paying their HOA dues and a meeting has been scheduled to discuss the financial situation of the condo HOA. Apparently there are several abandoned units and many folks that are underwater have stopped paying HOA dues.

Any ideas what this might result in?

The interesting part is that _none_ of these units have appeared on Zip Realty for sale, so I'm assuming there's something really weird going on.

paranoid renter said...

Check this out - 40% price drop over 2 years. It started out being a regular sale and is now a short sale. I had put in a bid for 200K when it was first listed. Glad it wasn't accepted. :-)

1603 Kentucky Way, Rocklin.

Price Reduced: 10/13/07 -- $259,900 to $249,000
Price Reduced: 02/26/08 -- $249,000 to $215,000
Price Reduced: 08/12/08 -- $215,000 to $195,000
Price Reduced: 02/23/09 -- $195,000 to $185,000
Price Reduced: 05/04/09 -- $185,000 to $155,000

On market for 692 days!

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

Mayors say cities need direct economic help

http://news.yahoo.com/s/nm/20090615/pl_nm/us_economy_mayors_2

"And it's important that metropolitan areas get money directly for recovery, and not through the states," said Los Angeles Mayor Antonio Villaraigosa, who has voiced concerns that states may use stimulus funds to close their own budget deficits, especially in California with its massive $24.3 billion gap"

And more news this morning that will affect mortgage rates at some point.

The Treasuries International Capital inflow report was dismal as Foreign capital has basically fallen off a cliff regarding long term treasuries. YOY purchases through April '09 as compared to YOY April '08 as follows:

April '09 YOY was $89B

April '08 YOY was $502B

This is major loss of financing revenue over the course of a year!! Without a turnaround here, we get to finance our massive debt internally...
This is setting up to be another Perfect Storm brewing in our RE market. Foreclosures have been stalled while mortgage rates are moving up. Burgeoning supply with rising rates aren't the kind of fundamentals that will bottom this market...

The RE caution flag is up!

patient renter said...

The mayor has a point, but I'm guessing the city is guilty of not reducing services appropriately to reflect the decrease in revenue from levels that were skewed by the debt bubbles.

husmanen said...

Here is an interesting article about the latest moratorium that took effect on Monday.

Little relief in new California foreclosure law By Eve Mitchell
Bay Area News Group

http://www.mercurynews.com/news/ci_12597775?source=rss

"...But don't expect automatic or immediate relief under the law, written by state Sen. Ellen Corbett, D-San Leandro.

Lenders and loan services that already have a comprehensive loan modification program in place are exempt from the law. Such programs call for loans to be modified by lowering interest rates for at least five years, deferring or reducing part of the principal, or providing for up to 40 years to repay the loan."

husmanen said...

Wow, this is most probably a 'pocket' listing. My guess it went pending before it was listed.

2119 Sheffield Dr, EDH, 95762

$325K, 2929 sqft

http://www.metrolistmls.com/cgi-bin/GetOneR.cfm?MLSNum=90045151&iRow=2&nRows=2&yAddr=T&yMy=F&yAsc=N&iSort=1&nJL=7

Getting close to $100 per sq ft, now we are talking!!

patient renter said...

The increase in home starts had NPR telling me today that the market may have bottomed out (how many bottoms are we up to now?)

Carrying on the time honored tradition of excluding all useful information, NPR forgot to mention that this increase is seasonal, that the increase comes off of a historic low, that month to month changes are mostly meaningless, and that the homebuilders confidence survey shows that the builders know something NPR apparently does not.

patient renter said...

An interesting find from a few years back - Krugman called for a housing bubble to replace the NASDAQ bubble.

http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html

Hindsight is 20/20, but I'd be too embarrased trying to influence policy were I him.

b1whois said...

here is the may report of MLS statistics from the sac assoc of realtors
http://www.sacrealtor.org/public-affairs/statistics.html

b1whois said...

from the link i just posted:

"The Total Listing Inventory also dropped year-to-year from 7,902 listings, a 35.9% decrease. This lowered inventory figure also drops the Housing Market Supply figure 6.5% from 3.9 months in April to 2.9 months in May."

and

"Sales records for the last three months have shown 1,725 sales in March, 1,707 sales in April and 1,733 sales in May."

would seem to confirm that there was no "flood of forclosures" for may, but i guess we knew that already....

b1whois said...

when you take these two together:

"UCLA foreecast says state worker layoffs could top 60,000"
http://www.istockanalyst.com/article/viewiStockNews/articleid/3270621

and

"total sacramento region job impacts from ... 5,000 layoffs"
http://www.srri.net/AboutUs/Jun09FOTM.gif

things look U G L Y! (does "job impacts" mean "jobs lost?")

notice that it estimates 1,200 government jobs lost in the sac region for layoff of 5,000 state workers.

sacramentia said...

