california foreclosures

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January 5, 2010

California Dreamin’ revisited

Posted by vegasandre under california foreclosures
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And you think it would eventully end – that they would figure out that paying 2.0 mill for a 2500 sq ft house with minimal or no ocean views on a 5000 sq ft lot wasnt a good deal after all.   Just because it sold for 3.0 mill in 2006 doesnt make it a good deal now at 2 mill.   

but some things never change.  

for many of the residents in the higher end coastal areas the Dreamin’  lives on…

Inventory keeps falling and home buyers keep buying -spurring talks of a mini Bubble.

Seems as if manyof these home buyers in So Cal are either:

        1-Smarter than us- as they buy when the market is down.

        2-Dumber than everyone as they think that prices of 6-10 times earnings represent a good deal.

Just go on any of the popular home blog sites from those areas and watch with amazement and horror of many of the buyers reasonings as to why the exorbarant pricing in some of the ritzy areas may be a bargain.

Should be interesting to watch how their tune will change in the coming 2 years…

with that in mind I wanted to repost one of my favorite blogs of 2009-”The Next Bubble- Califonia Dreamin’”

Tha Mama’s & The Papa’s famous tune states-   ” I’d be Safe and Warm-  if I was in L.A.”

They may be warm in LA. , But How Safe is it really? 

Is it Safe to get back into Housing ?  Many of the So Cals seem to think so .  Currently in our crazy economic times , So Cal is experiancing – 4 STRAIGHT MONTHS OF INCREASING MEDIAN HOME VALUES!       Like- Wow !   and how does that make sense?   I thought we were in a MAJOR recession?   I See new stats that the average So Cal homeowner is so far underwater that a Obama search mission cannot possibly rescue their floundering ship.  But yet, prices are going up and Inventory is going down !  Some one please explain how this can be occuring.     I will tell you all-  Here is what is happening and what will happen:

TULIP MANIA – part Duex

As many know, the first speculative bubble in recorded history is thought to be The Tulip Mania which occured in Holland in 1637- during which a rapid frenzied rise in prices for a new tulip bulb contract gave way to a price collapse that wiped out fortunes for many. Popularized in Charles Mackey’s;  “Extraordinary Popular Delusions and the Madness of Crowds”  the concept covers many bubbles with the assumption that crowds of people often behave irrationally. 

Currently we are seeing a mini REO buying mania in So Cal -and to some degree here in Vegas and the other hardest hit metro areas . Vegas and these other areas are also seeing a inventory falloff due to the Obama stimulus plans as well as a “leveling” of prices.  Of course , So Cal likes to go about things “In Style”  so this mini drop in inventory causes a panic that “the bottom must be in” and “now is the time to get a great deal on a bank owned home” as it might be your  “last chance” to ever see these prices again.  This perceived Supply shortfall has caused a Demand Mania. I just came back from a REO conference in Denver and I talked to a couple of big agents in San Diego and Orange County who talked about receiving 30 offers on every single bank owned home that was priced well.  30 offers?  on every house?  are you kidding?   Nope – they are not.  As in all frenzy’s, these tales of having to put in 20 offers to get one accepted and 30 offers on every house tend to only augment the size of the mania- it feeds itself.  So supply will keep going down for a while and the median price will show a continued rise for next couple months-but the best part is -THIS ENITRE MARKET IS FAKE!  

WHEN YOU DROP A FURRY LITTLE KITTY FROM A 60 STORY BUILDING………

Yeah we all know what happens and this current real estate market is right in the middle of this famous quoted “Dead cat bounce” . For the 3 of you that doesnt know what this means-basically when a market collapses it will bounce  up only to fall to new lows as each bounce gets a little smaller than the previous one.  What we are seeing is exactly the work of a maddening crowd- a crowd that should of took more Economic Courses in College rather than the easy 4 credit So Cal 101 course-”My house is bigger than yours and my wife is hotter too” . 

