On Monday, I reported that California home sales were down 21.4%. Now the national figures show a similar, alarming drop.
Irvine Home Address … 4511 CHARLEVILLE Cir Irvine, CA 92604
Resale Home Price …… $850,000
When I was younger, so much younger than today,
I never needed anybody's help in anyway.
But now these days are gone, I'm not so self assured,
Now I find I've changed my mind, I've opened up the doors.
Help me if you can, I'm feeling down
And I do appreciate you being 'round.
Help me get my feet back on the ground,
Won't you please, please help me?
The Beatles — Help!
Help! Sales are hitting record lows. Months of supply is hitting record highs. Asking prices are starting to come down. Housing market prices are about to double dip.
We have been waiting almost 18 months for the government to allow housing prices to fall to their natural market-clearing levels. First, the Federal Reserve lowered interest rates and directly purchased mortgage-backed securities, then the federal government began providing tax incentives and credits to further prop up prices, even California got into the tax credit act. And for what? Prices are still going to fall.
July Existing-Home Sales Fall as Expected but Prices Rise
National Association of realtors — Washington, August 24, 2010
Existing-home sales were sharply lower in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of realtors®.
Notice how carefully the NAr spins this disastrous headline. First, they fail to mention that the sales fell to a record low. Second, they suggest that a decline of this magnitude was expected. And third, they add that prices rose even though the rise was tiny and more likely attributable to a changing mix rather than an increase in value. So they downplayed the devastating truth and added some feel-good nonsense to soften the blow. It is laughably obvious, and it should be embarrassing, but this is the NAr.
Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2 percent to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5 percent below the 5.14 million-unit level in July 2009.
Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.
How can this be interpreted as any way other than a complete catastrophe? We have more people and more homes than we did in 1995 or 1999, yet we managed to sell far fewer homes. The viability of the housing market is in question. It certainly appears that prices are going to have to come down for transaction volumes to increase. We already have record low interest rates. Doesn't record low sales and record low interest rates suggest that prices are too high?
Lawrence Yun, NAr chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.
Consumers rationally jumped into the market? People were paying $30,000 to $40,000 more for properties to obtain an $8,000 tax credit. Is that rational, or is Yun trying to justify the taxpayer ripoff he supported?
The pace of recovery could pick up quickly? You better buy now, right? Lawrence Yun has mastered the art of bullshit over the last few years. He obviously has no conscience. At least he bothered to add his weasel statement about the economy consistently adding jobs. Since he knows that isn't going to happen, he can always argue that his prediction would have come true if the condition had been met.
“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun said.
More spin. First, do you think the activity in the first half of the year truly healthy? The housing market was smoking government tax-credit crack, and buyers purchased in a stupor. Now that the stimulants are gone, the market is crashing to sleep it off. Second, the annual sales rates over the last 20 or 30 years should be lower than today; we had fewer homes! If you adjust the current sales rates for population or housing stock, the rate would be at an all-time low. This is a blatant misuse of statistics.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.56 percent in July from 4.74 percent in June; the rate was 5.22 percent in July 2009. Last week, Freddie Mac reported the 30-year fixed was down to 4.42 percent.
Mortgage interest rates are at the lowest level every recorded too.
The national median existing-home price2 for all housing types was $182,600 in July, up 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009.3
“Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses,” Yun said. “Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward.”
Volume always precedes price. There almost certainly will be a measurable downward change in home prices going forward. I will agree with Yun that prices will not be going up any time soon. Notice that when the signs are unambiguously bearish, the furthest he will go is to say the prices will remain flat.
Months of Supply hits highest level ever recorded
Total housing inventory at the end of July increased 2.5 percent to 3.98 million existing homes available for sale, which represents a 12.5-month supply4 at the current sales pace, up from an 8.9-month supply in June. Raw unsold inventory is still 12.9 percent below the record of 4.58 million in July 2008.
While we are looking at housing market records, the months of supply of homes on the market is at an all-time high. We have high unemployment, record low sales, increasing inventory, and record high of months of supply. How do prices hold up with pressures like that?
NAr President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said there are great opportunities now for buyers who weren’t able to take advantage of the tax credit. “Mortgage interest rates are at record lows, home prices have firmed and there is good selection of property in most areas, so buyers with good jobs and favorable credit ratings find themselves in a fortunate position,” she said.
She had to slip in the nonsense about prices firming to convince people that it is okay to buy when its likely that prices will be heading lower. Although, to be fair to her, in Arizona where she is, prices have already been crushed, so prices don't have near as much bubble air in them as they do in Orange County.
A parallel NAr practitioner survey shows first-time buyers purchased 38 percent of homes in July, down from 43 percent in June. Investors accounted for 19 percent of sales in July, up from 13 percent in June; the balance were to repeat buyers. All-cash sales rose to 30 percent in July from 24 percent in June.
Single-family home sales dropped 27.1 percent to a seasonally adjusted annual rate of 3.37 million in July from a pace of 4.62 million in June, and are 25.6 percent below the 4.53 million level in July 2009; they were the lowest since May 1995 when the sales rate was 3.34 million. The median existing single-family home price was $183,400 in July, which is 0.9 percent above a year ago.
Single-family median existing-home prices were higher in 11 out of 19 metropolitan statistical areas reported in July in comparison with July 2009 (the price in one of 20 tracked markets was not available). However, existing single-family home sales fell in all 20 areas from a year ago.
This is a broad-based drop. All real estate may be local, but all local markets are seeing the same dramatic decline in sales.
Existing condominium and co-op sales fell 28.1 percent to a seasonally adjusted annual rate of 460,000 in July from 640,000 in June, and are 24.0 percent below the 605,000-unit level in July 2009. The median existing condo price was $176,800 in July, down 1.7 percent from a year ago.
Condo prices have already rolled over.
… Existing-home sales in the West fell 25.0 percent to an annual level of 870,000 in July and are 23.0 percent below a year ago. The median price in the West was $224,800, up 3.3 percent from July 2009.
Sales volumes are very weak.
WTF are they thinking?