PR - Great link from 2002. Thanks

Diggin Deeper said...

White House says no to California budget help

http://news.yahoo.com/s/nm/20090616/pl_nm/us_california_whitehouse_5

"It's obviously not an easy time for the state of California," White House spokesman Robert Gibbs told a briefing when asked if the administration would provide emergency financing for the state.

"We'll continue to monitor the challenges that they have, but this budgetary problem unfortunately is one that they're going to have to solve," Gibbs said"

This is today's talk, tomorrow may prove to be a completely different story...As California goes so goes the rest of the country...

Diggin Deeper said...

Don't be tempted to fall into the "real estate is bottoming" trap quite yet. We still don't know how effective these loan modification programs will be. "Qualifying" seems to be the magic word. Not everyone will qualify nor will those that do accept the terms...so the actual number will get watered down a couple of times before you get to those who participate.

Has anyone got any information on the qualifying parameters for this program? The moratorium basically got started in March. If takes 4 months for banks to make contact, one can only imagine how many there are in our area. Thereafter, the willing "qualified" get their loans modified and the rest proceed into foreclosure.

Until there's some clarity on this program and those that will actually benefit from it, there no rush trying to compete with others for an inventory that's being arbitrarily held back...

Randy said...

Paranoid Renter: Thank you for that Rocklin condo link! That's the one my sister was so crazy about buying last year! She was (and still is) living in Hawaii, but she wanted to own a piece of nice property in that area so bad she was thinking of all these crazy ideas about buying that condo, renting it out, until she would eventually move back to California. I kept telling her she had the craziest ideas, and that the condo would still keep dropping in price.

As it is, she's ended up staying in Hawaii and will be there for at least another 2-3 years. She would have been sooo underwater in just one year's time.

Luis said...

Looks like UCD folks are definitely getting furloughed/paycuts.

paranoid renter said...

Randy,

Why would she want to move from Hawaii to Rocklin???

It makes sense to keep waiting. Let the CRE bust take its toll on employment and the banks. We will probably need a MEGA-TARP shortly to deal with CRE.

Prices won't bottom until employment recovers and we are a LONG way from there.

Now I'm scared to get anywhere near a condo with all these "special assessments" hitting.

Better to save money and buy for cash in 5-10 years.

Deflationary Jane said...

Luis,

Per a memo that went out yesterday, staff and admin take all the cuts. No cuts or furloughs to faculty though faculty hiring will be frozen.

You can imagine what morale is like here but there is one bright spot - real estate prices in Yolo co. are going to take a hit.

Luis said...

DJ, yeah it's pretty much a for sure thing. I have a feeling they'll just cut the wages across the board like they did in the 90's. I am a UCD staff member, and my wife is a State employee. I think Yolo will need to come down way more before we can consider making moves.

patient renter said...

I'm gonna go out on a limb and declare the next bubble to be the lobbying bubble.

The process of buying influence will be streamlined in such a way that legislatiors will be securized and sold as assets. You will be able to buy a portion of a legislator, or trade legislative shares on the private market.

Currently legislative assets are vastly undervalued, making them an excellent buy opportunity. The banking industry's ROI for their 2008 legislator securities was well in excess of 2,300%. The private healthcare insurance industry is looking at a 4,200% to 8,500% ROI for their 2008 outlays.

This is a great opportunity for everyone, so get in while these assets are still dirt cheap!

David said...

Hee hee hee I can think of a few legislators I'd like to carve up and sell in tranches.

RV6Flyer said...

"I'm gonna go out on a limb and declare the next bubble to be the lobbying bubble."

It is already busting. My wife has been forced to go from being a lobbyist to teaching about it at Sac State. The lobbyist are all sitting on their arses waiting for a new client or something to lobby about. The budget is sucking up most of the law makers' time and attention.

patient renter said...

It is already busting. My wife has been forced to go from being a lobbyist to teaching about it at Sac State.

I would think business is booming in DC though, no?

(my post was mostly jest)

Diggin Deeper said...