Basically it goes like this …  as stated in one of my previous rants http://vegasandre.wordpress.com/2009/08/16/whats-next-for-vegas-a-great-rebound-or-planet-of-the-apes/, No matter what stimulus package is enacted -nothing will get rid of the negative equity-And when we say negative we mean huge- most are upside down over 100k. Another amazing stat is that in So CAL the amount of loans hitting 90 days delinquent IS TRIPLE what is was this time in 2008.  Amazing isnt it? and of course the rising unemployment . Parden my algebra but I am curious how severe under water + record 90 days late + record unemployment = increase in median prices.   Maybe I should of studied more.   Oh yeah – one more secret ingedient to throw into the mix… 

A NEW PSYCHOLOGY

 A paradigm shift is underway in our society where it is now Accepted and Smart to let your house go rather than working out a solution. At this REO conference I heard from a agent that he is underwater on his 10 homes  over 100k each and that he was letting them all go and collecting free rent till they get repoed by the bank. Another agent listening to this  gave him a  ”Hi Five” and applauded this action.  How times have changed- once it was a Scarlet Letter and now it is the “smart thing to do”  in many eyes.  I heard it all weekend- “hey you can repair your credit in a couple years but how many years to get back that negative equity?”

THE RESULT

Straight to the point- this mini bubble will be our new foreclosures in 2011-2013 and extend this downturn many more years .  I guess as a REO agent -I have some job security ahead of me

 

October 5, 2009

What about the super High-End market?

Posted by vegasandre under Housing Bubble, National Real Estate, california foreclosures
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As spec mansions lie unsold across Southern California, stressed sellers may deflate the housing market’s high end by lowering their prices.

Two years ago, Larry Igarashi bet he could build a sprawling house in Orange County’s foothills that would sell for at least $10 million. These days, you can easily guess how that turned out.

On Saturday he put the eight-bedroom house in the gated Coto de Caza community on the auction block and got a high bid of $6.6 million — less than he was willing to accept.

Igarashi had gone all-out when he built the “Santa Barbara ranch” house: The master bedroom suite alone is 3,200 square feet, a bit smaller than the 10-car, climate-controlled garage, which measures 4,000 square feet. The driveway is long enough for a firetruck to turn around, and there’s a wine storage enclave with room for 1,400 bottles.

The 16,500-square-foot hilltop house — in the community that was the setting for “The Real Housewives of Orange County” television show — is just one of dozens of unsold mega-mansions across Southern California conceived during the real estate bubble, when builders waged an ill-timed arms race to ever-increasing extravagance.

Comparably deluxe houses now lie vacant in droves along the coasts and hillsides of Southern California, from Manhattan Beach to Irvine. Their owners could afford to keep them on the market for months, sometimes years, hoping to find buyers who would pay their asking prices.

That holding pattern has kept the most expensive segment of the home market from posting the kinds of sharp price drops seen just about everywhere else. But it’s now clear that there are too many palatial properties and too few princely buyers.

As more sellers like Igarashi decide to cut their losses and move on — or are compelled to do so by their lenders — the most expensive homes could slip from their perch at the top rung of the market.

“Sellers there now have to unload, and in order to do so, they must reduce their prices,” said Chapman University economist Esmael Adibi.

Spec mansions are now amassed in some areas like rising floodwater behind a dam. A search of homes for sale built since 2007 and priced above $3 million shows 39 such properties in Newport Beach and Newport Coast, 27 in Laguna Beach, 19 in Manhattan Beach, 18 in Irvine and 11 on the Palos Verdes Peninsula.

There are also hundreds of other multimillion-dollar homes for sale in Southern California that were not recently built, but sellers who live in homes they bought before the housing bubble are less likely to be under the same pressure to sell as speculators stuck with vacant properties and construction loans coming due.

As speculators and recent purchasers who must get out of mortgages that exceed their home values slash prices to find buyers, other sellers will have to lower their prices to compete.

In much the same way that foreclosures pulled down market prices for lower-priced homes, stressed sellers could deflate the high end by unloading luxury homes at bargain prices.

But even at cut-rate prices, few multimillion-dollar homes are selling. With so many to choose from, even those with enough money are taking their time.

“There’s no sense of urgency among buyers,” Igarashi said. He had hoped that the prospect of snaring a good deal through Saturday’s auction would motivate those who have been delaying a purchase to get off the fence. But it turned out to be a double disappointment.

Igarashi had two houses at auction. The other was a six-bedroom Tuscan-style house he had once listed for $5.75 million. He finished the 10,500-square-foot house in 2007; it sat unsold as the even grander second house was built. It drew a top bid of $3.1 million, below Igarashi’s undisclosed minimum. After the auction, Igarashi began negotiating with the high bidder on each property, and was still talking with them at the end of the day.

Near his houses, another six-bedroom home is being auctioned later this month with a starting bid of $3.9 million. It had failed to sell when listed at $9 million.

Auctions can backfire. In December, five new homes in Manhattan Beach were auctioned with opening bids of more than $1 million — none were sold.

