Due to competing demands from holiday parties, we have decided to move the November and December presentations to the classroom at the offices of Intercap Lending.
Americans are captives in their own homes. The economic malaise and the abundance of underwater loan owners has immobilized our country. The mobility rate has recently fallen to its lowest reading every recording — and records go back as far as 1948.
WASHINGTON – Yet another symptom of the economic downturn: Americans aren't moving.
Young adults are staying put, often with their parents. Older people aren't able to retire to beachfront or lakeside homes.
And loan owners are trapped underwater in the bank's house. Underwater borrowers are the root of population immobility.
U.S. mobility is at its lowest point since World War II.
New information from the Census Bureau highlights the continuing impact of the housing bust and unemployment on U.S. migration, after earlier signs that mobility was back on the upswing. It's a shift from America's long-standing cultural image of ever-changing frontiers, dating to the westward migration of the 1800s and more recently in the spreading out of whites, blacks and Hispanics in the Sun Belt's housing boom.
Rather than housing magnets such as Arizona, Florida and Nevada, it is now more traditional, densely populated states — California, Illinois, Massachusetts, New York and New Jersey — that are showing some of the biggest population gains in the recent economic slump, according to the data released Thursday.
Residents have been largely locked in place. Families are stuck in devalued homes and young adults are living with parents or staying put in the towns where they went to college.
Population mobility has always been a key aspect of American society. People can more freely and easily move from state to state to take a better job or start a business. Without population mobility, America does not get the most value from its workforce creating a drag on the economy.
“The fact that mobility is crashing is something that I think is quite devastating,” said Richard Florida, an American urban theorist and professor at the University of Toronto's Rotman School of Management. He described America's residential movement as an important element of its economic resilience and history, from development of the nation's farmland in the Midwest to its coastal ports and homesteading in the West.
“The latest decline shows we are in a long-run economic reset and that we never really recovered — we've just been stagnating along,” Florida said.
There are other reasons than mobility that are contributing to our economic stagnation. The huge mortgage debt overhang which drains our economic resources and dampens household buying power is the real culprit. This debilitating debt also causes much of the social immobility.
About 11.6 percent of the nation's population, or 35.1 million, moved to a new home in the past year, down from 12.5 percent in the previous year. The current level of low mobility comes after the recession technically ended in mid-2009, beating a previous low of 11.9 percent in 2008.
It is the lowest in the 60-plus years that the Census Bureau has tracked information on moves, dating to 1948.
The share of people moving has been declining for decades, due in part to increases in two-income families that are more tied down by jobs and to an aging population that is less mobile. The peak for U.S. mobility came in 1951, when it hit 21.2 percent. The rate had leveled off at around 13 percent before falling off notably in 2008 during the recession.
Among young adults 25 to 29, the most mobile age group, moves fell to 24.1 percent from 25.9 percent in the previous year.
Longer-distance moves, typically for those seeking new careers in other regions of the country, remained largely flat at 3.4 percent.
The biggest drop-off occurred in local moves, down to 15.4 percent from 17.7 percent in 2010. It's a sign that young adults in the prolonged slump weren't even willing to venture outside their counties, continuing instead to live with relatives or on college campuses.
People most often cite a desire to live in a new home as the main reason for moving, as well as reasons of family or economy such as marriage or a new job. But analysts say with many young adults delaying marriage while struggling to find employment and aging baby boomers expressing financial worries about retirement, the current mobility freeze could continue for several more years.
There is no reason to think the problems with mobility will go away until we deal with the issues of underwater loan owners and excessive mortgage debt. Foreclosures and short sales are the way ahead.
An Associated Press-LifeGoesStrong.com poll this month found that more than half of baby boomers born between 1946 and 1964 say they are unlikely to move somewhere new in retirement; about 4 in 10 say they are very likely to stay in their current home throughout all of their retirement.
The annual growth of retirement-destination counties, typically in Sun Belt states such as Florida, Arizona and New Mexico, has fallen sharply since the recession that began in late 2007. It's down nearly half compared with the period 2000-2007, according to recent census data.
I think Nevada and Arizona will see a resurgence in retirees moving in over the next several years. The baby boomers are just starting to retire, and house prices in Nevada and Arizona are relatively cheap.
As I mentioned in a previous post, my parents have purchased three homes so far in Las Vegas. One is going to be empty half the time as they split between their Florida home and the one in Las Vegas. The other two homes are investment properties which provide enough excess cashflow to cover the expenses of the one they use half the year. Basically, a retiree with $50,000 and the willingness to own rental properties can obtain a modest primary residence with no monthly costs. It's a sweet deal that won't go unnoticed by other retirees.
In all, the mid-decade housing boom and subsequent bust took a toll on virtually all age and race groups.