Do any of you think house prices have appreciated 11% per year each and every year since 2002? These owners do. 
Perhaps in 2003 and 2004 that really did happen. The housing bubble frenzy was ridiculous. However, the rate of appreciation dropped in 2005, and the market peaked in 2006. In 2007 and 2008 prices dropped. They stabilized in 2009 — thanks to our expired stimulants — and now they are about to roll over again… But don't provide these facts to the owners of today's featured property. They think prices are still going to the moon. Perhaps they wanted to give some room to negotiate down to $550,000 where this property might have a chance to sell.
This property was purchased on 3/27/2002 for $337,500. The owners used a $269,900 first mortgage, a $50,000 second mortgage, and a $17,600 down payment. From that seed, they believe they should make $461,500.
They refinanced on 6/12/2003 for $309,000, and they have a credit line that has increased since then, but an increasing credit line is not proof positive that they took out the money. If they did, the final HELOC was for $275,600.
Obviously, at this asking price, it would be an equity sale…
Irvine Home Address … 4511 CHARLEVILLE Cir Irvine, CA 92604 
Resale Home Price … $850,000
Home Purchase Price … $337,500
Home Purchase Date …. 3/27/2002
Net Gain (Loss) ………. $461,500
Percent Change ………. 136.7%
Annual Appreciation … 11.0%
Cost of Ownership
————————————————-
$850,000 ………. Asking Price
$170,000 ………. 20% Down Conventional
4.51% …………… Mortgage Interest Rate
$680,000 ………. 30-Year Mortgage
$166,315 ………. Income Requirement
$3,450 ………. Monthly Mortgage Payment
$737 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$71 ………. Homeowners Insurance
$0 ………. Homeowners Association Fees
============================================
$4,257 ………. Monthly Cash Outlays
-$823 ………. Tax Savings (% of Interest and Property Tax)
-$894 ………. Equity Hidden in Payment
$284 ………. Lost Income to Down Payment (net of taxes)
$106 ………. Maintenance and Replacement Reserves
============================================
$2,931 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,500 ………. Furnishing and Move In @1%
$8,500 ………. Closing Costs @1%
$6,800 ………… Interest Points @1% of Loan
$170,000 ………. Down Payment
============================================
$193,800 ………. Total Cash Costs
$44,900 ………… Emergency Cash Reserves
============================================
$238,700 ………. Total Savings Needed
Property Details for 4511 CHARLEVILLE Cir Irvine, CA 92604
——————————————————————————
Beds: 3
Baths: 3 full 1 part baths
Home size: 1,369 sq ft
($621 / sq ft)
Lot Size: 5,000 sq ft
Year Built: 1970
Days on Market: 27
Listing Updated: 40388
MLS Number: P745790
Property Type: Single Family, Residential
Community: West Irvine
Tract: Othr
——————————————————————————
Great Area, Good Curb Appeal, Sharp Home, Kitchen Has New Stove, Dishwasher Eating Area,living Room W/fireplace, Family Room, 2 Car Garage With Roll Up Garage Door & Garage Access. home is also located at the end of a cul-de-sac street. All award winning schools are within walking distance.
The pictures and the description read to me like the realtor knows this listing is hopeless and he doesn't want to waste any effort on it. I wouldn't want to either.
You have to look at why people were buying homes up to 2007 and then after. You had lots of people ‘trading-up’. Taking the appreciation fueled equity out of their existing home and going bigger. An appreciating market fuels a lot of sales like this. Then you had people buying 2nd, 3rd homes – either for vacation or capital appreciation, not for cashflow. Those two factors are gone and not coming back soon. Then you have buyers based on family/job changes – graduating college/grad/professional school, moving, retiring & downsizing. The tax credits pulled some of this third group forward, but I’ll bet they were a small fraction of sales during peak years.
We had 5.6M sales in 2007. Roughly half were ‘investors’, so 2.8M occupant sales. Say half the investors come back, we’ll be at 4.2M, only slightly higher than we were in July. Peak was 7M/yr (2005), so I’d have to assume a smaller percentage of investors and trader-uppers returning.
I don’t think the assumption that we will have less second/investment home sales, and less trade up transactions is off. This is closer to the ‘new normal’ than a temporary blip.
What an ugly, garish house.
What good are inlaid stone floors with those cheap, mingy windows, that garish front door, or the ugly, graceless staircase? God knows what the rest of the house looks like.
You’re missing that it has a roll-up garage door, and there is access to the garage! Some amazing technology out there in Irvine.
Oh so I take it Luddites are no longer welcome in Irvine.
Not many Luddites in the statistics
http://www.cityofirvine.org/about/demographics.asp
This national home-sales drop is just a sign that real estate is now playing to a smaller, more selective audience. Since the market is now restricted to well-heeled and gracious buyers, interest in Irvine remains high, while demand elsewhere has declined.
Discerning buyers are ignoring all other markets, patiently biding their time until their desired Irvine home becomes available. The very fact of dropping sales can only mean that buyers have awakened to the Irvine Premium®, and now understand that purchasing anywhere else is the height of folly.
I see nothing but good news for Irvine in these national sales statistics.
“I see nothing but good news for Irvine in these national sales statistics.”
lulz
Not to mention Irvine Premium® is the last hope for all those poor souls out there desperately looking for a safe haven – you know, those boomers who just realized they could no longer live comfortably after their retirement on the savings returning <2%, or those new immigrant families who have that peculiar habit of saving (must come from their old custom) and now shake in their boots wondering what Uncle Sam or Uncle Benny will do to their hard earned US $$ next, or those investors who can no longer stomach the wild ride in stock/bond/commodity markets and completely lost faith in our economy … I am sure all of them will come to the realization that Irvine RE is the safest of all safe havens and will flock in with their bags of cash.
Irvine Premium? Safe haven? You guys are being satirical, right?
Yes, and they are quite skilled at it.
Don’t worry IR. Someone in the PR *department* (hmm….PR….) is going to show us another anecdotal evidence that Irvine is immune from all that sales drop.
Here kitty kitty kitty…..
PR…. Planet Realtard?