Buyers will eventually emerge as prices fall, Adibi said. Still, it’s hard to know how much real demand there is for super-sized homes, even among the very wealthy.

Spec home builders were motivated to ramp up square footage to justify higher prices on their projects. But buyers today who are more likely be looking for a long-term home than a place to flip may not want the trouble of maintaining such large houses.

A bigger question also remains: What if the giant spec homes just never sell?

Stefanos Polyzoides, a Pasadena architect who is an advocate of more dense, compact residences, said sometimes economies change in ways that make the original uses of buildings obsolete. The grand mansions of Newport, R.I., for example, have been converted to condominium buildings or inns, he notes.

Polyzoides doubts such reinventions could work for many of the latest spec mansions. “Some of these are huge albatrosses in exurbia surrounded by nothing. Many of these could face a very hard ending,” he said.

Igarashi acknowledged that he miscalculated the market. As he showed a reporter around his Coto de Caza project — a sprawling tile-roofed building measuring 218 feet across — Igarashi said it was easy to do in the go-go years.

Though he made a fortune as a titanium golf club manufacturer, Igarashi had been building spec homes as a kind of working hobby since 1980 — turning profits on all six homes he built in Orange County before his two latest.

“I just didn’t expect this would happen,” Igarashi said of the housing crash. “I don’t think Wall Street or even the president of the United States believed this could happen.”

He now hopes to get what he can for the houses and move on. He’d like to pick up land at today’s fire-sale prices and build more homes. But Igarashi said he’ll take a different approach next time. He plans to build apartments.

http://www.latimes.com/business/la-fi-spec-mansions4-2009oct04,1,1385597.story

 

October 2, 2009

Leaving Affordable Mortgage May Become Winning Gambit

Posted by vegasandre under Foreclosures/Bank Owned, Housing Prices, Las Vegas Foreclosures, National Real Estate, california foreclosures, short sales
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http://www.bloomberg.com/apps/news?pid=20603037&sid=a_yVFTDSiHhY

By Margaret Collins

Oct. 1 (Bloomberg) — Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.

Homeowners like Conroy who can afford their monthly payments are weighing whether to sell and pay the difference, stick it out until housing prices recover, or walk away. In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for New York-based Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent.

So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC, a Dublin-based credit-checking company, and Oliver Wyman, a New York-based consulting firm. Two-thirds of those who walked away defaulted on their primary residences.

“You’re looking at an extremely long horizon in order to see a return of home values to where they were at their peak,” said Stan Humphries, chief economist for Zillow.com, the Seattle-based real estate data service. “It could be 15 to 20 years in some markets.”

Strategic defaulters represent about 4 percent of all homeowners underwater. That trickle could become a flood as the likelihood recedes that home prices will soon return to their peak values, said Rick Sharga, senior vice president of Irvine, California-based RealtyTrac Inc., an online seller of real estate data.

Forty Percent Drop

In San Diego, where Conroy lives, home values are down about 40 percent since March 2006 when he bought his place, according to the S&P/Case-Shiller Index of 20 U.S. metropolitan areas. Prices have rebounded for three consecutive months, returning to the October 2002 level, before the start of the housing boom. Nationwide, home values are what they were in September 2003, according to the Case-Shiller index as of July.

“You have to ask yourself: Are you just renting the home from the bank?” said Michael Joe, a foreclosure expert at the Legal Aid Center of Southern Nevada. “Would it be cheaper to walk away and rent across the street?”

Conroy, 32, and his wife purchased their home for $385,000 in March 2006, a month before marrying. The property was reassessed this summer for $250,000. The couple is trying to save, he said, knowing they may have to move to a bigger place within 18 months to start a family.

“We’ve given up on this dream of having equity in our home,” Conroy said. “We don’t expect to walk away with cash in hand, we expect to pay.”

State Laws

More homeowners may opt to take a hit to their credit score rather than come up with cash to cover the loss, especially in California and the nine other U.S. states where the legal repercussions of foreclosures are less than other parts of the country, said Sharga.

Ten states are so-called non-recourse, prohibiting deficiency judgments after most home foreclosures: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon and Washington, according to the National Consumer Law Center, based in Boston. The bank can repossess your home in those states, not other assets, to settle the debt.

In California, a second-mortgage holder may try to pursue a delinquent borrower to repay through litigation, said Rick Brooks, a financial adviser with the San Diego-based wealth advisory firm Blankinship & Foster. Banks generally prefer not to sue because it can easily cost $60,000 or more, said Debra Guzov, co-founder of the law firm Guzov Ofsink LLC, based in New York.