Homeownership declined in 47 states and the District of Columbia while the national ownership rate fell by its largest amount since the 1930s. Hispanics who moved and purchased homes in new destinations in the Southeast were hit especially hard, with bigger drops in average income and increases in poverty after low-wage construction jobs dried up in states such as South Carolina, North Carolina, Alabama, Kentucky and Tennessee.
In contrast, middle-class blacks from the North who migrated to Southern states such as Georgia, Florida and Texas fared better, maintaining higher incomes than African-Americans who remained in declining industrial centers such as Michigan and Ohio.
Other bright spots in the housing bust included urban, high-tech college meccas that are proving to be a draw for young, college-educated adults of all races and ethnicities.
The data covering 2008-2010 show that Raleigh, N.C.; the Texas cities of Austin, San Antonio and Houston; Denver; Pittsburgh; and Baltimore and Washington, D.C., had some of the biggest gains in residents. All of them tend to promise specialized tech jobs and hip lifestyles.
Pittsburgh is hip now?
William H. Frey, a Brookings Institution demographer who reviewed the education and race data, said many of these cities will continue to attract new residents after the economy fully recovers. He said other cities must seek ways to diversify their industries, draw new investment and build partnerships with local universities to attract young talent, much like Pittsburgh has been striving to do after the collapse of its steel industry.
“Right now, the 'cool' cities are serving as way stations for the small number of adventurous young people who are willing to move in a down economy. But when the broader economy picks up, a much larger group of people will move to wherever the jobs spring up,” Frey said, noting that people are staying put for now because they have to, not because they want to.
“We are now just in a lull, albeit a hyperextended one,” he said.
Other findings:
— Texas posted increases in average income across all race groups even after the housing bust. The District of Columbia had the biggest overall gain in average income between 2005-2007 and 2008-2010 time periods, increasing 9 percent to nearly $60,000. Thirty-six states had declines.
— The district, New York, Connecticut, Louisiana, Mississippi, Texas, Alabama and California have levels of income inequality that rise above the national average. Broken down by large metropolitan areas, New York City, Miami, Los Angeles, Houston, Memphis, Tenn., New Orleans, San Francisco, and Birmingham, Ala., each had wider-than-average gaps between rich and poor.
— Across smaller areas of geography, Fountainhead-Orchard Hills, Md., just north of Hagerstown, had the greatest measured income inequality. Country Knolls, N.Y., near Albany, registered the least.
— Suburban and rural homeowners were more likely to stay put than others. Some 93.5 percent of the suburban and 93.7 percent of the rural population in owner-occupied units are residing in the same house as one year ago, up from the 2005-2007 time period, according to Kenneth Johnson, senior demographer at the University of New Hampshire.
— Renters were more mobile: Overall, 68.8 percent lived in the same rental unit one year ago.
Besides not losing hundreds of thousands of dollars, being a renter for the last ten years has given me the freedom to move wherever and whenever I wished.
John R. Logan, a sociology professor at Brown University, described consequences for mostly minorities should U.S. mobility stay frozen for extended periods. His research on neighborhood segregation has found that the average black or Hispanic household earning over $75,000 lives in a poorer neighborhood than the average white resident earning under $40,000.
“Being locked into place has its most severe effects on blacks and Hispanics, who are often segregated into disadvantaged neighborhoods regardless of their own incomes,” he said. “Many middle-class homeowners in these neighborhoods have lost home equity, making it harder to move to communities with better schools and safer streets. Even the slow decline in black-white segregation that we've seen in the last 20 years will be hard to maintain under these conditions.”
The lack of mobility kills the move up market. It's not that people are moving shorter distances, it's that they are not moving at all.
The census findings were based on the Current Population Survey as of March 2011, as well as comparisons of the 2005-2007 and the 2008-2010 American Community Survey to provide a snapshot of every U.S. community with at least 20,000 residents. Figures on income inequality come from a census analysis of survey data from 2005-2009.
The owner of today's featured property bought near the end of the last housing recession on 11/17/1998. She paid $226,000 using a $180,800 first mortgage and a $45,200 down payment. It didn't take her long to start making withdrawals.
On 12/7/1999 she obtained a stand-alone second for $50,000.
On 7/9/2001 she refinanced with a $251,500 first mortgage.
On 11/21/2002 she refinanced with a $269,160 first mortgage.
On 7/28/2003 she refinanced with a $285,000 first mortgage.
On 4/19/2004 she obtained a $60,000 stand-alone second.
On 4/29/2005 she got a $90,000 stand-alone second.
On 4/20/2005 she refinanced with a $388,000 first mortgage.
On 8/22/2006 she refinanced one last time with a $564,000 first mortgage.
Total mortgage equity withdrawal is $383,200.
Total squatting time is more than a year so far.