"The lobbyist are all sitting on their arses waiting for a new client or something to lobby about."

If you ain't got the cash, there's nothing to talk about, and California legislators aren't going to be seeing any extra "green" for a long time. Kind of like migrant workers, when there's no fruit to pick, you go home...

Just picked this off Bill Bonner's site...

"In 2001 the banking industry spent $5 million on lobbying in Washington. The total went up every year. By 2008, they were spending $20 million. Campaign contributions from bankers increased too...from only $4 million from the bankers' political action committees in 2000 to $8 million last year."

A growth industry that busted with the rest of them...

Jacob said...

Did you see the tax revenue chart at CR?

CA From April 08 to April 09, Income Tax revenue is off around 35%, about 16% loss of overall revenue for the state.

And to think our budgets always factor in positive growth. This puts us another $8-$12 billion or so in the red.

husmanen said...

In case you missed the SacBee article about move up buyers:

http://www.sacbee.com/topstories/story/1959684.html

Love the part where the woman is not satisfied with the price the Realtor suggested and will rent out the house. Lets see how that one works out regarding rental parity...

norcaljeff said...

Love this one too...

"Until the move-up sector of the market recovers, housing can't recover, analysts say. Everything above $400,000 is almost at a standstill."

Esp this one, since people are quick to point out those areas are untouchable by RE depreciation:

"DataQuick says sales in move-up neighborhoods such as Land Park, east Sacramento and Arden Park are half their 10-year average since early 2008."

RV6Flyer said...

"DataQuick says sales in move-up neighborhoods such as Land Park, east Sacramento and Arden Park are half their 10-year average since early 2008."

The number of sales may be down in those neighborhoods, but many of those residents are not forced to sell due to foreclosure. I don't have the numbers available, but I also don't think the number of pre-foreclosures or foreclosures are increasing at the same rate as the burbs.
What do the median price numbers look like? Have they gone down as fast as sales? I see $400M+ homes moving pretty fast in east sac. Zillow says the yoy price paid change for 95819 is flat.
Land Park is a little different, it rose in price faster and further than 95819. I also happen to think Land Park sucks to live in. I rented in Land Park while house shopping and was so, so glad to get out of there. Not as many restaurants, coffee houses (non-chain), more crime, and just not as easy to get around. I really don't like Land Park, so that means it will far further than East Sac ;)

Rich said...

Furloughs/pay cuts coming to the UC.

http://atyourservice.ucop.edu/news/general/0906-reduction_info.pdf

Bottom line, 8% less take starting 8/1

Deflationary Jane said...

That includes me Rich although for once I'm glad I'm one of the peasants so I'm only cut 4%.

Proving you get to keep to your job, an 8k tax credit does jack if you are getting cut 8%. I know the campus says it's only for a year but they said that last time too

Rich said...

What would really suck would be to make 46100 and get cut 8%, while your co-worker making 45900 only gets 4%.

And what's this about asking for feedback on the three proposals? Is anyone seriously going to ask for the straight pay cut option? Even the furlough option isn't going to be 8% more days off- some of it will be non-paid holidays.

Don't get me wrong, I have no problem joining in the pain. All's fair. I'm just glad my wife and I have some breathing room in our budget. There's a huge difference between having just enough, and having some breathing room. And either 4% or 8% can send you over that edge.

Deflationary Jane said...

If you aren't mad yet, you will be

Bailed-out bank's deals raise concerns
http://www.sacbee.com/topstories/story/1963763.html

details a local bank taking tarp money to funnel it to directors making re investments in the area.

Diggin Deeper said...

US cities may have to be bulldozed in order to survive

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5516536/US-cities-may-have-to-be-bulldozed-in-order-to-survive.html

"Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature."

Creative demand destruction...ought to be interesting

Deflationary Jane said...

DD,

Even that won't help until the median wage can buy a median home. I guess the next leg of the game is for 5% of population to control 70% of residential property.

Diggin Deeper said...

DJ...that's right but creative supply destruction at least puts us in a position of equalizing buyers with a corrected supply. Then median wages and home prices should line up...and if we're facing a jobless recovery, then prices will meet whatever the median income ends up being. Imo the problem is that people are demanding a 6 month solution to a 15-20 year problem, caused by the very institutions that are now charged with coming up with those solutions.

b1whois said...

is this what has happened to the "shadow inventory"??!! huge investment funds buying up all the REO??!! ARRRHGHHHGHGHG

http://www.dsnews.com/index.php/home/news_story/2994/23/12

http://www.redwoodre.com/inv-funds.html

David said...

quote from redwoodre: Return Profile: 8%+/- Cash Yields and 11%-14% internal rate of return net to the investor

They're going to do this with a mix of commercial, industrial and rental properties, huh? Good thing they're playing with other peoples' money.