Short Sales

Banks may be more willing to accept foreclosure alternatives, such as a short sale or deed-in-lieu of foreclosure, in states where a lender can’t sue for personal assets, said Brad Geisen, chief executive officer of Foreclosure.com, based in Boca Raton, Florida.

In a short sale, the borrower finds a buyer for the home at an acceptable price and the bank agrees to forgive the difference, said Greg McBride, senior financial analyst with North Palm Beach, Florida-based Bankrate.com. In a deed-in-lieu of foreclosure, the bank sells the home after a similar debt negotiation.

Tax Break

A 2007 law exempts from tax up to $2 million of debt forgiven in a foreclosure or similar proceeding for a primary residence, according to Internal Revenue Service spokesman Eric Smith. The tax break extends to 2012.

The lender’s willingness to negotiate varies and depends on the loan balance, condition of the property, location, and resale opportunities, said Alberta Hultman, chief executive officer of USFN, an association of U.S. mortgage banking attorneys based in Tustin, California.

Short sales or deeds-in-lieu of foreclosures are considered the same as a foreclosure on your credit score, said Craig Watts, spokesman for Minneapolis-based FICO Corp., owner of the credit-scoring formula most widely used by U.S. lenders.

A foreclosure remains on a credit report for seven years. Credit scores can begin to rebound in as little as 2 years if bills are paid on time, according to FICO.

“You really want to think through the inability to borrow and higher rates that you’ll pay,” Christopher Van Slyke, a partner at Trovena LLC, a wealth management firm based in La Jolla, California, said of walking away.

“If you don’t have the gun to your head then stay right where you are,” said Cheryl Morhauser, a financial adviser based in Nevada City, California, whose clients’ average net worth is $1.5 million to $3 million.

Staying Put

Jennifer Albaugh, 34, plans to keep her Las Vegas home, where prices have dropped 49 percent since she bought it in December 2004, according to the S&P/Case-Shiller index.

Albaugh, who owns a fabric store, might have sold her 3,000-square-foot house for as much as $550,000 four years ago, she said. Today she owes more than $300,000 on her mortgage and says her house isn’t worth even close to that. She and her husband are still looking to buy a bigger home for their two kids, especially while rates are low and might turn their current home into a vacation rental, she said.

“Walking out of your house to get a better deal down the street is just not the right thing to do,” she said. “It hurts everybody.”

Social Stigma

Morality and social stigmas play an important role in whether someone who can afford the payments will walk away, said Paola Sapienza, professor of finance at Northwestern University’s business school, in a July study on strategic defaults. Eighty-one percent of 1,646 homeowners interviewed think it is morally wrong, the study found.

“If you know someone who’s done it you’re way more likely to do it,” Sapienza said. “That’s the scariest part, is that there might be some contagion part of this.”

Albaugh and Conroy, the San Diego homeowner, said they’re frustrated by the lack of help for homeowners like them who keep paying.

“It seems like the banks are more willing to work with people who aren’t making their payments rather than people who are,” Conroy said.

To contact the reporter on this story: Margaret Collins in New York at mcollins45@bloomberg.net.

 

October 1, 2009

Are Distressed Homes Worth It?

Posted by vegasandre under Foreclosures/Bank Owned, Housing Bubble, Housing Prices, Las Vegas Foreclosures, National Real Estate, california foreclosures, short sales
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Home buyers are finding that the battered real-estate market offers just as many opportunities for headaches as for bargains.

http://online.wsj.com/article/SB10001424052970203803904574430860271702396.html?mod=googlenews_wsj

“Seth and Crystal Grotzke, both 25 years old, recently bought a bank-owned two-bedroom, two-bathroom townhouse in Edina, Minn., for $110,000—when similar homes in the same development were selling for as much as $131,000. But exactly one day before the scheduled July closing, the Grotzkes learned there was a second, unpaid mortgage. Because of the foul-up, the couple was forced to live in Mr. Grotzke’s boss’s basement for more than a month. They finally closed on Aug. 31.

“We knew there would be title issues, but none that would last for that long,” says Mr. Grotzke, an assistant pastor. He adds that buying a foreclosed property is a way for God to “teach you patience.”

“Colin and Alisabeth Shearn of Cherry Hills Village, Colo., a Denver suburb, managed to snag a seven-bedroom Mediterranean-style house in a short sale for $1,272,000, more than $900,000 below its original listing price in 2007. By the time they bid on the house last February, it had gone unsold for nearly two years and the price had been reduced to $1.5 million from $2.2 million. The couple closed on the purchase at the end of May, and moved in with their two preschool-age children.”