Foreclosure Record
Recording Date: 04/25/2011
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 01/18/2011
Document Type: Notice of Default
This woman pissed away nearly $400,000. The shocking part is how ordinary she seems. I have profiled many larger cases, and despite how obvious it was that this woman had gone Ponzi, her lenders didn't seem to care. After profiling nearly a thousand of these cases, $400,000 in mortgage equity withdrawal hardly registers. It doesn't even earn my half-million dollar club graphic. No, this is an ordinary borrower living an ordinary Irvine life. That's what's so shocking.
Charming 3 Bedroom Townhome Located In The Desirable Sheffield Manor Community. Light & Bright Floor Plan Features Laminate Wood Flooring, Vinyl Slider, Custom Baseboards, 6 Panel Doors, Plantation Shutters, Ceiling Fans & Mirrored Wardrobes. Upgraded Kitchen Includes Granite Enhanced Counters, Stainless Steel Appliances, Breakfast Counter Bar & Garden Window Overlooking The Private Patio Area. Large Master Bedroom Suite With Raised Ceiling, Greenbelt Views & An Upgraded Bath With Granite, Travertine Tile & Shower. Wonderful Association Amenities & Steps To Award Winning Elementary & Middle Schools. Centrally Located Near Walking Trails, Restaurants & Shopping. Low HOA Dues & No Mello Roos
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis
Resale Home Price …… $423,000
House Purchase Price … $226,000
House Purchase Date …. 11/18/1998
Net Gain (Loss) ………. $171,620
Percent Change ………. 75.9%
Annual Appreciation … 4.9%
Cost of Home Ownership
————————————————-
$423,000 ………. Asking Price
$14,805 ………. 3.5% Down FHA Financing
4.18% …………… Mortgage Interest Rate
$408,195 ………. 30-Year Mortgage
$121,375 ………. Income Requirement
$1,991 ………. Monthly Mortgage Payment
$367 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$88 ………. Homeowners Insurance (@ 0.25%)
$469 ………. Private Mortgage Insurance
$220 ………. Homeowners Association Fees
============================================
$3,136 ………. Monthly Cash Outlays
-$313 ………. Tax Savings (% of Interest and Property Tax)
-$570 ………. Equity Hidden in Payment (Amortization)
$22 ………. Lost Income to Down Payment (net of taxes)
The indelible symbols of the housing bubble are the empty towers left in its wake. We have them here in Orange County, and the Chinese have them in every major city.
The Chinese have long known they have a problem with real estate values. Over the last several years, the Chinese government has enacted a series of half-hearted policies aimed to slow the increase in real estate prices. Unfortunately, the Chinese housing bubble is a runaway freight train heading for an awful crash.
A weekend scuffle in Shanghai over a drop in apartment prices adds to increasing evidence that China’s efforts to tame a surging property market are having an impact – even as it offers a hint of what could happen if the measures go too far.
A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. One report said the price cuts exceeded 25% per square meter.
Can you imagine? These people are on the verge of rioting over a small decline in prices — at least it's small compared to what is coming.
I remember the fervor over rising house prices here and the hostility people exhibited at the mere suggestion that prices might go down. I had to blog anonymously for the first 18 months I wrote for this blog for fear of what the crazies might do. Given the behavior of these protestors in China ransacking a showroom, it appears my fears were well founded. When people realize they bought a steaming pile of crap rather than a pot of gold, they get pretty upset.
The local media reports said an unspecified number of people were injured. The property developer, a unit of China Overseas Holdings Ltd., didn’t respond to requests for comment. Photos of the event showed broken glass in the sales office, homeowners marching with banners and a phalanx of police watching over.
Chinese media separately reported that another group of Shanghai homeowners gathered on Saturday to speak with Longfor Properties Co., after it dropped asking prices to 14,000 yuan per square meter from 18,000 yuan per square meter at a residential development in the city’s Jiading district. Longfor didn’t return calls for comment. In an Oct. 20 release, it said it posted stellar sales following an aggressive sales strategy for three of its projects in Shanghai and in the city of Hangzhou.
It's time to line up the bagholders. Anyone who buys now in China will watch their investment turn to garbage overnight.
Beijing has been tightening control of the property market this year to tame surging property prices, amid fears that unaffordable housing could lead to greater social unrest. Measures include a massive 1.3 trillion yuan program to build about 10 million public housing units for low-income earners this year, as well as limits of purchases of second homes and other restrictions.
Data in recent weeks have suggested that the curbing efforts are having an impact. China’s housing prices were largely unchanged in September from a month earlier and grew at a slower pace than in September 2010, indicating Beijing’s efforts to cool the real estate sector are having an impact.
Speculation has turned to whether authorities will now relax restrictions. On Monday, China’s eastern city of Nanjing said it would let residents borrow more money from the city’s housing provident fund to buy “ordinary homes,” in a move designed to give the struggling property sector a boost. While it didn’t elaborate, such homes are often defined as no larger than 140 square meters.
In the southern city of Foshan earlier this month, local officials announced they would lift some property-market restrictions, then postponed that move the next day “to seek further public opinion and to make an assessment on the effects of such measures”, without giving further details.