PR has gone all in. If Irvine starts seeing price drops, he is going to be quite the laughing stock.
“The pictures and the description read to me like the realtor knows this listing is hopeless and he doesn’t want to waste any effort on it. I wouldn’t want to either.”
At $600+/sf, I wouldn’t even bother BEING his/her/their ‘realtard’.
I wonder how much of a hit the reputation of economics will take from this latest round of complete and utter failure on the part of the entire profession.
I once thought of economists as thoughtful observers who could at least describe the spectrum of possible outcomes in a helpful way. Now I see them as snake-oil salesmen who believe their own lies, just below Baghdad Bob yet above BP management.
They should close our university economics departments and use the space for actual science classes, and move a few economics faculty to religion and mythology positions.
After 3 years at Berkeley, listening to the law and economics professors speak about the virtues of government control, taxation, and progressive policy, I have come to the conclusion that today’s leading economists are not only incompetent but morally bankrupt as well. One single paragraph from any Friedman speach or Rand novel contains economic advice superior to the combined lectures of my professors. Luckily the practice of law has little to do with economic theory.
Hilarious satire. Yes, Milton Friedman, whose free market economics is the reasons for the deregulation that led to the banking crisis that made this blog so popular? And Ayn Rand, whose turgid odes to selfishness take in only the most naive of silver spoon crowd? If you really got through Berkeley, you definitely can’t be serious.
Economists should be held in the same regard as astrologers, tea leaf and tarot card readers, and their ilk.
Except that with the astrologer or tarot card reader, you at least get to sit in a cute parlor with delightfully eccentric decor and talk to a warm, motherly, charming woman dressed in beautiful, exotic clothing who oftentimes is psychologically very perceptive and sensitive, and can sometimes pick up enough about you and your situation to actually give you good advice or make you feel better about a stinky situation.
That’s more than you get from our tribe of over-paid, over-credentialed economic soothsayer frauds, who usually have the charm and personal appeal of toads. And he’s charging a lot more than the usual psychic’s $50 for his prognostications.
How often do you hear all these so called “economists” keep talking nonsense about US economy won’t recover until housing market recovers first? These clowns still think that US economy is a function of the performance of RE market – that what’s good for RE prices would be good for the economy – instead of the other way around.
Good point. I often wonder about the same thing. Many in the media must think that their listener is not that smart to be saying “Real Estate needs to recover first”. Recover to bubble prices? A growing building industry does create jobs, but we need productive jobs so people can buy these new homes. The secondary (resale) real estate market adds nothing to the jobs picture, and really adds little to the economy apart from its impact on some retailers, and financial balance sheets of both buyers and banks.
Lawrence Yun and the previous head bozo David Lereah are laughing stocks of the financial world. I would much rather have Baghdad Bob give me the news, I would probably believe him more.
Buy now in Irvine or be priced out forever…blablablabbla. Patiently waiting for the next leg down…
Patience, patience, patience… In an environment shaped by debt deflationary spiral, the most patient guy, not the smartest, will laugh the last laugh.
Yesterday I overheard some smug punk talking about how he got away with one by dumping his underwater house as a short sale, becoming a renter, and getting his finances completely in order if not better than before.
I was seething at how brazenly he copped to gaming the system, while the typical, renting, over-taxed, if not jobless, person has had to bear the pain.
Has anyone else overheard these deadbeats and just wanted to punch them in the face? Discuss.
It sounds like he faced reality and made an intelligent business decision before it was too late. What pain are you bearing? Prices are coming down, so wait to buy. Its a great time to be a renter. If you are worried about taxes, vote the bums out in November.
Totally agree with Law_Student. And what pain is the jobless person bearing as a result of this guy walking away? You anger is misdirected at best. I would bet that this “smug punk” did exactly what the law allows and his mortgage contract stipulates.
Did you hear that? The mortgage contract STIPULATED. Well then, sir! I guess that settles that! No more calling murderers murderers! The contract STIPULATED that if you kill, you go to jail. The murderers are just making the best decisions for themselves and conducting their business within the boundaries of what is STIPULATED in the law. No more accusing murderes of being immoral.
But the US economy is a function of the performance of RE market, just not how most people expect.
How much of our economy is driven by consumer spending? Lower RE prices, means more money in consumers’ pockets each month to spend in the economy, rather than pay ‘interest’ to a bank. Why doesn’t anyone realize this? Why hasn’t any media outlet or ‘expert economist’ picked up on this concept?
There is a difference between something which is legal and illegal. Both have consequences but this is where the similarities end. Terrible comparison. C’mon David, you’re better than that.
I am not a subscriber to the “cop out” argument that is “I did what was stipulated in the contract” so all is fine and dandy.
You and the bank both engaged in an immoral agreement. You took out a loan with no intention of paying it all back. The bank gave you a loan that it knew you could not pay back and shifted the risk to everyone else.
As far as I am concerned, the bank can implode and the taxpayers can garnish your wages at 10% to get their money back. I can now see how you have worked it all out in your mind. You believe that you pay more in taxes than the average guy so you have a right to use the other guys money to make yourself whole on your bad bets since you pay more than he does. That’s incredibly arrogant.
I know why no one has realized it, actually the big dogs at FED and Govt has realized it. With 8M folks/homes in default or near it, and with not many jobs out there, the rason folks are allowed to squat without paying for mortgage by HMAP bullshit program is simple. Let 8M folks not pay thousands of $$ in mortgage, spoiled Americans who squat for free are going to contribute big time to consumer spending. If these folks are kicked to the curb, they will end up spending a good chunck on renting which does not help the economy.
US Economy is a stinking corpse, sad thing is that I am part of the corpse now without choice.
It is your right to believe that there is some vague mysterious rule that overrides the terms of a contract. But to assume that I entered the mortgage with no intention to pay it back shows your true arrogance. I fully intended to pay the mortgage and live in that house forever. I loved the house but the long-term cost would have been a true detriment to my family. I made a mistake buying it and I openly admit that. I have never claimed that the bank screwed me or did anything wrong to me. They could have saved me some headaches while saving themselves some money but they chose not to. That’s fine with me, it was their right to do so.