I presume the "return" is actually the cash flow from rental income and not an increase in property value. So they go bottom feeding to make purchases and then squeeze the tenants whose leases at inflated price per square foot will remain in effect for years. Oh, and squeeze the students who don't have a car and have to live near campus. The presumption is those long-term tenants will be able to stay in business and that the students will continue to be able to afford to go to a school far away from Mommy and Daddy. Good luck.

b1whois said...

charities buying up REO's before they are listed to the public!

http://www.dsnews.com/index.php/home/news_story/2937/23/12

BofA selling to cities!!!

http://www.dsnews.com/index.php/home/news_story/3062/23/0

man, this website has a ton of stuff! i dont quite know what to make of this one....

http://www.dsnews.com/index.php/home/news_story/3040/23/6

b1whois said...

bill seeks to expand federal home buyers credit
http://www.dsnews.com/index.php/home/news_story/3105/-1/24

David said...

The NY Times may have some answers about big real estate investors and how they see the world.

http://www.nytimes.com/2009/06/21/realestate/commercial/21sqft.html?hpw

If anybody's going to call the bottom, it's these guys.

patient renter said...

So many cooks in the kitchen still. I'm happy to be sitting on the couch waiting to see what they come up with :)

husmanen said...

EDH could be starting to crack, this is the second house I have seen recently that has an asking price that is comparable to rental parity.

3223 Kensington Dr, El Dorado Hills, 95762
Asking: $305,415

Recently purchased by a bank for $399k.

http://www.metrolistmls.com/cgi-bin/GetOneR.cfm?MLSNum=90048297&iRow=1&nRows=2&yAddr=T&yMy=F&yAsc=N&iSort=1&nJL=7

patient renter said...

Random though: We hear a lot of talk about when prices will "recover". But really, prices don't recover after a bubble without another bubble.

husmanen said...

Spoke with a friend the other day, he bought in 2006 with an interest only loan, two years left of interest only.

He said he will be waiting for the "recovery", if it does not come he will dump the place... no skin in the game.

Also, he could dump it now but he is not sure which is best. I said credit recovery sooner is better than later, but there will also be a lot of people in the same situation.

Don't think this situation even qualifies for the infamous "shadow inventory".

Diggin Deeper said...

California set to issue IOUs as fiscal crisis weighs

http://news.yahoo.com/s/nm/20090625/ts_nm/us_california_debt_2

"Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Controller John Chiang said in a statement announcing that he would be forced to use IOUs to pay the state's bills beginning on July 2.

"The state's $2.8 billion cash shortage in July grows to $6.5 billion in September and after that we see a double digit freefall," Chiang said. "Unfortunately, the state's inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses."

As of July 1, California is effectively out of business...

I wonder how long this can go on before businesses tied to state government fail or if it will spillover to state worker paychecks?

The state has had months to come up with a plan to avoid this mess. The political posturing in the legislature is amazing. It's not about the budget, its about landing on the right side of the voter...putting political self interest ahead of the people's business...

Jacob said...

CA is so screwed up. The legislature will not make the tough decisions needed to balance the budget. And taxing more isn't gonna help.

Income tax revenue is in a freefall.

Property tax revenue is in a freefall.

They can issue IOUs for tax refunds and that may buy some time, until people just start withholding less.

I was owed a refund and just applied it to this years taxes, but also stopped paying estimated taxes to eat up that amount. No IOU crap for me.

As much as I want to own a home I dont think I want to buy until CA figures out this mess. Would hate to buy a home and then have the taxes raised, either by repealing prop 13 or by calling it a fee or whatever.

Maybe they should charge a non sales tax... 10% tax on what you buy and 20% tax on what you save... Wait, I better not give them any ideas... lol

patient renter said...

TBP has copies of several lobbying letters from industry leaders (NAR, NAHB) begging for a moratorium on the Home Valuation Code of Conduct (HVCC).

http://tinyurl.com/mxyn4k

I'm not an expert, but isn't the HVCC intended to prevent fraud? Some choice quotes:

"There is no doubt a rise in the fallout rate and we are currently conducting research to assess the extent of appraisal problems in hampering the housing market"

Accurate appraisals are a "problem"? Just yesterday I posted a thought about the word "recovery", and what it means. When an industry person says "recovery", they're not talking about price equilibrium, they're talking about a return to bubble inflated prices. That is not recovery.