Chinese Premier Wen Jiabao on Saturday stressed that all levels of government need to reinforce China’s controls of the property market, and that tightening efforts in the property market and the construction of public homes in China are at a pivotal moment.
It will be interesting to see how the Chinese react to this problem. They surrendered central control of all pricing and embraced a modified form of capitalism. With capitalism comes its associated ills, one of which is Ponzi viruses. Once a Ponzi virus in unleashed on the financial system it reproduces like a cancer cell until it grows so large it imperils the economy. China should have stamped out this virus years ago, but the ensuing development it created was highly sought after by the government, so they didn't recognize the danger in what they were doing.
They now have a Ponzi scheme so large it threatens everything. The civil unrest at this showroom is a minor skirmish in what could easily grow into a massive outpouring of violence when the crash wipes the illusions of wealth of the entire nation. If people are this upset over a 25% decline, they are obviously quite attached to their notion that prices only go up.
The Shanghai property-owner demonstration found little support on China’s Internet, where most still expressed worries that housing prices are too high. In an informal poll posted on the Twitter-like microblogging site Sina Weibo that had attracted more than 34,000 votes by Tuesday evening, 80% said they that thought it was normal for housing prices to fall and that the Shanghai protestors were just playing up the issue.
“This is an immoral action,” Weibo user Xiaobai Yeyou Naxieshi wrote in one of the 7 million property-related posts Sina had collected Tuesday on a special topic page. “Buying a house is a form of investment and every investment involves risk. If prices didn’t fall, people who can’t afford to buy an apartment would really have to wait forever.”
Interesting that your average Chinese citizen realizes people cannot be priced out forever, but the average Californian doesn't get the concept.
“Dear Government, can you please cancel my purchase of Petrochina shares? A refund based on the IPO price would be fine,” joked Linshi Renyuan. Petrochina, which debuted on the Shanghai stock market at 16.7 yuan per share in 2007, was trading at to 9.85 yuan per share at the end of the day Tuesday.
LOL! But real estate is different. Prices only go up. Real estate is an investment with no risk, right?
That said, a sustained drop in housing prices could spark its own displeasure. It could also spark criticism that Beijing’s policies don’t address long-term issues.
Outspoken Chinese real estate tycoon Ren Zhiqiang, whose properties haven’t been involved in the demonstrations, said on his microblogon Monday, “Does the government really want to solve the housing (issue) for the public or is it just using the property market as a tool to balance between economic growth and the public sentiment?”
The answer is obvious: the Chinese government doesn't care at all about providing affordable housing, it simply wants economic growth and the perception of wealth even if that wealth is an illusion based on a Ponzi scheme.
“Why doesn’t the government work on land supply, land prices and tax incentives? Why doesn’t it raise wages and lower home purchase taxes, and raise the affordability for the citizens?” Mr. Ren asked.
–– Esther Fung with contributions from Amy Li and Josh Chin
Yes, why doesn't the Chinese government work on those things. They demand they have created is artificial, just like ours was. They need to create real demand based on higher wages and increased worker productivity. The rest is an illusion.
North Korea towers in Irvine
Shanghai will be littered with empty housing towers built for high-end residents who simply don't exist. Orange County is also littered with empty housing towers built for high wage earners who simply aren't present. One of the most obvious examples of this phenomenon is the North Korea towers in Irvine, otherwise known as the Marquee at Park Place.
Most building and development happens in reaction to prices in the resale market. If developers believe they can sell a certain product for a certain price, they will provide that product if they believe they can do it profitably. Unfortunately, when the resale value is an illusion created by a housing bubble, developers build projects like these and either sell them to bagholders like the North Korea towers, or they become the bagholders like the Astoria across the street.
These false price signals sets in motion a great deal of wasted economic activity. The resources devoted to producing the worthless assets could have been, and should have been, diverted to other uses which would have had more societal value. This misallocation of resources is the problem with Ponzi viruses. For example, in the 16th century, the entire Dutch economy revolved around producing tulip bulbs. The misallocation of resources created a severe economic slump when tulip prices crashed.
Each dollar spent constructing an empty housing tower was robbed from a better use. Whatever this use might have been, it certainly would have helped the economy far more than the empty towers which serve as a testament to the folly of housing bubbles everywhere.
The unit is on the 5th floor of the Marquee at park Place. This unit is a 2 bedroom plus den with 2 baths. View of surrounding office buildings. Two parking spots in the second level. Small storage locker.