What is most puzzling to me is how you somehow think that I used someone else’s money to make myself whole. I don’t see how you got to that conclusion. But to be quite honest, I do feel like I contribute more to the country than most people. In my opinion I pay far more than my fair share of income tax and this is my reward for hitting the books hard while in school so illegals and lazy SOBs can continue to suck off the govt tit. You call it arrogance, I call it factual. And whatever taxpayer money is being used for the bailouts is not to make me whole, it is to make the banks whole. I guess to put in terms you would tolerate, I screwed the bank but the govt is screwing you.
In my opinion I pay far more than my fair share of income tax
Why not take a lower paying job if your tax burden is too much to burden? Where do you think the government got the money to pay you when you were in the military? It took it from people crowing about how overtaxed they are. Sound familiar?
Although I disagree with most government spending, including how much is spent on the military, my main problem is that taxes are levied on a sliding scale. I hate the fact that the more I make, the higher percentage of my income I pay.
Have you ever sucked on the tit? It’s not fun, nor an easy life. I just love it when someone thinks that people living on welfare or in Section 8 housing have so good. Get out more and meet some of these free loaders who take great care with the little money they actually get. I don’t see you whining about how much money we spend on propping up grain prices. Did you know that actually pay giant agribusiness NOT to grow food? Billions of our tax dollars!
I was talking to a friend’s brother at a party a few weeks back. He has been unemployed for about 9 months and he said that he has had job offers but they only pay about 10% more than what he is collecting in unemployment so going back to work for 40 hours a week would be a waste when he could sit on the beach all day and make close to the same amount of money. He went on further to say that he has been working side jobs here and there which pay him under the table so he can continue to collect unemployment. This is what pisses me off.
Additionally, I never said that people on welfare are living the good life. I know there are avenues which anyone can pursue to make a good life for themselves. Where there’s a will there’s a way. When there is no will, there’s the govt handout.
Lastly, I was at the grocery store this past weekend to cash in my recycling ticket and saw the guy in front of me buying milk, cheese, eggs, and cereal with a food stamp or WIC card and then pull out $40 to pay for the two cases of Corona he had. Again, no will = govt handout.
I saw the same thing with a mexican immigrant that couldn’t even speak orread english. Buying top quality foods (Lucky Charms, steak etc.) while I was buying generic brands trying to save money.
There is a difference between right and rwong and the LAW. The pharisees here on this board are only concerned with the LAW when it violates their personal virtues and ethics. As long as the LAW suppresses YUOR rights, they are OK with that. As long as the LAW only costs YOU, and not THEM, they are OK with that.
I only obey LAWS I want to, namely, the natural laws…do not hurt others, do not steal, don’t have sex with your married neighbor, don’t screw someone to make a profit…etc etc.
The LAW of this land is a JOKE, and has been for a few decades, for those of you just figuring it out….well BRAVO.
DON’T TREAD ON ME.
Many times have I heard this crap, but what stays my hand is knowing that our Corporate “persons” are walking away from $50M mortgages with no penalties whatsoever, as just another “business decision”.
We can’t hold individual borrowers of middle means to a different standard than defaulting corporate borrowers, whose ranks are multiplying rapidly as the commercial real estate market continues to unravel. They are walking away from shopping plazas, 40-story office towers, warehouses, and office parks. The worst thing about it is that oftentimes local taxpayers awarded these companies subsidies of $5M or more, often much more, just to build in their municipalities for the sake of “economic development”. This is why property taxes in so many areas are shooting through the roof and driving more people from their homes: to offset the subsidies given and the loss of the future taxes when the development is shuttered after three years or so.
The defaulting debt out there and the unwinding of the derivative instruments attached to it is going to have us buried for the next century. Who knows how long this will take to play out or how bad things will get? It looks to me like the unraveling of this massive tower of related swindles is enough to blow our entire credit system straight down, with no chance of rebuilding it for at least another 50 years.
The scuz you hear bragging about his superior money management skills by defaulting is a really just a symptom, not a cause. Save your anger for the people who created this and who had to know all along that it was going to blow up in our faces at some point.
FYI shadow, the best way to get a bad law/rule/regulation changed is to enforce it. That is what every person who “games the system” is doing, enforcing the law. I do not condone breaking the law, but as long as this guy did not vandalize the house or do anything malicious on his way out to screw the bank or future owner of the property, more power to him. You really sound like a bitter b!tch who is more jealous than angry. Take that passion and frustration out on the right people, those who created the rules of the game we all find ourselves in now.
No name calling please.
Irvineshadow’s concern is legitimate, and he speaks for many. I want to encourage open dialogue here.
I actually agree with him to a point. It is frustrating to play by the rules and see people who game the system get benefits we don’t. But I also agree with your point that the anger is better directed toward those who set up and maintain the corrupt system of supporting squatters on taxpayer dollars.
I apologize for the name calling. Shouldn’t have done that.
I have to say though that I see virtually no merit in what Shadow is saying. He says that “typical renters” are overtaxed and bearing the pain. In CA, 85% of the taxes are paid by people who earn over $100k/year. That does not describe the typical renter. And by saying that this guy gamed the system, he is implying that this was a 1st degree default, ie. pre-meditated. Based on what he wrote, it sounds to me like this guy realized he was screwed so he stopped paying and got a bit more responsible with his money. What’s the problem?
PartyBoy sounds just like Rush Limbaugh. He got strung out on his pain meds today and now everybody sounds like an angry bitch who makes less than 100K and pays no taxes.
PartyBoy, can’t you be more wholesome like sean Hannity? I would like to see some more flagwaving and lapel pins in the shapes of flags. Tell the next angry bitch that they are anti American anti Capitalist socialists! Don’t hold back. Let em have it!
Additionally, he calls this guy a deadbeat. Is he a deadbeat borrower? Perhaps. But what is the alternative? Would it better if this continued to pay so he could be a deadbeat provider for his family (if he has one)? That makes no sense. And isn’t the ultimate solution to bring prices back to levels commensurate with incomes? Well everyone who defaults on their overpriced mortgage is helping to achieve that goal…well, they would be if the govt would stop throwing dollars at the “problem” thereby preventing the solution.