"Any delay in the recovery will mean a further decline in home prices, which will hamper the economic recovery and lead to a greater number of foreclosures."

There's that word again! Let's take stock: LOWER prices = recovery. HIGHER prices = bubble. These guys clearly have no regard for the damage that the bubble caused.

patient renter said...

To be clear, as Barry Ritholtz was, the NAR and NAMB are basically promoting appraisal fraud. In the context of just having experienced the largest housing bubble ever, fueled by the greatest level of related fraud ever, there's no other way to view this.

HOUSE2008 said...

CA is in a mess! Even though my wife & I both took the 10% pay cut an additional 10% would be a total of 30%. Let me throw this out there. As some of you may remember we bought this house last August. Love it. Between my wife & I we have 780 Fico & just today we received in the mail all at once from three different credit card companies their raising the % rate. Mind you, we've NEVER been late,ect. Perfect. The cost? We're looking at payment jumping from $230 a month to...$740! on a $15,000 combined balances. Don't get me wrong, we will still be able to make this payment because we tried to live within our means but this WILL break MANY of good people. Something evil is brewing out there...

Jacob said...

That is a pretty big increase. If I were you I would opt out of these changes to the terms.

As you said you were not late so the rate is not increasing based on your agreed upon terms. They are changing the terms and you have the option to opt out.

You will be able to repay your balance at the rate you currently have.

Most likely the CC company will close your account.

But the savings is well worth having a few accounts closed.

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

Credit card debt for US households now tops $1 Trillion. Losses are now running at the highest levels ever...10% and climbing according to the Moody's Credit Card Index. With so many people out of work, it makes sense that plastic is one way to survive, temporarily.

CC debt is held in the same trashed derivatives that subprime were packaged in. We saw what subprime did to the financial system last September. At a leverage rate of 10 times, a $100 Billion loss (10% losses on $1 Trillion in CC debt) could easily translate into a $1 Trillion loss (at 10 times leverage) before this is over.

Banks are hoarding cash as if they were huddled in a storm cellar, waiting to see if the roof blew off...They're scrambling to handle real estate losses, CC losses, commericial RE losses, etc.

Indeed, "something evil is brewing out there"

Diggin Deeper said...

A Chronicle of Ben Bernanke's Forecasts on the Economy 2005-2007

http://www.youtube.com/watch?v=INmqvibv4UU&feature=player_embedded

Humbly, this is what happens when you allow academics, WITHOUT industry experience, to guide the future of US fiscal policy...It appears easy to create a bubble when you're living in one...

in_folsom said...

I have been following this blog closely for a long time now. We are thinking about buying our first house in Folsom. We are currently renting in Folsom. I am sure there are other folks who are thinking about buying in the Folsom/EDH area. I have a couple of questions to this forum:

1. Any idea about how much shadow inventory is in Folsom? Realtytrac shows there are 150+ bankowned homes where as only around 10 are currently in the market. Is what Realtytrac showing the correct number?

2. If and when the 15k home buyer credit is passed, when is the effective date going to be, and how long will that be good?

norcaljeff said...

Interesting experience for someone at an open house in EDH: http://patrick.net/forum/?p=16330#comment-646123

husmanen said...

Nice link NorCalJeff.

In_Folsom, in my neck of the woods (EDH & Folsom) the home prices are still out of whack with rental parity (PITI, 30yr, Fixed, 20% dwn) by at least 25%.

I have started to see cracks in the market though, e.g two in EDH one on Kensington as I mentioned above.

Regarding shadow inventory, on my street there are about 20% of the homes that are in preforeclosure. One was just auctioned off and is on the market, to be flipped for $80k more than auction price. The auction price was close to rental parity and the bank took a hair cut of nearly $300k.

The previous owners of my neighbors house did not pay the mortgage for nearly 2 years, the renters payed the previous owners though. The rent covered only 50% of the PITI. Specuvestor.

Don't know how many in my area are not paying and the banks are looking the other way. Just a guess, there are more than a few.

David said...

Startling revelation from the Wall St. Journal -- CAR cooked the numbers. Read it and weep.

http://online.wsj.com/article/SB124638992043975185.html