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis
Resale Home Price …… $390,000
House Purchase Price … $817,500
House Purchase Date …. 1/20/2006
Net Gain (Loss) ………. ($450,900)
Percent Change ………. -55.2%
Annual Appreciation … -12.1%
Cost of Home Ownership
————————————————-
$390,000 ………. Asking Price
$13,650 ………. 3.5% Down FHA Financing
4.18% …………… Mortgage Interest Rate
$376,350 ………. 30-Year Mortgage
$136,919 ………. Income Requirement
$1,836 ………. Monthly Mortgage Payment
$338 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$81 ………. Homeowners Insurance (@ 0.25%)
$433 ………. Private Mortgage Insurance
$849 ………. Homeowners Association Fees
============================================
$3,537 ………. Monthly Cash Outlays
-$289 ………. Tax Savings (% of Interest and Property Tax)
-$525 ………. Equity Hidden in Payment (Amortization)
$20 ………. Lost Income to Down Payment (net of taxes)
Due to competing demands from holiday parties, we have decided to move the November and December presentations to the classroom at the offices of Intercap Lending.
She is trading her MG for a white, Chrysler LeBaron
I want a girl with a short skirt and a
looooooooooooooooooooooooooooooooong jacket
Cake — Short Skirt, Long Jacket
The foreclosure process in Florida takes a long, long, long time. Florida is a judicial foreclosure state, and with millions of delinquent mortgage squatters and the lingering impact of robo-signer, BofA has given up on forcing people to leave via foreclosure, and has started to pay people to get out. Second mortgage lien holders must be thrilled, after all, they are the ones who will end up with the money.
It's not mortgage principal reduction, but it's a start.
WTF? Do I really care about the bogus opinion of this reporter to start the story? He makes this statement as if mortgage principal reduction is the answer to the problems in housing. Principal forgiveness is the the worst policy option. I certainly hope it isn't the endgame.
Further, if BofA is desperate, this is not the start of anything good for loan owners. It's a sign BofA is going to start clearing out its foreclosure pipeline which will reduce prices.
Bank of America is quietly rolling out an incentive program in parts of Florida in which they'll pay distressed homeowners up to $20,000 if they successfully short-sell their home, according to The Palm Beach Post.
A short sale is an arrangement in which the lender agrees to accept less than what's owed on the mortgage to avoid a lengthy (and expensive) foreclosure process. Foreclosures in Florida take an average of 23 months to be processed — nearly twice the national average, according to analytics firm RealtyTrac.
Therein lies the reason for this policy. The Florida court system is so bogged down with foreclosures, it is more cost effective for BofA to pay people to short sell rather than push them through the foreclosure process. If BofA doesn't get some of its capital back, they may not be around to complete the foreclosure process.
The pilot program, identified by BoA spokesman Rick Simon as the “short sale/relo incentive program,” is only being tested in Florida at the moment, due to the state's high volume of foreclosures. If the program is successful, the program may be launched elsewhere, he said in an email to AOL Real Estate.
Sometimes referred to as “cash for keys,” the money may be used to provide distressed homeowners “with the tools and resources necessary to transition out of their home with dignity,” the press statement says. In other words, there will be less chance that the homeowner will be tempted to vandalize the property on the way out.
This is a cash-for-keys deal, pure and simple. The contentious part will be debating over who gets the money. In the real world, the second mortgage holder is going to demand payment, and the loan owner is not going to want to turn over the money. Most borrowers have the belief that paying a second mortgage is optional, and that the second mortgage holder should lose everything because they took on that business risk. Of course, this is completely wrong, but that's what most people think. Plus, people simply want the money for themselves whether it's justified or not.
Trouble Thrives in Vacant Homes
In the humid climes of Florida, short sales are far more desirable to lenders than letting the house sit vacant in a foreclosure. Mold can ravage even the best built homes, and empty houses are prone to squatters and vandals. The $20,000 payout could be a drop in the bucket in comparison to the cost of maintaining a rapidly deteriorating home.
But there may be a major downside to the program for severely underwater homeowners. In recourse-loan states like Florida, the lender can seek what's known as a deficiency judgment — the unpaid balance left on the mortgage — even after a short sale is completed.
In such cases, much of the money could end up back into the bank's pocket.
If the same bank holds both the first and the second mortgages, this is less of a problem, but if another lender holds the second, they will not give up this money easily.
BoA's Simon said that the bank's guidelines “allow for the deficiency judgment to be waived,” but the bank reserves the right “to pursue collection” after the sale. That may not be a strong enough commitment, according to Broward County-based consumer defense attorney Margery Golant.
“The fact that they 'may consider' waiving the deficiency judgment means nothing to me,” Golant told AOL Real Estate in a phone interview. “It just fosters false hope.”
Hasn't everything the government and lenders done since the housing bubble burst been designed to foster false hope? I think so.
For Golant, who regularly sees homeowners with close to six figures of outstanding debt, even the full $20,000 would do little to get an owner out of the hole if they're still on the hook for the difference, she said.
“If they really were waiving the deficiency judgment, then I would think it could mean a meaningful approach,” Golant says. “But to say we'll give you $20,000, yet reserve the right to sue for the difference is not only not meaningful but deceptive.“
Yes, it is deceptive. Perhaps BofA doesn't want to write the debt off on their books, so they can retain at least some valuation for this bad loan if they can sell it to a zombie debt collector.