They are a deadbeat you fool. That’s what we call people who owe money and don’t pay. You think because the bank did a short sale, his deadbeat status is resolved?
Screw him and screw his family too. Let’s garnish his wages at 10% and get some of our money back.
Yes, everyone who defaults helps bring prices down. Great. That does not give them some get of of fail free card.
You are an apologist for deadbeats. I can only assume you shortsaled your own house since you were too much of a deadbeat to pay the deficiency.
David, I did not say that his deadbeat status is resolved. But to be quite honest, once the house is taken back by the bank, it is resolved pending potential tax liabilities. That being said, my point was that he seemed to be in a position where either he was going to be screwed financially for a pretty long time, or he had to cut his losses and move on. If you were in that situation, are you telling me that you would tell your family, “Screw you. I am paying the bank..”? It is easy to judge when you have not been in that position.
To your point about me being an apologist for deadbeats, I can see why you would think that. I did in fact walk away from my house. We bought in January 2007 and by the end of 2008 our house was worth almost $300k less than we owed. I could have continued to pay the monthly nut but there was a balloon payment which I would not be able to pay in January 2012. I called the bank to discuss refinancing the balloon payment into something long-term (like the remainder of the loan) and was told that we could discuss it when it came due. It was clear at that point that the home would not recover its value by 2012 and I felt that they would not refi the balloon payment and foreclose. Since foreclosure seemed inevitable, I stopped paying. I called the bank to attempt a loan mod to no avail. I offered to pay them $50k up front if they reduced the principal from ~ $500k to $300k. They said no. They actually laughed and told me I was crazy. I told them that the home would not get a dime over $250k at auction and they thought that was ridiculous. I asked for a deed in lieu so we could just have some closure and move on and they said no. At auction the house sold for $212k.
I understand and agree with a lot of the frustration and anger directed at people who have defaulted on their mortgages. But when push comes to shove, I will do what’s right for my family every day of the week. I left the house in “broom clean” condition and made no attempt to get a cash for keys deal when I left. Whatever tax burden has resulted from my decision has likely been covered by the $40k/year I pay in income tax so I sleep just fine at night knowing that I have covered my share of the problem. I am not an absolute apologist for people who walk away, but every situation is different and I prefer not to judge quite as quickly as many people on this blog.
I for one agree with Partyboy. Buying a house and getting a loan with the house as collateral are business transactions not morality plays. The bank was looking to make money not provide charity. As long as the homeowner truthfully filled out the loan application — they are in the clear.
If the bank is stupid enough to give a loan thinking housing prices can only go up then they deserve to have the keys handed back to them.
The problem is that in many cases the banks knew that the loan was likely to go bad. They did their best to pass these on to other investors such as Fannie and Freddie who are the stupidest of all.
Partyboy, did you pay back the interest deductions that you took while you were paying your mortgage? You should to truly cleanse yourself.
No I didn’t. Those deductions were made based on actual money paid so I don’t see why that would make sense. Now if the bank wanted to return those interest payments to me, I would be willing to modify my tax returns accordingly.
Don’t worry about it Partyboy. The peons who pay less in income tax than you do will keep sending money to pay for the government’s expenses. You have a mortgage that needs a cramdown; a true national emergency – so just take all that income tax you paid and use it to make your bad real estate bet whole. If those school teachers making 35K a year knew what was good for them they would get real jobs and contribute more so guys like you wouldn’t shoulder so much burden. You pay more income tax than they do – it’s your right.
Partyboy, based on your facts, I understand why you walked, but I don’t understand why you bought the house in the first place, nor why you thought a balloon was a smart option?
I came back to SoCal after getting out of the military and part of the relocation package was an offer to pay all closing costs if I bought a house within 6 months of starting work out here so we made a hasty decision. Dumb, but true. We had a house where we were moving from that was on the market and we wanted to make sure we didn’t get stuck with two mortgages so we took the loan option with the lowest initial payment (but no negative amortization) just in case the other house lingered on the market for a while. The other house didn’t sell for almost a year so we were making two payments for about 10 months. I ended up having to pay $35k out of pocket to close on the other house. I could have just let that one go but I wanted to make sure my credit was in good shape so I could refi the balloon loan after that house sold. The problem was that the LTV on the new house had made refinancing the balloon loan impossible. It was a series of bad decisions made with the best of intentions. I just finally got to the point where enough was enough and we needed to reset and move on. Tough and costly lesson but we are better off for it.
I think you fail to realize that the money you received from deductions came from people who didn’t take the deductions, namely renters and others who didn’t gamble on housing. I feel very justified in saying that you should have continued to pay the mortgage right up until the balloon payment would have occurred.
As you said: “I could have continued to pay the monthly nut but there was a balloon payment which I would not be able to pay in January 2012.”
I think it’s about time we hold people like you accountable.
Oh, btw, did you go back to your old neighborhood and brag at how much better off you are now that you defaulted on your loan? I’m sure your neighbors were thrilled.
Or he goes back and frees the other loanowners from ttheir shackles of debt.
There’s a perfect example of how banks will sell to someone else at a bigger loss rather than forgive principal (which is a good thing in my opinion).
It bugs me a little to hear about legitimate offers getting rejected, or all-cash ‘investors’ snagging up the trustee bargains on the courthouse steps only to flip them for $50K-100K more in the conventional market, but I bet that there’s still a lot of pain ahead for these guys.
I keep hearing that LV and IE/Riverside don’t have much more room to fall. Only time will tell.
Partyboy’s “intentions” were good, but intent and ability are not the same!!!
I’d have to side with Partyboy here; he played by the rules. Once he stopped playing, he handed it over to the bank. It sounds like he didn’t even squat, so let’s give him a little credit. He did what he thought was right, and what the banks allowed. In the grand scheme of things, of course we all know it was stupid, immoral, or whatever you want to call it, but the reality is that some bank loaned money to him to purchase a home.