The U.S. Treasury Department is expected to issue streamlined guidelines to lenders on short sales soon. Housing-industry leaders say complicated procedures are hindering them from clearing the large inventory of distressed property necessary to return the housing market to normal. Now, only about 20% or so of short sales are successful, according to real-estate brokerage Re/Max International Inc.

Buying a foreclosure is usually speedier than a short sale because lenders already possess the property. But there are other drawbacks. State laws vary considerably with respect to legal procedures surrounding foreclosures. Many states require judicial proceedings for foreclosing on a home that can take more than 12 months, a period during which the home may be vacant or occupied by tenants or squatters. Homes may have appliances, pipes and even electrical wiring ripped out.

Buyers of bank-owned properties are usually stuck with whatever hidden problems they discover, including construction defects, and they seldom get additional price concessions. For these reasons, it’s especially important for distressed-property buyers to have a thorough inspection by a qualified home inspector or inspection engineer, as well as a thorough title search and title insurance.

Despite the hurdles, competition for low-priced foreclosures under $300,000 is keen, sources say. “The bargain hunters have come out from everywhere, and they are getting into bidding wars,” says Re/Max Chairman Dave Liniger.

Buyers must be prepared and ready to move on a dime. If they’re paying cash, they have to certify they have the funds available. Those who need financing should obtain pre-approval from a lender before even looking at properties.

Successful foreclosure buyers often bid significantly above the asking price. Chuck Brueske, 46, a hospital biomedical technician, says he paid $111,000 in August to win a bank-owned townhouse built in 1981 in Maple Grove, Minn., listed at $99,600.

Mr. Brueske says his own good credit history helped him win over two other bidders.

“It was unusual that in a down, depressed market that I had to bid more than the asking price, but as it turned out the other bids were higher than mine,” he says. “It took me a while to swallow that.”

Some home buyers give up after discovering there are bargain properties without all the obstacles. Jerrold Horning, 34, an electronics technician for the U.S. government in El Cajon, Calif., says he and his wife bought a house in the conventional market after seeing the condition many houses were in.

“Some of the foreclosures I looked at were horribly trashed. You would have to put another $100,000 in just to make it livable,” he says. Of buying a distressed property for a primary home, he says, “I don’t think it’s worth the hassles.”

—Ruth Simon contributed to this article.

 

September 29, 2009

Case-Shiller -3rd straight month for Price gains (except Las Vegas)

Posted by vegasandre under Housing Bubble, Las Vegas Foreclosures, National Real Estate, Recession, california foreclosures
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Home prices down 32.6% from 2006 peak

By Inman News, Tuesday, September 29, 2009.

Inman News

Home prices rose for a third consecutive month in July, and the rate of annual decline continued to shrink for the sixth month in a row, according to the Standard & Poor’s/Case Shiller home price indices published today.

An index tracking prices in 20 metro areas showed prices increased in 18, by an average of 1.6 percent on a non-seasonally adjusted basis. Looking back a year, the 20-city composite index was down 13.3 percent — a smaller drop than the 15.4 percent decline seen in June.

The numbers “continue to support an indication of stabilization in national real estate values,” David Blitzer, chairman of the index committee at Standard & Poor’s, said in a statement.

But it remains to be seen whether the housing market will weather the possible expiration of a tax credit for first-time homebuyers in November, anticipated higher unemployment rates, and a possible increase in foreclosures, Blitzer said.

The 20-city composite index showed prices down 32.6 percent from their peak in second-quarter 2006, to levels last seen in fall 2003.

The five markets in the 20-city composite showing the strongest month-over month price increases were Minneapolis (4.6 percent), San Francisco (3.3 percent), Chicago (2.7 percent), San Diego (2.5 percent) and Atlanta (2.3 percent). Two markets saw month-over-month price declines: Las Vegas (-1.1 percent) and Seattle (-0.1 percent).

Looking back a year, all markets in the 20-city composite continue to show price depreciation, although six of those markets experienced only single-digit declines and three are nearing positive territory: Cleveland (-1.3 percent), Dallas (-1.6 percent) and Denver (-2.9 percent).

The five markets with the sharpest annual declines were Las Vegas (-31.4 percent), Phoenix (-28.5 percent), Detroit (-24.6 percent) Miami (-21.2 percent) and Tampa (-18.4 percent). The index showed prices in Las Vegas down 54.8 percent from their August 2006 peak

caseshillerjuly2009

 

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