Could It Work?
There is already a national precedent for what BoA is attempting – the Home Affordable Foreclosures Alternative (HAFA) program, which offers a $3,000 short sale “relocation” incentive. But so far the results have been less than encouraging. Since April 2010, HAFA has only completed 15,531 short sales nationwide, The Palm Beach Post reports, and the program is scheduled to sunset at the end of 2012.
Results have been less than encouraging? LOL! Completing only 15,531 short sales in a year and a half is a complete and utter failure.
Still, if BoA can put up some impressive numbers in its trial run, there may yet be hope of more aggressive financing options for America's thousands of underwater homeowners – like the often-trumpeted, mostly dismissed notion of mortgage principal reduction.
Statements like that give more false hope than any government or bank program. the reason the notion of mortgage principal reduction is mostly dismissed is because it is a really, really bad idea.
For Florida homeowners interested in participating in the program, here are some key points:
The program offers $5,000 to $20,000 to qualifying homeowners who complete a bank-approved short sale. The amount is based on the unpaid balance on the loan as of Aug. 2011.
Short sale must be initiated between Sept. 26 and Nov. 30, 2011, and closed by Aug. 31, 2012.
To learn more about the program, call 1-877-459-2852.
This program will likely spread to other judicial foreclosure states where BofA is having a hard time getting its money out.
Doubled the mortgage plus got a big HELOC
Meny casual observers of the housing market believe Turtle Rock may not fall because the homeowners there are generally longer term owners so there is less mortgage stress. Perhaps that is true, but perhaps not. Turtle Rock still had Ponzis, and today, we are featuring one of them.
This house was purchased on 12/30/1999 for $400,000. The owners used a $320,000 first mortgage and an $80,000 down payment.
On 7/5/2000 the owner obtained a $60,000 HELOC.
On 6/10/2005 they cashed out with a $650,000 Option ARM with a 1% teaser rate. It was a fatal mistake.
On 11/16/2006 they refinanced again with a 1-year ARM at $680,000.
On 7/26/2007 they obtained a $139,000 HELOC.
The quit paying in April 2010 at the latest and squatted for at least 15 months.
Foreclosure Record
Recording Date: 01/19/2011
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 09/03/2010
Document Type: Notice of Default
Foreclosure Record
Recording Date: 09/03/2010
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 07/27/2010
Document Type: Notice of Default
The 2005 Option ARM is what did them in. Once they doubled their mortgage, it looks as if they crossed the Ponzi limit. It was only a matter of time. They held out for five more years, but finally succumb to the weight of the accummulated debt.
Single level 4 bedroom home in highly desirable Turtle Rock. Large lot with views from backyard. Great location across from the park. Home has great potential. Great opportunity!
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis
Resale Home Price …… $764,900
House Purchase Price … $400,000
House Purchase Date …. 12/30/1999
Net Gain (Loss) ………. $319,006
Percent Change ………. 79.8%
Annual Appreciation … 5.4%
Cost of Home Ownership
————————————————-
$764,900 ………. Asking Price
$152,980 ………. 20% Down Conventional
4.18% …………… Mortgage Interest Rate
$611,920 ………. 30-Year Mortgage
$150,523 ………. Income Requirement
$2,985 ………. Monthly Mortgage Payment
$663 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$159 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$81 ………. Homeowners Association Fees
============================================
$3,889 ………. Monthly Cash Outlays
-$699 ………. Tax Savings (% of Interest and Property Tax)
-$854 ………. Equity Hidden in Payment (Amortization)
$228 ………. Lost Income to Down Payment (net of taxes)
The Orange County housing market is suffering due to the abundance of distressed sales. Prices are down 3.8%, and the volume of distressed sales shows no signs of decline.
The government is determined to prop up the zombie banks and the dead housing market. We would all be much better off if they simply let the bodies hit the floor and cleared the market
Market insiders had envisioned that the housing market would be well on its way to recovery by now.
No market cheerleaders and fools envisioned the housing market would be recovering by now. Thoughtful observers reasoned there were too many factors conspiring against higher prices and sales volumes for any market recovery so far.
Instead, it remains mired in the doldrums, with sales and prices hovering only slightly higher than when they hit bottom more than two years ago.
Here’s one possible reason why:
On average, four out of every 10 Orange County homes sold each month is either a bank-owned property or a short sale, according to figures provided by Adrese Roundtree, chief operating officer for the California Regional Multiple Listing Service.
These distressed properties – sold by the most motivated buyers in the business — act as a drag on the market, depressing prices.
Bank-owned homes are foreclosures that were repossessed by lenders. Short sales are homes sold on the open market for less than is owed on the mortgage.