Banks who enabled this, and all the funds that invested into mortgage backed securities should be left to fail, without any bailout, as they deserve to be punished for their actions. Investment involves risk; sometimes you win sometimes you lose.
If they really wanted to prevent this mess from happening, the easy way is to require 20% down payments so the buyers have some skin in the game. Since most people couldn’t come up with 20% of bubble prices, a good chunk of it would have been contained.
Why on earth would you do something as stupid as financing a home loan that contains a BALLOON PAYMENT? I’m serious here: unless you have an IQ under 70 (in which case you shouldn’t be making any major purchases without supervision from a cognitively capable adult), you have no excuse for not understanding the terms of your loan. None. Zero. Zilch.
I have no sympathy for you; to the contrary, I find your actions disgusting and morally reprehensible, since it is a cost that the rest of us are paying for dearly.
Joseph,
It had nothing to do with understanding the terms of the loan. We had another house which was on the market (in another city) when we bought this one. I wanted to keep the initial payments low in case the other house lingered on the market for a while. A neg-am loan was something I would not do so the balloon payment (20% of the total financed amount) was the best way to go. The way the loan was set up made the balloon portion almost like a deferred payment and was the best way to keep the monthly payment down while we waited for the other house to sell. The idea was that as soon as the other house sold, we would refi the 20% loan into a 30-year fixed and remove the need to come up with $100k or so at the 5-year point. By the time the other house sold our LTV was so high, refinancing was not an option. I know this was a mistake but at the time this sort of thing was not too uncommon. The creative financing was not in an effort to buy more than we could afford, it was and attempt to prevent having two large mortgage payments simultaneously.
Of course, because why would you do something logical, like rent before you sold your home?
Sorry, you don’t get a pass. You made a horrible financial decision, and the taxpayers are paying for it. You deserve no sympathy.
Honestly, why do people try to make simple things complicated? I think it’s either greed, childish self-delusion, or a misplaced sense of entitlement, justified with euphemisms like “creative financing”. You might try being honest with yourself.
Actually, in order to truly cleanse yourself, you should eat a ton of fiber rich foods, defecate in a bag, and send THAT in as payment for the house, because that’s what the house is worth to someone $100-300,000 underwater.
The bankster will get almost 100% of the original loan paid back by the guvment, approved by Uncle T. Obama. The INVESTOR will pick this property up for a song and a dance and then make a profit off some other family.
Could have just re-financed the owner for the amount the home is worth NOW…..but hey, can’t do that…much better to let them live for FREE for 1-2 years and then kick em out. The whole scenario makes me want to vomit. Banksters and government fornicating together in a giant pile of ARTIFICIALLY CREATED DEBT.
Ban the central bank. Term limits on EVERY F’ING OFFICE. No benefits such as retirement/health insurance for the vultures and scumbags who call themselves politicians.
Well HELLO St. Joseph the Hypocrite.
I’m willing to bet such a high moral crusader such as yourself never breaks the law, or even touches himself thinking about some other woman…(or man for that matter, I know you not). I’m also sure you drive the SPEED LIMIT, pay taxes on birthday gifts, never pay cash for one single thing, etc etc….cause only dirtbags, scumbags, and pedophile priests break the LAW.
I find YOU morally reprehensible and disgusting. For the record if you have EVER made a mistake, you’re a piece of offal.
Goodbye St. Joseph the Hypocrite.
Well, at least he didn’t call him a ‘realtard’ 😉
What’s the alternative? That’s not so appealing either.
Jailed in Dubai, Accused Wait Long After Good Times (Update1)
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aXqyMWV7Apsk
IrvineShadow –
You have to realize that many of the folks on this blog are sociopaths who think anything legal is perfectly moral.
I suggest that you pickup a copy of their bible:Perfectly Legal so that you can better understand this new brand of American morality that we see exhibited here on a regular basis.
David,
Just curious. So do you think that bankruptcy laws should not give people a fresh start? People should have debts that go on forever no matter what?
Or are people who buy homes with mortgages different and special? If I took a business loan and couldn’t repay it because my business failed, should I have to repay that business loan for the rest of my life by having 10% of wages garnished until its all repaid? What if the amount was large enough that I could never repay it?
Who would take the risk of starting a new venture or even taking a loan to expand an existing venture if failure meant a life time of servitude to repay the loan?
So do you think that bankruptcy laws should not give people a fresh start?
Depends.
You can’t bankrupt out of student loan debt. I see no reason why mortgage debt should be any different. A house is a consumptive expenditure unlike starting a new business.
the fact you can’t bankrupt out of student loans is probably one of the worst things that the student loan industry was able to lobby into law.
It has created a whole segment of society who was conned into taking out loans for virtually useless online school diplomas for which it will drag on them for a significant portion of their life.
Student loans are uniquely different from any other type of loan.
Also, if you point is correct, then if I am an investor in a real estate, you are suggesting that I should be allowed to walk away since I was running a business but because I used a mortgage to buy a primary home, and it happened to be a mistake (for whatever reason) then it should weigh on me for the rest of my life?
Like student loans, you will create a whole segment of society who are virtually trapped as servants to debt forever.
The US bankruptcy laws are one of the reasons America’s economy has relative success for a long period of time..because people can take risks and not be bound to that mistake forever. they feel pain but they aren’t indebted for the rest of their lives for it.
I am certainly not supporting fraudster or scammers but the idea that debt should following you forever is pretty problematic.
Some guy walked to your house with a box of matches and some gasoline, burned the house down, and torched the whole community while at it. The guy also bought a bunch of insurance policies on your (and your neighbors’) houses and cashed out like a bandit. During all this time you were busy screaming at a drunk who pissed on your front lawn.
When real unemployment rate approached 20% and near 50 million people on food stamps, I doubt the notion of morality still crosses many people’s mind often these days. Survival does. As much disgusted I feel about the whole “pretend and extend” business, back in my mind I can’t help but wondering what would happen if our Ponzi economic system was allowed to crash and burn from day one. “Pretend and extend” could be the reason why my wife and I still have a job today and had 3 years to get financially prepared for the next “dip” and many more dips to come.