Supply is only half the problem. Demand is off as well. The move-up market is dead, household formation is low, unemployment is high, and with falling prices, buyer motivation is low.
The MLS numbers show:
The average number of distressed properties sold through the broker-run home listing system was 1,119 a month in 2009, representing 49.9% (half!) of all MLS deals.
In 2010, the average fell to 1,097 a month, accounting for 43.5% of all MLS transactions.
This year so far, the average held at 1,090 a month, still at 43.5% of all deals.
So even though the percentage of distressed sales fell slightly, the actual number of distressed transactions remains virtually unchanged for nearly three years.
What better example can we find of lenders controlling the property flow? They are selling out their inventory at a rate designed to hold prices steady. However, since their sales need to be slightly below comps to attract buyers, prices are drifting lower.
Of course, those numbers are averages. Monthly numbers fluctuated from a high of 1,239 in May 2009 to a low of 669 this past July.
In addition, the distressed market’s share of sales fluctuated from a high of 63.9% of all homes sold in January 2009 to a low of 30.1% in July.
But even after falling to July’s low point, distressed sales turned around in recent months, rising to 971 homes sold in September, representing 42.7% of last month’s total MLS deals. September’s distressed sales numbers are only slightly below the post-crash averages listed above.
Look for the percentage of distressed sales to increase in the coming months as lenders such as BofA become more motivated.
Other trends show that while the number of bank-owned sales has been falling over the past three years, short sales have risen. The MLS figures show:
Sales of bank-owned homes dropped from an average of 615 units a month in 2009 (or 27.9%) to 552 a month this year so far (24.1%).
Short sales increased from an average of 451 a month in 2009 (or 19.7%) to 481 this year so far (21.3%).
Period
Short sales
Bank owned
Total distressed sales
2009 Average
451
615
1,119
2010 Average
466
578
1,097
2011 YTD
481
552
1,090
I would look for short sales numbers to decrease, particularly now that lenders have no way to collect for deficiencies after an approved short sale. Lenders cannot sustain the loans on their books in California after a short sale because they have no residual value. In other states, they can potentially sell this bad debt to zombie debt collectors, but not here.
October 24th, 2011, 12:11 am — posted by Jon Lansner
Highlights of DataQuick’s Orange County homebuying report. For the 22 business days ending October 6 — the latest numbers — Orange County’s real estate market saw …
Median selling price for all residences of $425,000 — that is off 3.8% vs. a year ago.
Total Orange County sales of 2,505 residences closed in the latest period — that is off down 2.0% vs. a year ago.
Note: 12 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!
If 12 of 83 zip codes had both rising sales and prices, then 71 of 83 zip codes or 85% of local zip codes had either falling prices or falling sales volumes. It doesn't sound quite so rosy when put that way, does it?
Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2010:
Slice
Price
Price vs. year ago
Sales
Sales vs. year ago
Sales vs. ’88-’10 avg.
Houses
$480,000
-5.9%
1,714
+3.9%
-24.1%
Condos
$262,500
-12.4%
646
-12.8%
-25.0%
New
$604,250
-9.7%
145
-12.1%
-72.4%
All O.C.
$425,000
-3.8%
2,505
-2.0%
-31.3%
And more analysis ….
$425,000 median selling price is 34% below June 2007′s peak of $645,000.
Current price is 5.6% below 2010′s peak (May and July) of $450,000; 4% above end of 2010′s median ($410,000.)
The most recent median is 15% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 20% of the $275,000 price drop from the peak.
Compared to cyclical low, single-family house median is 15% higher ($418,250 in January 2009); condo median is 4% higher ($252,000 in March 2009.) Builder prices for new homes are 43% above June 2009′s $424,000 bottom.
Those statistics show just how unreliable the median is as a measure the change in value of individual homes. Nobody who bought in early 2009 has seen 20% appreciation, and nobody who bought a new home has seen 43% appreciation. The change in mix greatly distorted the median in 2009. The number reported was too low. The big rise off the bottom is nothing more than a statistical aberration created by the distortions from the changing product mix. The $/SF and the Case-Shiller indices both show a double dip as neither of these measures are impacted much by a change in sales composition.
The median selling price of a single-family home is 35% less than their peak pricing (June ’07). Condos sell 44% below their peak in March 2006. Builder prices for new homes are 30% below their February ’05 top.
Single-family homes were 83% more expensive than condos in this period vs. 70% a year ago. From 1988-2010, the average house/condo gap was 57%.
There are two reasons for the change in the SFR premium. First, fewer detached homes are selling as these are being withheld from the market. These prices will come down to help close this gap. The second reason is the increased cost of FHA financing. Since the FHA insurance premium is now a whopping 1.15%, substantially less of an FHA buyer's income is going toward the loan payment. Smaller payments makes for smaller loan balances and lower prices on condos which typically use FHA financing.
Builder’s new homes sales were 6% of all residences sold in the period vs. 6% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.