Back in early 2008 I was concerned about housing market and tried to figure out when would be a good time to buy. Now I am more concerned about financial survival of my family for the next 10 years. What happened in the last 3 years was merely the appetizer, main course has yet to arrive.
When the next shoe drops later this year/early 2011 – as many now expect, do I really care if the RE market will fall another 10%, 20% or 50%? If the job as the main source of income is gone, who cares how much more house prices will fall, or whether failure to pay your mortgage debt is an immoral act.
At least we will all still have the Irvine Housing Blog to keep us entertained. Through the closed sales in Irvine we will know who still has money and which doors to knock on for food.
More like, while you were saving and scrimping every last dollar bill and hiding it in your mattress, you failed to notice a guy outside with a printing press, printing bills as fast as he could.
One day, you walk out, and realize your dollars don’t buy very much after all, despite all that effort to save.
“Yesterday I overheard some smug punk talking about how he got away with one by dumping his underwater house as a short sale, becoming a renter, and getting his finances completely in order if not better than before.”
If he did it within the letters of the law, there’s nothing you can do about it.
Blame the politicians for creating, ratifying, and executing those laws.
After 3 years of smoke and mirrors and trillions of $ flushed down the toilet, it has become patently clear that the sole priority was and still is keeping insolvent banks in its perpetual zombie state. All the policies – tax credit bait, inflation scare, ultra-low interest rates, foreclosure prevention programs, sweet talk of green shoots and “strong” recovery, change of accounting rules to allow banks not to foreclose and debtors to squat – from Washington and Fed meant to accomplish two things:
1. smoke out as many savers and renters as possible and pushed them into the market to pick up banks’ losses. On that front they have been very successful (Just look at all the large cash down payment purchases in OC).
2. Keep debt slaves continue to make payments on their underwater properties. Success rate on this one has been abysmal and is getting worse. But who cares at this point. Banks are just fine making risk-free money on yield spread, while squatters enjoy their free dwelling.
But at this point it looks like they have finally run out of savers to pikc up the bag. Anyone who is destined to be taken for a ride seems to have jumped in. It will take more imagination from White House or Fed to come up with some more potent “pulling-demand-forward” scheme.
They’ll just start another round of tax credit giveaways to lure the next batch of bag holders. This time it might be a 20K off coupon for your house purchase. Someone will eventually have to pay for all this mess!
“People were paying $30,000 to $40,000 more for properties to obtain an $8,000 tax credit… “
It’s just matter of time before potential buyers figure this out, and “pull demand forward” type of schemes will cease to work once that happens. They just can’t fool people forever – even those who do nothing but watching American Idols will one day come to their senses and see it as what it is – a trap.
They are now suggesting doing interest free loans from the government to housedebtors to help them make mortgage payments (to bankers) LOL
I can already envision Uncle Sam’s next gimmick like those signs out in front of apartment complexes in crappy neighborhoods:
Buy a house! 12 months Free
I will vote for you if you decide to run for office, and I am not being sarcastic.
The medallion in the middle of the living room must have added about $350,000 to the price of the house. I guess this explains why the asking price is $850K.
The kitchen has a “Dishwasher Eating Area”
I take it the good folks of Irvine are too highfalutin to allow their dishwashers to eat at the table with the rest of the family.
Not quite. It’s an allusion to the fact that if you buy this shitbox you will have to eat your dishwasher. Thankfully, there is a special area for it.
I am waiting for a $40,000 tax credit for buying and then I will pull the trigger.
I wanted to go off on Lawrence Yun before I remembered what my friend Walter once said, “What the fuck are you talking about? The Chinaman is not the issue here, Dude. I’m talking about drawing a line in the sand, Dude. Across this line, you DO NOT… Also, Dude, Chinaman is not the preferred nomenclature. Asian-American, please.”
I don’t get it.
I think he means that the medallion in the middle of floor really pulls the room together.
The Dude abides. (Big Lebowski inside joke.)
There is a difference between some which is legal and illegal. Both have consequences but this is where the similarities end. Terrible comparison. C’mon David, you’re better than that.
I used to have moderate respect for Pimco’s Bill Gross, but several of his recent comments on housing finance had me think otherwise. This is his latest:
“Cut Down Payments to Boost Housing Recovery: Gross”
http://www.cnbc.com/id/38852316
WTF! Isn’t low or 0% down payment what got us into this catastrophy in the first place.
Bill Gross reminds me of the saying by Upton Beall Sinclair:
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
Oh My God! Record Low home sales!!!! WTF Happened????
Oh, banks are holding all the inventory out there, either you can support price OR sales, you cant hold price for long, while banks can hold inventory until they themselves get wiped out LOL
On another note, sell your bonds if held at PIMCO, Bill Gross has had a brain hammerage IMHO
Cut Down Payments to Boost Housing Recovery: Gross
http://www.cnbc.com/id/38852316/comid/7#comments_top
WTF! Gross says cut downpayments so those in distress can buy more homes. WTF is he thinking. This has to be height of foolishness and desperation. Looks like PIMCO is holdng FNM/FRE MBS big time!
I really don’t know the answer to this.
If you get foreclosed on, but owe less than the value of the house at auction, does the bank force the sale, collect their due, and then cut you a check for the remainder?
No, if there is any remainder, this is value to the bank they convert to cash when they sell it. If someone’s house goes to auction, any equity remainder goes to the highest bidder. That is why there are bidders at auction.
Ariz. Man Sues Bank Of America For $100M
Claims Bank Promised Loan Modification, Then Foreclosed On Home
Jason Barry
Reporter, KPHO.com
POSTED: 4:58 pm MST May 20, 2010
PHOENIX — An Arizona man has filed a $100-million lawsuit against Bank of America.
Joel Williams, of Lake Havasu, said he fell behind on his mortgage and was promised a loan modification; however, instead of a loan modification, Williams said his home was sold without his knowledge.