The lack of new home sales is an ongoing problem exacerbated by the ridiculous prices being asked in many new home communities. Competition from REOs is likely to keep sales of new homes low for the foreseeable future.
Bear rally buyer takes a loss
Many bear rally buyers refuse to acknowledge the obvious. The bear rally was not for real, prices have double dipped, and prices will continue to decline. For proof of these market realities, we only need to see today's featured property.
The buyers paid $425,000 on 11/30/2009. The conventional wisdom in 2009 was that prices bottomed in the spring along with te stock market. A buyer in 2009 would not have worried about selling for a loss. They should have.
Today's featured property is asking less than their 2009 purchase price. When you factor in the commissions, they will lose nearly 10% of the purchase price or about 40% of their down payment. That makes the cost of ownership for this family over the last two years quite high. It's cases like this which prompt Shevy and I to warn buyers against buying if they might have to sell in the next three to five years. This could happen to them as well.
Absolutely fantastic, great opportunity for the first time buyer or investor, family floor plan, gourmet kitchen with Island, upgraded cabinetaries, nice sized great room with fire place, formal dining room. Upgraded wood laminated floors, front private patio. 2 bedrooms suites upstairs, plantation shutters. Just walking distances to Woodbury Elementary school and Woodbury Town Center and to the Commons. This is a must see.
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis
Resale Home Price …… $409,000
House Purchase Price … $426,000
House Purchase Date …. 11/30/2009
Net Gain (Loss) ………. ($41,540)
Percent Change ………. -9.8%
Annual Appreciation … -2.1%
Cost of Home Ownership
————————————————-
$409,000 ………. Asking Price
$14,315 ………. 3.5% Down FHA Financing
4.18% …………… Mortgage Interest Rate
$394,685 ………. 30-Year Mortgage
$128,866 ………. Income Requirement
$1,925 ………. Monthly Mortgage Payment
$354 ………. Property Tax (@1.04%)
$250 ………. Special Taxes and Levies (Mello Roos)
$85 ………. Homeowners Insurance (@ 0.25%)
$454 ………. Private Mortgage Insurance
$260 ………. Homeowners Association Fees
============================================
$3,329 ………. Monthly Cash Outlays
-$303 ………. Tax Savings (% of Interest and Property Tax)
-$551 ………. Equity Hidden in Payment (Amortization)
$21 ………. Lost Income to Down Payment (net of taxes)
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Besides not losing hundreds of thousands of dollars, being a renter for the last ten years has given me the freedom to move wherever and whenever I wished.
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Charming 3 Bedroom Townhome Located In The Desirable Sheffield Manor Community. Light & Bright Floor Plan Features Laminate Wood Flooring, Vinyl Slider, Custom Baseboards, 6 Panel Doors, Plantation Shutters, Ceiling Fans & Mirrored Wardrobes. Upgraded Kitchen Includes Granite Enhanced Counters, Stainless Steel Appliances, Breakfast Counter Bar & Garden Window Overlooking The Private Patio Area. Large Master Bedroom Suite With Raised Ceiling, Greenbelt Views & An Upgraded Bath With Granite, Travertine Tile & Shower. Wonderful Association Amenities & Steps To Award Winning Elementary & Middle Schools. Centrally Located Near Walking Trails, Restaurants & Shopping. Low HOA Dues & No Mello Roos 
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The Chinese have long known they have a problem with real estate values. Over the last several years, the Chinese government has enacted a series of half-hearted policies aimed to slow the increase in real estate prices. Unfortunately, the Chinese housing bubble is a runaway freight train heading for an awful crash.
It will be interesting to see how the Chinese react to this problem. They surrendered central control of all pricing and embraced a modified form of capitalism. With capitalism comes its associated ills, one of which is Ponzi viruses. Once a Ponzi virus in unleashed on the financial system it reproduces like a cancer cell until it grows so large it imperils the economy. China should have stamped out this virus years ago, but the ensuing development it created was highly sought after by the government, so they didn't recognize the danger in what they were doing.
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Those statistics show just how unreliable the median is as a measure the change in value of individual homes. Nobody who bought in early 2009 has seen 20% appreciation, and nobody who bought a new home has seen 43% appreciation. The change in mix greatly distorted the median in 2009. The number reported was too low. The big rise off the bottom is nothing more than a statistical aberration created by the distortions from the changing product mix. The $/SF and the Case-Shiller indices both show a double dip as neither of these measures are impacted much by a change in sales composition.
Absolutely fantastic, great opportunity for the first time buyer or investor, family floor plan, gourmet kitchen with Island, upgraded cabinetaries, nice sized great room with fire place, formal dining room. Upgraded wood laminated floors, front private patio. 2 bedrooms suites upstairs, plantation shutters. Just walking distances to Woodbury Elementary school and Woodbury Town Center and to the Commons. This is a must see. 