“I was not (the only one) under the impression they were going to give me a loan modification. They had made those claims not only to me, but to a HUD-approved counselor,” Williams said.
The lawsuit accuses Bank of America of fraud and misrepresentation.
Williams said he got a phone call one day from someone who had just purchased his house during an auction on the courthouse steps.
“I was in total shock,” Williams said. “My family was in shock. It was quite an emotional thing to have that happen to you.”
Harvey Jackson, attorney for Williams, said he is hoping the lawsuit will send a message to all banks not to take advantage of their customers.
“All they had to do was tell him the truth. Instead, they lied to him,” Jackson said.
“The only way these banks understand, the only language they speak, is when you hit them in the pocketbook,” said Williams. “It needs to be stopped. People need to be treated fairly.”
A representative for Bank of America would not comment on current lawsuit, but said Bank of America is committed to helping homeowners and is responsible for more than 500,000 loan modifications since January 2008.
What the story does not state is that the house was a “million dollar property” according to the owner and the bank sold it on the courthouse steps for a fraction of that.
No clue where the 100M figure comes from if the house was only worth 1M at the peak.
Off topic, but interesting quote:
http://latimesblogs.latimes.com/lanow/2010/08/billionaire-donald-bren-denies-he-loved-mother-of-his-2-children.html
“Education is the most important gift a person can make to a child,” he said in court. “It would allow those two children to grow up and be successful in their own right and not rely on anyone else but themselves to become productive and happy human beings.”
I would like to bring to your attention an article that bears on the ongoing mortgage lending viability of the mortgage GSEs. A Morgan Stanley analyst raises the issue that governments, in the case of the USA, that being Freddie Mac and Fannie Mae, will renig on their promises and impose a loss on some of their stakeholders by defaulting on part of their debt.
Tyler Durden of ZeroHedge quotes from the Arnaud Mares, Morgan Stanley, August 25, 2010 report …. Sovereign Subjects: Ask Not Whether Governments Will Default, But How …. ”Debt/GDP ratios are too backward-looking and considerably underestimate the fiscal challenge faced by advanced economies’ governments. On the basis of current policies, most governments are deep in negative equity. This means governments will impose a loss on some of their stakeholders, in our view. The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.”
“So far during the Great Recession, sovereign (and bank) senior unsecured bond holders have been the only constituency fully protected from partaking in this loss. It is overly optimistic to assume that this can continue forever. The conflict that opposes bond holders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well aligned with those of influential political constituencies …. Investors should be prepared to face financial oppression, a credible threat against which current yields provide little protection.”
It’s credible to believe that in the near future, the US Treasury will not be funding the GSEs and as such, their debt payments will be diminished to the bondholders.
Could it be that the mission of the GSEs might change from mortgage underwriting to property leasing?
Of significant note, US Treasuries, turned lower today and the interest rate on the US Government Note, ^TNX, turned up. Perhaps today August 25, 2010, marks a day pivotal day; a day when interest rates go forever higher.
I believe that soon, out of the chaos of “financial oppression” cited by the Morgan Stanley author, that here in the US a Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts. He will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.
I believe that here in the US, the Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve. Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have created and serviced mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, and Annaly Capital Management, NLY, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value.
Client to Broker: Clean My Windows!
http://www.nytimes.com/2010/08/24/nyregion/24appraisal.html?_r=2&src=me&ref=nyregion
I currently rent in Irvine,
I have no debt, make 15k per month, have ~250k for a down payment. I am fortunate and very thankful for the situation I am in.
I have seen many houses over the past 3 months in Irvine, RSM, MV, AV and parts of Lake Forest in the 750k range.
Observation – Income is probably top 5-8% for Orange county, yet I feel like I am purchasing in the 75th percentile in RSM and LF, 60th percentile in MV and AV, and 40th percentile in Irvine (100th percentile is best)
Good news – Value is improving
Bad News – There is not a single house in the price range that I love enough to purchase
Good news – there is desperation of some sellers and prices are falling and falling faster
Good news – 5 of 6 houses we saw for a second time are still on the market, 3 have had price reductions – there is no one out there buying per some friends in the business and reports this week confirm it.
Bad news – Interest rates are falling. I would rather see them tick up 1/4, 3/8 of a point and crush prices even further and quicker
Good News – Furloughs are continuing, price pressures will continue as more people will be overextended due to reduced income, more properties will be distressed and this will increase shadow inventory to 4-5 times of current listings
All in all – no hurry to buy, no reason to feel pressure to buy and I sleep like a champ every night
Prediction I see a 8-10% drop in LA Case Shiller by Jan 2011 and from there troughing and waffling in a +/1 6% range for 4-5 years as shadow inventory works its way through the system and interest rates tick up to reduce affordability
Thank you for your insightful comment. I see the same realities as you, and I see the same future.
Well, I passed by a new house on the market this week to see two sets of buyers talking with their agents in front of the house, on the second day it was on the market. However, it still does not have an offer on it, at least per the mls. But, I think it shows that there are interested buyers around. I also saw a stream of shoppers to the open house around the corner this weekend. My take: They are waiting for those prices to go back down to last spring’s levels.
I think it will be a long, slow struggle to the bottom. If you look at the last sale price of a lot of houses on the market, they are only one mark down away from being a short sale. The sellers have no choice but to ask the inflated prices they are asking. The after-effects of the bubble will be with us for a long, long time.
Good News – Furloughs are continuing, price pressures will continue as more people will be overextended due to reduced income, more properties will be distressed”
Karma
She’s a bitch
“Good News – Furloughs are continuing, price pressures will continue as more people will be overextended due to reduced income, more properties will be distressed and this will increase shadow inventory to 4-5 times of current listings”
Well heeeeyaw! Sheeet, maybe if EVERYONE but YOU lost their job, you could pick-up a house for the price of a meal for a family of four. Good old OC compassion…want to go to Saddleback or Calvary brother!?!?!
Maybe with the best of luck, you too will be out of a home and then the market will have ZERO buyers, but one can only hope for such GOOD NEWS right? With outstanding luck, maybe we can read about you living out of your car. A Purpose Driven Car.